By- Fikir Belete
The startup ecosystem in Ethiopia is a dynamic and vibrant space, bustling with innovation, creativity, and ambition. It is now getting the recognition it deserves for having the potential to serve as a catalyst for economic growth, job creation, and technological advancements. The key stakeholders are doing a self-assessment and realizing the roles they need to play. We’re watching the private and public sectors coming together to create fertile grounds to work on. However, it’s not just about implementors coming together holding hands, and singing kumbaya, the focus is and should always be on the startups.
Moreover, within this ecosystem, there exists a dichotomy between impact-driven and number-driven approaches. While both have their merits, understanding the nuances and implications of each can be crucial for entrepreneurs, investors, and policymakers alike. This article aims to shed light on this topic by exploring the significance of impact-driven and number-driven approaches in the startup ecosystem and the lessons we can learn from each one.
The Impact-Driven Approach
The impact-driven approach places a strong emphasis on addressing social or environmental challenges through entrepreneurship. Startups adopting this approach aim to create positive change, often targeting issues such as poverty, education, healthcare, climate change, or gender inequality. These ventures prioritize their mission and social impact over financial returns, although profitability remains important for sustainability.
But does it really work in Ethiopia? In regions like Kenya and South Africa, where socioeconomic challenges are prevalent, impact-driven startups have gained significant traction. These ventures leverage technology, local knowledge, and innovative business models to tackle pressing issues specific to their communities. By aligning their goals with the needs of society, they attract support from impact investors, philanthropic organizations, and government initiatives focused on social development.
The Number-Driven Approach
On the other hand, the number-driven approach prioritizes rapid growth, scalability, and financial returns. Startups adopting this approach aim to disrupt industries, capture market share, and generate significant profits. They often rely on technology-driven solutions, data analytics, and a relentless pursuit of efficiency and customer acquisition.
Number-driven startups typically seek funding from venture capitalists, angel investors, and other sources of capital that prioritize high returns on investment. Their success is often measured by metrics such as revenue, user acquisition, market valuation, and exit strategies such as IPOs or acquisitions.
While impact-driven and number-driven approaches may seem divergent, they are not mutually exclusive. In fact, there is a growing recognition that both perspectives can coexist and even complement each other. By bridging the gap between the two, we can create a more holistic and inclusive startup ecosystem.
Collaborate and Network: Gold ore in the making
Lessons can be learned from the experiences of entrepreneurs and incubators in Africa. Despite facing similar challenges, such as limited access to capital, inadequate infrastructure, and regulatory complexities, these regions have witnessed remarkable entrepreneurial growth. By fostering collaboration, sharing best practices, and promoting cross-border learning, startups can leverage each other’s strengths and overcome shared obstacles.
For instance, impact-driven startups can benefit from adopting certain elements of the number-driven approach. Embracing data-driven decision-making, scalability, and market-oriented strategies can enhance their operational efficiency and improve their ability to create sustainable impact at scale. On the other hand, number-driven startups can learn from impact-driven ventures by incorporating social or environmental considerations into their business models, thus contributing to a more responsible and sustainable future.
In addition to bridging the gap between impact-driven and number-driven approaches, fostering networking and emphasizing sustainable groundwork are crucial for a thriving startup ecosystem. These factors play a significant role in ensuring long-term success and maximizing the positive impact of startups and SMEs.
Networking is a fundamental aspect of the startup ecosystem. It facilitates the exchange of knowledge, ideas, and resources among entrepreneurs, investors, mentors, and other stakeholders. By encouraging collaboration and learning from one another’s experiences, startups can overcome challenges more effectively and identify opportunities for growth.
The Enkopa Summit, organized by Lauradu and Associates, Flawless events with the authorization of the Ministry of Labor and Skills, is an example of stepping in the right direction in terms of networking amongst the public and private sectors. It brought together various stakeholders, including investors, industry experts, and support organizations, to foster collaboration and knowledge exchange. The summit offered valuable insights, direction toward mentorship, and exposure to potential investors for startups through panel discussions, workshops, and networking opportunities.
However, addressing ticket affordability and enhancing accessibility are crucial challenges that must be tackled to ensure the inclusivity of startups and MSMEs in future events. It doesn’t matter if the topics covered have valuable insight for building a sustainable startup business and growing into an enterprise if the startups can’t afford a seat and aren’t present for the discussion. Despite these challenges, the Enkopa Summit as indicated in its name holds immense golden promise for Ethiopian startups, positioning the country as a hub of entrepreneurial excellence and economic prosperity.
Implementors
Incubators and accelerators also play a vital role in supporting startups by providing mentorship, resources, and access to networks. However, it is essential for these support organizations to focus on sustainable groundwork rather than solely relying on large donors or time-bound projects.
Incubators and accelerators should prioritize building strong relationships with startups and SMEs, understanding their needs, and tailoring their support accordingly. This involves going beyond providing financial assistance and short-term assistance. Instead, they should focus on fostering long-term relationships, offering continuous mentorship, and assisting with developing essential skills and knowledge.
By adopting a sustainable approach, incubators, and accelerators can ensure that their impact extends beyond the duration of individual projects. They should empower startups and SMEs to become self-sufficient, resilient, and capable of driving their own growth. This can be achieved through capacity-building programs, access to networks and market opportunities, and ongoing support beyond the initial stages of development.
Metrics: measuring accurately
To achieve sustainable impact, incubators and accelerators should establish clear metrics and evaluation criteria beyond short-term goals. Instead of solely focusing on the number of startups or SMEs assisted, the emphasis should be on the quality of support provided and the long-term outcomes achieved.
Metrics could include the number of successful business launches, revenue growth, job creation, and the overall social or environmental impact of the startups. By utilizing comprehensive and well-defined metrics, incubators and accelerators can align their efforts with the broader goals of creating a sustainable and inclusive startup ecosystem.
