The Startup Journal #3: High Level Overview of the Startup Ecosystem: Algeria vs Other Countries
As in a biological ecosystem, a business ecosystem is the network of organizations. In startups, it is formed by elements (ideas, inventions and researches), people( entrepreneurs, investors , advisors, customers, competitors…), universities (due to the fact that many business ideas are born from universities’ researches) , government agencies, and so on. They all get involved in the delivery of a specific product or service through both competition and cooperation.
Each entity in the ecosystem affects and get affected by others, creating a constantly evolving relationship in which each entity must be flexible and adaptable for the startup to grow sales and survive.
In the present article, we attempt to consider the logistical aspect of several startups’ ecosystems in Algeria and other countries, see the pros and cons, and of course explore what we can learn from other countries’ experiences.
How is the Turkish Startup Ecosystem going?
Taking the example of Turkey, a country that is seen at the rise of the third wave: a term that was used for the first time by Steve Case to refer to the vast transformation in the entrepreneurship environment thanks to digital revolution. Many see the third wave as the future that we have to prepare ourselves for especially in business to appease the customers’ needs and expectations.
Turkey have two advantages we can observe: The first being the Youth-Driven, digitally-active population which make the country a hotbed for innovations. And the second is the public and government’s support.
Turkey has the largest youth population in the EU area, half of its population of 82 million is under the age of 32. The Innovation rate outperforms even the EU countries. The size of the Turkish ICT sector has almost doubled since 2014, the e-commerce Market has grown bigger and the e-retail sales were 5.3 % higher than both Russia and India.
With this kind of modernizing economy supported by a young and educated demographic and high internet penetration, Turkey is an attractive growing market for startups.
Moreover, the Turkish government is a very active and strong supporter of the startup ecosystem in the country, offering a variety of programs and policies to enable the establishment and growth of startups. A few of the government’s key entrepreneurial policies are as follows:
● Startup Support Organization or Program: Top organization like The Scientific and Technological Research Council and The Ministry of Finance continuously offer support for startups and their investors.
● Startup Funding/Access to Capital: Early fundings to idea-stage startups , reducing tax for companies whose investments is linked to startups and providing support grants to acceleration programs abroad to help the globalization of Turkish startups.
● Entrepreneurship & Technology Education: Technology Transfer Offices (TTO) at universities serve as a bridge between those universities and the private sector, helping to commercialize research and facilitate joint projects between academia and private companies.
All the above is a complete answer to the question of “why Turkey and why now?”. The Turkish government’s many strategies to create market-independent businesses and the people’s well receivence is what established a name for Turkish Startups and made them the next big thing making the investments in Turkish startups increase by 66% in the EU region and within the MENA region.
2 Years After Tunisia Startup Act: What has Changed & What Lessons Can Be Learnt?
Taking another successful example: Tunisia, the country that boosted its tech ecosystem and showed Africa and MENA region how empowering startups are and how entrepreneurship should be done.
Tunisia is the most innovative country in Africa, occupying Africa’s first place for the quality of its entrepreneurial environment and having the best mobile internet connection on the continent. That is mainly due to its favourable market condition: Wealth of human capital. And the country’s strong infrastructure, ICT sector represents 7.2% of its GDP.
The only weakness that hindered the country’s entrepreneurship was the poor capitalisation of opportunities. For that, to bring investors and to reduce barriers for entrepreneurship, the government or more precisely Tunisia’s minister of ICT and Digital Economy introduced The Startup Act. It has been announced in 2015 and officially took effect in October 2018. The goal at first was to digitalize Tunisia via two programs: Smart Tunisia, to convince international tech companies to move there, and Digistartup, to create an ecosystem favourable to startups in Tunisia.
However, since the economic laws in Tunisia were outdated from the 90s, the Minister met with entrepreneurs to hear their law-related problems and suggested solutions, which were gathered in a public document.
“To my knowledge, it’s the first law drafted in a collaborative way in Tunisia, meaning actually coming from the civil society,” he said.
Since then, the Act was submitted and entered in vigour.
These are some benefits of the Act that could be seen as too good to be true:
● Leave for creation of startups: It is a leave of 1-year renewable once. It means regular employees, public or private, who have interests in entrepreneurship can take a year off their job and still get paid by the government while pursuing a startup venture. And even if they don’t succeed, a return to their old job is guaranteed.
● Licenses of registering startup patents at the national and international levels.
● The good failure: The Startup Act encourages good failure by promoting the amicable liquidation of startups through the combination of measures such as the Guarantee Fund for Startups, exemption from corporate tax and State support for salary costs and employers.
The market in Tunisia is experiencing a 30% increase in startup creations since the establishment of the Startup Act. The ecosystem is still fresh and has yet to mature as two obstacles came in term of the mobility and transport of the products or services through other countries, also lack of banking network. The Tunisian ecosystem is taking its first steps but has become almost competitive with the European startup ecosystem.
Can startups and governments work together?
Till this point we have analysed what makes two different countries with two different cultures, ecosystems, and regulations succeed in blooming and helping startups grow.
It is pretty obvious that what helped the most was the top down strategy that came first from the government in changing laws and making it advantageous for startup ecosystem. Some may argue that “Changing the law doesn’t change a country.” Or “Awesome, the government is going be more involved, we’re gonna have more regulation!”
There is a risk that will slow innovation and frustrate a lot of entrepreneurs. But we would rather see that it will impact things that will continue to be regulated. In any case, governors come with rules, and for them to do what countries like Turkey and Tunisia could do would come out just as great. The public should be mature and the government should continue creating opportunities and trust that the people will take advantage of it.
The biggest challenges facing the Algeria startup ecosystem and Algerian entrepreneurs.
Coming back to Algeria, the government is in the process of creating a startup friendly ecosystem while Algerians are growing entrepreneurial spirit. These conditions and environment are suitable to take the experience of the two countries that we mentioned to get an ecosystem that supports and boosts startups.
Traditional media are also paying attention to the digital scene and startups which is a good sign to attract diverse audience as all the actors of the Algerian tech scene agree that the solutions lie in education, in training entrepreneurs, explaining to politicians why and how they can help, and getting the media involved.
Algeria is coming in late with the government’s many promises, maybe action. Entrepreneurs see that Algeria’s ecosystem is lacking: Only a few private incubators with good reputation, small government-funded success business rate, and the spread of the risk aversion mindset — some entrepreneurs would rather keep a full time job on the side than fully committing to their business -.
In the light of current events, Algeria may soon face a large crisis, and the government should be aware that digital companies, and especially startups, could help enhance the country’s economy. The first step should go towards the digitization and modernisation of the financial systems. And what better way for Algeria to do it than apply one of Jim Rohn’s most famous quotes, “It’s important to learn from your mistakes, but it is BETTER to learn from other people’s mistakes, and it is BEST to learn from other people’s successes.”
References:
The State of Turkish Startup Ecosystem
Here are 5 reasons why governments should implement startup acts like Tunisia’s
