The Great Debate: Why Rwanda may be the Best Country to Launch and Scale Your Tech Startup!

This post was written by Nadine Antoun for MEST.

The Great Debate

How do African countries rank when it comes to creating the enabling environment for technology startups to thrive? Do tech entrepreneurs fare better on the West, East, or South of the continent? And, if a founder is looking to launch a tech venture in which African country can one find a startup ecosystem with the right balance to jump-start startup success? This is the Great Debate!

The Rwandan edition of the Great Debate is part of a larger series of articles that explores startup ecosystems in the nine 2020 MEST Africa Challenge markets, also including Kenya, South Africa, Senegal, Tanzania, Ethiopia, Nigeria, Ghana, and Cote D’Ivoire. These African countries have some of the most developed tech startup ecosystems on the continent. Where some markets have the right culture, and mature capital markets, others can leverage stronger networks and ICT Infrastructure. Check out the entire series and decide which African country you think is the best market for tech startups!

Why Startup in Rwanda

With a private sector-driven economy, Rwanda is ideal for newcomers seeking to establish a presence on the continent, as barriers to entry are almost non-existent. Moreover, Rwanda’s untapped potential offers a plethora of business opportunities. There are many good reasons to start a business in Rwanda, including its business-friendly environment, market accessibility, and geographic centrality.

Business-Friendly Environment

According to the World Bank’s Doing Business 2020 report, Rwanda was ranked 38th globally and 2nd in Africa for its ease of doing business. This position was earned with consistent and collaborative efforts made by the Government to reform the Rwandan business environment for the past 20 years. The country’s liberal and reformist policies make it a globally competitive place to do business.

• It is possible to register a business in less than a day (usually in 6 hours) and for free. The whole process can be done online.
• Rwanda offers many interesting fiscal and non-fiscal incentives for national and foreign investors. For example, the country has no minimum capital requirement for entry, and “newly formed small and medium-size enterprises are exempt from paying the trading license tax for their first two years of operation”.
• Although Rwanda is an authoritarian regime, with little freedom of the press, the country has been able to maintain a high degree of political stability and public safety. With the levels of crime and corruption being amongst the lowest on the continent.
• The Government has created the Kigali Special Economic Zone (KSEZ), in order to increase private sector investments and to develop industrial/non-agricultural sectors. KSEZ is located 10 km outside of Kigali and offers direct access to the Central Transport Corridor. The KSEZ also offers industrial producers access to roads, water, electricity, fiber-optic internet, and sewage systems.
• Rwanda ranked 9th out of 153 countries in the World Economic Forum’s Global Gender Gap Index. The index measures gender-based gaps in four dimensions (Economic Participation and Opportunity, Educational Attainment, Health and Survival, and Political Empowerment). Women in Rwanda are venturing into traditionally male-dominated industries ranging from politics to agriculture.

Market Accessibility

After the 1994 Rwandan genocide, the country’s economy had drastically failed. It is impressive to see that only 26 years later, the country has recovered. This is due to high economic growth, averaging over 7% per year in the last decade. As a result, the standards of living have greatly improved. The goal is to propel Rwanda into an ITC-driven, knowledge-based, middle-income economy by the end of 2020.

• Despite being the smallest country in East Africa, the market is over 12 million people which makes it both substantial and manageable.
• According to Disrupt Africa, Rwanda’s population is young and is willing to adopt new technology solutions, which makes it an “ideal place to launch and test a tech startup”.
• The Smart Rwanda Master Plan which was established by the Rwandan Ministry of Youth and ICT (2016–2020) focuses on business and innovation. This includes making Rwanda Africa’s ICT Hub, with digital literacy for all and a strong focus on research and development in sectors such as the Internet of Things, Big Data and Analytics, Cyber Security Research, Creative Industries, and Multimedia, Mobility and Digital Lifestyle.
• It is a direct gateway to other East African markets. Rwanda shares borders with Uganda, Burundi, and Tanzania, which are all part of the East African Community (EAC) markets. EAC partner states can freely move goods, capital, labor/workers, etc. EAC represents a large market of over 125 million people.
• 90% of Rwanda’s national territory is covered by the 4G network. The country also boasts affordable broadband access.

Geographic Centrality

Despite being landlocked, because of its geographic centrality, Rwanda has a strategic location for business. The Rwandan Government is currently working on expanding trade and connectivity with other East African countries, as well as the rest of the world.

• The Rwandan Government invests a tenth of its annual budget to aggressively develop infrastructures such as roads, rails, and water transport. This is consequently fostering a competitive private sector by reducing the cost of transportation for individuals and cargo.
• Major railway lines are in the works to link Kigali to two of Africa’s largest seaports located in Mombasa, Kenya, and Dar-es-salaam, Tanzania.
• RwandAir, Rwanda’s national carrier offers intercontinental flights to other major business hubs such as London, Dubai, Mumbai, and Guangzhou and is “looking at both, sustaining operations and expanding the airline” post-COVID-19.
• The Rwandan government also plans to build a second airport in Kigali to increase the city’s operating capacity when it comes to passengers’ transportation and cargo freight.

The combination of all the above makes Rwanda the ideal for those seeking to do business or to invest in a new market.

Ecosystem Players

Rwanda’s startup ecosystem has a variety of stakeholders that offer non-financial business support, mentoring, and co-working spaces. Key ecosystem players located in this market include 250STARTUPS, Impact Hub Kigali, KLab, Westerwelle Startup Haus Kigali, African Entrepreneur Collective, Norrsken Kigali, and Iris Hub.

250STARTUPS was established by the ICT Chamber Rwanda to promote entrepreneurship. The 250STARTUPS program fosters the incubation and the expansion of technology startups with financial, legal, technical, and mentorship support. The main objective of this program is to accelerate the funding of the participating start-ups over a period of six months per cohort.

Impact Hub Kigali is part of a global network of entrepreneurs that works with companies from all life-cycle stages. The hub offers entrepreneurs the opportunity to attend or host local events, as well as insight into social innovation.

KLab (Knowledge Lab) is a hub where students, fresh graduates, entrepreneurs, and innovators go to develop their ideas and projects into businesses. The hub offers a mentorship service and hosts events, workshops, bootcamps, hackathons, and networking sessions to encourage partnerships, investments, and financing.

Westerwelle Startup Haus Kigali is an entrepreneurial hub and a co-working space that offers various services such as networking events, private offices, maker-space, advisory services, and international networking opportunities to local entrepreneurs.

African Entrepreneur Collective (AEC) is for entrepreneurs who already have viable businesses and are looking to grow to scale. AEC offers consulting services, practical training, technology tools and capital to entrepreneurs with micro, small, and medium-sized companies.

Norrsken Kigali is an office space/hub where start-ups, incubators, VCs, accelerators, and corporates can work and connect. Norrsken Kigali is centered around creating social development. The hub which was founded by the Norrsken Foundation sponsors memberships for companies that are considered to have an impact and/or that are tech-focused.

Iris Hub is an incubator, accelerator, and innovation center that has the mission to alleviate youth and women unemployment in Rwanda through technology. Part of the Iris Hub is the Iris Accelerator, which is a venture-backed and sponsored accelerator.

Investors

For financial services — smart money for startup growth in Rwanda, entrepreneurs have access to grants, angel investors, pre-seed, debt, and equity investment. According to Briter Bridges, “The investment landscape, especially for early-stage start-ups, is still nascent, and the size of Rwanda’s market tends to keep large capital away. Yet, the implementation of pro-business laws has paved the way to investors.” Some of them include Akili, Alphamundi, Factor[e] Ventures, Zephyr Acorn, VilCap Investments, and Energy Access Ventures

AKILI is a venture that works with entrepreneurs to develop and build businesses. AKILI also offers investment advisory to global investors who want to build, scale, and support companies in Africa.

Alphamundi is an Impact Investing firm that offers debt and equity financing to small and medium companies who are at an inflection point. Alphamundi offers investments ranging from USD 250K to USD 2M to companies that have annual sales of USD 200K to USD 10M. The firm’s investment thesis “relies on the unmet needs of low- and middle-income consumers in Sub-Saharan Africa, and their increasing purchasing power.”

Factor[e] Ventures is a seed-stage impact investor providing capital and hands-on support to early-stage technology companies in the emerging markets.

Zephyr Acorn supports and invests in early-stage companies with innovative concepts. They are usually a company’s first institutional capital. Zephir Acorn mostly invests in companies that are either digitizing traditional business models, using technology to enhance productivity, innovating the distribution or delivery of products and services, or developing customer segments with new products and services.

VilCap Investments provides capital to early-stage companies that demonstrate a social and environmental impact in the agriculture, education, energy, financial inclusion, and health sectors.

Energy Access Ventures (EAV) offers equity investments ranging from USD 100K to USD 8M to startups operating in Sub-Saharan Africa. EAV invests in companies that offer new technology and business models in order to solve the lack of electrification in the region.

Startup Spotlight

A shining example of how startups are thriving in Rwanda is Bag Innovation. The company was named Best EdTech in East Africa by EdTechXGlobal in 2019 and Best Start-Up in Rwanda by Hub Africa (Morocco). BAG Innovation is a digital platform where students from East-African Universities can connect with the business sector to find virtual internships. The platform is a “learning tool for students and at the same time a strong value proposition for companies looking for affordable insights, growth support, and data collection”.

MEST Africa Challenge Country Finals: Rwanda

Join MEST and Microsoft on June 24th, 2020, for the online Rwanda Country Finals of the MEST Africa Challenge. Startup finalists will pitch their business ventures virtually to a panel of expert judges made up of leaders, investors, and ecosystem partners. The best from the Rwanda finals will go on to compete against winners from eight other countries including Nigeria, Senegal, South Africa, Ghana, Côte D’Ivoire, Ethiopia, Tanzania, and Kenya for $50,000 in equity investment and a chance to join MEST’s Africa-wide startup support network. Register to join, here.