Updated ICT policy will support local innovation

Last week the Ministry of ICT published a revised ICT policy which may shed some light on the relationship between ICT and innovations. FILE PHOTO | NMG 

By CATHY MPUTHIA
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Summary

• The first sizeable investment into Facebook was a $ 500,000 (about Sh50 million) by angel investor Peter Thiel.
• This investment was in exchange for 10.2 percent equity in the company and was structured as a convertible note.
• The founders of Facebook took the deal and were able to grow their company.

From a humble beginning Facebook has grown to be one of the world’s best performing companies. Its success story is every techpreneur’s dream and I am sure a lot of of them find a lot of inspiration in the social media giant’s story.

The first sizeable investment into Facebook was a $ 500,000 (about Sh50 million) by angel investor Peter Thiel. This investment was in exchange for 10.2 percent equity in the company and was structured as a convertible note. The founders of Facebook took the deal and were able to grow their company.

Over the years and with several rounds of investment, several investors came on board such as Accel Partners with a $12.7 million capital investment. This was in the form of venture capital. Other investors included Greylock and Meritech and it took a series of investment rounds before Facebook could grow into what it is today.

I have met several techpreneurs whose main problem hinges on funding. Some have very high expectations when they seek funding. They want a sizeable first round of investment and are seldom willing to dilute their equity. They at times have a misconceived notion that they call the shots when it comes to funding and are therefore not able to compete effectively for funds. The result is that investors loose interest spelling the end of promising innovations. This would not have been the case if the techpreneur was a bit more flexible and patient.

As the Facebook story demonstrates, innovation funding comes in rounds. The first round is usually a small amount but that will enable the techpreneur grow the innovation to a size it can attract venture capitalists and grow all the way to being listed at the stock exchange.

Last week the Ministry of ICT published a revised ICT policy which may shed some light on the relationship between ICT and innovations. I am happy that finally there is an in depth recognition of the importance of innovation in job creation. While policies are not laws and do not form the legislative environment, they are likely to provide some guidance on the way forward. I also believe it is not possible to legislate every aspect in technology as the changes happen so fast. Perhaps this may be the reason that ICT laws do not cater for every technology.

The policy has several objectives. However, I will focus on the goal of innovation. The main objective is to support transition for citizens from traditional ways of working to more innovative and digitally enabled methods. The policy comes at a time when Covid-19 has forced this shift. More businesses have been had to become digital due.

The thrust of this policy is to encourage the government and private sector to purchase home grown ICT solutions and opt for Kenyan solutions through procurement. This means there will be a larger demand for Kenyan ICT solutions and will perhaps spur more innovations.

Innovation funding methods have also been proposed. One is to have pre-prototype and start-up funding for new innovations. Currently it is very difficult to fund pre-prototype innovations due to the high risk. I am glad that there is a consideration of pre-prototype funding, meaning innovators will get early growth support to scale up.

Venture capital has also been proposed for innovation funding. I hope the government will consider giving incentives to venture capitalists who invest in ICT start-ups so as to attract funding.

Home grown innovations spur economic growth.