The GEN Atlas Policy Deep Dive explores several examples of the same policy introduced in different countries. By drawing out the subtle variations in approach and highlighting innovative ideas, we hope to learn more about the most effective approaches to policy making and offer a roadmap for other policymakers to learn from.
Startup Acts are comprehensive legislative instruments that are designed to foster the creation of startups and empower entrepreneurs. Although the specific measures included in Startup Acts vary significantly from country to country, Startup Acts are linked by their core objective and provision of incentives tailored directly towards startups as defined separately from other kinds of businesses.
Startup Acts have emerged as a popular option for Governments – especially in Africa – seeking to develop their entrepreneurial ecosystems in a top-down way that avoids the pitfalls of implementing a complex range of programs that cut across ministerial and departmental portfolios. By contrast, the Startup Act provides central coordination and clearly outlines where program responsibilities lie.
The concept originates from Italy where the very first Startup Act was legislated in 2012 during the administration of Mario Monti. However, it is the development of the Startup Acts in Africa and Latin America that has generated serious momentum for the concept with nine startup acts passed since 2017 and several more in Africa on the horizon including in South Africa and Mauritania.
Amongst the 100+ new and updated policy case studies recently published on GEN Atlas, there are 9 Startup Acts featured including those from the Philippines, Spain, Italy, Tunisia, Nigeria, Senegal, Brazil, Argentina and Colombia. It’s worth noting that the Latin American examples do not use the Startup Act branding, however, each example contains the core characteristics of a Startup Act.
The first core feature of any Startup Act is the defining and labelling of startups to distinguish them from other business entities. A new report for the Innovation for Policy Foundation has detailed the differences in approach, noting that age of business and degree of innovativeness/growth potential are the key criteria used alongside size of company, annual turnover and capital requirements.
Of the nine case studies featured on Atlas, only Argentina does not have an innovation requirement. Of the remaining 8, Brazil sets the lowest bar for turnover (roughly $3.2 million) whereas the Philippines, Nigeria and Senegal set no limit. Italy/Spain have the most restrictive age definition with the bar set at less than 5 years with Brazil and the Philippines have no age limit for startups.
The second core feature of Startup Acts is that companies labelled startups are able to secure benefits and incentives unavailable to other companies. However, there are huge variations in scale and type of support available in each country that we are going to explore further. Using the eight key themes identified by GEN Policy to analyze each piece of legislation we see that only measures targeted at Finance and Regulation are featured in every Startup Act with the other six themes are present in at least one of the nine Startup Acts.
Access to Finance
Ensuring that startups and scaleups have access to the right amount of capital at the right time is widely seen as the single biggest challenge facing policymakers and this is reflected in the presence of policies and programs targeting this problem in every Startup Act. There are three main approaches to this. Firstly several Startup Acts contain pots of funding to be distributed via grants with the most generous of these existing in Tunisia and the Philippines. By contrast, the New Startup Law in Spain contains only tax incentives to promote investment in innovation and technology firms. The final approach is to make it easier for Startups to secure loans either through a loan-guarantee scheme in Italy or through convertible loan agreements in Brazil.
Regulation
Besides simplified business registration that features in every Startup Act, other common measures include: cuts to red tape, elimination of registration fees, exemption from taxation, flexible business structures and simplified business liquidation. In addition to this Spain, Colombia and Brazil each used the legislation to establish frameworks for the regulatory sandboxes.
Market Access
The third most popular measures related to increasing opportunities for entrepreneurs to access new markets, although Italy, Nigeria and Argentina focused their efforts elsewhere. In particular, Brazil, Colombia and Senegal launched measures to open up procurement processes to startups. The Tunisian Startup Act contains a series of measures aimed at supporting Tunisian Startups enter international markets, while Spain and the Philippines used the legislation to introduce new visa programs.
Ecosystem & Economic Development
Several Startup Acts include measures that reach beyond supporting just entrepreneurs and aim to bolster the wider ecosystem. In particular the Argentinian and Colombian Entrepreneurship Laws includes funding for accelerator programs and measures to strengthen entrepreneurial institutions. Uniquely, the Nigerian Startup Act creates a One-Stop online portal that facilitates efficient access to support programs and directs startups to other ecosystem resources.
Policymaking
Some of the most innovative ideas contained within Startup Acts have been in the field of governance and policymaking. Most notably the Nigerian Startup Act provides a framework for co-creation of regulations between government and the wider ecosystem. The Act established the Council for Digital Innovation and Entrepreneurship, whose primary role is to formulate policies that are friendly, clear and well planned. It also has scope to give direction for the harmonization of laws and regulations affecting startups. Similar innovations in governance have taken place in the Philippines and Senegal.
Science, Technology and Innovation
Both the New Startup Law in Spain and the Senegalese Startup Act contain measures to incentivize R&D spending, while the Argentinian Entrepreneurs Law contains a specific technology development fund. Notably absent from the majority of Startup Acts are measures to increase digitalization of government services.
Other Themes
The two remaining themes “Education + Skills” and “Inclusivity + Culture” do not feature in the vast majority of Startup Acts, however, a portion of the Colombian Entrepreneurship Law is dedicated to improving enterprise education in schools and wider training for entrepreneurs. Similarly, the Tunisian Startup Act aims to open up entrepreneurship to a wider segment of society by providing “Startup Leave” and founder stipends.
Policy Development
Outside of the measures contained within Startup Acts, there has also been some intriguing approaches to policy design. In several African countries including Nigeria and Senegal, the legislation was designed through a participatory process involving the collaboration of different stakeholders in the entrepreneurship ecosystem. In Senegal, over 1000 citizens were consulted through a 19-month process developed with the Innovation for Policy Foundation which allowed those directly affected by the policy to participate in the drafting of new laws alongside analysts and professional policy advisers.
Assessing Impact
One area of weakness for the Startup Acts featured is a lack of rigorous impact assessment built into the policy process. Only Italy reaches GENs highest level of policy impact through its annual impact assessments which include independent analysis of the economic impact of the legislation. Tunisia also publishes annual reports; however, these only follow a limited number of metrics such as labels awarded and lacks an assessment of wider economic impact.
Most of the Startup Acts featured are relatively recent pieces of legislation so it is possible more evidence of impact will be forthcoming. Nevertheless, it is clearly an area that could be improved in the policymaking process and one that other nations seeking to emulate the Startup Act phenomenon should be attempting to improve upon.