There is increasing interest and appetite from international development partners to support start-ups. Part of it is fueled by the interest in being in the game and in the fad without knowing its relevance. Part of it is genuine- we want to leverage private funds, innovation, and technological advancements to solve the critical challenges related to the economy, environment, education, water, sanitation, finance, and the wider inclusion agenda. But given how the development fund is designed, there are some fundamental strategic misalignments and mistakes that I believe are defeating the purpose.
1. The traditional outreach coverage targets will not work for start-up eco-system development projects!
To measure success, aid programs use outreach as a fundamental target. It is of pivotal interest to have high output and outcome targets so that the donor can simply divide the grant money by the number of participants to show higher value for money. As such, we are observing Terms of Reference with targets like 1000 start-ups identified and trained, 500 going to the seed stage, and 100 going to scale! The real number of some of the programs that I have come across is even higher! This is absolutely futile and goes completely against the ethos of start-ups. Outreach, outcome, and output targets for projects working on start-ups cannot be defined in the same manner as in the entrepreneurship development programs targeting, for example, youth skills development. Even if there are 5 successful start-ups coming out of a three-year project, that is already huge! By targeting high outreach numbers, we are stretching resources and making the investment per start-up too thin to make it work!
2. Pre-dominant focus on youth
It appears to me that most grant funds available for the start-up ecosystem are targeting youth, fresh graduates, and university students. This is wrong. We are giving too much hope and making young people crumble. We are destroying the prime time of their lives by selling inflated promises. While there is nothing wrong with promoting youth in start-ups, and we ‘should’ have projects focusing on youth, I would say it should not be ‘almost’ universal. We need to find a balance and open up. Trying to solve the youth entrepreneurship challenge and climate change challenge with one stone may not work!
3. Short tenure
A three-year project that is further broken down into shorter cohort-based phases is too short to have a meaningful impact! If the project is constrained by time, then it is better to put the money into building resources that can serve for a long time.
4. Misguided priority
In addition to point number 3, I must say that our focus is misguided when it comes to defining the project’s focus. How about funding a training institution for founders? How about funding an investor’s club? Start-ups are struggling because of poor technological networks, high operating costs, and human resources. How about solving those with the aid money?
5. Rushing to ride the train
I am observing too much interest to be on the train by any means. Terms like accelerator, incubation, etc. are being put in without any critical thinking. Not all problems in the world will require start-ups as the solution! Form follows function! Let the problem define the solution. Pre-disposed ideas are only likely to fail!
Md. Rubaiyath Sarwar is the Managing Director and Lead Consultant at Innovision Consulting.