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iceaddis: Building Ethiopia’s Startup Ecosystem

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With a community of 14 startups, iceaddis may seem like a small coworking hub, but it is more than that to the startup ecosystem in Addis Ababa, Ethiopia. As a technology and startup incubator, iceaddis is helping to solve real-world problems facing the region.

Cofounder and Manager Markos Lemma shared with 1776 his view of the startup ecosystem in Ethiopia and the impact it will continue to have on the economy.

What challenges do startups in your ecosystems face? What change or resource do you think could have the biggest impact in helping them be successful?

We are a growing ecosystem, but currently, the startups in Ethiopia have lots of challenges. When we launched iceaddis in 2011, the Internet penetration was only 0.4 percent. Now, it reaches 8 percent.

Though there has been a lot of progress in the last six years, the Internet infrastructure and service isn’t keeping up with the needs of the startups or the consumers.

Seed funding and starting capital is a big problem as well. Only a handful of Ethiopian investors are interested in putting money into startups. Some of them ask for 70 percent of share for that. Access to funding is a big challenge for Ethiopia, especially compared to Kenya, for example.

We have a lot of policy-related challenges. Registering a business requires a physical space, and this is a requirement before the business starts. So, the startups don’t even have a chance to test their products, and the taxation system is quite unsupportive for young entrepreneurs.

The sector also isn’t a priority, and among other challenges, the culture of celebrating successful entrepreneurs isn’t developed.

Building a vibrant ecosystem requires a lot of resources, and making business easy is the first step. This is also done by facilitating easier business registration and closing, clear instructions of what’s needed (access to information), and mentorship that brings the biggest impact as well as early stage seed funding.

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What role can local government play in strengthening your startup ecosystem?

The government drives economic development in Ethiopia. Primarily, prioritizing the startup sector helps a lot. The government can play a key role by providing organizations — like iceaddis — with promoting foreign direct investment in this sector as well as having smart policies.

The government can also support putting some basic infrastructure in place like enabling mapping (which isn’t possible right now), setting up early stage seed funding, accelerating Internet penetration, and having a clear and transparent business environment.

What impact do you see the startup ecosystem having on the local economy?

SMEs, or small and medium enterprises, play a great role in diversifying the economic development opportunity. Small businesses hire more people than traditional businesses in the Ethiopian economic scale. Once we create highly scalable startups, it will not only help us to grow the country but also increase human development.

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Given the challenges Ethiopian startups face, the opportunity to work with the government to support startups, and the positive impact startups have on the economy there, iceaddis and its coworking space are integral to driving the region forward. By supporting innovators and entrepreneurs and giving them a space to collaborate, network, and share their ideas, iceaddis will continue to work on increasing human development and overall quality of life in Ethiopia.

Applications for Challenge Cup Addis Ababa close June 30, and startups can apply through UNION here.