Nigeria has the highest volume of startups in Africa. Consequently, having observed the reverberating growth of startup companies in Nigeria, the government deemed it fit and expedient to formulate and enact a law that will provide a regulatory framework for early-stage Startups to be able to compete with its counterparts, thereby creating a friendly atmosphere for competition and by extension, contributing to the economic welfare of the nation. The Startup Act signed into law by H.E. President Muhammadu Buhari on the 19th of October, 2022, seeks to address the problems facing a newly incorporated tech company and as a matter of fact, the Startup Act is tilted towards tech companies for technology advancements.

Notably, the provisions of the Startup Act is only applicable to tech companies who have been given the status of a Startup label. A Startup label is a certification or license showing that a business is tech-enabled, allowing them access to the incentives provided under the Act. In order to qualify for the status of a Startup label, there are several criteria to be met and these are: must be a registered company under the CAMA and has been registered for a period less than 10 years; its objects are innovation, development, production, improvement, and commercialization of a digital technology innovative product or process; it is a holder or repository of a product or process of digital technology or the owner or author of a registered software; it has at least one-third local shareholding held by one or more Nigerians as founder or co-founder of the startup; in the case of a sole proprietorship or partnership, it satisfies the conditions set out in paragraphs (b), (c) and (d); and a pre-label status is granted for a period of six months to enable the sole proprietorship or partnership comply with the conditions in (a) to (d).

KEY PROVISIONS AND IMPACT ON EARLY-STAGE STARTUPS

The Act was designed in such a way as to ensure it creates more opportunities for startups, especially early-stage ones to harness the benefits and opportunities through the Startup portal. Some of the key provisions identified in the Startup Act are:

PROVISION OF FINANCIAL AIDING SYSTEM

Essentially, the startup Act enables Startup companies to easily access finance after meeting the prerequisites of a Startup label. Furthermore, several sources of funding as stipulated in the Act include: Startup investment seed fund fully managed by the Nigerian Sovereign Investment Authority through which Ten Billion Naira will be disbursed on a yearly basis source of which is to be determined by the National Council for Digital Innovation and Entrepreneurship; grant and loans from the Central Bank of Nigeria and other statutory bodies empowered to help Small and medium-scale enterprises; credit guarantee scheme; and funds through crowdfunding intermediaries.

PROVISION OF TAX INCENTIVES

Also, the Act provides for the establishment of the startup innovation clusters, hubs, and physical and virtual innovation parks in each state of the Federation to aid the activities of the startups. The importance of this inscription cannot be overemphasised as it tends to provide a healthy atmosphere and an unending growth to the tech ecosystem. By aforementioned provision, Startups will be given an opportunity to collaborate with the government, private individuals and other corporate entities recognised internationally. Furthermore, this will spur the growth and development of technologically related innovations through the provision of comprehensive resources to do research, further advance the innovation and advertise it to the world to attract foreign investors.

PROVISION FOR A NIGERIAN FOUNDING MEMBER

Consequently, most tech companies established in Nigeria are usually founded by foreigners and, most often not managed by foreigners as well. The provision of the startup Act expunge this practice by stating that at least, one of the two founders of a company should be a Nigerian. This provision immensely encourages talented individuals to showcase their ideas by establishing Startups that edifies the tech ecosystem which, by extension, contributes to the expansion of technological innovation in Nigeria.

CONCLUSION

In a nutshell, early-stage Startups can immensely benefit from the newly enacted Startup Act which seeks to address the problems facing newly established tech companies. This piece of legislation is undoubtedly a laudable initiative as leveraging on its provisions will enable tech companies to be able to stand at the forefront globally.

DON'T FORGET TO LIKE, COMMENT & SHARE