Episode 4: Startups and Government

Transcript

Introducing Mohamed Fagiri (Country Director, CEO and founder of Uqudo)

Abhijeet Malik: Hello again and welcome to our podcast series Startups of Today for the Impacts of Tomorrow. An amazing episode that we have today for you is around startups and governments. Why do they partner with each other? How can they benefit from any collaboration? What are the things to keep in mind? And as usual, we have two guests to discuss this topic with us. I'm very happy to announce we have Mohamed Fagiri, who is the CEO and founder of Uqudo. Mohamed, welcome.

Mohamed Fagiri: Welcome and thank you.

Introducing Yves Iradukunda (Permanent Secretary of the Ministry of ICT and Innovation, Government of Rwanda - Ministry of ICT and Innovation)

Abhijeet Malik: And we have Yves Iradukunda, who is the Permanent Secretary of the Ministry of ICT and Innovation, Government of Rwanda. Welcome, Yves.

Yves Iradukunda: Thank you for having me.

The Role of Startups and Innovators in Driving Economic Growth and Job Creation

Abhijeet Malik: I'm just going to start immediately by asking, as I was very excited about this topic, Yves, why do governments want to work with startups?

Yves Iradukunda: Thank you. That's a very interesting start to our episode today. To my knowledge, there is no country that I know that has achieved economic prosperity without entrepreneurs, startups, innovators and MSMEs [Micro-, small and medium-sized enterprises] - companies that are focused on innovating and solving problems and, as a result, create jobs and wealth for the people. I think for any government, it's imperative that startups and innovators are given the space to be able to drive that economic growth from that perspective. If you're a government that is looking at creating wealth for the people and achieving prosperity, if you're looking at being innovative in how you solve your challenges, whether it would be health care, education, food, security, and many other aspects (especially in these technology driven world where a lot relies on technology), you really want to create a space for startups. But also, as I mentioned, job creation; I think for a country like Rwanda in particular, where we have a very young population and a very young private sector, startups will play a critical role in our socio-economic growth. Job creation is very important. Ultimately, you want to have a society that is socially cohesive. I think startups do play a role so that citizens in general feel they're able to contribute. Citizens, entrepreneurs and small companies are able to use their means to create that economic growth and in return have a social impact.

The Importance of Collaboration Between Startups and Governments for Impactful Change

Abhijeet Malik: Thanks for that, Yves. I'm actually going to come back to some of the points you mentioned there, which are really interesting. But before that, I'm going to get the startup perspective. Mohamed, even more interesting for me than hearing about that from the government, is hearing about that from the startups: Why would startups prefer to work with governments?

Mohamed Fagiri: Thanks, Abhijeet. I wouldn't say prefer; I would say it depends more on the situation, or on what makes us as startups work with governments. You look at startups and entrepreneurs, which are there to make an impact. And sometimes, that impact (directly or indirectly) will result in an involvement with some government services. To have that change or that disruption that you're looking for, sometimes there is that government impact. So, depending on the market or the problem that you're trying to solve, you will end up in situations where you have to address some of the challenges. Sometimes these challenges that you're trying to address are beyond the enterprise, so you need to either collaborate or have a common understanding between startups and governments. What Yves mentioned earlier is extremely important, which is that governments must be open to collaboration as well. I think we're going to cover a lot of these points during the discussion today.

The Role of Identity Verification in Enabling the Digital Economy and the Importance of Collaboration with Governments

Abhijeet Malik: Thank you. Mohamed, staying with you on that because it's interesting what the two of you have said, being that there could be a range of reasons why startups and governments collaborate: Were there any such experiences for Uqudo, regarding what Uqudo wants to do? And was there a commonality of interest when you found a government that was beneficial to work with?

Mohamed Fagiri: Our main business is the identity space, so anything that has to do with onboarding, verification and authentication. And these things, as you can imagine, are very close to governments and government services. You cannot have the ability to make a true change through technology, without the ability of being able to verify and understand who you are dealing with. And this is where you will have to have that interaction with the government for them to understand what you are trying to achieve and how you are trying to solve an uncommon problem. It's a national level challenge. Whether we’re talking about the Middle East, Africa or another region; we are facing the same challenges. How can we enable the digital economy, especially after COVID and the lockdown, where we end up looking at ways to be economically active again?

The Role of Government in Promoting Innovation Across Various Sectors for Economic Acceleration

Abhijeet Malik: Thanks. Yves, you mentioned a few reasons why governments would like to work with startups, for example societal aims that the government might have. What has been your experience working at the Rwandan Ministry for ICT? Have there been relationships and other examples that have benefited society?

Yves Iradukunda: Absolutely. It happens to be that part of our mandate here at the Ministry: to promote innovation across the board, not just in technology, but also in other sectors. Of course, technology does play a big part in helping to accelerate the economic sectors. We've had innovations taking place in the health care system. One of the more successful examples that is known globally, is a company called Zipline. They set up a use case for drones by delivering blood to remote health care facilities. This has saved lives and also reduced the amount of blood wasted due to storage and transport challenges. We've been looking at innovative startups that can come and work with the government in respective sectors. This is just one example, but we have many others in transportation. We have further examples in education and agriculture, where we are looking at solving some fundamental challenges that we are facing.

Fostering a Conducive Environment for Startup-Government Partnership: Policies and Programs

Abhijeet Malik: Something that I find very powerful about this conversation is the fundamentally transformative nature of these partnerships that take place. But one question that's still in my mind is: how do the two sides find each other? I'm going to start with you, Yves: as a government, you have your mandate and you'd like to solve some challenges. How do you find the right startups? Do you have to go looking for them? Do you wait for them to come looking for you? How does it work?

Yves Iradukunda: Thank you. That's a very interesting question. In this context, it's been really the government recognising that, to achieve economic prosperity, we're going to have to hand hold the process in which startups get engaged with the government, to bring the solutions that we need to solve some of the challenges that we are facing. We understand that a startup has to have a strong value proposition vis-à-vis what we are trying to do as a government. We also have to have startups that are committed to understanding the context of the government and religious institutions. The startups also need to understand that while there are multiple ways of partnership with a government, it ultimately has to be a forward-looking and long-term commitment. As opposed to solutions that have a public track record that have been implemented in multiple contexts. Usually, we are engaging with startups that are just trying out their first use case. There has to be that forward-looking core belief in the partnership. In this context, we also have to create a conducive environment, whether through policy or through regulatory framework.

We have, particularly, a policy geared toward public procurement for innovation. I will talk more about this later, but essentially we allow startups to participate in the public tendering process. Previously, public procurement would privilege mature companies. We're creating an environment that, from a policy point of view, allows startups to take part in this process. Of course, we also want to make sure that we, particularly as the Ministry in charge of innovation, engage different government agencies to allow visibility of the progress that entrepreneurs and the startup community are making. To some extent it's a matchmaking approach. We also do competitions that are sector specific. We have a structure that allows the Ministry to be embedded in other sectors through roles that we call chief digital officers. These are people that are really working hand in hand with other sectors to make sure that we are looking at the startup community so that we will be able to work with them. I think that while startups have to present a strong value proposition, we've also understood that we have to create policies and the procurement processes that give a chance to young, new startups.

Navigating Government Procurement as a Startup: Challenges and Opportunities

Abhijeet Malik: Thank you. Some great pointers there, especially as some of our viewers are from the public sector, and we will come back to those points. Mohamed, startups that may be watching this episode could be thinking that it may be good to work with a government, but if you don't mind telling your story, how did you start working with the government and the public sector?

Mohamed Fagiri: For us, the start was through consultancies and through initiatives from the governments that we were looking for. Addressing the question: How do you actually have that first engagement? Well, the word startup itself can have a very negative connotation in the government. Sometimes, there is a lack of understanding from a lot of governments. I think we also have to distinguish between the forward-thinking governments, as we can see here with Yves and with Rwanda, and other governments where there is still a lack of understanding of the value of entrepreneurship and problem solving. I’m talking generally because I know that Yves will miss some of the points I'm going to raise, as there's a lot that's been happening within Rwanda. But the first point I will pick up on is the point that you mentioned about procurement. Today, if you look at the startups, you're looking at SaaS companies that mainly look to create their monthly recurring revenue. But if you go to a government, it wants to procure for the next five years. They want to have an understanding how much it will cost us as a government in the long run. That goes against everything that you are building as a startup.

Planning far ahead also goes into the core of your business model. And that's something that you have to understand how to deal with. We have also had these challenges at the beginning. I remember we had a tendering process with a semi government entity. They had a very strict tendering process where they had about 30 detailed items that needed to be broken into the hardware and the operating system. We broke down the cost of an item and installed it. However, that got people extremely upset and angry to an extent that we've been told that we don't respect the process, we don’t respect the government. But again, that was in our early days. Since then, there has been a complete change regarding how we reduce cost, how we bring in innovative modules, and how we can even help governments reduce prices. So for that we had to look at business models procurement. Generally, there is a different culture in startups and how we want to move things very quickly. As a startup you want to build things quickly, and some things might break while you're building.

The other point is that the government is the complete opposite. I want to make sure that what I'm procuring today is going to serve its citizens and everyone else. Another big differentiator between government and startups: As a startup, usually you have a well defined group that you are targeting and you're working to provide services to that group. I don't have to provide my services to everyone, but we have customers that we are building our solutions towards, and these are the ones that help you to grow. We recently became involved with one of the governments on an election program. We're doing elections digitally and on the phone, there are no polling stations. And one of the things that we have to address is that, everyone, without exception, has the right to vote. If you cannot vote digitally or on the phone, there are no polling stations to go to. So you have to think of every single scenario, for example of people who haven't got phones. I remember during one of the tests, we had some people over 100. We had a 105 year old that within the system was considered underage, so he wouldn’t have been allowed to vote. These are small things that usually you wouldn't think of as a startup, but you have to think of them when working with a government.

Another example with the election. We do verification, we do the process of lifelongness detection, we make sure that the vote goes through, and we do a number of checks.
One of the checks is we need to make sure your eyes are open. We had blind people who wanted to vote. That means: when we build our solutions as a startup, we want to build it for a defined group of people, for example people between the age of 23 and 25. The target customer can be a male or a female, for example, and it can be very targeted, in a very niche market, with very specific economical affordability. That is actually the complete opposite when you're dealing with a government. You have to provide your services to everyone. And there are other points that we can touch upon later.

Working with Governments: How Startups Can Navigate Bureaucracy and Find Success
Abhijeet Malik: So, Mohamed, that's very interesting. It may not be all good stories everywhere, right? There are some challenges for startups and governments to work together, so what would be your advice? How did you get around some of these procurement challenges and culture differences in this case, but also other cases that might be interesting for startups that may be listening? Maybe they are working, or wanting to work, with governments that may not have the public procurement policy as Yves outlines the Rwandan government has. What would be your recommendation?

Mohamed Fagiri: I think the number one recommendation is to look at the government agencies. We're seeing more and more governments start to adopt programs to incentivize startups, which can be accelerators, for example, that are linked directly or indirectly to the government. What we found extremely effective is to work with well established organisations. We built a very strong partnership network around very respected organisations. Rather than us going directly to the government, it can be part of a wider proposition. That trusted partner, which is usually a trusted partner within the government as well, or one of the major providers of technology, or otherwise has access to the government, will be responsible for the due diligence. They will also give the assurance to the government that this is a viable solution. We stand behind it. And that helps in a lot of cases. It has its drawbacks and limitations. But what we found is that this is a very strong way to enable you to go work with a government. And while you're doing that, you have to be extremely patient. And I think the most important thing and the most important advice for startups is to prepare for a very long winter when you're working with governments.

You have to. Things go at a much slower pace for a number of reasons. Bureaucracy in government is not always a bad word, by the way. There is a reason for that bureaucracy. There is a reason that you have to get all of these approvals, all of these checks and balances. Again, the blood example in Rwanda: There are people's lives at stake. You cannot cut corners. We are used to cutting corners, right? It is part of our nature to deliver as quickly as possible, but you cannot do this. For us, the way that we prepare for that long winter, we do not account for our government project when forecasting our growth numbers, for example. We look at it like black swans (and they do happen). We're very lucky regarding the number of opportunities and the number of projects we work on, but they are there.

Make sure that you have other income means or that you have a product. We have our product that we are providing to the enterprise, and we're also going at the government pace as fast as possible, but we understand these limitations that we are working with.

Building Trust and Collaboration: Creating a Framework for Government-Startup Partnerships

Abhijeet Malik: Okay, that's great. Thank you. Yves, one of the points that Mohamed mentioned, I'd like to take that up with you. So, you have a startup that comes in with a very innovative solution, something that you, as the representative from the government, can foresee is going to benefit society. How do you collaborate and co-create with them? Because their solution, as Mohamed is saying, sometimes could be a very targeted niche solution for a particular group of people. How do you make that broad for the rest of society and to tackle a wider group? What is the role that you would recommend governments and the public sector can play in that?

Yves Iradukunda: Thank you. I think Mohamed, you're right. Typically, the processes of procurement, how it typically works, is that we have to define what we need. We create terms of reference, we launch a tender and people express interest. The alternative is that as a startup, you come to the government and you pitch a solution. First of all, if it's not in my plan and I don't have a budget for it, it's almost pointless to have that conversation because even if I like the solution, I'm not necessarily looking for that solution, if that makes sense. We've had to be creative around how we start introducing these new ideas and what are the framework of adopting these solutions into our processes. Because if it's simply relying on making a plan and creating specifications, and then going out there to acquire a solution, the startups will never have a chance because the requirements that are in place are prohibitive. For us it means really investing upstream, starting with rolling out incubation centres because we really want to build the trust element. Usually these startups are providing solutions that, again, either put the client first or the customer. And then the government usually would be risk averse, especially when you're dealing with public finances.

And so what we want to create within our ecosystem is a process where, even when these innovators are coming up with solutions, they are within our network, within our ecosystem, and we can actually play an active role in guiding them on how their innovations and their applications can be solving certain problems. And from there we think about, okay, if it's not going to be a direct procurement process, can we look at public private partnership where we have a long time engagement in how we roll out the solution? And can we look at a model where there’s a commission based fee, where the service is delivered and the fee is paid as the service is delivered. Data has been instrumental in our journey for digitization because not all the time the government has to invest 100% in acquiring the solution. We can actually leverage the work that has already been done to say, Okay, what if we enter into an agreement and then as we use the service, you get a fee? This is to eventually hand over the solution to the government or to figure out a different business model.

I think, again, what's important is to build trust. If Mohamed goes to my government and is pitching a solution, how do I know that this is indeed a credible solution, a credible partner that is also looking for a long-term commitment? Is this a solution that we are able to utilise? We are mobilising the understanding across different government agencies that we don't always have to first mobilise the funding and define what we want to engage with innovators, but we can actually bring our challenges out to the startups and ask them about how we can implement a solution. Whether we acquire that solution, whether it's a PPP model that we set up or whether it’s another business model that allows us to bring the service to the citizens. Ultimately, what's been helpful is to accelerate how fast we can solve the challenges and how fast we can improve the services we're delivering to the citizens. Mohamed, I think you're right when you say that some of these processes are designed to have accountability, especially to the government as we are using public finances. We have to be accountable for all the resources we use. It's really about building different approaches and processes that allow us to be a partner to the startups to be able to achieve our goals.

Empowering the Startup Ecosystem: Encouraging Change and Collaboration

Abhijeet Malik: Very powerful points that the two of you are making. I find it really insightful. We're coming towards the end, so I'm going to try and end the conversation by asking your final pieces of advice. I'm going to start with you, Mohamed. What I'd ask you, the two of you is, what would be your one advice for governments and one advice for startups in terms of how they can work together and maximize that collaborative potential between the two? Mohamed, over to you.

Mohamed Fagiri: I'll start with the startup and I will say something I've said earlier: prepare for the long winter. Just to elaborate on that: If you're looking at some of the changes in your business model, the PPP models, the collaboration etc., then be open minded and be more understanding of the value that you will bring. And to governments: If you look at technology built by startups, a lot of the change we're seeing today is being built in garages. Be part of that and encourage it. We're seeing a lot of countries are encouraging startups and the startup ecosystem. I was in an African country recently that has small businesses and innovation, and it is fully focused on the startup ecosystem and on empowering it. My message for governments is that the impact that these startups would bring into the ecosystem cannot be measured.

Building an Ecosystem for Government and Startup Collaboration

Abhijeet Malik: Great. Thank you, Mohamed. Yves, your piece of advice?

Yves Iradukunda: Thank you. First of all, allow me to say that I don't think there is meant to be a one size fits all approach to all governments or all startups that are trying to solve (even sometimes similar) problems because everyone is operating within their own context. Something Mohamed mentioned, you have to be open minded and adaptative to those constraints and challenges. Regarding both the government and the startup, I think we need to build an ecosystem that allows everyone to do their part. That is what governments can do from a policy and regulatory framework approach. Also, importantly, there are partners from the private sector that are really eager to support the job creation process. What has worked for us, especially when it comes to early stage startups, is leveraging either its technical support or financial support at the early stage, to push these startups forward and to find use cases that really make sense. I think some problems may make sense for startups to engage with. Other things may not make sense depending on the complexity of financial muscle and the sophistication of the solution that is needed.

It's really within the national strategies to say: What can we achieve by mobilising the youth, the young startups, companies, versus what we need to go out to find a company with proven expertise? That balance has to be intentional. It cannot happen in a vacuum. My encouragement to governments, and I think this is what we are learning in the process as well, is to learn from other established ecosystems and prosperous countries that have been able to execute similar approaches. And again, I want to encourage governments to be open minded even when we are in public service as we are accountable to the citizens. We should create pathways that allow startups to succeed. I think, again, if we put the citizens at the forefront, then startups should also be regarded as a part of creating socio-economic prosperity for our people.

Abhijeet Malik: Thank you, Yves. I found this discussion powerful, insightful, and really interesting. To our viewers: I really hope that you found this episode and our discussion interesting as well. And if you'd like to join us for these discussions, make sure to watch out for our next episode. Make sure to subscribe so you get notified when the next episode is dropping. I'm going to end today by thanking our two guests, Mohamed and Yves. Thank you very much for joining and for sharing your ideas and experiences with us. As part of our podcast series Startups of Today for the Impacts of Tomorrow, thank you.

Mohamed Fagiri: Thank you. I appreciate it.

Yves Iradukunda: Thank you for having us.