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Innovation’Act to Boost the Startup Ecosystem in Tunisia

The adoption of the Innovation’Act bill remains an emergency to promote the results of the Startup’Act law, develop the startup ecosystem, and boost their contribution to the national economy.

The Startup Act initiated the concept of startups promulgated in 2018 and entered into force in April 2019, with the granting of the first label, but this framework did not anticipate the next phase, explained Oussama Messaoud, president of the TunisianStartups Association, founded in 2016 and which aims to be the voice of the startup ecosystem in Tunisia, cited by the Tap agency. 

Startup Act achieved its goal by creating the first pool of startups (around 1000) based on innovation and scalability (ability to adapt and grow efficiently in response to an increase in demand for products or services), but today we have the impression that the ecosystem is “a louse left behind”, hence the urgency of updating the law in question, insisted the activist. To recall that following this observation, a task force bringing together the public and private sectors composed of the Ministries of Economy and Planning and Communication Technology, the Agency for the Promotion of Industry and Innovation, TunisianStartups and several other stakeholders, worked, in 2022 and 2023, on the update and development of Startup Act.

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A framework more suited to innovative companies

Called the Innovation Act, this bill, developed through a participatory approach, aims to be a framework that is a little more suited to startups and innovative companies.

Indeed, investing in startups, a model based on risk-taking with a very high potential return on investment that has proven itself in several countries, is not a priority for local investors.

In addition, the current legal framework (Startup’Act/exchange regulations, etc.) does not make it possible to attract foreign investors, Messaoud said.

For the startupper, the absence of international financing mechanisms and the narrow size of the Tunisian market are at the origin of the emigration of several Tunisian startups seeking to mobilize international financing from foreign investors to develop.

Several countries have copied the Tunisian law and have been able to move forward, underlines Messaoud, believing however that it is time to improve and move things forward to move to another level favoring the valorization of achievements and catching up with the delay to the world given that it is no longer possible for certain startups to continue to develop and operate from Tunisia with an outdated regulatory framework.

A new wave of measures

In this sense, the bill provides for a new series of measures that will make it possible to relax procedures to guarantee more impact and to rely on innovation to emerge from the crisis since it (bill) concerns not only startups but also innovative companies.

Indeed, the new project proposes, among other things, to introduce new activities, especially since several of them are either prohibited by law (drones) or overly regulated (fintech), hence the impossibility of innovating. , says Messaoud. And to add that this will be made possible thanks to the creation of sectoral Sandboxes, like the one created at the Central Bank of Tunisia (BCT) to test innovative financial solutions before validating them.

The bill also provides for new financing mechanisms adapted to startups and meeting international standards.

Regarding the attraction of world-class talents, the project provides for the granting of talent visas while facilitating procedures (online platform with rapid response), to allow Tunisian startups to recruit foreign talents to to benefit from their expertise.

It also covers incentives for Tunisian skills (employees of startups and innovative companies) to promote the retention of Tunisian talent.

For example, the bill mentions the payment of part of salaries in foreign currencies and the possibility of accessing participation in the capital of the startup (stock options) via a participation plan according to the objectives or in the company’s foreign subsidiaries.

Digitalization and simplification of procedures

The bill also provides for the creation of legal forms specific to startups instead of the current legal forms, namely the Limited Liability Company (SARL), the Single-Person Limited Liability Company (SUARL), and the Public Limited Company (SA), which are not very suitable.

Indeed, explains Messaoud, the governance of Sarl and Suarl is not too formalized (shareholders and manager), while the SA is too rigid for startups. “We have proposed more simplified forms such as simplified joint stock companies (Sas),” said the president of Tunisian Startups.

The bill also proposes the creation of specialized investment funds that are more suited to startups and innovation with simplified conditions. These are regulated funds but with few procedures accessible via a digital platform.

The funds that currently go through the Financial Market Council (CMF) are not very suitable for startups. They are more used to investing in the industrial sector and large companies, says Messaoud, who also points out that part of the bill has been reserved for the post-label phase, which is limited in time.

The startup no longer has a Startup Act label because it failed in scalability because it did not comply with the law because the validity of its label (8 years) has expired, or because it has succeeded and expanded (more than 100 employees and more than 15 million dinars in turnover).

If successful and the label deadline expires, it is no longer considered a startup but rather an innovative company.

During this phase, several advantages are withdrawn including that of the payment of employee and employer contributions by the National Agency for Employment and Self-Employment (Aneti) or the holding of a foreign currency account, recalls Messaoud, believing, however, that these advantages which allowed the startup to grow will have to be withdrawn gradually to avoid its destabilization while allowing new labeled startups to benefit from them.

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