The Ethiopian Startup Proclamation No. 1396-2025 establishes a formal legal framework to accelerate national economic growth by fostering a conducive startup ecosystem. Administered by the Ministry of Innovation and Technology and overseen by a National Digital Economy Council, the law defines “startups” as innovation-driven entities focused on scalability and market-changing products. To access specific government incentives, such as the Startup Grant Program and a credit guarantee framework, businesses must obtain an official Startup Designation, which remains valid for two years and up to a maximum of eight. Additionally, the legislation recognizes Startup Ecosystem Builders, including incubators and venture capitalists, providing them with a streamlined system of accreditation to ensure integrated support for new enterprises. Ultimately, this mandate seeks to transform high-potential ideas into large-scale industries that can compete on a global level through sustainable technological progress.
Short Title: Startup Proclamation No. 1396/2025.
Issuing Organ: House of People’s Representatives.
Effective Date: September 2, 2025, as the proclamation entered into force on the date of its publication in the Federal Negarit Gazette.
Status: Active.
Other Key Particulars
Core Objective: The proclamation aims to build a conducive startup ecosystem and ensure sustainable technological and economic progress through streamlined systems for designation, accreditation, and capacity building.
Defined Entities:
Startup: A person or group with limited business history involved in creating economic value through innovation and tech-enabled, scalable, market-changing products or services.
Startup Ecosystem Builder: Includes incubators, accelerators, co-working spaces, private equity funds, and venture capitals that actively contribute to startup sustainability.
Designation and Certification:
Obtaining a Startup Designation is a prerequisite for receiving incentives and privileges.
The Ministry of Innovation and Technology grants these designations, which are valid for two years and can be renewed, though the total duration cannot exceed eight years.
Financial Incentives and Support:
Startup Grant Program: Established to support startups in early development stages with costs related to research and commercialization.
National Credit Guarantee Fund: Created to increase credit access for designated startups and ecosystem builders.
Startup Fund of Funds: Established as a commercial enterprise in partnership with the private sector to invest capital in other funds that support startups.
Tax and Customs Privileges:
Designated startups may be exempt from income tax, dividend tax, and withholding tax.
They are permitted to import duty-free capital goods necessary for their operations.
Investors who lose money in a designated startup are eligible to deduct 100% of that loss on their financial statements for up to two years.
Regulatory and Labor Provisions:
Regulatory Sandbox: The Ministry is authorized to implement a framework for testing and introducing innovative products to the market.
Startup Visa: Foreign nationals joining a designated startup in Ethiopia are entitled to a “startup visa” and a work permit valid for three years.
Capital Requirements: The minimum capital requirement under the Investment Proclamation does not apply to foreign startups or ecosystem builders investing in Ethiopia.