Originally published in ET Tech, India
The diversity and complexity of ordinary life in an average developing economy gives bold entrepreneurs and investors a compelling, reason to train their sights on these countries. The variety and urgent nature of problems that these economies present — and at the scale that they do — demand a quick turn-around of entrepreneurial solutions that are simultaneously inventive , affordable, and scalable.
So, whether it is about unearthing solutions to provide safe, easy ways to bank, have groceries delivered at your doorstep, deliver tech-based education for children unable to attend school, enable remote access to specialized diagnostic services in remote parts, or provide new modes of efficient transport for urban residents — developing economies have it all.
To make these possibilities more challenging is another given: developing economies often have fuzzy and unclear regulations regarding business models and lack the infrastructure to support them. Although hazardous, the lack of clarity turns into an advantage for innovative entrepreneurs who are ready to take on some calculated risk. It provides them with an opportunity to push the envelope in terms of edgy new ideas, typically out of bounds in developed economies due to the prevalence of heavy and strict regulations.
So why is it that there isn’t as much traction in the start-up space in these economies as there should be given the existence of these conducive factors and what is it that can be done differently to maximize the potential they intrinsically have?
Unlike in the US, several developing economies are home to cultures that discourage and look down on failure. Not being able to succeed at a public venture is associated with shame and guilt. The customary expectation is that whoever (or whatever) fails must learn a lesson to never try his or her hands at another endeavor again. But this clearly goes against the grain of what lies at the heart of entrepreneurship: of building a new company based on a new, untested idea that aims to solve a problem with the hope that it will eventually, after a few possible rough turns, take off.
However, the last few years has seen some improvement on this front. The Mexican startup ecosystem for instance long known for such an approach, has begun to actively promote a culture more accepting of failure. This has encouraged a greater number of entrepreneurs to come on board and establish companies with varying levels of risk. Most however continue to believe that the edgiest ideas pose the greatest risk and therefore also the greatest danger to investors and founders. But our experience over the last five years spent investing in dozens of startups has shown us that truly innovative projects have a greater chance of succeeding simply because they are premised on better ideas. Projects that are not mere imitations of global sweethearts, but are authentic local startups, or well thought out applied models of new technologies, are able to establish a sound base and are more likely to steadily scale up, simply because they factor in the very nuances of a place and a people and the challenges they face every day in more accurate ways.
Compelling value propositions
Take for instance Weex, a Mexican virtual mobile operator that targets millennials. Established in 2015 from one of Coca-Cola’s global innovation programs, the company is now the fastest growing and third largest virtual mobile operator. It has successfully closed three rounds of investment with VCs and corporate investors.
What Ricardo and John, its founding team, got right was correctly identifying the unmet need of millions of young Mexicans that could not afford prepaid cell phone plans. Weex created the first app-based prepaid mobile service that lets users spend credit based on app usage instead of calls and megas. Weexers took back control of their digital life. As it grows its user base in the highly competitive Mexican telecom market, Weex is looking to expand its offering to financial products to further empower its used base. Success in developing economies is all about a powerful value proposition and a consistent execution.
Forging close ties with the Mecca of entrepreneurship
Although it is impossible to think of anything entrepreneurial without first in some way invoking that Mecca of entrepreneurship — Silicon Valley — developing economies and those interested in supporting its startup culture must always remember that there can be no second Silicon Valley. And yet it would be prudent to find ways to forge close relationships to it, and try to attract not only its capital but also its talent.
The case of Startup Chile is a good example. Pursuing one of the valley’s most salient strength, the Chilean government created a program to attract the talented founders from all over the world by basically subsidizing any entrepreneur who wants to launch a company in Chile. If you are an Indian engineer or a French designer, you go to Chile and you get up to $90,000 to start your company. You don’t need to prove anything but your ambition to solve a problem with tech and your willingness to launch it from Chile. Since starting in 2010, hundreds of companies from 80 countries have moved to Santiago for the program. This rich talent pool kickstarted in turn a new vibrant ecosystem of accelerators, VCs and corporate programs.
The humane scope of applied AI
I believe that programs like this indicate the vast scope a globalized world offers to extend change to the places that need it the most. Just as entrepreneurs in Latin America stand to benefit from having close ties to the entrepreneurial and experimental spirit of Silicon Valley, so too can startup founders and their investors in the US and the rest of the West learn from the many applications of AI technologies that local entrepreneurs are creating in developing economies.
Why AI? Because it is in my view the first disruptive technologies to have emerged in the last years which has the potential to help imaginative entrepreneurs in the developing world solve an array of pressing problems with nuanced solutions that only they understand completely.
Aerobotics, a Cape Town based startup is using AI to power a fleet of drones that assist farmers in South Africa to enhance fertilization and yields of crops such as wheat and sugar cane. An Indian startup, SigTuple aims to set up a platform that will help detect diseases by using machine learning software to analyze medical images and patient data. And a Mexican architect hopes to scale Lupe, an IoT-based gaming system that runs on a machine learning platform that will be enabled to measure and boost children’s creativity.
As more start-ups post success stories in developing economies, they will inspire others from both inside and outside their geographies to join in. And while some will be inspired by business ideas already vetted in the West, several others will owe their roots entirely to the special and distinct context in which they were imagined. The next generation of unicorns will come from unlikely visionaries based in remote geographies.