Ten Myths Slowing Down Entrepreneurs In Emerging Markets

One of the biggest advantages of a rising ecosystem is that a rising tide lifts all boats. I found myself in Chicago in 2012 when the tech startup scene was budding and getting energy from a small coworking space called 1871. Today, 1871 boasts of being the largest innovation hub in Chicago and attracts entrepreneurs from all over the world. Just a tiny testament the growth that one can expect over a short five-year span. As such, if you find yourself in an emerging ecosystem such as India, South Africa or Dubai; know that not all roads lead to Silicon Valley. You can definitely swing by for a peek at the world’s largest innovation ecosystem and learn a thing or two about it’s ‘Can do’ attitude or learn how the ‘early adopter’ culture and mindset have made it stand part. Reality is that your ecosystem likely has a few key things that might just be the answer you’re looking for.

Here’s my take on busting some of the common myths that entrepreneurs are likely to believe in an emerging ecosystem.

1. Tech startups should not bootstrap.

Bootstrapping is not bad. Investors in a typical emerging startup ecosystem don’t want to invest unless there’s some revenue or customer traction. A lot of entrepreneurs stop at the idea thinking there may not be much to do without venture funding. Do think about how you can build a business that is revenue positive and not necessarily profitable. Even if you break even, you have discovered a good business model to start testing with. Contrary to perception, bootstrapping is in the DNA across the US and entrepreneurs here do not dismiss it. As an example, Contextmedia bootstrapped for a long time since it was founded in 2006 before raising venture funding as part of a Series A round in 2017.

2. It’s tough to be credible when no one knows you.

Unless you have a brand name mentor or advisor, or a brand name university it is likely that you’re not viewed as a credible technologist or entrepreneur. Taking your startup brand and yours up a notch will pay dividends. This is no means rocket science and doesn’t have to be hard. No one is expecting you to be on TechCrunch overnight. It coudl start with small steps, a simple partnership Microsoft or a local company, an even that you attended or a conference you spoke at. Credibility will build over time as long as you consistently show up. As an example, Chicago-based startup, Cleversafe had a partnership with IBM that they built over the years and eventually got acquired by IBM.

3. Local problems are just not cool enough.

Putting restaurant menus online was about solving a local problem in Chicago. Two college students were sitting late at night dreaming that food would just come to them instead of scouring the bitter cold streets that winter semester. Matt Maloney and Mike Evans applied for the business plan competition in their b-school and in a matter of ten years, the company had it’s IPO.

So, what are the nuances of your ecosystem? What’s keeping you awake? What are the problems around you in your city? Looking to solve local problems may not appear cool or innovative at first but, often you’re closest to the problem and in fact, may have hit upon a real problem to solve. Now that doesn’t mean you stick to growing your company locally or for that matter funding it locally either. For example, Grubhub kept their roots in Chicago but, ultimately took funding from VCs in the valley as part of their third round of venture funding. This helped them tap into expertise and scale the company across the east coast of the US.

4. Failure is not ok.

If you pivot, it’s ok. I’ve known one startup for five years now and they’ve had three solutions, multiple partnerships, 18-month pivots and have had 4 pivots so far. Failure is acceptable and we tend to be harsher when we’re bootstrapping. One of the advantages that entrepreneurs from Silicon valley emboy is the absolute tranquility with failure. If you haven’t failed, you haven’t tried and so, Failure is completely OK!

5. Traditional enterprise companies are boring.

At least a few times in most conversations with entrepreneurs, I hear how Microsoft or IBM are too big or too hard to work with. Take that up a notch when it comes to traditional companies such as Comcast or Statefarm that started out as service providers and are only now undergoing what we call a digital transformation. Typically, entrepeneurs will dismiss their local enterprise companies in favor of smaller innovative startups for partnership. Here’s the one thing you need to know. If you’re looking to solve for credibility or looking to tap into a huge salesforce or looking for an exit, which I’m sure most entrepreneurs are, the typical traditional enterprise has a lot to offer. You just need to be patient and work with them through the hoops. Very simply,

  1. Identify a Fortune 500 company that is local to you.
  2. Learn about their business model and offerings.
  3. Strategize and think about how can you can help them innovate or be relevant in today’s changing technology landscape.

Companies such as Samsung, Comcast, Statefarm, Kimberley Clark and many others have built innovation programs across the world. It’s not only about Google, AWS, Facebook or Microsoft. These traditional companies are not agile but have a burning need to survive via innovation and that’s where you come in!

6. Focus on building for one ecosystem only.

UAE-based Namshi and Souq(now acquired by Amazon) and all are focused on one ecosystem which seems to be working well for these startups because they’re tapping into a hyper-local need for e-commerce. But, if you’re building a technology solution, how do you build for more than one ecosystem?

Validating your business model locally may help but, if you plan ahead with a rollout strategy globally from the beginning that might put you on the map faster, literally! This is especially true for companies outside the valley that may be bogged down by government regulations and policy in their market. Even Uber had a global strategy to start with and quickly scaled across other markets internationally. Asking the question around scale and rollout upfront can save a lot of time cutting out the competition but, more importantly, tapping into the strengths of your solution which or may not be timely in your local market. For example, a video streaming solution in the Midwest may not be as attractive to an investor who is looking for hard revenue numbers. Scale that minimally to the west coast and now you have early adopter technologists with an eager mindset looking to invest.

7. Accelerators are the holy grail for startup success.

Accelerators and co-working spaces are great and if you get into one, hats off to you! However, if you’re in a deep pocket of South Africa or the Middle-east, chances are that your local startup hub may not boast of the typical brand names one hears about in Silicon Valley. That doesn’t mean you are passing up on an opportunity. You can look online for resources and there are plenty! Novoed is an example of one such platform which has great sources including the Technology Entrepreneurship course being taught for Free!

The classic mistake that entrepreneurs make is to think that they don’t need to think through and educate themselves much because they have the best advisors or had a successful exit in the past with another business. Building a tech startup may have similarities but, isn’t the same as building a commodity business. It’s also not identical to owning P&L responsibilities at a large corporation. Simply step back and take the time to educate yourself on how to build a technology startup vs. using the business model that may have worked in other commodity businesses. Fun fact – even if you did have a successful exit from a tech startup, chances are that you’re going to need to at least tweak your business model instead of going wholesale and applying it to another industry. Serial entrepreneur or not, a little of education and awareness will go a long way. Leverage online educational resources.

8. I need to grind and do everything.

You’re one person. There’s only so much you can take on when it comes to your startup. Start thinking about how you can automate the stuff that is eating away at your creative time. Online payments, payroll, expenses, logo creation are just a few things where you’re either not the expert or might benefit from some help. If you can’t find a local bank, write an email to an international bank or service provider making the case for why they should consider partnering with your startup.

Many law firms, banks, and other service providers give away free credits to entrepreneurs in the US and globally. Use them. Automate the non-critical path work items and get them out of your way. Enough said.

9. Showing up is tough.

With a million things on your mind including the challenges of your local startup scene, it can seem daunting to be in front of Sam Altman from YCombinator or Dave McClure from 500 startups. Showing up in Silicon Valley may mean spending lots of money on travel and with a scrappy startup budget, that is undoubtedly tough!

It is true that a lot of investments happen when there is an in-person relationship. Fact is that I’ve seen investors make bets and at minimum indulge in conversations with entrepreneurs overseas. From Canada or the Middle East, there are micro VCs and venture funds all over the US who would love low valuations and high returns. The unfair advantage that an emerging market brings is low cost to build and thus likely a lower valuation for investors. Moreover, some of the brand name VCs do take tours across the world meeting promising entrepreneurs. Several hubs like 1871 invite entrepreneurs from Kenya, India and other markets to connect with the local leaders.  Build relationships online via Skype to start with, learn and tap into exchange programs for entrepreneurs and grants. Ultimately, if you can, travel and be present in person to build partnerships with people that will truly drive your business. Showing up in person globally with a shoestring budget is tough but, it’s easy to show up and be present in your ecosystem and online.

10. Government regulations create a rigid top-down mindset.

Government regulations don’t have to prevent you from scaling your business. Build locally but, scale globally.

If you can incorporate in the US or at minimum partner in the US to get access to resources, you can start moving away from some of this local rigidity. Startups that have nothing to do with the US have also succeeded but, there is a fluidity in the ecosystem that may bring technical, business or education resources to you.

For example, Snapchat and Skype are banned in Dubai. If you have a partner in the US and are using those channels for distribution, you can seamlessly integrate and work around the ‘local system’.

As you solve locally, build simpler iterations that you can then roll out globally. As an example, Uber is working around the local regulation in the Middle East that prevents individuals from driving due to visa constraints. In Dubai, they solve for this by teaming up with the limosine service providers instead of the individual drivers. The thing to learn here is that the same product when rolled out globally may need tweaks that can eventually help boost the local business too.

Think about how you can creatively work around local regulations but, also the issues that you may run into in other markets where you may have the first-mover advantage. Leverage other markets to double down on your strengths. As soon as you hit barriers locally or have hit product market fit locally, start thinking about rollout outside your city or country.

Lastly, if you’re in an emerging market and running into one of these issues or seem to be stuck with your startup business, I’d love to hear from you! Write in. To learn more, you can see the full video behind this post. This is an excerpt from a talk that I gave at in5 in Dubai.