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How Startups Tackle Emerging Markets

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Developing new business in emerging economies, especially rural ones, is hard. An entrepreneur has to create products and services that are able to withstand the vagaries of the emerging market context: no electricity, no spare parts, hardly any logistics infrastructure, customers with very tight budgets, and with an over responsive sensor for glitchy value propositions, etc.

Just like for the entrepreneur, investors also have a hard time figuring out how to get a foothold and support successful emerging market business. When can a business be considered successful in these overly tough market conditions that make business development so risky and hard? On what basis can they judge that a business has made meaningful progress?

This question came to me when I encountered a new entrant to the Unreasonable Institutecalled Juabar. JuaBar is a social enterprise startup building a pushcart mobile phone charging station in Tanzania. They intend to implement a franchising system to entrepreneurs who want to develop a business out of charging peoples’ phones. In this article I will take this case of solar powered push cart solutions to illustrate the investment decision problem, and what I suggest is needed to overcome it.

The tale of 2 similar emerging market startups
JuaBar is not the only startup working on this specific idea. There is another startup called ARED, which is developing the same concept, but then in Rwanda. Both startups have been at it for several years, with Juabar starting about 6 months earlier. Essentially ARED and Juabar are building exactly the same business, if you look at the pictures below, they look more or less the same.

The Juabar solar charger
The ARED solar charger

 

 

 

 

 

Given that these businesses are so similar, how would an investor choose which startup to put their money in if they were given the choice to invest in either? What would they need consider?

Lets put ourselves in the shoes of the investor, and break things down a bit. These businesses are both riding the same promising market trends:

  • Mobile phones are spreading everywhere in Africa, and they need to be charged
  • The grid is only beginning to spread, and has yet to reach rural areas, let alone provide a reliable supply. There is a huge opportunity for solar powered products
  • Entrepreneurs in this market space operate on low and irregular income streams. They can use the pushcart to create multiple revenue generating opportunities like selling accessories, prepaid cards, and other services, which is crucial for keeping your livelihood afloat.

Despite the similarities, there are some marked differences in their business design. ARED is aggressively promoting some additional features to charging, that could arguably give it an advantage over Juabar. Here’s a couple of the key features and their related assumptions:

  1. ARED is more mobile: it can be mounted on a bike. Assumption: It’s likely to be beneficial to the entrepreneurs because she can cover large market areas.
  2. ARED has developed a technology for faster charging. Assumption: Both franchisee and their customers benefit from that, and think it is really important.
  3. ARED is explicitly promoting the advertisement option as a way for additional revenue generation. Assumption: this advertising creates conversion for advertisers, and enables the franchisee to directly earn extra cash.

The first 2 features make sense. You can intuitively see them add value. Yet at the same time they are features, which can be copied quite easily. They won’t protect ARED’s advantage for long.

But what about the third one? Growing the franchise could create a defensible moat for generating advertising revenue that competitors can’t readily copy. It seems like a really powerful feature, already glancing at the next stretch in developing the business after it would have successfully expanded from its current investment round.

Successfully growing ARED could mean that a new, highly granular advertising channel with ubiquitous emerging market penetration will be created if ARED succeeds in achieving growth. Imagine an ARED cart on every meaningful market place in East Africa! This coverage would be the key resource that keeps the competition at a distance; something any investor drools over.

But despite the attractiveness of this advertising channel opportunity, the make or break question here is whether the basic premise of advertising works: does it create conversion for advertisers with ARED’s low, and uncertain income target market? Is it an opportunity worth investing in to achieve that scale? What can we put to the table now to somehow back the validity of this assumption?

Looking for elementary market insights from elsewhere.

To back the opportunity of the advertising claim we need to look elsewhere, and move to Monrovia, Liberia, where we will find Alfred Sirleaf. Alfred is a famous figure on the market, because he mans a blackboard newsstand. Alfred scans the newspapers each day for interesting stories, and writes them up on the blackboard for people who can’t afford newspapers. He developed this during the Liberian civil war, when news was scarce. But currently in peacetime, it is still very much in operation.

The interesting thing about Alfred’s business for our pushcart solar phonecharger case, is that Alfred offers advertising space with his blackboard. Apparently there are advertisers that get some kind of conversion from advertising to people who can’t afford a newspaper! Why would they otherwise pay for using that space?

Back to our discussion on ARED, you can see the similarity in advertising opportunity with Alfred’s newsstand. Both attract attention on busy marketplaces. Though this is still an open hypothesis about conversion, it could imply that there is a real case for the ARED advertising solution, and that it is investment worth pursuing.

Closing thoughts
From the arguments it is becoming clear that ARED is playing a stronger game than Juabar. It might be that Juabar is banking on its focus on rural areas, given that ARED is currently predominantly active in urban areas. If ARED is able to grow fast however, and expand beyond urban limits, then it will have created these advertising channels, whose ubiquity would make it a winning, maybe even invincible, business model.

But the point of my article is not about qualifying one idea over another. Juabar and ARED serve as a case about making better guesses on developing a business, sourcing insights on which to base those guesses, and showing what these insights could do to make better business decisions by entrepreneurs and investors alike.

We need to move beyond emerging market startup ecosystems that have to scramble for those valuable business model insights each on their own. It takes such a tremendous amount of resources to understand and validate these insights. You would spend equal, if not even more time understanding the marketing basics in your context, rather than actually building your business. This is a big constraint on business development, and it undervalues the potential of startups.

The good news is though that the market insights required to develop successful business at scale in emerging markets are already out there. They’re with shopkeepers, merchants, existing service providers, etc, currently running their businesses (remember our case of the Agrovet in Karatina). What if we had the chance to reach out to Alfred and discuss advertising conversion, and learn from him on what works and what doesn’t?

Such insights should be collected, categorized, and made available publically to any entrepreneur and accelerator program that supports startup entrepreneurs in emerging markets. In no way will this substitute for the groundwork that an entrepreneur needs to make to understand their customer. But based on such insights, entrepreneurs can make better bets, and everybody would get a more informed shot at developing metrics that are key to understanding business performance in emerging market contexts. It won’t make a bad business good, but it could make a good business better.

Now that you made it this far in the article, I would like to hear from you as a reader, what you think about a repository where validated emerging market insights (like on marketing, distribution, trust, and methods of market size estimation) are shared open source, and free for anyone to use. Would you think that it would be worth the investment to set up such a repository? Are you familiar with the lack of these insights? Would it support business development? Are the examples I have provided on this blog already triggering your next business hypothesis to test? Please do share your thoughts, and I hope to be talking with you soon!

[post publication edit: I have been in touch over email with the founder of ARED: Henri Nyakarundi. Henri emphasised that ARED’s strategy is to develop many more functional, income generating opportunities with their hardware for their franchisees. Currently they are exploring opportunities to build in WiFi connectivity into their cart, providing the growing population with smartphones access to the internet. The idea would be to have the franchisee function much like the Grameen Foundation’s Community Knowledge Worker, a human interface to guide people around the internet. This is a very important gateway for connecting people who are as of yet unfamiliar with what the internet is, and what it can do for them.

Last but not least, this point: Henri has been very actively, but unsuccessfully seeking investment to further expand his business, despite his obviously entrepreneurial talent, and despite ARED having several contracts and demonstrated revenue generating capabilities on the ground. Investors are apparently having a hard time sizing up his business! I you see any possibilities to help here, then do get in touch with Henri!]

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About the Author

This article was produced by Bart Doorneweert of Value Chain Generation. Value Chain Generation is a blog platform that aims to create a movement that lays out the design principles for upgrading the dismal and narrow view on innovation in business in food and agriculture. Bart hopes to engage people through powerful innovation and entrepreneurship languages like customer development, user-centered design, business model generation, and lean startup. see more.

Callum Connects

Malcolm Tan, Founder of Gravitas Holdings

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Malcolm Tan is an ICO/ITO and Cryptocurrency advisor. He sees this new era as similar to when the internet launched.

What’s your story?
I’m a lawyer entrepreneur who owns multiple businesses, and who is now stepping into the Initial Coin Offering/Initial Token Offering/Cryptocurrency space to be a thought leader, writer (How to ICO/ITO in Singapore – A Regulatory and Compliance Viewpoint on Initial Coin Offering and Initial Token Offering in Singapore), and advisor through Gravitas Holdings – an ICO Advisory company. We are also running our own ICO campaign called AEXON, and advising 2 other ICO’s on their projects.

What excites you most about your industry?
It is the start of a whole new paradigm, and it is like being at the start of the internet era all over again. We have a chance to influence and shape the industry over the next decade and beyond and lead the paradigm shift.

What’s your connection to Asia?
I’m Singaporean and most of my business revolves around the ASEAN region. Our new ICO advisory company specialises in Singaporean ICO’s and we are now building partnerships around the region as well. One of the core business offerings of our AEXON ICO/ITO is to open up co-working spaces around the region, with a target to open 25 outlets, and perhaps more thereafter.

Favourite city in Asia for business and why?
Singapore, since it is my hometown and most of my business contacts originate from or are located in Singapore. It is also a very open and easy place to do business.

What’s the best piece of advice you ever received?
Be careful of your clients – sometimes they can be your worst enemies. This is very true and you have to always be careful about whom you deal with. The closest people are the ones that you trust and sometimes they have other agendas or simply don’t tell you the truth or whole story and that can easily put one in a very disadvantageous position.

Who inspires you?
Leonardo Da Vinci as a polymath and genius and leader in many fields, and in today’s world, Elon Musk for being a polymath and risk taker and energetic business leader.

What have you just learnt recently that blew you away?
Early stage bitcoin investors would have made 1,000,000 times profit if they had held onto their bitcoins from the start to today – in the short space of 7 years.

If you had your time again, what would you do differently?
Seek out good partnerships and networks from day one, and use the power of the group to grow and do things together, instead of being bogged down by operations and going it alone from start.

How do you unwind?
I hardly have any time for relaxation right now. I used to have very intense hobbies, chess when I was younger, bridge, bowling, some online real time strategy games and poker. All mentally stimulating games and requiring focus – I did all these at competitive levels and participated in national and international tournaments, winning multiple trophies, medals and awards in most of these fields.

Favourite Asian destination for relaxation? Why?
Phuket – nature, resort life, beaches, good food and a vibrant crowd.

Everyone in business should read this book:
Rich Dad Poor Dad by Richard Kiyosaki

Shameless plug for your business:
Gravitas Holdings (Pte) Limited is the premier ICO Advisory company and we can do a full service for entrepreneurs, including legal and compliance, smart contracts and token creation, marketing and PR, and business advisory and white paper writing/planning.

How can people connect with you?
Write emails to [email protected], or [email protected]

Twitter handle?
@malcolmABM

This interview is part of the ‘Callum Connect’ series of more than 500 interviews

Callum Laing is an entrepreneur and investor based in Singapore. He has previously started, built and sold half a dozen businesses and is now a Partner at Unity-Group Private Equity and Co-Founder of The Marketing Group PLC. He is the author two best selling books ‘Progressive Partnerships’ and ‘Agglomerate’.

Connect with Callum here:
twitter.com/laingcallum
linkedin.com/in/callumlaing
Download free copies of his books here: www.callumlaing.com

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Entrepreneurship

Women on Top in Tech – Pam Weber, Chief Marketing Officer at 99Designs

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(Women on Top in Tech is a series about Women Founders, CEOs, and Leaders in technology. It aims to amplify and bring to the fore diversity in leadership in technology.)

Pam Webber is Chief Marketing Officer at 99designs, where she heads up the global marketing team responsible for acquisition, through growth marketing and traditional marketing levers, and increasing lifetime value of customers. She is passionate about using data to derive customer insights and finding “aha moments” that impact strategic direction. Pam brings a host of first-hand startup marketing experiences as an e-commerce entrepreneur herself and as the first marketing leader for many fast-growing startups. Prior to joining 99designs, she founded weeDECOR, an e-commerce company selling custom wall decals for kids’ rooms. She also worked as an executive marketing consultant at notable startups including True&Co, an e-commerce startup specializing in women’s lingerie. Earlier in her career, Pam served in various business and marketing positions with eBay and its subsidiary, PayPal, Inc. A resident of San Francisco, Pam received her BA from the University of Pennsylvania and MBA from Harvard Business School. Pam is a notable guest speaker for Venture Beat, The Next Web, Lean Startup, and Growth Hacking Forum, as well as an industry expert regularly quoted in Inc., CIO, Business News Daily, CMSwire, Smart Hustle, DIY Marketer, and various podcast and radio shows. You can follow her on Twitter at @pamwebber_sf.

What makes you do what you do?
My dad always told me make sure you choose a job you like because you’ll be doing it for a long time. I took that advice to heart and as I explored various roles over my career, I always stopped to check whether I was happy going to work every day – or at least most days :). That has guided me to the career I have in marketing today. I’m genuinely excited to go to work every day. I get to create, to analyze, to see the impact of my work. It’s very fulfilling.

How did you rise in the industry you are in?
I had a penchant for numbers and it helped me stand out in my field. This penchant became even more powerful when the Internet and digital marketing started to explode. There was a great need for marketers whose skills could span both the creative and the analytic aspects of marketing. I capitalized on that growth by bringing unique insight to the companies I worked with, well-supported with thoughtful analysis.

Why did you take on this role/start this startup?
I’m not sure this is relevant to my situation as I had been a marketing leader in various start-ups and companies. I took on the role at 99designs because I was excited by the global reach of the brand and the opportunity the company had to own the online design space. I especially liked the team as I felt they were good at heart.

The challenge I’ve faced in my time at 99designs is how do I evolve the team quickly and nimbly to address new challenges. The work we do now, is very different than the work we did a year ago and even the year before that. There is a fine line between staying focused on the goal ahead and being able to move quickly should that goal shift.

Do you have a mentor that you look up to in your industry or did you look for one or how did that work?
There is no one I’ve sought out or worked with over my entire career as my “mentee” needs have changed so much over the years. There are many people who have helped me along the way. For example, one of my peers at eBay, who was quite experienced and skilled in marketing strategy and creative execution, taught me what was in a marketing plan and how to evaluate marketing assets. As I have risen to leadership positions over the years, I often reach out to similarly experienced colleagues for advice on how they handle situations.

How did you make a match if you and how did you end up being mentored by him?
I learned early in my career that it rarely hurts to ask for advice. So that is what I have done. Additionally, there are people that are known to be quite helpful and build a reputation for giving back to others in advisory work. Michael Dearing, of Harrison Metal and ex-eBay, is one of those people. I, as well as countless others, have asked him for advice and guidance through the years and he does his best to oblige. Finding mentorship is about intuiting who in your universe might be willing and whether you are up for asking for help.

That being said, generally, I have found, if you are eager to learn and be guided, people will respond to the outreach.

Now as a leader how do you spot, develop, keep, grow and support your talent?
I generally look for a good attitude and inherent “smarts”. A good attitude can encompass anything from being willing to take on many different types of challenges to working well amongst differing personalities and perspectives. Smarts can be seen through how well someone’s done in their “passion areas” (i.e. areas where they have a keen interest in pursuing).

I try to hire those types of people because in smaller, fast-growing companies like many of the ones I’ve worked in, it’s more often than not about hiring flexible people as things move and change fast.

Once those people are on my team, I try to keep them challenged and engaged by making sure they have varying responsibilities. If I can’t give them growth in their current job or in the current company, I encourage them to seek growth opportunities elsewhere. I’d rather have one of my stars leave for a better growth opportunity than keep them in a role where they might grow stale.

Do you consciously or unconsciously support diversity and why?
I consciously support diversity. When I am hiring, I am constantly thinking about how to balance the team with as broad a range as possible of skill sets, perspectives, etc. to ensure we can take on whatever is thrown at us, or whatever we want to go after.

What is your take on what it takes to be a great leader in your industry and as a general rule of thumb?
I’m going to assume a great leader in my industry to mean a marketing leader in a technology company. I think a great leader in this industry is not afraid to learn new tricks no matter their age – it’s the growth mindset you may have heard about. I have a friend who inspires me to do this – she purchased the Apple Watch as soon as it was available, and was one of the first people I knew to use the Nest heating/cooling system. She’s not an early adopter by most definitions, but she adopts the growth mindset. This is the mindset I, too, have sought to adopt. In my field of marketing, it most recently has meant learning about Growth Marketing and how to apply this methodology to enhance growth. Independent of your industry, I think a growth mindset serves you well.

Advice for others?
I have been at 99designs for 3.5 years. During that time we’ve invested in elevating the skills and quality of our designer community, we’ve rebranded to reflect this higher level of quality, and have improved the satisfaction of our customers. Our next phase of growth will come from better matching clients to the right designer and expanding the ability to work with a designer one-on-one. We have the best platform to find, collaborate, and pay professional designers who deliver high quality design at an affordable price, and it’s only going to get better. I’m excited to deliver on that vision.

Pam Webber
Chief Marketing Officer of 99designs
Twitter: @pamwebber_sf

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