How to launch a startup in an emerging market

This is the first in a multipost series that I’ll be publishing over the medium-term future. I’ll be moving stage by stage (from pre-seed to pre-series B). My goal is to create a practical, emerging market-specific complement to existing startup literature, which often neglects the realities of these regions.

The author in front of Karaweik Palace in Yangon, Myanmar / Photo credit: Julian Rowlands

Base yourself locally and commit to the long-term

I’ve met too many founders who try to run a business in the developing world but don’t want to give up the comfort of their lives in the US, Europe, or Singapore. This is a huge mistake that will likely prevent your business from achieving success.

The most basic thing that happens during the pre-seed phase is the transmission of information. Data enters your brain, allowing you to form a hypothesis (building a minimum viable product). You then communicate that value proposition to potential customers (sales), intake data on the results, and use that information to tweak and alter your hypothesis – rinse and repeat. This is called iterating.

The speed with which you iterate in the search to find a functional business model is directly linked to the speed with which you find success. In a capital-constrained environment, this is the difference between survival and death. You’ll need to raise funds to extend your runway at some point, and it’ll be easy to do that if you’ve found traction but very challenging if you have no evidence of success.

In turn, the best mechanism for information transmission is in-person communication. As every great product manager knows, you need to get out and talk to your customers in person as often as humanly possible. Calls don’t cut it; video chats don’t cut it; asking your buddy to talk to customers on your behalf definitely doesn’t cut it. Finding product-market fit is a herculean task even when everything is aligned in your favor. To have any chance of succeeding as a seed-stage startup, there’s only one option: you simply must be in market in person.

I learned that this was do-or-die when I was working for an asset financing startup in Uganda, where we had to develop a know-your-customer process to vet customers for creditworthiness. “Normal” credit verification processes in the US would use an applicant’s birthday as some sort of input. But in Uganda, some people don’t know what day they were born, and I even met people who didn’t know the decade they were born in. They could’ve been 20 years old or 40 years old – they simply had no idea.

Working face-to-face with customers in Kampala let us catch this early and make that input optional. If we’d been developing the credit check process from outside of the country, however, we would have assumed that, of course, everyone knows their birthday and would have made the input mandatory,  thereby breaking the process without realizing it.

Finally, you can’t truly understand the struggles of your local team without being in the trenches with them. In July 2019, Jakarta went through a four-day period in which (a) a 6.9 magnitude earthquake struck close to Jakarta, (b) a nine-hour full blackout hit half of Java (which houses roughly 100 million people) and even knocked out cell service, and (c) ride-sharing drivers started a protest and lit fires in the street outside my office. If you aren’t present in a country in person, you can’t be attuned to the realities of your business and fully be there for your team and your customers.

One last note: You need to be in it for the long haul. You should be willing to commit to spending the next five years of your life (at a minimum) to being physically present in the country over 80% of the time. I’m not saying this is definitely what will be needed, but you need to be prepared to do whatever it takes to create your company. Some truly crazy shit will happen on your road to success, and defeat will be snatched from the jaws of victory over and over and over again. You must be in country in order to survive these setbacks, and you must have the mindset that only literally running out of money will push you to pack up and leave. If you can’t make those commitments, don’t waste your time.

Building a strong network is the difference between success and failure

Emerging markets are “low-trust environments” in which people default to the assumption that you are untrustworthy until proven otherwise. People being unreliable is normal; people saying “yes” but meaning “LOL no” is normal; even people threatening you is unfortunately somewhat normal.

If you grew up locally and you’re from a “good family,” you’re in a great position to succeed. If you aren’t those things, the best way you can build relationships with powerful people is to share experiences with them.

I’ve found sports to be a great way to meet people. Brazilian jiu-jitsu has helped me personally, and I’ve also seen friends build good relationships via ultimate frisbee. Rugby is great, too. If you’re in Nairobi, for instance, there’s a weekly touch rugby game that’s frequented by people from just about every major startup, venture fund, private equity firm, and capital markets advisory group in East Africa. It’s great for quickly meeting all the movers and shakers, which will help with hiring employees, finding investors, and more.

Additionally, religious services are also a good way of building trust. For instance, people seem to develop strong friendships from attending English-language church services.

Use your network (and a tiny bit of media attention) to find your first few employees

Build rather than buy most of your talent

Use English (or another global language) in the office