Consider the ‘unicorn factory’ closed

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It’s much easier to learn from your own mistakes than it is from the mistakes of others.

I can’t count the number of times I’ve received some great advice about a problem in my life, acknowledged how wise it sounded, and then proceeded to do the complete opposite of what I should. I’m stubborn, I suppose.

For instance, for years I persisted in driving a cheap but crappy automatic scooter that kept breaking down, despite being advised by friends to spend just a little bit more on a more reliable semi-automatic. It took one final embarrassing breakdown in front of the Ho Chi Minh Mausoleum in Hanoi for me to finally see sense and upgrade my ride.

If I had only been able to learn from the mistakes of my friends who used to drive similarly awful bikes, I would have saved myself a lot of frustrating trips to the mechanic.

As today’s premium story explores, the stakes are a bit higher for emerging markets’ startup ecosystems hoping to learn from the mistakes of the West’s “unicorn factory.”

Today we look at:

• How emerging markets are avoiding the mistake of factory-farming unicorns
• More leadership changes at Paytm
• Other newsy highlights such as Apple’s solid results in China and Kenangan Brands’ new affordable coffee chain.

Premium summary

Uncoding the unicorn factory

Image credit: Timmy Loen

You’ve likely heard of all the problems with factory-farmed chickens, but what about factory-farmed unicorns? Not the mythical creatures, but startups worth a billion dollars of course. Not all unicorns, though, are made the same.

• Spanner in the works: According to American venture capitalist Sem Lessin, the “unicorn factory system” in the Western startup ecosystem is dead. Previously, VCs packaged companies to raise their next round to the next investor without looking at their business fundamentals deeply. This led to disappointing IPOs, such as that of scooter firm Bird. As a result, there’s an existential crisis for US venture capital, but these issues don’t seem to have afflicted ecosystems in emerging markets.
• Conditions on the ground: For one, the nascent nature of VC industries in many emerging markets and the lack of supply of risk capital have hindered the development of similar factory systems. In addition, rising digitalization and a growing middle class have given founders ample room to grow, with Brazilian firm Nubank a good example. The fintech company capitalized on the middle class’ growing desire for more advanced digital financial services, and has secured healthy unit economics.
• Crypto’s role: While cryptocurrency faces a reckoning in the West amid myriad scams and frauds, the tech still has game-changing potential for startups in emerging markets. With the expense of cross-border payments putting a strain on fragile startups, crypto’s ability to transfer money quickly and cheaply could ease this nightmare.

Read more: Learning from the mistakes of the West’s ‘unicorn factory’

Musical chairs at Paytm

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