Entrepreneurship, particularly in the software, mobile, and internet sectors has become a global phenomenon more then ever before. It seems once a week you hear about a new accelerator or seed fund in an emerging part of the world. The fundamental reasons for why a successful tech company could emerge are broader access and lower cost of the components necessary to start a tech company.
Source: Dave McClure, Building 500 Strong (July, 2013)
I would argue the four necessary aspects to start a technology company are:
- Access to infrastructure
- Talent / skills/ knowledge
- Access to distribution
- Access to capital (less important than the above three to start)
With respect to access and affordability of infrastructure, the graphic below does a good job explaining how open source software plus cloud infrastructure providers such as Amazon have brought down the cost of infrastructure necessary to start a company by magnitudes.
Source: Mark Suster, Both Sides of the Table
Access to talent, skills, and knowledge is much more broadly available in a number of different ways. One, there are many more tools that allow people to acquire key skills such as computer programming including through online tutorials, online communities like Stack Overflow, and MOOCs (massive open online courses). Two, robust skill marketplaces like oDesk and Dribble are also making it easier for teams to find talented people to help early teams supplement their core competencies with necessary skills (such as design in the case of dribble). Three, the explosion of content from Quora and the blogosphere are making it easier to understand best practices for startup operations.
Getting distribution (the ability to market your product to access a large number of potential customers) is becoming more doable as emerging markets come online. Unlike a few years ago, many emerging markets now have enough users online and on mobile that startups can start to prove customer traction in their home countries even in the developing world. Social networks and app stores, both of which are becoming increasingly prominent in the developing world, have also been shown to be good channels for large-scale distribution from time to time.
Access to seed capital is still difficult for entrepreneurs outside of a few hubs (Nairobi, Accra, Santiago, Brazil, Singapore) but there are more funds than there once were and likely more importantly, the reduced costs of starting a business as mentioned above means seed money is less necessary than in years past.
So that all sounds great, but where is the BUT and why haven’t we seen huge behemoths coming out of the developing world?
So given everything written above, it is clear that the opportunities to create a company, test it, gain traction and get it off the ground in an emerging country are more doable now than in years past.
However, lots of challenges still arise. Seed funding as mentioned is still extremely hard to find outside a few hubs, growth capital beyond the seed round ($5M+) is still very hard for people to come by even in many parts of Europe, and there are major issues with respect to transparency, market size, and the lack of an M&A environment in many parts of the emerging world that are still major problems for potential technology startups. (We’ll cover this stuff in the future but remember that there is good reason for optimism.)