For Startups, The Growing Promise of the Developing World

Startups need capital and customers. Generally, the capital will flow to anyone who credibly demonstrate that they know how to find and hold customers.

The problem is that in developed markets like Europe, the US and much of urban Asia, the competition is so intense that it means margins are going to be low and sales growth tough to build.

Which leaves, what, exactly? Why, it turns out, it leaves much of the rest of the world. Where populations and incomes are growing, demand for technology is high, competition is less sophisticated and well-funded - which means opportunity is vast.

The logic is that many, if not most, startups begin by discounting their product in order to gain market share, so the ethos of cost-cutting is already deeply ingrained. Furthermore, market analyses generally demonstrate that the greatest opportunity for profitable growth lies in the quadrants where the greatest potential lies, not in those quadrants where substantial investment has already been made. In short, developing markets for technology products are characterized by some of the most crucial determinants of future success for startup companies.

There is, of course, the challenge of adapting to a different culture, moving to a new environment and enduring all manner of discomfort, physical and emotional. But then these obstacles are already emblematic of the startup milieu. The only question is why so few are taking advantage of the manifest opportunity. JL

Signe Brewster reports in GigaOm:

Feature phone users represent the fastest-growing markets in the world. And when companies enter those markets, they should apply the startup model of thinking big.
In our smartphone-dependent lives, it’s hard to imagine getting by with a feature phone. But in developing countries, those phones have become lifelines that can handle a money transaction or goods order, and companies are continually finding new uses for them.

Frog’s vice president of creative Fabio Sergio and UNICEF Innovation Unit co-founder Erica Kochi made the case at the Gigaom Roadmap conference that feature phone users cannot be ignored because they represent the fastest-growing markets in the world. And when companies enter those markets, they should apply the startup model of thinking big from the beginning, while also maintaining a conscience.
“There is clearly a must in what we are talking about, and then there is a should or a could,” Sergio said. “We should embrace the social must.”
Sergio noted that in many countries residents don’t have a government they can trust. They might not have a birth certificate or a formal bank. Instead, brands are stepping in as trusted service providers. Kochi cited that 43 percent of Kenya’s GDP flows not through a traditional banking system, but through M-Pesa, a money transfer service launched by mobile provider Vodafone.These kinds of systems will require mobile developers to completely rethink how they go about their jobs. But when they do, they will find huge opportunity.
“For most people in the world, constant electricity is not a given at all. In the most extreme cases, they’re paying a tremendous amount of their daily wage for power,” Kochi said. “I think we’ll see the widespread adoption of smart phones. But when you’re thinking about the services that you put on top of them and that they’re so data hungry, I think we’re going to hit a major barrier, not just on battery life, but how we design apps.”