Startup challenges in emerging markets

In our consulting practice, T2 Venture Capital focuses on building innovation ecosystems in emerging markets. Entrepreneurs in developing countries face unique obstacles and challenges that founders in places like Silicon Valley can circumvent by virtue of the innovation ecosystem they inhabit. Omar Koudsi is a co-founder and CEO of Jeeran, the largest review site in the Middle East and North Africa that is based in Amman, Jordan. During a recent trip to Silicon Valley, Omar shared some thoughts on the obstacles emerging market entrepreneurs have to overcome:

“Being from Jordan and having visited Silicon Valley on a number of occasions, this visit (along with others) continue to show how the realities of the Valley stand in stark contrast with what an emerging world founder, particularly in the Middle East and North Africa, face to start and scale a Web business.

I believe the lack of a well-developed ecosystem (funding, mentoring, risk culture, lawyers, human resources) puts the burden tenfold on the entrepreneur in the emerging world. In many cases, foreign entrepreneurs have to do ten times the lifting of an American startup — for a much longer period of time to boot — in order to succeed.”

via Startups: Silicon Valley Vs. The Emerging World | TechCrunch.

To many peoples’ surprise, emerging markets are not the only regions where entrepreneurs face these challenges. We often hear similar complaints from founders in places like London, Chicago, Toronto, Tokyo and New York. The fact is that there simply aren’t that many well developed innovation ecosystems out there: Silicon Valley, San Diego and Boston represent a few standouts.

Luckily, the factors that have made places like Silicon Valley successful can be combined to cultivate innovation ecosystems in new places. Our consulting practice engages with new regions to help co-create business environments that are friendly towards entrepreneurs. As Omar pointed out, this is far more complex than simply setting up an incubator. There are many ingredients that need to be balanced and combined if they are to result in a healthy startup environment: mentorship, integrative capital formation, workforce training, entrepreneurial education, recruitment support, community engagement and culture building among many others.

We’ve observed that some of the most important pieces of the innovation puzzle are sometimes the least tangible. Establishing a culture of risk-taking that treats failure as a learning experience is incredibly important. Cultivating social norms that allow and promote collaboration within and across teams, firms, sectors, universities and governments is crucial. It’s also vital to socialize the perspective that entrepreneurship is about creating positive sum games: mechanisms through which 1+1=3. These win-win propositions operate in stark contrast to the ‘competitive mindset’ of traditional business development.

Only when these critical factors are mixed in a holistic design process that takes all these components into account within the local context can regions hope to build sustainable economies based on innovation, what we like to call ‘rainforests.’

Cross-posted on Eliot blog, the founders’ sandbox

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