The Key To Entrepreneurial Success In South Asia
An founder who has studied entrepreneurship in the region explains why Asia’s infatuation with the Valley has to end.
By Shruti Challa (CEO & Founder, Mentorzen)
Entrepreneurs from South Asia are obsessed with Silicon Valley, as is much of the world these days. Social media and mass media have combined to create the perception that geeks from the Bay Area are a breed apart.
The combination of skinny jeans, hipster glasses and confident personalities like Dave McClure or Steve Blank, it seems, is irresistible. But this style has nothing to do with building a great company. Solving important problems does, and for anyone not in Silicon Valley, that means focusing on their own markets and not what seems to be cool.
Countries like Sri Lanka and India have what it takes to be uniquely brilliant and entrepreneurial. South Asian entrepreneurs need to know and believe this. If they do not, South Asia will never become a center for innovation, creating the game-changing products and services their local economy demands and our global economy could benefit from.
I say this having spent the last couple of years traveling across India and Sri Lanka connecting with the startup community, recruiting local talent for my own venture, and listening to more than 200 pitches. I recently spent three weeks visiting with accelerators, incubators, and institutes on behalf of the State Department’s Specialist Speaker Program and discovered that founders’ obsessions with the Valley prevents them from solving local problems.
The paradox I’m seeing is this: The bulk of the world’s economic growth will come from regions like India and China, and although they may have cyclical slowdowns, these markets are necessary to the world economy.
In India, the story is not just about tech support and engineering offices. Product startups have been developing through accelerators like TLabs or Startup Village and incubators like IIT Bombay’s SINE and Startup Weekend. And various business communities are developing their own nationwide programs to support fledgling companies.
For instance, NASSCOM (National Association of Software and Services Companies) has undergone efforts to get India more product-focused. To this end, the organization has devised goals to create events and programming to help inspire 10,000 product companies by 2022. Even Uber, in some ways a symbol of “developed” cities getting even more sophisticated, just launched in Bangalore.
But if the best entrepreneurial minds here are trying to copy the next Snapchat, they probably won’t be building products that the market truly demands in India. And the region won’t live up to the hype.
“Solving large local problems is one easy way for Asian startups to differentiate and sustain a competitive edge,” says Mukund Mohan, director of Microsoft Ventures. “Since customers are also local, the ability to get quick feedback and iterate rapidly will help them grow faster to achieve scale.”
One example of this is Flipkart, the Amazon of India. By introducing COD (Cash on Delivery), Flipkart has been able to convince consumers to buy online by allowing them to pay with cash instead of credit cards. This twist on traditional e-commerce is a major reason why the company was valued at $1.5 billion. Unfortunately, this example is an outlier.
So what are the issues that arise as a result of this infatuation with the Valley?
First, countries like India and Sri Lanka blindly implement Western approaches to cultivating entrepreneurship. Asian cultures tend to not be as “individualistic” as Western cultures, and the next breakthrough entrepreneur may not be a rebel like Steve Jobs. They tend to be more motivated by social reputation and intimacy than their Western counterparts. As an Indian-American entrepreneur, I understand this.
As a result, it is necessary to create approaches that uniquely address these differences. For example, showcasing entrepreneurship as a credible path is extremely important, as family acceptance is ingrained deeply in the DNA of South Asians.
“Entrepreneurship is still a taboo for most Indian parents,” says Cherian Thomas, founder of Cucumbertown. “Failure is too bitter a pill to digest and people fear society’s ostracization. A stable salaried career offers all the perks in life and is good enough for most. Besides, we are yet to have a Zuckerberg for inspiration.”
Second, key internal aspects of running a startup are also different, such as financing options and lean startup approaches. I recently had the opportunity to watch a Tech-Connect stream with a room full of Sri Lankan entrepreneurs. Tech-Connect is basically a video panel of American entrepreneurs preaching to foreigners. As a Global Innovation through Science & Technology (GIST) initiative, it is one of the U.S. government’s methods for fostering innovation abroad. I listened not as an American, but as a Sri Lankan. I felt transported, and it was as if I were part of a sci-fi movie where this Silicon Valley panel was a group of tech gods. The audience hung on the panel’s every word like it was life or death.
The problem was that the information disseminated was not only incorrect in the local context, but was also presented as incontrovertible fact. For example, convertible debt was advocated as the only way to raise “early” capital, $100K seed rounds were categorized as small, and crowdfunding was viewed as a viable option.
In Sri Lanka, most rounds are priced and equity-based, and $100K is considered to be a large investment since the cost of living is substantially lower. Thankfully, Brad Feld was there to offer the “it depends” perspective, otherwise this would have been a complete waste of time. As Silicon Valley spreads knowledge, it is important for us to adjust to the local context, and entrepreneurs from other countries need to call bullshit when we don’t.
Beyond deciding to start a company and figuring out how to run one, there’s also the issue of what results founders in South Asia want. To build something big or build something that looks like a Silicon Valley company that might get bought by a Silicon Valley company.
From what I’ve seen, it feels like the goal of getting acquired by a Facebook or Google is over-prioritized. Several entrepreneurs are trying to create the next hot social app. I have seen Quora, Instagram and Path copycats in just the last couple weeks. This is a waste of talent, and a sure-fire way to turn away foreign direct investment or local capital.
There are bigger and more relevant opportunities if these innovators would just recognize the unmet needs right before their eyes, such as better infrastructure, agriculture and mobile solutions.
“The Indian market is very different from most western countries,” says Abhishek Gupta, partner at TLABs. “Though the opportunities are great, the customer behaviour and purchasing patterns are very different. What works in the Valley may not work here, and even if it does, the purchase behaviour and distribution mechanism will most certainly be different. Deals sites are a good example of this. Groupon caught on quickly but most deal sites in India shut down a year or two later.”
That said, there are few companies leading the charge. As Pankaj Jain, venture partner at 500 Startups, aptly points out, companies like Eko Financial, ZipDial, Innoz, InVenture and Next Drop are approaching innovation in India with an “indo-flare.”
ZipDial is leveraging the common social interaction of “missed calls” to drive polling and contests instead of Internet-dependent solutions like Twitter, while Innoz makes SMS-based applications for the masses who do not have connectivity. Eko Financial provides low-income workers in urban areas to send money to their homes using mobile phones, while InVenture is a global credit-scoring service.
“The real opportunity for smart, savvy entrepreneurs is to solve the problems plaguing them and their fellow Indians on a daily basis,” Pankaj says. “There really is no shortage of problems, big or small. Solving these problems for three-quarters of a billion people who don’t have access to smartphones, tablets or computers is exciting.”
In addition, innovations in sustainable agriculture like Lifeline Agriculture, which connects farmers with quality information or management tools that help increase accountability from construction workers, are uniquely desi. These are a few that are taking local innovation seriously.
We need to stop idolizing Silicon Valley. We should seek to learn about and collaborate with international ecosystems, not just preach to them. Efforts like 500 Startups’ Geeks on a Plane or bringing different “local” experts into the GIST’s Tech-Connect mix are examples.
Silicon Valley is amazing. It’s why so many of the worlds smartest geeks flock here. However, it’s amazing because it supports the needs of our well-developed economy. South Asia should stop glamorizing the Valley and start looking within to find solutions. Only then will genuine innovation evolve. After all, there is much we could learn and gain from places like Sri Lanka and India.
This post originally appeared on TechCrunch.
International founders, is excessive imitation of Silicon Valley a problem in your region as well?
About the blogger: Shruti Challa is a Silicon Valley entrepreneur. She has built several social consumer companies. She was recently part of a small team acquired by Groupon in 2011. Her most recent venture is called Mentorzen, which is an expert marketplace. Follow her on Twitter @shrutichalla.