In theory, replicating proven business models appears to be a safe investment strategy. In reality, proven business models from a world with pervasive broadband connectivity, smartphones and laptops, mean very little in a world where SMS and “ring cutting” (calling and hanging up quickly to signal that the caller expects a call back to talk) are de facto modes of communication.
In this world, social networks that use SMS can gain greater market traction compared to Facebook; low-literacy, text-free interfaces have much wider appeal compared to traditional text-centric interfaces, and platforms for writing applications on so-called “dumb” phones are more relevant than iPhone software development kits. The markets for mobile payments, micro power-grids, water management solutions, health care and distance education present many opportunities for billion-dollar startups.
There is no denying that the markets in the developing world are fraught with challenges: government censorship, overbearing regulations, lack of protection for intellectual property, and affordability — to name a few. However, as an April 2010 piece in The Economist outlined, “the combination of challenges and opportunities [in emerging economies] is producing a fizzing cocktail of creativity.” Drawing a parallel with Japan in the 1980s is not out of place: “Toyota and Honda took to just-in-time inventories and quality management because land and raw materials were expensive. In the same way, emerging-market companies are turning problems into advantages,” the piece continued.
But this hasn’t happened in the tech world. Instead of building innovative products, vying for user traction, creating defensible intellectual property, and inventing new monetization models, tech startups in the developing world focus simply on labor arbitrage. Facebook debuts on the public market with a valuation of over $100 billion, while tech growth in developing countries is condemned to unimaginative outsourcing sweatshops.
Take the example of the most successful of the success stories in this part of the world: India. IT and computer software exports: $102 Billion. Talent: Over a dozen IITs that fuel some of the best engineering teams worldwide. Workforce: 4.4 million skilled workers. When was the last time you heard of an Instagram-style, Sandhill-backed startup from India rising up to become a billion-dollar company due to an innovative product? I rest my case.
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