10 Challenges for Emerging Market Startup Ecosystems

slides from my talk at #StartupIstanbul

  1. Dave McClure
    slides from my talk at #StartupIstanbul
    Transcript Header:
    10 Challenges for Emerging Market Startup Ecosystems
    Transcript Body:
    • 1 0 C H A L L E N G E S F O R E M E R G I N G M A R K E T S TA RT U P E C O S Y S T E M S @ D A V E M C C L U R E @ 5 0 0 S TA R T U P S 5 0 0 . C O
    • 1 ) T H E R E A R E N ’ T M A N Y I N V E S T O R S . M O S T O F T H E M A R E E V I L O R S T U P I D . • low valuations and crappy terms: “51% for $100K” • supply vs. demand problem; fewer investors than startups, lack of competition = no urgency, • say NO to business plans / revenue projections • say YES to marketing plans, expense projections • wins & exits => FOMO, competition increases
    • 2 ) T H E R E A R E N ’ T M A N Y E N T R E P R E N E U R S . M O S T O F T H E M A R E C L U E L E S S . • need more mentorship, more founder experience • product management, design & UX, growth hacking & marketing • changing quickly as 1st gen founders exit -> 2nd gen startups
    • 3 ) T H E R E A R E N ’ T M A N Y C U S T O M E R S . M O S T O F T H E M D O N ’ T PAY. • Not true anymore; 3B+ smart phones • increasing internet penetration + consumer GDP • improving payment & logistics • local/regional markets getting BIG • access to global markets easier
    • 4 ) S TA RT U P S D O N ’ T H AV E T R A C T I O N , A N D N O I D E A H O W T O G E T I T. • Growth Hacker movement • STOP building product features; START growing customers (via online platforms) • unit economics: CAC vs. CLV, timing of revenue & expense, conversion metrics • find profitable, high-volume customer acquisition channels that convert to KPIs, learn how to grow them • WMD.co (weapons of mass distribution)
    • 5 ) T H E R E A R E N ’ T M A N Y E X I T S . M O S T O F T H E M A R E S M A L L . • where are the unicorns? • acquirers crossing borders to find talent (US, EU, China, Japan, Korea, etc) • non-tech companies acquiring startups for innovation • global companies looking for emerging market footprint • local -> regional -> global growth
    • 6 ) I N V E S T I N G I N R E A L E S TAT E I S B E T T E R B E T T H A N I N V E S T I N G I N S TA RT U P S • startups aren’t real estate! • real estate doesn’t go up forever • most startups fail completely • but a few startups grow up to be unicorns • use real estate to lower risk, drive liquidity
    • 7 ) M O S T A C C E L E R AT O R S S U C K . A N D T H E Y ’ R E G O I N G T O D I E . S O O N . • Accelerator economics are tough. • Most startups fail. Most wins are small. Big wins take time (5-7 years). • Most accelerators are under-staffed, under-capitalized, short time horizons. • Accelerators should verticalize, focus on industry-specific expertise, get corporate / academic / govt sponsors • Create operational capital via investment; use real estate to hedge risk, be creative
    • 8 ) E M P L O Y E E S D O N ’ T U N D E R S TA N D E Q U I T Y. F O U N D E R S D O N ’ T G I V E I T T O T H E M . • equity should be distributed widely among team (not just founders and management) • when exits happen, a thousand angels are born • PayPal Mafia, Google, Facebook • Yemekspeti example • create equity culture, angel investor culture
    • 9 ) M O S T S TA RT U P S N E V E R G O G L O B A L . M O S T T H AT T RY W I L L FA I L . • startups have to start SOMEwhere • some local & regional markets are BIG — Turkey, MENA, Brazil, Indonesia • 50-100M customers is a good place to start • hard to jump to global markets without local market MVP, product/market fit • you don’t need to go to Silicon Valley, but you need to get Silicon Valley to come to YOU.
    • 1 0 ) M O S T F O U N D E R S & I N V E S T O R S D O N ’ T T H I N K T H E Y ’ R E A S G O O D A S S I L I C O N VA L L E Y. • Silicon Valley isn’t a place, it’s a State of Mind. • Most startups in Silicon Valley came from somewhere else (PayPal, WhatsApp, Udemy) • The biggest problem isn’t lack of experience, it’s lack of confidence (for both investors & founders) • You’re Good enough. You’re Smart enough. Get Going!
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    Ez nagyszerű nem igaz?
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    Hi Dave, a great insight about emerging markets but would investors in MENA including Turkey accept marketing plans and expense projections instead of business plans?
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    Hi Dave. I'm a brazilian entrepreneur. All these points are true. I don`t know how exactly works in other emergent markets, but, here, one of the greatest challenges that you did not include in this list are political and taxes issues. Besides, we have old and inefficient labor laws, simple contracts like "vesting" can generate a big legal problem...