Dan Morrell: I’m Dan Morrell and this is the third and final episode of “Out of the Valley,” a Skydeck mini-series that explores the past, present, and future of entrepreneurship. We started in the whaling capital of the world: New Bedford, Massachusetts in the 1800s, where we saw the roots of the venture capital industry. Then, of course, we found ourselves in Silicon Valley, where so many of the brands that shape our daily life got their start in humble garages.

Silicon Valley has been the global hub of tech innovation since the 1960s—but its most influential product might just be its model of entrepreneurship: disruptive, asset-light and capital-intensive businesses with a scale-at-all-cost mentality and no fear of failure.

But now something is threatening to disrupt the disruptors. Alex Lazarow (MBA 2010), author of Out-Innovate, calls it the “frontier market model.” Founded in places with limited resources and nascent entrepreneurial ecosystems, these startups have to be scrappier and leaner. And these limitations, Alex says, make businesses more sustainable.

In this episode, we ask entrepreneurs from frontier markets around the globe: What can Silicon Valley learn from your experiences? And what happens if the Startup Capital of the World ignores these lessons?

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Nicole Poindexter: My name is Nicole Poindexter (MBA 1997) and I'm the CEO of Energicity Corp and its subsidiaries in West Africa. We provide electricity that is affordable, and reliable, and sustainable, using a technology called solar-powered mini-grids. What that means is, we provide electricity to people who don't have it in rural villages across West Africa.

Morrell: If you live with electricity, it’s hard to imagine a world without it.

Nicole Poindexter (MBA 1997)
Photo by Eric Don-Arthur/GPA

Nicole Poindexter (MBA 1997)
Photo by Eric Don-Arthur/GPA

Poindexter: I talk a lot to my customers about what life is like without electricity. And one of the most profound things that they said to me was, "Life without electricity, you're always rushing." And it's because you have to do all of life in the daytime hours.

Morrell: When Energicity turned on the power in a village in Sierra Leone in 2019, there was communal joy.

Poindexter: The chief of the village, he had a stereo, he had a TV, he had a ceiling fan, but he ran all of these things off of a really expensive old gen[erator] set. And I say expensive, because it broke down all the time, and expensive because it used diesel, which costs a whole lot and was hard for him to get.

Morrell: A visiting dignitary flipped a switch to turn on the local grid.

Poindexter: So we get to the chief's house, the soccer match is playing, and he's got his ceiling fan running. And then he turns on his favorite music.

It was just this seventies disco hit, everybody breaks out dancing. It was such a profound experience of seeing the excitement and the potential for people having a new life, and how much fun and joy they were having—not to mention I was dancing, too. So it was a good time. That was a great moment.

Morrell: Nicole was no stranger to the Silicon Valley model of entrepreneurship when she launched Energicity in 2015. Until its IPO, she had been a part of US-based OPower, a software-as-a-service company that helped utilities engage customers.

But her experience as a founder in a frontier market was very different. With Energicity, she was building an asset-heavy company from scratch in a region that wasn’t even on the radar of most venture capitalists.

Poindexter: One of the challenges of being a startup outside of the traditional markets is that it's harder to fundraise, honestly. So we raised a bit of money in 2015, just a friends-and-family round. We raised from an angel in 2016, and we closed a seed round in 2020, after a pretty long slog of raising money.

Morrell: Without an influx of VC money, Energicity grew organically, funded by contracts for its services.

Poindexter: The constraints that we've had have inspired creative solutions, and those creative solutions have been access to better profitability, better tools for serving our customers who are incredibly poor, and so we need to actually figure out how to drive a solution that is incredibly low cost. And we figured out a path to that low cost because we were really cash-constrained. And I believe those two things are linked.

Morrell: The frontier market model has helped Nicole create a more sustainable business, but she knows that’s not what Silicon Valley values most. And that fact will shape Energicity’s future as it expands from 25 communities in mid-2020 to 50 communities by the middle of 2021 and beyond.

Poindexter: Ultimately for a business like mine, the rules and the context of Silicon Valley are still applicable. So I was talking to one of the former founders of Opower about our business. We have built a business that is, despite our small scale, has a very clear track record of profitability, and have had the fundraising challenges And his response was "Well, you're not really a fast-growing business." And he's right. He was applying a Silicon Valley mindset to look at our business. And so as long as the Silicon Valley mindset is the goalpost, it still has to be aspirational for our business.

Amira Rashad: What orders are you packing there, Richard?

Richard: [inaudible]

Rashad: For cleaning supplies? For Abu Dhabi?

Morrell: That’s Amira Rashad (MBA 1998), speaking with a worker at the BulkWhiz warehouse.

Amira Rashad (MBA 1998)

Amira Rashad (MBA 1998)

Rashad: I am Amira Rashad. I am founder and CEO of BulkWhiz, an online bulk grocery platform based out of Dubai in the UAE and covering the Middle East region.

Morrell: Like Nicole, Amira has a lot of experience with the Silicon Valley business model. Before she started BulkWhiz in 2017, she worked at Facebook as the head of brand advertising in the Middle East and North Africa.

And it was in that role that she saw opportunity for BulkWhiz: The region had booming internet usage, but its e-commerce options were woefully underdeveloped. Amira thought—correctly—that the region’s consumers, who were already active on platforms like Facebook and YouTube, would be quick to embrace online retailers.

But BulkWhiz did have to convince shoppers to change their buying patterns.

Rashad: We were offering bulk for the very first time in this part of the world. And it was very important for us to start our beta, which we launched out of Dubai, with a consumer base that knew what we're talking about. And therefore we purposefully—actually, probably surgically—targeted expats from North America and parts of Europe that had exposure to Costco before.

Morrell: Amira had something of a Silicon Valley mindset in the first days of BulkWhiz. She was ready to move fast, break things, prove the demand for her product, and then scale. That kind of approach was unheard of in the region just a few years ago, but Amira’s foray into entrepreneurship coincided with a boom in startups in the Middle East, and she found the VC money she needed to realize her vision.

But then her vision began to change.

Rashad: It actually used to be the case that I thought that way prior to the pandemic. And I very quickly realized that because of where things are in this part of the world—namely underdeveloped infrastructure, underdeveloped skill sets, probably nascent understanding of new spaces altogether—I think it is, more than ever now, that it's extremely important for businesses to actually have a solid operational and financial base before they scale.

Morrell: For example, with no suitable last-mile infrastructure to rely on in the region, BulkWhiz had to build its own. It was costly and time-consuming—and not a decision Amira would have made if she had been operating in a place like the US where she could easily outsource the work.

But this choice that BulkWhiz was forced to make because of the ecosystem they were operating in—it actually put them in a better position to meet the demands of 2020.

Rashad: Most startups that have created scale in this part of the world—and there aren't many—have actually rolled their sleeves up and built things from the ground up. And not just on the technology side, but also on the operational side. But I think most importantly on the people side. When you're looking at a new sector that requires new skill sets altogether, there's a lot of heavy lifting to do on the people side as well. And I think that's what we're realizing now, and entrepreneurs as well as VCs and others in this space are starting to take the longer-term view of it.

Morrell: Silicon Valley could use some of that long-term thinking, Amira says.

Amira: I think that encourages a little bit more responsibility in the way decisions are made both from an investment perspective, but also from a money-deployment perspective on the entrepreneurial level.

Morrell: It’s easy to think of the Silicon Valley model and the Frontier Market model as two distinct approaches to entrepreneurship. That’s how we’ve been talking about them in this series. But Amira thinks that’s going to change.

Amira: I think it's actually changing today, as a lot of the models in the online space are starting to look at global scale. And therefore, there has to be a point that comes very soon where this understanding between the various ways that the startup world functions across the world, [where] we start connecting the dots between those things.

Morrell: Remember Aldi Haryopratomo? He was the founder of Mapan, which we featured in the last episode.

Haryopratomo: Hi, my name is Aldi.

Morrell: He’s hoping that as we connect the dots between the world’s entrepreneurial ecosystems, we keep what’s unique about each of them.

Like we discussed in episode 1, Silicon Valley gave rise to the Silicon Valley model because of distinct characteristics of its era, its space, its sector, and its customer.

Haryopratomo: I don't think it's just Silicon Valley against the world or frontier markets. I actually think every country has a slightly different culture and you have to embrace what is strong about their culture. Indonesia has always been a very communal-type market where families are big. People gather quite a lot. People donate a lot. … There's just this energy of helping each other and Mapan, for example, embraced that energy so that we can deliver products. And that will create the value that then eventually creates profits. I do believe that understanding the fabric of the culture and what is unique about that culture is really what's going to create a sustainable company.

Morrell: The successes of Aldi’s Mapan—of Amira’s BulkWhiz and Nicole’s Energicity—offer tangible, actionable lessons to Silicon Valley, says Alex.

Alex: Across so many vectors, the ecosystems that are proliferating around the world are generating different models that work in different ecosystems, but that can teach us, readily in the Valley as well, how to build and scale and succeed for different styles of innovation.

Morrell: Alex offers the example of Go-Jek, the Indonesian ride-sharing giant that is the parent company of GoPay, where Aldi currently serves as CEO.

Alex says Go-Jek’s lessons break down into three parts: How the idea was born—and how it adapted; how it was built with an ecosystem in mind; and how founder Nadiem Makarim (MBA 2011) thought about impact.

Alex: So first, around this notion of where the ideas emanated from. Around the world, the best entrepreneurs are cross-pollinators. They are taking ideas and adopting them and that's kind of what I call the innovation supply chain. So ride-sharing obviously emanated in the Valley with companies like Uber and Lyft. But in Indonesia, the model was adapted to a completely different reality.

Nadiem's vision was, "Look, in the morning, I want to drive people to work. At lunch, I'll deliver food. In the evening, I'll drive people home. After that, deliver supper. And throughout the day, the drivers will be able to provide a range of other products.” Like for instance, delivering e-commerce packages or being cash-in/cash-out points for financial services in a market with high underbanked rates. And so totally reinvented the model, learning in some ways from what happened in Asia with the WeChat ecosystem and super apps.

Morrell: And these innovations are now influencing the original model. Alex says it’s no coincidence that Uber has begun to experiment with financial services offerings and that its fastest-growing segment is UberEats.

Alex: Second, is this notion of building an ecosystem. Outside Silicon Valley, the best entrepreneurs have to build the full stack.

Morrell: Which usually means developing both the ultimate product and the infrastructure that underpins it, says Alex. Think of Amira having to build not only the consumer-facing website for BulkWhiz, but also its last-mile delivery system that ensures its orders can be delivered.

Alex: But other times it means when you are reaching a customer, there are so many unmet needs that you can offer. And to be able to captivate their attention and change behavior, you have to offer a range of different things. And that is a good example of what Gojek has had to do.

Morrell: And a third important lesson from GoJek, and the closest to Alex’s heart, is the idea of building for impact. Nadiem told Alex that he launched the company with a vision of being a force multiplier on the economy.

Alex: Outside of Silicon Valley, the best entrepreneurs are what I call multi-mission athletes. They think obviously about operational success and scaling—all of the things that any startup is thinking about. But they're also thinking about creating a business model where the output, where the operational outcomes of the business are also directly tied with impact.

In the case of Gojek, they've created a million roles and employment through their ecosystem, but are also offering a range of critical services that weren't offered before. And one of the ones that I think is really potent example is what's been happening with GoPay and the financial services ecosystem in a really high market of underbanked rates. And one of the biggest reasons it's so expensive to reach customers that are unbanked and far away from branches and have low balances. Well, with a platform like Gojek, every driver can be a cash-in/cash-out point, human ATMs effectively. And with a wallet, with a regular use-case, can become very affordable.

And so Nadiem has created a model to drive financial inclusion where the impact of the business is directly tied to the operational success. And I think those are three dimensions to businesses at the frontier that teach us in the Valley about how we might out-innovate in the future.

Morrell: But the Silicon Valley philosophy and model is deeply entrenched. So while more successful examples might help some startups and VCs see the light, market forces will help, too.

Alex: What's going to change minds is competition. The best of innovation is coming from everywhere and it's getting improved as it scales. And Silicon Valley will continue to be a great hub for innovation, but the best businesses here will see increased competition from the best businesses all over the world.

Silicon Valley is at a critical moment. It's, today, on top of the world, but it's facing competition and frankly, an ecosystem that is globalizing. And to give you a sense of how this story might evolve, I think we can look to a different city and a different technology.

A hundred years ago, the technology of the day wasn't software. It was automobiles. And the capital of innovation wasn't Silicon Valley. It was Detroit. And at the time, the top three car companies were there and hundreds of entrepreneurs were building car companies where company service is a booming industry. Fast forward, what happened?

Today, Detroit is a shadow of its former self, but also the innovation of the automobile industry globalized and the best place to get the sexiest sports car is probably in Italy. And the capital of raw engineering might be in Germany. And the most reliable cars come from Japan. And arguably, the capital of electrification is in Silicon Valley or Shenzhen. And so this innovation movement of automobile production internationalized—but so did best practice. Think of things like just-in-time manufacturing that emanated out of Japan and is now standard practice around the world.

Morrell: This rise in globalized specialists that ended Detroit’s auto dominance is just like the challenge Silicon Valley is facing to its innovation dominance. We can already see some of this, says Alex. London has become a global capital of fintech innovation, Estonia has become the go-to hub for e-governance innovation.

But it’s not too late for the Valley to course correct.

Alex: And so Silicon Valley has an opportunity, but I say a necessity to take a moment and learn from and adapt to and take inspiration from these new ecosystems and these players coming from around the world because that is the way, the requirement, for Silicon Valley to continue becoming the most relevant place in the world in innovation.

This episode of Skydeck was co-produced with contributor April White, with additional production by PRX Productions. It was edited by Craig McDonald. It is available at iTunes or wherever you get your favorite podcasts. For more information or to find archived episodes, visit alumni.hbs.edu/skydeck.

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