We all talk about encouraging entrepreneurship in developing countries. Yet how many of us have launched our own business, or spun off an initiative from our employer into its own organization?
The startup life is hard, despite all the hype about venture capital funding and million-dollar exits. In the USA, only 50% of startups survive to the fifth year – and this is an “easy” startup country.
When you think about the high barriers to entry, the long sales cycle, and the meager returns, why would anyone want to launch an ICT4D business? In fact, at the Technology Salon on How to Launch (and Fund!) Your ICT4D Startup Idea?, one equity investor said:
“We don’t invest in ICT4D companies only targeting the NGO space because the market is too small and has too many disincentives to buying technology services.”
Still there are new tech startups every year in international development and we discussed the why and how of launching an ICT4D startup organization with key thought leaders, including:
- Ben Bellows, co-founder of Nivi
- Brent Chism, CEO at TaroWorks
- Laura Walker McDonald, former CEO of SIMLab
- Chris Walker, Social Innovations Director at Mercy Corps
What Are the ICT4D Startup Challenges?
Entrepreneurship requires vision to see a market opportunity and then organize the resources required to address that opportunity.
An Overall Lack of Time
One resource that everyone agreed that was the hardest to find is the time to work on a new initiative while balancing a day job, family obligations, and life in general. Here is it key to focus on just what absolutely matters and discard everything else, and even then, expect the startup life to be mentally challenging.
Active Cash Flow Management
Experienced entrepreneurs spoke of the immense pressure to manage cash flows, especially when proposals take 6-18 months to go from invested idea to actual project activity that can be billed out and generate organizational revenue. This requires “patient capital” that could be from a parent organization that is willing to incubate an initiative until it has the maturity to spin out into a separate entity.
Disincentives to Purchase Services
The international development bidding process itself is also a challenge to ICT4D startup organizations in that prime contracting organizations have strong incentives to use the startup’s ideas during the proposal phase, but not in implementing the program.
During implementation, prime implementing partners are incentivized to invest in their own staff, and not external entities. Many entrepreneurs spoke of primes who would pay their own staff to recreate the ICT4D startup’s technology, instead of buying it from the startup, even if it took longer and was more expensive.
ICT4D Startup Founders Need Support Networks
A reoccurring theme throughout the Technology Salon was the need for strong support networks for entrepreneurial success. Support networks that were both personal and professional.
On the personal side, entrepreneurs need to have a trusting and supportive family, and in the USA, a spouse with affordable healthcare coverage through their employer. The personal support allows the entrepreneur to face the wild variability of startup founder salary – or lack thereof. Friends and family can be the first advisors too, helping craft the solution idea and refine its selling points.
On the professional side, all the entrepreneurs spoke of the need for parent organizations or outside investors to bring more than financial investments to support startups. Contacts, initial sales, and overall validation were mentioned as crucial to startup success.
Parent organizations, and entrepreneurs themselves, also need to know that there are no big equity exists in ICT4D, and therefore have their motivations in alignment with realistic expectations of what success (or failure) will look like.