NB Financial Innovation
Think Globally, Innovate Locally: If you’re trying to serve individual customers, you can’t be a plane ride away, says Accion Venture Lab’s Paul Breloff
In the 18 months since we launched the Accion Venture Lab, our team has spoken to 450 entrepreneurs around the world – and counting. One of the things we look for in potential investees is a willingness to get their hands dirty in learning about their customers and understanding local markets firsthand. We’d prefer that our entrepreneurs hail from the very markets and customer segments they wish to serve, but when that’s not the case, we like to see them adopt these new contexts as “home.”
Unfortunately, we hear a different story from many founders: “We’re focused on the BoP in [pick an emerging market] – but our senior management team is based in [some fully emerged market].”
There are some well-developed explanations for this, like: “We’re not a Ugandan company [for instance], we’re a global company, and that’s why it makes sense to stay on the West Coast, closer to global talent and investors.” There is logic here, particularly for business-to-business models – but if you’re trying to serve individual human customers, you can’t be a plane ride away from them.
Everyone on the Venture Lab team has spent time managing impact enterprises in emerging markets while based in the “field” – e.g., India and Kenya – and abroad – e.g., in the U.S. but with companies operating elsewhere. In our experience, the only way to succeed is to be there, and our attempts to do it from a distance were handicapped and frustrating. Managing a startup requires daily immersion in your customers, your local team, infrastructure realities, the cultural and political context, business partners and other stakeholders, the time zone and countless other intangibles. That’s how you put the pieces of your business model together – and how you deliver real value to your customers.
As investors, we like to practice what we preach. Venture Lab invests at the earliest stages of a company’s life cycle, often pre-revenue and sometimes even pre-operational. We aim to be active partners in building a business, achieving proof of concept and helping firms start to scale. Since our two-person, D.C.-based launch in 2012, we’ve worked hard to cover the globe by building an international deal referral network and racking up lots of airline miles. As a result, we were able to source and close investments in some great companies from the start – but we’ve worried we’ve missed certain beneath-the-radar opportunities and local market context.
To this end, Venture Lab recently went through a Great Decentralization. Our small team dispersed and began to dig in with entrepreneurs in high-potential regions: Nate Gonzalez moved to Nairobi, Kenya; Vikas Raj moved to Bangalore, India; and Alina Kogan started splitting her time between Mexico, Colombia and a U.S. home base. Our newest colleague, Rishabh Khosla, and I are now a bit lonely back in D.C., where we continue to explore opportunities domestically, support global operations and maintain a strong link to the Accion headquarters.
(Above: Paul Breloff)
Has this been easy? Not at all. We’re a young initiative still defining our shared DNA, long-range goals and collective worldview. Dropped Skype calls, major time zone dislocations and delayed real-time responses complicate our ability to share new ideas and insights, brainstorm about companies and themes, and create the kind of “soft” infrastructure and bonds that define the most effective teams. And will this ultimately be the best model to support our work? We’re not quite sure; at this point it’s an experiment. Perhaps there will come a time when it’s again more important for all of us to be sitting in the same place.
But for now, the trade-offs seem worth it. Being closer to the action, we can find more and better investees, particularly those with indigenous founders, and those that aren’t on the usual global conference or accelerator circuits. We can tap into a much richer and broader market perspective to inform investment decisions and diligence processes, including a better understanding of customers, political winds, regulatory subtleties and partnership dynamics. We can tailor our engagement model and thematic focus areas to the unique dimensions of local markets, rather than approaching the world with one-size-fits-all hypotheses about the ways mobile phones, internet, data and technology will disrupt status quo financial inclusion.
We can also more effectively engage with and (hopefully) add value to a given company on a regular basis – as a true business partner, not just a fly-in/fly-out investor. We can join key sales calls, participate in customer research, brainstorm strategy over a meal or drink, and do a variety of other things that are much more difficult (or even impossible) to do from a distance. Ultimately, we can build the kind of face-to-face personal relationships that make all of our efforts more effective and fun.
Of course, we’ll remain globally opportunistic as we search for the best financial inclusion enterprises with whom to partner – so we haven’t put long flights entirely behind us. But our regional presence has already paid dividends. In the coming weeks, my colleagues Nate, Vikas and Alina will share more perspective from their particular regions here on NextBillion Financial Innovation, particularly as it relates to financial inclusion themes to watch – so stay tuned!