The startup world outside Silicon Valley

Crazy stories Tanzania, Brazil and India

If you want to join a growing startup, your best option is to move to one of the tech hubs - Silicon Valley, New York, London, Paris, Tel Aviv, Bengaluru.

But what happens in the rest of the world? In Africa, Asia, or even in ‘boring’ cities such as Detroit or Zagreb? With no VC money, no Standford graduates to hire?

There, unicorns do not exist, only ‘Camels’ - the now-famous term Alexandre Lazarow coined in Out-Innovate.

The ‘Classic’ Unicorn playbook

Before we cover camel startups, let’s talk about classic unicorns - a more than one-billion evaluated private company.

If we need to simplify the Unicorn-playbook to 5 steps, it’ll probably look something like this:

1. You come up with an amazing idea

2. You go to a startup accelerator or pitch it straight away to VCs

3. You raise money, hire people, and aim to grow as fast as possible

4. You raise additional rounds of funding every 2 years and become huge

5. A big company buys you, or you start thinking about an IPO

The strategy is very simple - you become bigger and bigger, taking a huge share of the market. All that invested VC cash transforms into your moat.

Uber is a classic example. It took them 15 years (!) to become profitable, but now it’s evaluated at $150B, x30 than Lyft, which was considered its biggest competitor.

Uber is not alone - it took Facebook 5 years to become profitable. For Shopify, it was 11 years. Same with other famous companies - Spotify, Netflix, Tesla, Amazon - at first, you burn money. Then, you become a giant.

And the VCs are happy with the results. Even if you have some colossal failures like WeWork (raised $15B), Quibu ($2B), Jawbone, and Better Place ($1B) - it’s still worth the risk for VCs.

What happens when Silicon Valley's playbook doesn't work

That classic playbook works only if you have:

• VC money

• A big talent pool to hire from

• The infrastructure you need to create the startup

In the frontier (outside the big tech hubs), ALL of the above is harder, making the unicorn playbook impossible. You don’t have the benefit of 5 rounds of funding with hunters of millions of dollars.

A camel is a company that strives to be profitable from the first day - it knows that it has no other chance. In the frontier, if you are not profitable, you will lose.

Some camel examples

A camel is NOT like any regular bootstrapped startup.

It’s very different from an MIT graduate who starts a SaaS with his friends, aiming to become profitable without raising money. The main difference is that a camel startup has no choice.

A camel might still raise money - but the goal is not ‘growth at all costs’, but profitability and slow expansion.

A few examples:

M-Pesa wanted to solve a difficult challenge - many people in Kenya didn’t have access to banking infrastructure or even the Internet! Paying for something was very hard, making the lives of people harder. So they built a simple SMS-based mobile money platform that allowed people to send and receive money using basic cell phones.

Imagine a farmer who, without M-Pesa, would have to travel miles to pay for supplies or receive payment for crops. Now, with a simple text message, they can manage all their finances from their village, saving time and money.

For d.light (founded in India) and Zola Electric (founded in Tanzania), it was even harder - they wanted to provide electricity to remote areas with no existing power infrastructure and no ability to pay upfront installation costs for complex systems.

They solved it by designing affordable solar-powered products and offering flexible, pay-as-you-go plans that allowed customers to pay in small installments.

Today, d.light sold over 125 million products globally, and Zola Electric continues to expand across Africa.

Final words

You might think: "I'd rather get funded and feel secure than raise a camel".

But here's the good thing about not having money: You come up with new ways of doing things. Why? Because necessity is the mother of invention.

What we enjoyed reading this week

1. Big Tech vs. Mid Tech: Which One’s Right for You? by

   Hemant Pandey
   and
   Gourav Khanijoe
   . Unicorns still rule the current world, so if you live in a tech hub and wonder what’s right for you - Hemand and Gourav cover the options with a great article.

2. 8 lessons from my first startup investment by

   Jaryd Hermann

3. Building a Culture of Operational Excellence by

   Joshua Burgin