Understanding the Rise Of Successful Tech Juggernauts in Unlikely Places

When friends in Silicon Valley concede to me that rapid, near universal access to mobile and software is revolutionizing societies around the globe, they still fall short of wanting to invest there. The risks are too great; the opportunities in tried and true markets too significant; ecosystems outside of the US – perhaps even outside of Silicon Valley itself – are too immature to matter. Where are the opportunities beyond “copy cats” which take successful western tech juggernauts and localize them – say in eCommerce or ad tech – where are the consistent exits?

I’m going to start handing out copies of the new book by Sami Mahroum, the Academic and Executive Director of INSEAD’s Innovation & Policy Initiative, Black Swan Startups: Understanding the Rise of Successful Technology Business in Unlikely Places.

Like powerful reads over the past several years such as Pando Daily founder Sarah Lacy’s Brilliant, Crazy, Cocky and journalist Elmira Bayrasli’s Other Side of the World and my own focused on the Middle East Startup Rising: The Entrepreneurial Revolution Remaking the Middle East Mahroum shares riveting narratives of how entrepreneurs build enormous enterprises across unexpected markets. But he also combines a tour of decades of academic research on entrepreneurial ecosystems with extensive data and frameworks. These are both guide posts for anyone supporting these entrepreneurs and good predictors for anyone who might want to invest in new, rising markets.

Mahroum uses what is becoming a common analogy of the Black Swan where an understood, given belief system instantly unravels when we find evidence that calls a premise to question.  In absence of proof to the contrary, scientists believed all swans had to be white. When an explorer of Australia in the late 17th century discovered thousands of black swans there, the paradigm forever shifted. “Black Swan Startups” are not, thus, one-off success stories but irrefutable evidence of a new era of near borderless, rapidly growing entrepreneurial activity.

In examining specific, highly successful tech enterprises across eleven cities around the globe – as diverse as Amman, Tallinn, Lahore, Berlin, Espoo and more – Mahroum underscores not only the breadth and impact of the companies. In fact they are long in motion vanguards in countries beyond the successes we’ve come to expect in China, India, Brazil and Israel. Spurred by rising, consumer-oriented middle classes across emerging markets and progressively near universal access to technology, entrepreneurs are building ecosystems bottom up. In so doing they are creating fly wheel of success stories that spin out new startups, create new wealth that invests in the next generation, create jobs relevant to the 21st century and compound economic growth. And there is no turning back.

The story of these shifts and opportunities are not based around answering “what is the next Silicon Valley?” as valuable as the lessons are from there. Access to highly skilled talent; great entrepreneurial supporting universities; highly skilled entrepreneurial immigrants; flexibility of specialization to capitalize on tech advances as they occur; culture of risk-taking; open and collaborative social and professional networks; sophisticated and experienced venture capital across the spectrum of growth; competitive and open regulatory environment encouraging the free movement of goods, service, ideas, people and capital; cities that offer great life styles -- all remain essential and universal.

As new markets to varying degrees adopt many of these ingredients, what is really interesting however is how the best entrepreneurs regularly compensate for when they are lacking. These include access to global networks; anchor firms that have helped in investment, skills and research to compensate when universities are not around; low cost production/engineering costs; growing strong infrastructure; knowledge base of local and regional markets; government support especially to work around regulatory challenges (industrial parks, free trade zones etc.)

Local entrepreneurs thus Mahroum notes “assess local conditions in terms of a) their needs; b) how much value can be leveraged locally and c) how much value can be leveraged globally – and then they seek to compensate for the missing critical factors by reaching out beyond their location… What emerges as the most important criterion that needs to be present for success in a particular location it’s the ability of the founders to transcend any shortcomings involved in operating there.”

How did Skype create a communications juggernaut in Tallin? SoundCloud a global audio platform from Berlin? Sofizar, a leading global SEO/Internet Marketing platform in Lahore? Bayt.com one of the largest recruitment sites in Dubai? The stories all are here, each with its unique address of their markets. But they also share a hyper sensitivity to what needs to be navigated on the ground locally, across their regions and often beyond. They leverage their local communities to rapidly test, local talent often at great cost advantage to build, last mile expertise to offer new convenience, the attraction and caliber of their cities and communities to collaborate. When they lack advantages in easier access to capital, more open rule of law, advanced research – they compensate. They open offices where they can succeed in expanding operations, addressing larger customer bases and raising money; they use unprecedented access through technology to create networks of expertise, mentorship and resources to succeed.

There are no doubt strong head winds. Most frustratingly much of what can be aggressively adopted in rising markets to leap frog their success – aggressively opening of rule of law in the short term and utterly shifting the emphasis on education to critical thinking versus wrote learning, to heavier emphasis on STEAM curricula, smaller class sizes, better compensated teachers while leveraging remarkable ed tech to expand and scale the reach in the medium and long term – are eminently doable if there was political courage, vision and understanding of the potential of this amazing new generation of entrepreneurs. 

The very universal access to technology that unleashes the opportunities Mahroum describes also means that software giants from the West and China – well funded, filled with armies of world class engineers and data scientists – can knock out would be local competitors. There is a reason that the Facebook, LinkedIn, SnapChat, Uber in many nations are, well, Facebook, Linkedin, SnapChat and Uber.

All the more reason why it is essential to understand what is changing around the globe. Local advantage, solving big, hands dirty problems on the ground and layering in technology offer significant opportunity. Emerging markets are where the growth is because it is where talent is becoming unprecedently unleashed and where citizens are seeking their voices and ways to improve their lives despite their challenges.

I’d say Silicon Valley take note, except in the end it won’t matter. These shifts are happening any way, with opportunity for anyone anywhere who sees it and is willing to engage.