Entrepreneurs from developing countries are drawing inspiration from successful Silicon Valley startups to launch products and services in emerging markets.
The recent Y Combinator Demo Day revealed a strong trend: the replication in emerging countries of business models that have proved their worth in Western markets. Several of this year’s crop of YC graduates have set out to make some key innovations from the Valley – including online payments, e-commerce, agricultural market platforms and more – accessible to the wider world.
Paystack: the African Stripe
Paystack is targeting the online payments market in Africa, starting with Nigeria. This country of 180 million inhabitants, which boasts no fewer than 60 million Internet users, presents a real opportunity for online payment systems providers. Last year most of the $150 billion that Nigerians spent on retail purchases was handed over at bricks-and-mortar stores, partly because online payment services are currently far from being an optimal alternative. The procedure is complicated for the customer and merchants wishing to integrate online payments into their websites find the process lengthy and tedious.
Fast, simple integration for e-tailers
Paystack’s approach, inspired by the model developed by San Francisco-based payment infrastructure provider Stripe, is to offer e-merchants fast integration of online payments services and ensure a frictionless, user-friendly experience for customers wishing to purchase goods on the Internet. The fledgling company claims to have already slashed integration time for e-commerce sites from three weeks to thirty minutes and reduced the number of steps required for customers to pay for goods online from seven to just two. Since January, Paystack has already won over more than 700 merchants in Nigeria. If the startup can emulate the exploits of its US big brother Stripe, success in the African market would seem to be assured.
Delivery apps becoming popular from Latin America to Africa
Echoing Brad Stone’s book telling the story of Amazon, Bogotá-based Rappi calls itself ‘The next everything store of Latin America’. The Colombian startup is profiling itself as a Latin American combination of Instacart and Postmates.
Rappi’s winning recipe is based on low manpower costs – just $2 an hour for delivery personnel – coupled with densely populated cities so that a great number of deliveries can be made every hour. This equation means that the customer is charged only 70 cents per delivery. With its attractive pricing, Rappi is potentially able to reach out to an estimated 70% of the Latin American population, with the added promise of speedy delivery – ranging from 12 minutes for a bottle of wine to 42 minutes for a shopping basket of over 30 items. With this kind of service performance, the startup’s highly ambitious slogan may well be justified.
Shypmate is also in the delivery business, this time with international scope. The San Mateo, California-based startup, which calls itself the Airbnb of international delivery, offers a fast delivery service to Nigerians and Ghanaians for products ordered in the United States. The packages are carried by amateur couriers – basically people travelling to those destinations who have some spare luggage capacity.
Current delivery services to Nigeria and Ghana are rather clunky and do not meet the growing demands of the 18 million Internet users who purchase goods online from overseas websites. Shypmate promises to deliver at an 89% lower cost than traditional delivery services. It is often the case that the specific features of markets in emerging countries require a local entrepreneur’s vision to identify opportunities and adapt a successful model to that particular market. This is what Shypmate’s four founders did when they estimated the potential of their ‘P2P’ delivery service at over $3.4 billion. At the Y Combinator Demo Day, CEO Perry Ogwuche announced that the company had seen a 60% increase in turnover every month since its launch last September.
A platform connecting Indian farmers with buyers
Agriculture in India – unlike the United States – is a highly fragmented sector in which 72% of the market is accounted for by 100 million farmers and smallholders. In order to sell their produce, Indian farmers have to load their trucks themselves and sometimes drive up to 160 kilometres to get to the nearest market. This situation may be about to change with the advent of online tools. Having observed that more and more Indian farmers were getting connected with the Internet via smartphones, the founders of Kisan Network developed a platform – accessible from a mobile phone – to put small producers in India in touch with bulk buyers.
Kisan Network connects Indian farmers directly with buyers
The way it works could not be simpler. Farmers post details of their produce online and buyers can choose from the range of offerings they find on the platform. Kisan Network co-founder Aditya Agarwalla points out that while under the traditional system intermediaries take around 20% of the transaction price, Kisan Network charges just 10%, thus enabling the producers to retain more profit and ensuring considerable savings for the end-buyers. In just three months, Kisan Network has already brought 2,500 farmers on board its market platform and 68,000 kilos of produce have been sold – a clear example of how the online marketplace model originating in the United States is able to transform local economies worldwide.