Startups have changed the world. In the United States, many startups, such as Tesla, Apple, and Amazon, have become household names. The economic value of startups has doubled since 1992 and is projected to double again in the next fifteen years.
For decades, the hot centre of this phenomenon has been Silicon Valley. This is changing fast. Thanks to technology, startups are now taking root everywhere, from Delhi to Detroit to Nairobi to Sao Paulo. Yet despite this globalisation of startup activity, our knowledge of how to build successful startups is still drawn primarily from Silicon Valley.
As venture capitalist Alex Lazarow shows in this insightful and instructive book, this Silicon Valley “gospel” is due for a refresh–and it comes from what he calls the “frontier,” the growing constellation of startup ecosystems, outside of the Valley and other major economic centres, that now stretches across the globe.
The frontier is a truly different world where startups often must cope with political or economic instability and lack of infrastructure, and where there might be little or no access to angel investors, venture capitalists, or experienced employee pools.
Under such conditions, entrepreneurs must be creators who build industries rather than disruptors who change them because there are few existing businesses to disrupt. The companies they create must be global from birth because local markets are too small. They focus on resiliency and sustainability rather than unicorn-style growth at any cost.
With rich and wide-ranging stories of frontier innovators from around the world, Out-Innovate is the new playbook for innovation-wherever it has the potential to happen.
More about Alex: https://www.alexlazarow.com
[00:00:00] Steve Jobs: [00:00:00] Stay hungry, stay foolish.
[00:00:13] Aidan McCullen: [00:00:13] startups have changed the world in the United States. Many startups, such as Tesla, Apple, and Amazon have become household names. The economic value of startups has doubled since 1992. And this is projected to double again in the next 15 years. For decades, the hot center of this phenomenon has been Silicon Valley.
[00:00:34] This is changing fast. Thanks to technology. Startups are now taking root everywhere from Delhi to Detroit, to Nairobi, to Sao Paolo. Yet, despite this levelization of startup activity or knowledge of how to build successful startups is still drawn primarily from Silicon Valley. We welcome author of out innovate.
[00:00:54] I would love all entrepreneurs from Delhi to Detroit are rewriting the rules volley [00:01:00] Alexon. Lazaro’s welcome to the show. Thank you so much for having me. It’s great. Great to have you on the show and good news for our audience today. I have a copy of out innovate to give away just by signing up to the innovation show website, our newsletter on the innovation show.io.
[00:01:15] I’m going to start somewhere. I rarely do. And it’s with your dedication because you dedicate the book to men and women in the arena. And then you quote this beautiful Theodore Roosevelt quote as follows. “It is not the critic who counts, not the man who points out how the strong man stumbles or where the doer of deeds could have done better.
[00:01:35] The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood.
[00:01:41] Who strives valiantly, who errs, who comes up short again and again, because there is no effort without error and shortcoming. But who does actually strive to do the deeds. Who knows great enthusiasms, the great devotions. Who spends himself in a worthy cause. Who at best knows in the end of [00:02:00] triumph of high achievement and who at the worst, if he fails at least fails while daring greatly. So that his place shall never be with those cold and timid souls who neither know victory nor defeat.
[00:02:13] I absolutely love this way you start the book.
[00:02:16] Alex Lazarow: [00:02:16] I have one quote on my fridge and it’s this one here. And it’s been meaningful for me, my whole career. And the reason it’s meaningful for me is I’m a venture capitalist by day. I invest in startups with one foot in the Valley and one foot, uh, around the world.
[00:02:33] And. The thing I do most often. And the thing I like the least about my job is that I meet great entrepreneurs for, for whatever reason, the entrepreneur opportunities, just not a fit for my day job for my work. Um, it might be too early. It’s not the right industry focus, whatever. And I think it’s so important that I always remember that the credit is due to the man or woman in the arena.
[00:03:00] [00:02:59] And that entrepreneurs are really putting themselves out there and building a business and looking to change the world. And I think that’s why it’s so important for me to remember that. And that’s why it’s on my fridge. And the reason I started the book with it is that I wanted the readers of this book to also take that lens as well of look, we are going to take this attitude of learning from entrepreneurs around the world.
[00:03:27] And what are some of their best practices. And some of these businesses have scaled and succeeded. Others have stumbled and had harder times, but either way, the credit is due to the entrepreneurs that have looked to build this. And I wanted that value statement being the first thing that we start the book with.
[00:03:44] Aidan McCullen: [00:03:44] This book is a most rate for startups and VC’s alike all over the world. And for those people that are involved and the ecosystems around them, the story you share of Zevia Helgeson and how many Silicon Valley investors could not get behind the notion that his company could break the [00:04:00] Silicon Valley paradigm so extensively and still succeed.
[00:04:03] And this story really shares. That breaking of the paradigm that is so necessary.
[00:04:09] Alex Lazarow: [00:04:09] The story it’s about a startup at the time called off grid electric. Now it’s called Zola, which offers solar home systems to the unelectrified around the world. So it blew my mind to find out that 1.2 billion people don’t have access to power.
[00:04:26] That means when the sun goes down, there is no light. When the sun goes down, there is no air conditioning. There’s no fan, there’s no TV. There is darkness except for burning kerosene or some of these other, uh, other methods. Um, uh, and what this business wanted to do was change that. And so imagine a couple solar panels, a battery, some cell phone chargers, a TV, et cetera, essentially, a whole modern lighting system based on solar that is underpinned by three technologies.
[00:04:57] The same time. One obviously [00:05:00] is the rapid decrease in solar and battery costs that makes these home systems possible. The second, yeah is the proliferation of mobile money because most of the families that are buying these cannot afford. To buy a couple hundred dollars system, but they can’t afford a couple of dollars a day or a week.
[00:05:17] The same amount of money they were spending on kerosene for their lights and third IOT and an ability to do it remote diagnostic, because it would be way too expensive to go and send someone in person to go visit each one of these if they broken. So this business model was possible because three technological trends were happening at the same time, but this model looks totally different than a software.
[00:05:37] Only Silicon Valley startup that wants to grow at any cost. There’s a lot of differences to this. And so when I had met Xavier, when he was building this business in the early days, it was one of these moments that really catalyzed, just my understanding of just how radically different, the most successful entrepreneurs around the world, what their [00:06:00] business models look like and what it takes to succeed.
[00:06:02] And this started this conversation in this reflection about it, what it was that will help these businesses succeed, what it is that works over the longterm for them spoiler alert it. Isn’t following the Silicon Valley playbook.
[00:06:17] Aidan McCullen: [00:06:17] Like you say, Somebody likes Javier has to totally do things differently because the ecosystems for attempt, even to find investment don’t exist and they have to create those.
[00:06:25] They have to rally political support. They have to rally banking support. So let’s jump into what you mean by a frontier innovator. Yeah,
[00:06:34] Alex Lazarow: [00:06:34] happily. And so I think at the highest level one, one to say, entrepreneur, no ship is exploding around the world, right? Some studies talk about 400 million entrepreneurs around the world.
[00:06:45] 6% of the, of the planet are entrepreneurs. Um, in the book I’m talking about frontier innovators. And so there’s two substance to that that are important. Let’s talk about frontier and let’s talk about innovators. We’ll start with the latter. When I talked about [00:07:00] innovators in this book, I’m really Tookie talking about entrepreneurs of opportunity.
[00:07:04] So people that are leaving, whatever they are doing to build a startup, to build a business because they see an opportunity in the market to businesses that are looking to solve a problem using technology. And business model innovation is part of it. And three critically, it’s also businesses that aspire to scale their operation.
[00:07:25] It’s not a single location type of thing. It’s really an aspiration to build something meaningful and big. So that’s what I mean by innovator. And then frontier, you know, obviously this is a very nebulous term and this is when I talk about frontier. I’m really talking about this new frontier. Of innovation around the world.
[00:07:43] There’s now 480 startup ecosystems around the world, but 10 years ago you would have been correct in saying, look, all the action is in Silicon Valley or a handful of other ecosystems. Not only for ecosystems are created billion dollar businesses today, 84 startup ecosystems around the [00:08:00] world. 84 countries have created billion dollar businesses.
[00:08:03] There are 480 of these startup equals since we’re on the road, there’s a million startups around the world. And so in the frontier, um, my argument is that the best entrepreneurs outside of Silicon Valley, and a lot of these emerging startup ecosystems have more in common, right? An entrepreneur in Detroit or Chicago or Amsterdam or Bangalore, or Nairobi has more in common with each other or the best entrepreneurs in Sao Paulo than they do with those in San Fran, San Francisco.
[00:08:26] And so that’s what I mean by the frontier. And obviously those cities I mentioned. Is a really heterogeneous bunch. They all look different. And so if I was going to grossly oversimplify it I’d say, look, if you map a two by two, the matrix you say on the one hand developed market versus developing market on the other developed startup ecosystem versus developing startup ecosystem top, right.
[00:08:47] You might say, look, that’s where Silicon Valley is, right country. And it’s a very developed started because assume you might put a handful of other places there, right? Maybe New York or London, Tel Aviv. Bottom left in my book. I take us as far [00:09:00] as young yang in North Korea, believe it or not, but also, you know, you might say, look, there’s started ecosystems in Zambia, right?
[00:09:06] Where I talk about one example in very developing country and very nascent startup ecosystem, the very exact opposite. And so in the book I use some of these strong opposites to really pull out the differences, but there’s obviously a lot of nuances to think of a market like Bangalore, right. In a developing context.
[00:09:23] But very developed startup ecosystem. It just looks different, right. Or, you know, I’m from Winnipeg, just a small, medium sized city and in the middle of Canada or developed country, but very nascent startup ecosystem, also different dynamics. And so in the book I use some of these more nuances differences to pull at that, you know, we obviously oversimplify the frontier to be this set of emerging startup because it was when I write.
[00:09:47] The SQL I’ll have to do a bunch more. DoubleClick’s for this as a startup ecosystems around the world, continue to scale.
[00:09:53] Aidan McCullen: [00:09:53] So many of these organizations, so many of these startups are changing the world and there’s a global rally cry, which is [00:10:00] startups can change the world. And you say in the book, it’s preached where religious fervor, but it’s not unfounded.
[00:10:05] And I quote you hearing you say in the United States companies founded by entrepreneurs and often supported by VC money, include household names like Apple, Amazon, and Facebook. And now 40% of publicly traded us companies listed after 1979. Where, when startups, entrepreneurship is a driving force for employment in the U S alone, entrepreneurship is responsible for all net new jobs created in the past decade.
[00:10:32] And in all but seven years since 1977, I think that’s a critical point. We need to plant the seeds for the future by investing in startups, on changing our mindset about them.
[00:10:42] Alex Lazarow: [00:10:42] Absolutely. And I think what’s really exciting about the data is, and we will see this topic studied increasingly in years to come in the academic sphere.
[00:10:52] And so fast forward a couple years, what I would predict we will hear. Is as a startup innovation ecosystems, continue to [00:11:00] globalize and around the world, as we continue to see successful startups getting built in these emerging startup ecosystems, the same dynamics will be true. We will see growth in employment driven by this.
[00:11:12] We will see a push towards innovation, but also. One of the things that I think is exciting is that the best entrepreneurs outside the Valley are taking a different attitude to the problems they’re solving. And by and large, I believe they are creators, not disruptors. They’re taking this lens of looking to solve some of the biggest challenges through technological innovation and doing it so creatively.
[00:11:37] And so we’re also going to see a lot of social impact as a result of it too.
[00:11:40] Aidan McCullen: [00:11:40] Well, let’s jump into the playbook because through your studies, through your. Traveled throughout the world as a VC, but also as a lecturer, you have written a playbook, some themes, and some rules that these frontier innovators follow and your book explores 10 elements.
[00:11:57] We won’t get through them all today, but I love to share a few of [00:12:00] them starting with this brilliant one, which is create this concept of creation rather than disruption. I was shocked to read in your book that in 2014, more than half the world does not have addresses. In Kenya where this a startup called Timbo is based only 2% of all buildings have them.
[00:12:18] And to put that in context, you share that the average ambulance response time in Nairobi is more than two hours versus six minutes and 10 seconds in New York. And a large part of the problem is improper location and addressing, causing ambulances to circulate it for critical minutes to find an exact location.
[00:12:35] And then you bring us. Into an, a more trivial element, which is a lack of addresses, stalls commerce, and it takes 3.1 phone calls for a KFC delivery. And 1.4 calls per ride for our Nuber pickup. And to solve this problem, you share the great story of a company called Timbo, a technology driven startup that creates addresses where there are none.
[00:12:59] Alex Lazarow: [00:12:59] I think this is one of [00:13:00] those things. When we reflect on what it takes to innovate. It’s important to remember how different the context is in a lot of ecosystems, right. And address. This is a really great example. If you don’t have an address. You know, nevermind. Just having, not being able to get services in critical times with ambulances, but it’s tough to do a lot of services we take for granted, um, any type of delivery, the postal service, but also even applying for a bank account.
[00:13:28] Um, it’s really hard to apply for bank account. If you also have to write your address down and you don’t have one and that’s a requirement. And so this is a really big challenge. And the story here is of an entrepreneur in Kenya, that’s looking to build this through technological innovation and creating it.
[00:13:43] And so this raises the question of what do I mean by creators and also what does that mean in relation to what happens in the value? Um, disruption let’s start there, um, which is this notion of disruption. It was started the research with. Clayton Christiansen. I’m the, uh, the academic [00:14:00] at Harvard business school, but not, not in the software industry, actually in the steel industry where he observed that in the steel industry, uh, integrated steel mills were getting quote, disrupted.
[00:14:13] At the low end of the market at their most unprofitable area by these mini mills. But over time, the mini mills took over the entire model market, starting with a small little bit and then, and scaling it’s this incredibly emotionally appealing story. It’s a modern day, David and Goliath of the small Valley and player at the low end of the market, succeeding and scaling by offering a better product by being more nimble and by better serving customers.
[00:14:39] In what’s happened in the Valley is that we’ve taken disruption and it’s become more than a approach. It’s kind of a flag waving philosophy and it defines the types of problems that entrepreneurs seek to solve, where they look for a big market, where there is a inefficient solution that can be disrupted [00:15:00] with a software solution.
[00:15:02] And those are the problems that are getting solved. And yet in emerging markets, what we see is the opposite. We see the best entrepreneurs solving problems, um, like Timbo, um, solving addresses. And so what’s happening is, you know, if you look at the best entrepreneurs in Silicon Valley, right, the largest companies, less than 20% of them are in critical industries like financial services or agriculture or energy or healthcare.
[00:15:27] If you look at Subsaharan Africa, that number is over 60%. The types of problems, getting solved are totally different. There they are creators. And so what do I mean by creators specifically it’s entrepreneurs that do three things simultaneously. The first is they are, um, offering a product or service that was previously not available, or at least not available in the formal economy to they’re doing it.
[00:15:50] Uh, for the mass market in three, they are often the shoulders of giants upon which others build the business like, uh, okay. High scales. Um, that means that others can scale on top [00:16:00] of it, leveraging this, leveraging this platform. So they are, they are, these is the shoulders of giants as they, as they scale.
[00:16:06] I mean, that’s what I mean by, by being a creator and by building a business. And I think we’re going to see more of those types of entrepreneurs getting built in emerging startup because around the world,
[00:16:17] Aidan McCullen: [00:16:17] Almost more important because we need to create a surplus of jobs and surface of enterprise because of the threat of artificial intelligence.
[00:16:27] I thought this is really important because rather than disrupt existing incumbents, existing businesses, we need to create on top of them. And I thought this is such an important aspect of the creation versus disruption, but let’s move on. Cause there’s loads in here because you talk next about this idea called the first mover.
[00:16:45] Disadvantage. And there’s a great saying that the second mouse gets the cheese and you illustrate this using the story of an Peyser. The company was by no means an overnight success and encountered financial, social, cultural, political, [00:17:00] technological. And regulatory roadblocks along its way to success.
[00:17:03] Alex Lazarow: [00:17:03] Yeah. So first, you know, what does M-Pesa? They are the leading mobile platinum mobile payments platform, um, also in Kenya and they’re not a traditional entrepreneurial story. They were built by intrepreneurs within Safari comm. The seed investor was actually, uh, Money from, uh, uh, the British aid agency and what essentially they created was an ecosystem where people could use, uh, feature funds, right?
[00:17:27] Simple, you know, simple phones, not smart phones to essentially have a modern banking experience. And, um, one of the quotes I like, um, uh, around his story was, was, you know, uh, around how do you convince a shopkeeper to open up their till and give money to someone that comes and shows an SMS code? Because essentially what was happening is people with SMS money and, uh, it would be held in the cloud, uh, in virtual wallets.
[00:17:55] And all these little shops were essentially ATS that you could go and cash in [00:18:00] cash out, and you really had to build. A trust around the system that you could give money out to someone. And that would be okay because you would then have money in your, in your own wallet. And so that’s one of the challenges around building startups.
[00:18:13] But I think that one of the macro lessons in the book, if I was going to take a step back, is that the best entrepreneurs outside the Valley have to do more with less. And so in this case, right, they have to, um, do all of these things really and, and change behaviors part of it. But at the end of the day, Because they’ve done that.
[00:18:33] They’re also, they also have a range of advantages and one of them is, you know, they are able to get support from a range of other ecosystem players. They’re, um, uh, able to build a new market, uh, rather than disrupt another one. And, and, uh, and so in the end, this has ended up being a really, really successful business.
[00:18:53] Um, there’s a lot of these reasons why taking this attitude of being creative or can yield and lead to [00:19:00] incredible. Outcomes and incredible impact that also translated into advantages. Um, and, and, and this is this push pull that we will feel throughout the book as well, turning adversity into advantages in some way.
[00:19:13] Aidan McCullen: [00:19:13] So let’s jump then Alex, to an idea, you call it fostering the full stack where. Frontier innovators. Don’t just rely on the software here. You say in Silicon Valley’s classic model, startups are asset light in Silicon Valley. Best practice suggests following a software base asset light product or service startups are told to focus on their wedge, that narrow segment in the market in which they will compete and hopefully dominate providing a full end to end spirit experience is a bold, expensive, and often foolhardy strategy.
[00:19:45] For frontier innovators often need to construct their vertical full stack all by themselves. Developing both. The ultimate product or service and the enabling infrastructure that underpins it. And this is why it takes so much more resilience, [00:20:00] so much more investment and so much more time.
[00:20:02] Alex Lazarow: [00:20:02] And I appreciate you asking me this question cause it’s, it’s a perfect segue in some ways to the last one, which is having to do more with less and that being both more challenging, but also turning it into advantages.
[00:20:14] And let me tell you the story of one entrepreneur, which is the story of Gib also in Brazil. So give also is trying to go. What’s called a personal finance manager. So in the U S we have apps like mint.com or credit karma, and.com allows you to see all your bank accounts. We want to place understand who you owe money to when the bills are coming and things like that.
[00:20:33] Credit karma allows you to understand your credit score and do similar things in the U S to build a business like that. You have to connect to people’s bank accounts? Well, it turns out there’s actually a lot of infrastructure that exists already that allows you to do it. If you want to monetize, you can offer your customers better offers.
[00:20:48] And there’s a lot of players that are willing to acquire customers in addition, your format, and interact with that kind of, kind of up. And by the way, there’s a really big credit scoring infrastructure. A business idea of also [00:21:00] I had a much harder and hand dealt to them because in all those cases, that infrastructure didn’t exist.
[00:21:06] So the first thing is they wanted to go to an app to give people access, to understanding their bank accounts. Well, there is no way to connect to all the banking apps or at least there wasn’t in Brazil at the time. And so they had to build it themselves. And so they had to build this bank interconnection layer.
[00:21:19] And the next, when they wanted to give people insights into, you know, their credit worthiness, because a lot of people were saying, well, you know, I, you know, I have this high cost debt or I have this or this and I’d like to optimize, what should I do? They have to give insights to that. But there is no credit score at the time in Brazil, there’s only a block list.
[00:21:36] You’re either on it or you’re not. Um, and so they had to give insights into the customers and build some of that. As well, and there also wasn’t an ecosystem of fintechs or traditional financial services, incumbents who were willing to land. And so they had to really build that ecosystem themselves too monetize.
[00:21:53] So they had to do all three of those to be able to just do the one thing. So it makes the mountain that [00:22:00] much harder to climb, but in the similar way, as we talked about the creator’s advantage, um, this also gives advantages to. On the one hand, it’s a moat, right? It’s a little bit of this full stack mode because once you built a lot of this infrastructure, it’s harder for others to do it.
[00:22:17] You’ve raised a lot of capital for it. There’s less venture capitalist. There. It’s less likely that a competitor will also get funded for similar business. That’s much, much smaller. And, uh, and because you’re doing something that has this creator’s land, et cetera, you’re also able to leverage some help in the ecosystem potentially too.
[00:22:34] That’s a little bit of the dynamic of having to build a vertical stack and not being very painful, but also, you know, over longterm potentially leading system advantages as well.
[00:22:44] Aidan McCullen: [00:22:44] Focusing on the idea of the horizontal stack, the reason I like this, and I see it as I do the career of the future, because we need to be more horizontal.
[00:22:54] We need to have more than just one skill. And here startup example that you give us [00:23:00] is. Nadia , I’m butchering these names. I’m sure not to build how to do this. When he built Go-Jek horizontally offering related business models, dunk, mutually reinforced the core offering. Let’s share a bite about this.
[00:23:13] This is a fantastic story.
[00:23:15] Alex Lazarow: [00:23:15] Yeah. Happily. And so, you know, firstly, this full-stack concept that we’re talking about, you know, the most obvious manifestation of it is this vertical stack of having to build enabling infrastructure to do it. But one of the things that I’ve observed in the best startups around the world is that often they’re, they’re building this horizontal stack as well.
[00:23:32] So they’re building a set of offerings because the market, uh, uh, gaps are so large the way to serve customers. He has to offer this ecosystem around. And so the story of Nadeem is really exciting. So first, what is go Jack? They are a, um, a startup now a, a scaled company that started in Indonesia, um, that is in the ride sharing industry.
[00:23:56] But yeah, instead of it being kind of an Uber like model with cars, I mean, [00:24:00] Indonesia. Um, and is around OGX and that’s why it’s called Go-Jek, um, objects are motorcycle taxis, and there’s a really big informal industry of these motorcycle taxis. And, uh, what demon built was an ecosystem to enable people, to call them and drive more business for them, et cetera.
[00:24:18] But his vision was actually much broader. And it was this idea that, well, if you build this ecosystem and you give some of these drivers more jobs, more rides during the day, that’s interesting, but could you do more. And so the way the go Jack ecosystem has evolved today is that it isn’t just right.
[00:24:36] Jerry, the Dean’s vision is in the morning. We’ll drive people to work. I launched with deliver food in the evening. We’ll drive people back to back home in the evening. Perhaps you could deliver food during the day. You can deliver e-commerce. Um, or services, including for instance, uh, financial products and services.
[00:24:52] And so they launched, uh GoPay, which is similar to Ambika that we talked about earlier, where their drivers can be cash in cash, [00:25:00] out points for people. And so our network of humanity, ATS, um, and so, uh, go, Jack had to do more, um, as well. Um, but in the end, this creates a really powerful ecosystem. And by the way, I’ll, I’ll make one aside.
[00:25:15] Which is, um, one of the things I don’t like is that people talk a lot about how ideas come from Silicon Valley and get copied everywhere around the world. I think the story of go Jack is really a great example of this new phenomenon, where ideas come from everywhere and get improved as they get tested and built around the world.
[00:25:35] And so I’ll go, Jack had some inspiration around ride sharing. Their model of ecosystem was fundamentally different than the original Uber model. In some ways, borrowed from the superhero, a model in China, um, that we chat and things like that, um, had built by the way the Go-Jek model has now influenced and inspire the originals.
[00:25:55] And it’s no surprise that the fastest growing segments at Uber are around food delivery. And they [00:26:00] also tried with. Uh, building a wallet and arrange with these other services too. And so I think that’s one of the things that’s also really exciting, uh, to see is where inspiration is coming from.
[00:26:09] Aidan McCullen: [00:26:09] One of the things you say here is when they build trust, then they can leverage natural.
[00:26:15] It’s not just that their capability, but it’s the trust in the brand. And then you can leverage the brand elsewhere.
[00:26:21] Alex Lazarow: [00:26:21] Absolutely. You know, in some ways, one of the challenges of being a creator is that it’s harder on the other is particularly in emerging markets, because there are so many different market gaps.
[00:26:33] If you build a brand and a trusted relationship with customers and a way to reach them, and they like the interaction, they are often willing to have a couple of different interactions with you. You can also start starting away towards building
[00:26:47] Aidan McCullen: [00:26:47] frugality is a huge part of these frontier innovators and.
[00:26:53] I’d love. If we could take the opportunity to share the idea of camels versus unicorns, but also taken a little of an [00:27:00] aside here to share with the audience, the origin of the word unicorn, because many won’t know why these startups are called unicorns, but also that newer term, which is a DECA corn.
[00:27:10] Alex Lazarow: [00:27:10] Yeah.
[00:27:11] Well, so it’s interesting. The unicorn word, I think on the one hand has a numerical, meaning it means a startup that’s worth a billion dollars. But it also has a philosophical underpinning where to build a unicorn is also an approach, a style, a philosophy towards how to do it. And if that’s the philosophy, the method is growth, it’s growth at any cost.
[00:27:33] It’s okay to focus on growth with unsustainable economics. It’s okay to burn lots of capital in service of growth. It’s okay to take a short term approach to building your business in service of growth. That’s the philosophy of building unicorns of growth at any cost. And the decacorn is a $10 billion business numerically, but underpinned by the same philosophy.
[00:27:55]What I to talk about in the book is this notion of being a camel. it’s this [00:28:00] idea of building sustainability and resilience into the business model from day one. It isn’t about growth at any cost. It’s about sustainable and resilient, balanced growth over time. And why did I choose the camel?
[00:28:13]The camel is an animal that can survive some of the harshest environments around the world that can survive in the deserts and around the world. But also when there’s water, it can drink faster than other, any animal and it can sprint very rapidly. And so when times are good, It can scale very quickly.
[00:28:28]And when times are bad, it is built on a foundation of strength that lets it endure over the longterm. And so that’s where this notion of being a camel. And so let me give you one example, which is the case of GrubHub. I often think of on demand food delivery as an incredibly venture subsidized model, like door dash raised $1.5 billion GrubHub, comparatively raised a pawltry less than $80 million.
[00:28:52] It was founded in Chicago. And, when I interviewed Mike Evans, the COO and cofounder, he talked a lot about how [00:29:00] philosophically they looked to build sustainability and resilience from the getgo. And every single fundraise they did was at a point where they were sustainable. And for specific purpose, it was to expand a couple other cities to do a spot acquisition.
[00:29:13] What have you, it took them about 10 years to exit and IPO. And I asked Mike, I said, why didn’t you do this faster? Why didn’t you raise a little bit more money and accelerate? And he said, look, I could have done it in eight years, but I would have done so at meaningfully more risk. And that’s what I’m, that’s really what I’m talking about in the book.
[00:29:30] I think that we have this, fallacy where we see all these big startups and the success stories that have grown at any cost, we say, well, they did it this way. And therefore that is the answer. But what we don’t know is the counterfactual to the story. You know, if you replay that story a hundred times, how many of those times taking this growth at all cost methodology, will you get the outcome that we just happened to see here versus the amount of times where the [00:30:00] company would not have succeeded?
[00:30:01] And I believe that using a camel approach gives us a better risk adjusted outcome, gives us a more likely likelihood over a hundred times of getting into meaningful, large, sustainable, great companies, enduring companies by taking that approach versus a unicorn one.
[00:30:17] Aidan McCullen: [00:30:17] One of the reasons I mentioned the camel and it’s so relevant to them in the current times, we’re experiencing that because. We are in a drought of sorts. We need to conserve our water in a way. And I’d love your chair in this current pandemic, how you see the lessons from the frontier innovators panning out across the world.
[00:30:38] And particularly for places like the Valley, where the paradigm is different than it needs to change.
[00:30:44] Alex Lazarow: [00:30:44] You know, I wrote this book in a completely different context and I was rallying against. This growth at all cost methodology, believing not, you know, it might make sense for it. Very small handful of startups where eight is truly winner takes all markets.
[00:30:58] And there’s a lot of [00:31:00] capital going to competitors to be taking this growth at all costs methodology. I think it works for a very small set, but I think that for most startups, it isn’t appropriate. And what’s interesting is the context has changed. When I wrote the book, I was Silicon Valley. It was a context of abundance.
[00:31:17] The times were good. There was lots of Capitol and businesses weren’t in great shape, but the context has shifted right to this context of adversity. And as the best entrepreneurs in the Valley are looking to build more enduring businesses and weave sustainability and resilience into their business model as well.
[00:31:38] There aren’t that many great models in Silicon Valley and how to do that. And this is really the point is that best practice around this is global and that best practice already exists with the best entrepreneurs that have had to do this in ecosystem of adversity all along. Looking to and learning from the best entrepreneurs around the world, gives us a playbook on how to navigate the crisis [00:32:00] in silicone Valley.
[00:32:01] But you know, obviously all around the world too,
[00:32:03] Aidan McCullen: [00:32:03] I love that you’ve done this. You’ve taken the best from all around the world and also in doing so encouraged the people in different countries as well, because oftentimes people are comparing themselves to the Valley and counting, and I wish it was like that in your going, no, wait a second.
[00:32:17] You have some advantages that they don’t have. And you give a great example. I live in Ireland, which is a pretty small ecosystem, but you give a great example of a country like we’re aware of, for example, Estonia, who totally made itself a digital country, digital passports, digital identity system, et cetera, or Rwanda is one that many of our listeners won’t be familiar with, which is awesome.
[00:32:41] Alex Lazarow: [00:32:41] What I think is really interesting is that outside of the Valley, The playbook looks different on how to build a startup and having to do more with less again. And this is a good example is having to be born global in the U S entrepreneurs are lucky. They have a massive trillion dollar economy to tackle 380 [00:33:00] million person market or, or whatever the updated number is.
[00:33:02] But, um, for many entrepreneurs operating around the world, um, like entrepreneurs in, in Dublin or in Estonia, um, the local market might be too small. And so entrepreneurs need to build in a born global way. From the get go. They need to figure out how to build a product that in service that can scale across borders.
[00:33:20] And in that works around the world to be able to build a bigger Tam. And there’s a bunch of different ways that manifest itself. I mean, I think the Rwandan story is interesting. Rwanda has become a market that welcomes innovation and has become a testing ground for innovators that want to launch in Africa companies like zip line, starting in Rwanda with their drone delivery of blood, right.
[00:33:44] Healthcare products as a way to start test the product, figure out if it works and then go elsewhere. And there’s numerous other stories like that for Wanda. And I believe that this skillset of being born global is critical for entrepreneurs outside of the Valley. And it [00:34:00] also leads to some of these companies innovate their Silicon Valley peers.
[00:34:05] Let me give you one example to that, that I just think is really interesting as a story of UI path. Which is a robotic process automation business. So RPA, and that is bots to automate white collar work, taking something from this spreadsheet, dropping it somewhere else. That’s, you know, massive oversimplification, but that, that kind of approach of, of, of automating work, it was started in Romania, Daniel Dines, a CEO.
[00:34:27] Why interviewed for this? Talk about how the fact that he had to be born global was critical to their success because they had to build a product that could scale across borders that could be localized, that could sell across borders. And today the business is arguably the fastest growing enterprise business of all times.
[00:34:42] And the biggest in the, in this massive case and bigger than it’s Silicon Valley peers. And so the fact that it started in a smaller market, um, was part of the reason that it was able to succeed over time by being born global.
[00:34:56] Aidan McCullen: [00:34:56] One thing I wanted to ask you, we touched on it earlier on and [00:35:00] we’ve talked about on previous shows is innovation teams within organizations, established organizations are coming under pressure.
[00:35:06] As the economic environment comes under pressure, but equally startups are going to come under pressure. Scallops are going to come under pressure. What is your advice for them? To navigate these uncertain times.
[00:35:19] Alex Lazarow: [00:35:19] Yeah. Well, so first of all, my, my heart goes out, um, to entrepreneurs that are having to navigate this crisis to the men and women in the arena to harken back to the beginning of our episode.
[00:35:30] Um, but I’d say, look, I think. We have an opportunity to learn from how some of the best startup entrepreneurs that have scaled through ecosystems of adversity, how they’ve done it and apply it to this ecosystem. And I’d say, look, there’s probably two lessons that I think are particularly important. Um, and the first, uh, is tied to this camel notion of building with sustainability and resilience in mind having sustainable unit economics, managing burn, but also remembering to take a longterm outlook to the work.
[00:35:59] I’m in the [00:36:00] second is, and this is partially a hope as well, which is this notion of being a creator or building businesses that have social impact as part of it. I think that COVID has laid bare some of the biggest challenges in the world, in the United States, for instance, where I live. Um, it’s not new that there are 60 million Americans that are underbanked or unbanked.
[00:36:22] It’s not new. That there’s 80 million Americans that are under-insured. None of these challenges are new. But all of a sudden we’ve seen. Why those challenges are so important in the ability to deliver benefits to those folks or healthcare or whatever it is. Um, and so I hope that what we will do is we will change that the lens around some of these problems and to see these are big challenges.
[00:36:46] But they are also really big opportunities for entrepreneurs and innovators, both at big companies and startups alike to tackle. And so I hope that we take this opportunity to shift the types of problems that are getting solved and focus [00:37:00] more on being creators with impact and really hopefully building things that.
[00:37:05] Leave the world a better place
[00:37:07] Aidan McCullen: [00:37:07] before I close out today, I just want to remind our audience. I have a copy of this brilliant book up for grabs. If you just sign up to the innovation show.io newsletter on the innovation, jada.io, you can be in with a chance of winning Alex. Where can people find out more about you, your book, your newsletters, et cetera.
[00:37:22] Alex Lazarow: [00:37:22] Yeah, happily. So you can sign up for my email@example.com. Lex LA Z a R O w. Dot com or follow me on Twitter at Alex Lazo. And you can find my book anywhere where books are sold on Amazon, notably, but given the crisis, I encourage you to support your local, small business in bookstore and buy it there.
[00:37:42] So a really excited to hear your feedback from your listeners and enjoy the show. Thank you so much for having me
[00:37:47] Aidan McCullen: [00:37:47] author of out innovate. How global entrepreneurs from Delhi to Detroit are rewriting the rules of Silicon Valley, Alex Lazaro. Thanks for joining us.
[00:37:56] Alex Lazarow: [00:37:56] Thank you so much, Ravi. This is fun. [00:38:00]