Howour tech ecosystem is failing?

It seems like the wave has passed and what we are left with are the aftershocks. It’s never going to be as good as it was from 2012 to 2014/15. The first couple of batches from Plan9 were the best in terms of quality of ideas and attraction. The same goes with LCE, currently NIC Lahore, as well as i2i. These are probably the top three. I do not have any statistics but again that’s the point of the article.

Yet, the statement is not completely true. There is a lot of buzz in the industry. At least in terms of setting fancy new incubators. A lot of money is being thrown into making incubators look more “innovative”. Our incubation centers, at least in terms of a facility are on top of their game, yet there is very little to show up. There are stories like Sehat Kahani or PakVitae which sometimes take over your social media stream. But these stories are becoming rarer compared to early years. Wasn’t it supposed to be the other way around?

I do not do this often but every time I talk to stakeholders in the ecosystem, there is one constant theme in all of those discussions. And that’s a general sense of disappointment on the way things are being done. And just how much fluff is out there! This sounds truer every time there is a good story like Sehat Kahani. The news gets circulated like everyone was anxiously waiting for it. Something is definitely going wrong. And to some extent, we all know what that is. But we are not willing to talk about it in an open and honest way.

This article is an attempt to do exactly that. So please feel free to chip in. I am looking to be more wrong than right here. In the interest of fairness, I will start with something I am part of i.e. media covering the startups.

Media

To be honest this article wasn’t my idea. It was Fatima’s. We have been discussing a potential collaboration and the topic came up, again. To her credit, she is honest about things TechJuice needs to be doing. Mainly that is actively going out and see what is happening behind the curtains to create news rather than waiting for something to come to them. The main problem she sights is user interest. Readers are not interested in a startup story until and unless it impacts them directly. On the other hand, smartphone stories sell like hot cakes because everyone wants to know the next smartphone in their budget range.

Startup journalists can act as a bridge between a startup and its customers. It’s their job to tell what good a startup is doing and how the startup is progressing. These journalists can become customer advocates as well and bring to light the new features startups should work on. I have this conviction that Steve Jobs gained a lot from his “friendship” with Walt Mossberg. I am using the word friendship rather cautiously because it can result in prejudice. Your relationships with founders should not come in way of you doing your job, and your job is consumer advocacy and not necessarily startup praise.

Personally, I think I need to meet with founders and stakeholders more. And write in a way that more people can relate to. I will welcome any suggestions.

Incubators

I do not like bringing the same topic again and again, but our extravagant spendings on facilities are part of the problem. Plan9 and LCE used to be pretty raw and messy places. But you felt good meeting with people over there. Especially entrepreneurs. I vividly remember when I first visited LCE, I was in total shock. It was such a small place for an incubator. In hindsight, though it was perfect. I do not feel the same way now. Especially after its “NIC Lahore” incarnation. The place puts a lot of Silicon Valley offices to shame. That’s not a bad thing provided you have something to show up for. The last time I heard something exciting was Maro Tandoors, and it has been some time now.

The choice of LCE as an example is intentional and personal. It was always a place I resonated more with. The problem is just as pervasive elsewhere. And probably more so. The first three batches of Plan9 were the best. They do not have much to show afterward too (mind occasional breakouts like WiFiGen). Let me a bit more clear on what I mean by “show”. Markhor, Popinjay, Maro Tandoors, Patari, none of them became a million dollar company—as yet. But there was a vibe to their emergence. The road to startup success is always long, hard and unpredictable, but looking at them gave you hope that one of them might just get there. While you can throw part of the blame on founders who came afterward. The fact that incubators, and people running them, take most of the spotlight does not help.

Besides, the last thing you need to come up with an innovative solution to a problem worth solving is a comfy beanbag. We, as humans, are pretty complacent. Unless there is a fire under our seats, it’s hard for us to do anything let alone be innovative. It’s like going alone in your life with your father’s credit card in your pocket.

Do not get me wrong. I have a lot of admiration for people running incubators. For one they are the ones most hopeful about the ecosystem. Founders are silent, investors are nowhere to be found and media/customers do not give a damn. It’s these people that for the most part have been keeping the conversation alive. I am certainly not questioning their intentions, but the purpose of incubation is to encourage someone else. Your role is to be invisible. Not because you are not excited about anything, but precisely because of it. An essential part of helping someone is also not to put words in their mouth.

So either incubator(s) are taking all the oxygen that there is. Or there is no oxygen what so ever, and both are problems.

Investors

The number of startups in the ecosystem is always going to be higher than the number of investors there are to fund them. Which fundamentally shifts the power balance to investors. The problem becomes even worse in a country like Pakistan where there is no breakthrough startup success story as yet. Plus, investors also have to make money. Else who is going to invest in them? That’s precisely the reason why I believe, for now, we need more angel investors than VCs.

Investors (local) probably share the least of the responsibility compared to others. Not because they are doing well but because they aren’t doing much. In the long run that could be a problem. Look no further than India. The country is filled with startups riding on outside investments. Good for startups but not so much for the local investment community. For now, it’s a chicken and egg problem. We need a unicorn for investments to flow in and we need investment for any startup to actually be a unicorn. I think local investors need to see this as a small opportunity window.

To realize that, however, investors need to be more fluid. By that I mean they need to invest more often. I am not saying invest more. Just do it more often. For example, instead of giving one startup $200K, give ten startups $20K. $20K is a lot of money unless a startup is building a hardware product. Or needs massive infrastructure investments for a service at scale. Both deserve more caution, but for majority $20K for maybe 1%-2% equity stake is a great starting point. If things go well you can invest more for more equity. If they do not. your risk profile is much lower compared to losing $200K all at once.

Founders

Most startup founders are not real. By that I mean they do not necessarily get what they are signing up for. It becomes evident as soon as you start talking about what they are building rather than the incubator they got in. By virtue of what they are doing, a founder will look scrappy and rough on the edges. So will their product or service. Now that’s not a bad thing. It is actually a hallmark. Also, often times founders do not necessarily understand the difference between a technology, a product, and a business.

Technology is not the product, and a product is not necessarily a business. You might be really interested, and possibly good, at Machine Learning. That does not mean you can build a product. A product is much more than just technology. So if your interest is getting your hands dirty on a new cutting-edge technology, a much better option would be to join an academic or research institute. Similarly, you might be a really good product person. That does not mean you should start a new company. A much saner approach would be to join an existing startup whose product fascinates you. Entrepreneurship is about building a business, and the choice has to be deliberate.

In short, if you are passionate about playing cricket then play cricket. Do not start a premier league.

Secondly, please avoid the word traps i.e. digital, innovation, disruption etc. Avoid using them especially when you are talking to users, investors or press. They are often scapegoats for the lack of value proposition. And if you have to use them understand what they mean for you and your company. Digitizing transportation does not say anything. We will get you a car on the press of a button on your smartphone is much clear. Same goes for innovation. Innovation means a new way of doing an old thing. That thing can be how you market or distribute your product. Or a new way to satisfy an existing need. It’s not necessarily tied to technology.

Most new products are not disruptive. At least not in a way you think they are. If you have to understand one thing about disruption, please understand that it’s a business phenomenon, and not a technological one. You do not disrupt an industry because your product has a new technology. You disrupt an industry because your product has a new business model.

Perhaps your most important job is what Ben Horowitz preaches i.e. understanding and managing yourself. Understand why you are doing what you are doing. What is it that you really like? The thing you are building or the occasional pat on the back from Umar Saif or Khurram Zafar? Frankly, they are just doing their jobs, and that does not make you any special. They have backed hundreds before and will continue to do after you are gone. Examine your feelings when you wake up. Observe what’s more exciting to you? The work or the central cooling at incubator’s facility?

Onward…

When I shared the article with Fatima, she had a lot to say. Especially when it comes to the role of Media. I do not think we still agree 100% with each other, but we have a conversation going on. That’s exactly what I was aiming for. We would love to have your say to push this conversation forward. Twitter or Facebook are good places to start the conversation, but if you have more to say we will be happy to talk to you. Send an email to fatima@techjuice.pk or hey.imranhaider@gmail.com.

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