(If the angels at YouTube and WordPress do their thing, the above should start at 46m31 with a tall, blue-shirted, bald guy in his (then) mid 40s saying the words ““By the way, the thing worth highlighting is”, and should end, 31 seconds later, with the same guy saying “the customer actually needs the full product when they first start using it” by 47m02. You can press pause at 47m02)

A low cost MVP is not applicable

Hopefully the above insight answers why so many of us proptechs in emerging markets are feeling frustrated or ashamed why it’s taking us so long to get to a minimum viable product.

Why? Our product is much like a 2,000 km railway line. It’s only useful when a carriage can carry a user from point A to point B. Therefore, until then, it’s a lot of hype and blood, sweat and tears going into the ground – for not much obvious good. Buffett kindly calls this a defensive “moat”. To those in the trenches building it, it’s an agonising project.

You “want some more” (pain)? Okay, here’s data

Another uncomfortable fact. Commercial property (and property in general) runs on data. So, in a proptech startup, you have the added complexity of developing a SaaS tool … PLUS … a data solution.

Thus, not only is a) your product only usable by (enterprise) customers later in the development cycle, but, b) because of complexity, your product’s development lifecycle is longer than normal.

Longer development means one thing: more funding required.

How about more (pain)? Product maturity vs user value

Expanding on Andreessen’s point 1, and applying the railway line metaphor, here are two realities affecting the beloved user metrics:

1. For the first 50% of development of your product, customers are worse off using your product. I.e. it is better customers don’t use your product.
2. For the next 20% of the same development journey, while using your product is better than not using your product, the bad news: they are still worse off than using existing pen and paper / Excel solutions.

This, explained by the SaaS chart of pain, is a hard problem to solve.

Unfortunately we’re not in Silicon Valley, Boston or London. We’re operating in Mumbai, Bucharest, Santiago, Manila, Nairobi.

$5M is a huge number for local VCs. Secondly, the proptech ask of $5M for a business with initially no users, a long development roadmap and an initially small addressable market is dripping with risk for investors.

While the above are hyper rational criteria for VC investments, it’s a catch 22 for niche startups.

Firstly, how many tech home runs can you name out of emerging economies?

Secondly, the road of proptech innovation is littered with the burnt-out carcasses of failed tech startups. The most common reason, and we see these guys come and go every couple of years: teams who have tried to attack proptech “from the outside in”.

Why the failure? Property is a relatively unstructured industry riddled with complexity, and stacked with secret handshakes and landmines – it has a massive domain IP moat. It truly is a jungle. Therefore, without the 10,000 hours in property, you’re in unknown, and unforgiving, territory.

With Silicon Valley’s enterprise SaaS bitter medicine out of the way, I am now going to share with you unromantics from operating at the coalface here. In summary, what’s different about proptechs in emerging markets, and, then, what are the solutions.

As the image unpacks above, niche proptechs are dealing with a whole bunch of noise their competitors overseas are not. The result, high opportunity-cost-of time founder team members waste hours fighting fires at the bottom of the “startup needs pyramid”, and miss the important stuff higher up.

In addition this combination of “helicoptering” up and down the needs hierarchy and the higher levels of stress introduces brain fog. This lack of clarity results in poor decisions. Poor decisions will kill you faster than anything else.

3. Smaller markets

Punch 3: different customer characteristics, smaller market size

• Your B2B customer base is smaller – significantly so. So even at very high levels of market penetration, you’re short on revenues. Unfortunately these fewer customers still require at least the same size feature set.
• The data from guys who have broken out of emerging economies and into overseas markets is interesting. Leaning on their wisdom and experiences on their time in less mature markets:
  • While smaller, our emerging economy customers are less divisionalised or niche, and more “Jack of all Trades”. I.e. they do more with less.
  • Of lower importance, our internet is bad/erratic, and hardware is weak.
  • What this means? In order for your product to be a sufficiently compelling solution, customers need and demand both wider and extra functionality

4. Customer appetite for “new”

Punch 4 is summarised by the image above. Your average emerging market customer is not mandated to be innovative, and is generally distrustful of tech. Further they are budget strapped, underestimate the complexity, and is less receptive to Silicon Valley customer development programs.

Further, much like you, they are “too busy being busy” surviving.

1. Grant / soft funding, or 2. Side gigs

The obvious levers here are a) grant or soft funding, or b) the Holy Grail of an existing revenue stream. While the latter gives you the ability to keep the lights on, nothing is for free. It’s defocusing at best. Remember the adage “chase two rabbits, lose them both”.

3. Going “all in”

Selling assets. Cash is needed, and, in this fly or die environment, you need to be all in. If you believe in your product or solution and ability to execute on it, it should beat the ROI of your other assets.

4. “With a little help from my friends”

A friend, family and business network round. VCs can’t be expected to judge your character accurately. They simply don’t have enough data. But friends, family and business associates do have that data, and they can make smaller-sized bets. Y Combinator’s elegant SAFEs or similar country-specific convertible instruments are simple ways to get funding, with a reduced risk of parties being wronged (intentionally or otherwise) in the near-impossible task of trying to value an early stage business.

5. Spread the love

Partner with companies that do complimentary things to you in the same niche. Don’t fall into the trap of thinking you can build it all. Yes, this means leaving economics on the table and relinquishing control. But you don’t have other choices. The good news: not only can complimentary businesses with like-minded partners be personally fulfilling, but, done right, they activate elusive synergies, and potentially grow the pie bigger, for both parties.

6. Formal consulting to larger clients

Until the huge mass of invisible features are built, this can be tricky. If your product is mature, and you are not at risk of burning credibility and networks, this “selling hours” for a consulting led startup is a strong option. The benefits to you: deepened domain IP, and partial funding of development. The benefits to the corporate: 1) avoiding big capex costs and risks, 2) they get features they have a hand in defining, in the sequence they want, and 3) they get to see efficiency impacts in their business for relatively low TCO.

The negatives to make peace with: corporates operate at a slower cadence to tech startups, and new projects are risky (so under-promise and over-deliver). Consulting clients may want features in a different sequence to other customers.

The non-negotiable: it is a terrible, terrible idea for both the corporate or tech startup to build custom features into the core product set.