Business plan competitions, hackathons, shepherd’s PIE and pre-seedstar. These are nowadays’ buzz words.
The typical ‘Silicon Valley’ model has been a successful one in the developed world but as far as the developing world is concerned in general and Pakistan in specific, there seems to be an incompatibility between international practice and the local economic and investment trends.
There is no doubt that entrepreneurship has a major role to play in developing economies in this era of fast paced technological development, although some methodologies need to be established that are more conducive to the local environment.
If we look at our society, there could be many examples of people who never went to business plan competitions, following the Silicon Valley’s ‘big vision’ model.
Shakaib, who was a car fanatic, is one of these young entrepreneurs providing inspiration for others. He was so fond of cars that during his school days he would do his homework while sitting in his father’s car. At a very young age not only did he learn to drive, he also became familiar with the structure and engine of an automobile.
When he started to work on his current business idea he only had Rs800 in his savings which he spent on getting some stickers and business cards printed.
Instead of looking for venture capital funding and presenting his business model in front of judges he took action and created a syndicate for mediating between naïve car owners and deceptive mechanics who often swindle clients, charging them exorbitant amounts of money for minor faults.
This work later took the shape of a company providing car maintenance, buying and selling services. He made Rs13,000 in the first month followed by Rs20,000 in the second; and rising.
Another story worth quoting here is that of Hassaan. He was a BBA entrepreneurship student dreaming of starting a cash on delivery (COD) business. He started small by delivering goods to his fellow students in the campus.
This work rapidly grew and with a joint investment of Rs50,000 — between him and his friend — he started a service in Karachi to pay COD payments in only 24 hours as opposed to the 15 to 20 days set down by established courier companies. Because of their expedient service they grew their customer base so swiftly so as to be viewed as major competition by already established businesses.
Hassaan’s company was finally acquired by a big media group against a handsome payment and a job in their own company.
Stories like the above clearly show that there is hardly any semblance of the business methodologies followed by these young entrepreneurs with the Silicon Valley model.
These tales of successful businesses starting up with a very small amount of money are only two of the numerous stories spread all around us.
The current chair of the Pakistan Leather Garments Manufacturers and Exporters Association, Mr Shujat Ali, while sharing his story, told this writer that he started his business with Rs2,700 by getting three leather jackets stitched from a tailor in Saddar, Karachi. He sold these jackets through a leather goods shop owner in Sheraton hotel Karachi and thus embarked on the journey of a business which led him to become one of the biggest exporters of leather goods in Pakistan.
Dr Sarasvathi in the Darden business school, University of Virginia, US, also discovered similar phenomena while researching successful entrepreneurs around the world. She found that these entrepreneurs have grown by, predominantly, using a few principles.
These anti-Silicon valley principles can be equally useful in providing a strong and sustainable foundation for young entrepreneurs in Pakistan.
The first principle, called ‘The bird-in-hand principle’, leads successful entrepreneurs to ask themselves who they are, what they know, and who they know. Thus the business they start is always relevant to their expertise and they never invest in a venture which could be a hit trend in the market, but is out of their knowledge area.
The second principle that they follow, is called the ‘affordable loss principle’ which emphasises on only investing that amount of money in a new idea which an entrepreneur can ‘afford to lose’.
This means that out of savings of Rs100,000, one should only invest Rs25,000 or less so that if the investment doesn’t bear fruit, you still have enough to survive and try your luck in other ventures. This principle slightly shakes the foundations of the popular cliché ‘the bigger the risk the bigger the reward’. While this might be true in some cases, successful entrepreneurs prefer to play safe.
The third principle is the avoiding extensive research and effort to perfect the product or service. Successful entrepreneurs found it better to test the feasibility of their product or service by forming the simplest and smallest possible version of it called the ‘Minimum Viable Product’ or simply, MVP.
The idea behind it is to launch the venture in a reasonably mature state and let the user innovate it through feedback. As a result of this experimentation oriented approach, as opposed to a market research and feasibility analysis method, the venture gets started quickly and evolves according to the needs and requirements of the customer.
In sum, these principles and quoted stories advise entrepreneurs not to wait for a big investment and base their business launch on too much research and analysis. This encourages them to ‘take action’ and see what unfolds.
The above mentioned principles however, do not mean that you leave for a thousand miles journey without a step in your car. They rather advise against not going on the journey at all because of feeling ‘unprepared’.
According to the UNFPA State of the World Population Survey of 2015, Pakistan has the sixth largest youth population in the world. These young people are an asset for the country.
If, however, they are not provided with a legitimate means to earn their living, they could become the biggest liability.
The effectuation method of entrepreneurship gives hope to these, mostly underprivileged’ young citizens and encourages them to start now with whatever they have without seeking external help — from investors and the government — that seldom comes.
—The writer is an assistant professor at the Aman Centre for Entrepreneurial Development at IBA, Karachi.