How Startups Can Best Benefit Developing Economies
Most startups fail within the first five years of establishment. Media outlets and established business owners criticize startups today as another way that millennials are attempting to wiggle out of a desk job. With more and more websites designed to make starting a business easier than ever, a previous Forbes article, The Millennial Startup Revolution, goes so far as to say that starting a business has never been so “hip”.
Unfortunately, this is a stark deviation from the genuine purpose of a startup. Startups are meant to be formed when there is a gap that needs to be filled, a creative way to solve or reinvigorate an out-dated system or a solution in performing a usually time-consuming task has been developed.
With that mentality, the startup economy is in its essence best suited for developing countries and with the leaders in developing countries’ aiming to reduce poverty and create sustainable wealth, they are beginning to look to the startup community to create innovative solutions to solve industry-wide problems.
While a common misconception is that businesses are most efficient in countries with established economies, the Internet has completely revolutionized the landscape for global trade. Opportunities to commerce goods and services have become readily more available worldwide. This has enabled a platform for developing economies to connect with large-scale economies and effectively compete globally.
The social, political, legal and commercial foundation plays a vital role in the orchestration of each economy. The most effective startups are considerate of the country they have chosen to work in’s existing foundation. Their models are designed to improve the overall wellness of the country.
Build an Inclusive Business Model
The most effective startups host business models that promote positive socioeconomic impact. These startups create sustainable methods to:
• Boost local employment by creating opportunities within the community to assist in diminishing poverty rates. The dispersion of wealth created by expanding the local workforce cuts the amount spent on welfare and tax credits and encourages spending within the local economy. Startups that can also employ generally oppressed groups, including women, minorities and disabled, will further assist in expansion of the existing labor force.
• Increase the quality of the local labor force by hiring the appropriate experts to implement training establishments and conduct instructional courses.
• Drive demand to local businesses by channeling revenue to local parties through joint ventures and profit shares or by sharing information and developing avenues that direct customers to other goods and services. By supporting local businesses, the legitimacy of local provisions heightens, industries further stabilize, the general economy prospers and new strategic opportunities arise.
• Expand economic opportunity by limiting external influences that serve as substitutes to local businesses, including importing and outsourcing. Bearing respect to local traditions and supply, using natural resources and services belonging to the region will create a multiplier effect on the development of each community’s local economy.
The government and private sectors will benefit significantly from startups that promote positive socioeconomic missions. This approach will also raise public interest amongst customers, the media and economists in support of the developing country’s cooperative economic strategy. The final element that a startup may include to be most effective in a developing country is its contribution to the philanthropic sector.
Become A Pillar of Support
As emerging economies have a tendency to be volatile due to a sudden demand of rising industries, many developing countries struggle to prevent a growing disparity of wealth.
As certain industries experience a rapid increase in demand, it is essential to the security of the country’s constructive growth to create models so that these prospering sectors serve as the main driver in building the more vulnerable sectors.
Subsidizing non-profits and local community programs that enable sustainable methods to preserve and improve the country’s environment, health, education, governance and culture will promote this healthy progression.
This inclusion is the most important element to the constructive growth of a country.
Create A Communal Vision
To a greater extent than with large-scale economies, developing economies are constantly refining protocols and procedures that enable a fully responsive market; including but not limited to infrastructure, politics, property rights, bureaucracy and banking systems. As such, the success of developing economies is all the more reliant on the contributions of local experts in their respective fields. The capabilities to connect industry experts, along with their ability to network positive international relations, with local contributors will create the communal vision essential to building an effective startup in a developing country.
Together, a vision must be created that will benefit the country, as a whole for the future.
Written by Matt DeSantis is the founder of MyBhutan, created in 2014 to establish a global platform in support of current philanthropic activities and to develop innovative social enterprises alongside The Tarayana Foundation. MyBhutan’s first social enterprise is the only one-stop travel portal that provides the fastest, most cost-effective way to visit the Land of the Thunder Dragon.