Editor’s note: Throughout 2017, NextBillion is organizing content around a monthly theme, dedicating special attention to a specific sector alongside our broader coverage. This post is part of our focus on technology for the month of May.
Ask the average person what comes to mind when they think of a tech start-up hub. They will probably answer Silicon Valley, picturing geniuses in hooded sweatshirts. Or they might say Bangalore, thinking of sari-clad staffers in futuristic call centers. But the top-of-mind answer would probably not be the Persian Gulf. Or the former Soviet bloc countries. The reality, though, is that some of the best ideas can be found in places we’re overlooking. And nurturing that potential – the goal of a new partnership between Village Capital and MetLife Foundation in four emerging start-up markets – can pay dividends beyond the purely financial.
Central and Eastern Europe, along with the United Arab Emirates (UAE), face daunting challenges alongside unique opportunities for innovation. Ukraine faces political and economic uncertainty, including multiple currency devaluations. It also graduates 15,000 IT professionals every year and saw year-over-year venture investment increase more than 230 percent between 2014-2015. Turkey faces political challenges of its own, but early-stage investment in Turkish tech start-ups continues to grow, too, thanks to strong engineering talent from Turkey’s universities and a young population comfortable with technology and eager to be connected. UAE also skews young. More than a third of its population is under age 25, and the UAE’s leaders seem determined to attract tech investment to diversify the economic base and create good new jobs. Poland, which was arguably the financial capital of Central Europe already, is emerging as a tech start-up center, too.
Village Capital is supporting entrepreneurs in all four markets – Poland, Turkey, UAE and Ukraine – based on their potential. Village Capital is a venture capital firm focused on working with entrepreneurs who have the potential to solve real-world problems, whether environmental, social, or a combination. Then we support them with the resources they need to refine their innovations and take them to scale.
We’ve supported more than 500 entrepreneurs in a dozen countries, and we’ve learned that entrepreneurs need money, sure, but that’s not all they need. Before they can even think about funding, start-ups need the support of an ecosystem.
Think again about Silicon Valley. Decades before the hoodie-clad geniuses showed up, the Valley was research labs scattered among apple orchards. Silicon Valley didn’t become great because of its early inventions, ranging from the semiconductor to the microprocessor, but because its innovators built an ecosystem, not just specific firms. The talent in Silicon Valley grew exponentially, each innovator and engineer recruiting the next. The Valley is also embedded in a larger society with a sophisticated financial sector and governed by the rule of law, including intellectual property right protections. This kind of ecosystem – the thousands of factors, some obvious, others invisible, that converge to make innovation possible – is so important that it’s easy to take for granted. Silicon Valley succeeded because generations invested in the ecosystem, not just specific ideas.
Village Capital, in partnership with MetLife Foundation, is making a similar investment in fintech ecosystems in these nascent markets. Fintech, or technology solutions to improve financial services, holds great promise to solve a problem that both Village Capital and the foundation care about deeply: financial health. Millions of people in low- and middle-income countries lack basic financial services, and even in high-income countries, financial stress is a major issue: One well-known recent survey found that almost half of all U.S. adults said that they would have a hard time covering a $400 emergency. Fintech solutions like mobile money and financial coaching have already helped populations globally access the financial system and manage their savings.
Fintech is a relatively young field whose breakthrough potential to expand financial health has only begun to be tapped. The Village Capital/MetLife Foundation partnership will nurture the kinds of partnerships that fintech innovations need in order to scale. Bankers and tech entrepreneurs operate in different worlds; bridging those cultures can be difficult. We’ll also enable intermediaries to convene important stakeholders around the new companies to help them navigate regulations, build relationships with investors and find the right key staffers.
Village Capital and MetLife Foundation are identifying barriers to scale and designing solutions, building a roadmap for future innovations with the end goal – financial health at large scale – always in mind. As our work progresses in Poland, Turkey, the UAE and Ukraine, we plan to showcase the top innovations locally and internationally. All four markets have unique characteristics that make them high-potential start-up hubs. All four, we are confident, will have world-class examples to share.
Financial health, a key focus area for Village Capital, is also the five-year strategic focus of MetLife Foundation, Village Capital’s partner on the Financial Health Forums project. MetLife Foundation is devoting U.S. $200 million to financial health via grant-making all over the world. More information about the partnership is available here.
Ross Baird is the CEO of Village Capital, a venture capital firm headquartered in Washington, D.C., with a portfolio of more than 70 investments globally. Françoise Lamotte is senior vice president, head of direct and digital of MetLife’s EMEA (Europe Middle East Africa) region.