I’m interested on your perspective on the magnitude of the cost of ‘learning to do business in Africa’, relative to the potential impact of a start-up like Wave. Was ease of doing business a consideration when you were thinking about whether this idea had legs? Was it a factor in choosing which countries to operate in?
I think private sector development in Africa seems quite promising from an EA perspective, but non-financial barriers to entry make this path significantly less accessible (especially for non-citizens). I am a foreigner working for the government in Ghana, and my impression from friends in the private sector is that improving transparency and simplicity of regulatory processes (business registration, paying taxes etc.) is super important.
However, I don’t have a good sense of how important ‘ease of doing business’ is relative to other barriers (eg. access to capital), or whether these barriers are significant enough to prevent start-ups getting off the ground in the first place. I realise this is all quite difficult to quantify but I’m keen to hear your thoughts!
Ultimately, there are very few barriers to getting started doing the things that you want to be doing anyway: for most countries, if you are from a developed country, you can fly there as a generic visitor and start talking to people. (once COVID is over anyway. note: I definitely do not recommend violating any visa laws.) My first trip to Ethiopia to investigate mobile money’s potential was only a week long—stayed in a hotel, made a few connections, talked to a bunch of people in a marketplace. A subsequent month-long trip was a bit more involved, but still required no special visa, just a longer stay in some kind of temporary housing.
Once you are pushing up against the limits to generic visitors (often 3 months or so), hopefully you’ve learned enough to know whether it will be worthwhile to invest further, at which time you probably need to hire a local lawyer to start investing in figuring out how to do whatever’s next most important (maybe your visa; maybe creating a local company, etc).
I want to emphasize that startups are hard. Entrepreneurship of any kind is going to put barriers in front of you. The question is, do you want to let these random barriers block you? Cross-border paperwork is one example of such a barrier—but so is getting a bank account, getting licensed, negotiating an IP deal, or whatever junk you need to do to get started in almost any industry. Paul Graham writes about this in Schlep Blindness—in some sense, value is created when you decide to plow forward and solve the problems in front of you, despite them looking annoying to solve.
So yes, I think these barriers are a blocker for many, but they don’t have to be a blocker for you :)
Stepping back to our experience: we started in Ethiopia, which is not an easy place to do business by any metric. And we got very far before we had to stop (it’s a place that is unusually hostile to foreign companies) -- far enough that we had learned significant lessons about how to start mobile money which we were able to port over to Senegal (which we chose partially due to “ease of doing business”). So while I wish we had not decided to spend so much time and energy there, I also don’t 100% regret it. Plus, it was a lovely place to be and I have some wonderful friends from that era.
I think if a given place is the best place to get started, you should just go to that place and try not to over-index on “ease of doing business”. However, if you have many similar-looking places to start, it will likely save you quite a bit of energy choosing a place where it’s easier to do business!
Oh, and in terms of raising money, I think you should go to Silicon Valley for that (if you have a scalable enough business anyway) unless you have strong local connections.
Hi Lincoln and Ben, thanks for doing this!
I’m interested on your perspective on the magnitude of the cost of ‘learning to do business in Africa’, relative to the potential impact of a start-up like Wave. Was ease of doing business a consideration when you were thinking about whether this idea had legs? Was it a factor in choosing which countries to operate in?
I think private sector development in Africa seems quite promising from an EA perspective, but non-financial barriers to entry make this path significantly less accessible (especially for non-citizens). I am a foreigner working for the government in Ghana, and my impression from friends in the private sector is that improving transparency and simplicity of regulatory processes (business registration, paying taxes etc.) is super important.
However, I don’t have a good sense of how important ‘ease of doing business’ is relative to other barriers (eg. access to capital), or whether these barriers are significant enough to prevent start-ups getting off the ground in the first place. I realise this is all quite difficult to quantify but I’m keen to hear your thoughts!
Good questions.
Regarding general startup barriers:
Ultimately, there are very few barriers to getting started doing the things that you want to be doing anyway: for most countries, if you are from a developed country, you can fly there as a generic visitor and start talking to people. (once COVID is over anyway. note: I definitely do not recommend violating any visa laws.) My first trip to Ethiopia to investigate mobile money’s potential was only a week long—stayed in a hotel, made a few connections, talked to a bunch of people in a marketplace. A subsequent month-long trip was a bit more involved, but still required no special visa, just a longer stay in some kind of temporary housing.
Once you are pushing up against the limits to generic visitors (often 3 months or so), hopefully you’ve learned enough to know whether it will be worthwhile to invest further, at which time you probably need to hire a local lawyer to start investing in figuring out how to do whatever’s next most important (maybe your visa; maybe creating a local company, etc).
I want to emphasize that startups are hard. Entrepreneurship of any kind is going to put barriers in front of you. The question is, do you want to let these random barriers block you? Cross-border paperwork is one example of such a barrier—but so is getting a bank account, getting licensed, negotiating an IP deal, or whatever junk you need to do to get started in almost any industry. Paul Graham writes about this in Schlep Blindness—in some sense, value is created when you decide to plow forward and solve the problems in front of you, despite them looking annoying to solve.
So yes, I think these barriers are a blocker for many, but they don’t have to be a blocker for you :)
Stepping back to our experience: we started in Ethiopia, which is not an easy place to do business by any metric. And we got very far before we had to stop (it’s a place that is unusually hostile to foreign companies) -- far enough that we had learned significant lessons about how to start mobile money which we were able to port over to Senegal (which we chose partially due to “ease of doing business”). So while I wish we had not decided to spend so much time and energy there, I also don’t 100% regret it. Plus, it was a lovely place to be and I have some wonderful friends from that era.
I think if a given place is the best place to get started, you should just go to that place and try not to over-index on “ease of doing business”. However, if you have many similar-looking places to start, it will likely save you quite a bit of energy choosing a place where it’s easier to do business!
Oh, and in terms of raising money, I think you should go to Silicon Valley for that (if you have a scalable enough business anyway) unless you have strong local connections.
Great answer, thank you!