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Is the “cult” of Y Combinator good or bad for Africa’s startup ecosystem?

76 points by mellosouls 6y ago

BoiledCabbage 6y ago
Interesting perspectives I had never considered about VC funds and picking companies to invest in and the impact of it.
Ozzie_osman 6y ago
(Context: Silicon Valley-based entrepreneur, but advisor to several Middle Eastern startups, a couple of which have been through YC) I have mixed feelings about this article. On one hand, yes, YC gives startups in these markets a stamp that creates a sort of cult. Most of the startups/founders they pick are awesome, but YC invests without a ton of local context or diligence and so they definitely can get it wrong. But, they also get it wrong here in the US, and that's the nature of early-stage startups, but because the volume in the US is so high, it's not that big a deal. Anyway the most important benefit I see is that local startups get access to YC knowledge and network. That's way more important than any amount of credits. The YC-alumni email list (Bookface) is especially valuable. There's just so much tactical knowledge in there. What email provider to people use? What should you use for mobile ads attribution? If you're based in the US ecosystem, you just ask your entrepreneur friends or your investors. If you're abroad, there aren't people to ask. There just aren't a lot of startups around, and even fewer that are further along to learn from. YC is facilitating a huge transfer of knowledge to new ecosystems. EDIT: another massive facilitator is 500 StartUps
hardwaresofton 6y ago
It is good, because Y Combinator is likely a better less exploitative (also read: shrewd/demanding) investor than China would be. Hyper cynically, SV/Valley VC funds investing in Africa's startup ecosystem is about the best thing that could happen in it -- they are the least ruthless of the sharks (as far as I can see) out there, and the business ocean ocean is full of lots of kinds of sharks.
- endisneigh 6y ago
  By what basis is YC more likely to be less demanding than an investor in China?
  - sudosysgen 6y ago
    Literally none. It has to be considered on a case-by-case basis. There's just a lot of sélective reporting and sometimes even literal lies about the subject (such as the Sri Lanka situation).
  - thedogeye 6y ago
    Other than taking 7% of the business YC demands literally nothing of you.
  - hardwaresofton 6y ago
    YC is much more likely to bow from moral arguments (with widespread support) and bad press. For example if YC started running reeducation camps (let's imagine they were doing something questionably wrong like forcing people to learn how to run startups well), they'd face blow-back (from the subset of people who are firmly against reeducation camps) that I am firmly sure would cause them to reverse course fairly quickly. As far as the demanding/shrewd/exploitative investor bit: Sri Lanka: - http://www.slguardian.org/2020/06/sri-lankans-feel-humiliated-as-china.html http://www.slguardian.org/2020/06/sri-lankans-feel-humiliate... - https://biznakenya.com/how-china-took-over-sri-lanka-port/ https://biznakenya.com/how-china-took-over-sri-lanka-port/ Greece: - https://apjjf.org/2017/13/Mathews.html https://apjjf.org/2017/13/Mathews.html Ghana: - https://www.dw.com/en/oil-promises-ghanas-dreams-of-black-gold/a-55556389 https://www.dw.com/en/oil-promises-ghanas-dreams-of-black-go... (YT: https://www.youtube.com/watch?v=b58b-BvWEpo https://www.youtube.com/watch?v=b58b-BvWEpo) -- it's quite difficult to find negative coverage of the Ghana deal right now, but this provides some evidence for the idea that some of the promises are not being kept and weren't as beneficial as Ghana may have been lead to believe. Again, depending on how you look at these (which is often a result of where you stand in the global economy), these are just brilliant business moves -- advanced risk analysis and the right convincing of the right people in power and unfortunate conditions for the other side. YC is probably not going to take over a sea port because of back-payment, or similarly a bank that wanted to innovate and develop neo-bank style operations (as an example). In general I think it's safe to say that YC will be more forgiving on the revenue-target/KPI target side.
muzani 6y ago
I'm from a developing country and it sounds like the core problem is there are few tech entrepreneurs here. There are investors from sectors like gambling and construction, and the expectations are entirely different. Money might be released in waterfall-like tranches, meaning that a seed fund needs about 4 pitches to the same investor. Someone from say, a plantation background, also doesn't understand the challenges of doing blue ocean businesses - the market might not fully be there yet. They often undervalue customer understanding and product market fit, while overvaluing things like exit strategy and marketing. A lot of the pitching becomes very investor oriented. I've worked on many apps that never have any users - I literally get more revenue as a two-member team than most companies I've work at does with a dedicated international marketing team. A lot of those users are also the investors; very often an app sells their product to the family owned corporations run by the investors. And because of the need for marketing, there's a lot of $1 products sold at 80 cents, where the 20 cents are written off as a marketing cost. All these things are cardinal sins by the YC playbook. I'd say if any accelerator can match YC's record, they'd do very well, but few do, and many former colonies still don't have that "trust the entrepreneur" mindset.
DoreenMichele 6y ago
“Local founders/investors are annoyed by the gate-keeping role that YC is unintentionally playing. This role is being reinforced by market-ignorant – often foreign – investors,” was another. Definition of Gatekeeping: the activity of controlling, and usually limiting, general access to something. The internet tells me there isn't really an antonym for this word, which makes me feel better about failing to think up any myself. But I would imagine YC is serving to open a way for foreign money to flow in, not serving to control, limit and decide whom to let in or keep out. If that is accurate, they really should do some research and write about that to educate people that "We absolutely aren't gatekeeping anything here. If people are using our activities as a proxy metric for what to throw money at themselves without doing a lot of research on their own, that's not us gatekeeping anything whatsoever." I'm short of sleep and not heavily invested in creating some free PR resources for a multi-billion dollar company, but I imagine it would take a bit of research to come up with a good concept or metaphor to do this justice. However, it would likely be well worth the time spent on it in terms of making people in foreign countries feel more at ease with their activities. I'm sure there are legitimate concerns on the ground in Africa about (things like) the potential impact of foreign money and foreign expertise flowing in without a lot of context and local knowledge to inform those choices. But this idea that YC is gatekeeping something is probably flat out wrong in a way that essentially drags their name through the mud baselessly.
- xwdv 6y ago
  Floodgating.
  - DoreenMichele 6y ago
    Opening the floodgates is surprisingly good imagery for capturing the concern about an influx of large sums money and the potential downside for that. That would be a good place to start for tying to put together an image-rich metaphor and try to meaningfully address such things.
- pessimizer 6y ago
  > there isn't really an antonym for this word, It's too complicated to have a simple antonym that makes sense. From the perspective of the person trying to get in: "gatecrashing." Instead of trying to limit access, encouraging access: being a "barker." Instead of being selective, being complete: doing a "rollup."
IG_Semmelweiss 6y ago
This article is odd. The counterfactual would be, these funds were doing their own DD to find companies to invest in. Is that really true ? My gut says no. So in effect, YC is expanding the pool of potential investment dollars flowing into Africa. The author would prefer that YC stay out of africa . Yet the article never refutes if YC leaving means other VCs depart africa too. The forgotten companies would remain forgotten. Doesn't seem to be a good argument to stand on.
walrus01 6y ago
where is this cult of ycombinator in africa? I consult in things related to the ISP and telecom industry in developing nations, and there's nothing ycombinator-like whatsoever in any of the African ISPs I've worked with. It's a very rapidly growing market with increasing builds of terrestrial fiber, new submarine cables along both the west and east coasts of africa, new numbers of people who can buy their first $65 Android phone with an LTE radio in it... I'd wager good money that if you picked a dozen random AFRINIC members and talked to their neteng people most if not all of them would have never even heard of ycombinator. Maybe if the context is in some new software-as-a-service startup, sure...
ycombinete 6y ago
It is difficult to speak of “Africa”. It is not a country. That said there are a set of common historical experiences (colonisation, coupled with gaining independence during the Cold War being a big one) that have managed to line up a lot of common philosophies. One of them is a pervasive academic/intellectual mistrust of international funding. I am a South African. I studied African political history, public policy, and political philosophy at a number of South African universities. At most institutions as an undergraduate I was taught about the peril of IMF and World Bank loans etc. So I’m not surprised that this kind of thinking is being applied to private investment via bodies like YC.
benjaminjosephw 6y ago
> "the accelerator occupies an ambiguous position within the continent’s startup ecosystem, at once bringing in necessary funding and attention..." One of the biggest problems with startup ecosystems outside of SV is the perception that funding is a necessary step to start a disruptive high-growth company. Talent and time are the only two things that founders really need and it's the main thing that early-stage investment buys anyway. There are lots of ways to collect and organize these two resources - heavy capital investment is just one of them. In places where the cost of living is low and where there are talented people the investment models should look different to SV. The very nature of innovation and disruption require new perspectives and ways of thinking. Global entrepreneurial communities could rise above and beyond SV if they stepped out of its shadow.

76 points by mellosouls 6y ago

Interesting perspectives I had never considered about VC funds and picking companies to invest in and the impact of it.

(Context: Silicon Valley-based entrepreneur, but advisor to several Middle Eastern startups, a couple of which have been through YC) I have mixed feelings about this article. On one hand, yes, YC gives startups in these markets a stamp that creates a sort of cult. Most of the startups/founders they pick are awesome, but YC invests without a ton of local context or diligence and so they definitely can get it wrong. But, they also get it wrong here in the US, and that's the nature of early-stage startups, but because the volume in the US is so high, it's not that big a deal. Anyway the most important benefit I see is that local startups get access to YC knowledge and network. That's way more important than any amount of credits. The YC-alumni email list (Bookface) is especially valuable. There's just so much tactical knowledge in there. What email provider to people use? What should you use for mobile ads attribution? If you're based in the US ecosystem, you just ask your entrepreneur friends or your investors. If you're abroad, there aren't people to ask. There just aren't a lot of startups around, and even fewer that are further along to learn from. YC is facilitating a huge transfer of knowledge to new ecosystems. EDIT: another massive facilitator is 500 StartUps

hardwaresofton 6y ago

It is good, because Y Combinator is likely a better less exploitative (also read: shrewd/demanding) investor than China would be. Hyper cynically, SV/Valley VC funds investing in Africa's startup ecosystem is about the best thing that could happen in it -- they are the least ruthless of the sharks (as far as I can see) out there, and the business ocean ocean is full of lots of kinds of sharks.

endisneigh 6y ago
By what basis is YC more likely to be less demanding than an investor in China?
- sudosysgen 6y ago
  Literally none. It has to be considered on a case-by-case basis. There's just a lot of sélective reporting and sometimes even literal lies about the subject (such as the Sri Lanka situation).
- thedogeye 6y ago
  Other than taking 7% of the business YC demands literally nothing of you.
- hardwaresofton 6y ago
  YC is much more likely to bow from moral arguments (with widespread support) and bad press. For example if YC started running reeducation camps (let's imagine they were doing something questionably wrong like forcing people to learn how to run startups well), they'd face blow-back (from the subset of people who are firmly against reeducation camps) that I am firmly sure would cause them to reverse course fairly quickly. As far as the demanding/shrewd/exploitative investor bit: Sri Lanka: - http://www.slguardian.org/2020/06/sri-lankans-feel-humiliated-as-china.html http://www.slguardian.org/2020/06/sri-lankans-feel-humiliate... - https://biznakenya.com/how-china-took-over-sri-lanka-port/ https://biznakenya.com/how-china-took-over-sri-lanka-port/ Greece: - https://apjjf.org/2017/13/Mathews.html https://apjjf.org/2017/13/Mathews.html Ghana: - https://www.dw.com/en/oil-promises-ghanas-dreams-of-black-gold/a-55556389 https://www.dw.com/en/oil-promises-ghanas-dreams-of-black-go... (YT: https://www.youtube.com/watch?v=b58b-BvWEpo https://www.youtube.com/watch?v=b58b-BvWEpo) -- it's quite difficult to find negative coverage of the Ghana deal right now, but this provides some evidence for the idea that some of the promises are not being kept and weren't as beneficial as Ghana may have been lead to believe. Again, depending on how you look at these (which is often a result of where you stand in the global economy), these are just brilliant business moves -- advanced risk analysis and the right convincing of the right people in power and unfortunate conditions for the other side. YC is probably not going to take over a sea port because of back-payment, or similarly a bank that wanted to innovate and develop neo-bank style operations (as an example). In general I think it's safe to say that YC will be more forgiving on the revenue-target/KPI target side.

muzani 6y ago

I'm from a developing country and it sounds like the core problem is there are few tech entrepreneurs here. There are investors from sectors like gambling and construction, and the expectations are entirely different. Money might be released in waterfall-like tranches, meaning that a seed fund needs about 4 pitches to the same investor. Someone from say, a plantation background, also doesn't understand the challenges of doing blue ocean businesses - the market might not fully be there yet. They often undervalue customer understanding and product market fit, while overvaluing things like exit strategy and marketing. A lot of the pitching becomes very investor oriented. I've worked on many apps that never have any users - I literally get more revenue as a two-member team than most companies I've work at does with a dedicated international marketing team. A lot of those users are also the investors; very often an app sells their product to the family owned corporations run by the investors. And because of the need for marketing, there's a lot of $1 products sold at 80 cents, where the 20 cents are written off as a marketing cost. All these things are cardinal sins by the YC playbook. I'd say if any accelerator can match YC's record, they'd do very well, but few do, and many former colonies still don't have that "trust the entrepreneur" mindset.

DoreenMichele 6y ago

“Local founders/investors are annoyed by the gate-keeping role that YC is unintentionally playing. This role is being reinforced by market-ignorant – often foreign – investors,” was another. Definition of Gatekeeping: the activity of controlling, and usually limiting, general access to something. The internet tells me there isn't really an antonym for this word, which makes me feel better about failing to think up any myself. But I would imagine YC is serving to open a way for foreign money to flow in, not serving to control, limit and decide whom to let in or keep out. If that is accurate, they really should do some research and write about that to educate people that "We absolutely aren't gatekeeping anything here. If people are using our activities as a proxy metric for what to throw money at themselves without doing a lot of research on their own, that's not us gatekeeping anything whatsoever." I'm short of sleep and not heavily invested in creating some free PR resources for a multi-billion dollar company, but I imagine it would take a bit of research to come up with a good concept or metaphor to do this justice. However, it would likely be well worth the time spent on it in terms of making people in foreign countries feel more at ease with their activities. I'm sure there are legitimate concerns on the ground in Africa about (things like) the potential impact of foreign money and foreign expertise flowing in without a lot of context and local knowledge to inform those choices. But this idea that YC is gatekeeping something is probably flat out wrong in a way that essentially drags their name through the mud baselessly.

xwdv 6y ago
Floodgating.
- DoreenMichele 6y ago
  Opening the floodgates is surprisingly good imagery for capturing the concern about an influx of large sums money and the potential downside for that. That would be a good place to start for tying to put together an image-rich metaphor and try to meaningfully address such things.
pessimizer 6y ago
> there isn't really an antonym for this word, It's too complicated to have a simple antonym that makes sense. From the perspective of the person trying to get in: "gatecrashing." Instead of trying to limit access, encouraging access: being a "barker." Instead of being selective, being complete: doing a "rollup."

IG_Semmelweiss 6y ago

This article is odd. The counterfactual would be, these funds were doing their own DD to find companies to invest in. Is that really true ? My gut says no. So in effect, YC is expanding the pool of potential investment dollars flowing into Africa. The author would prefer that YC stay out of africa . Yet the article never refutes if YC leaving means other VCs depart africa too. The forgotten companies would remain forgotten. Doesn't seem to be a good argument to stand on.

walrus01 6y ago

where is this cult of ycombinator in africa? I consult in things related to the ISP and telecom industry in developing nations, and there's nothing ycombinator-like whatsoever in any of the African ISPs I've worked with. It's a very rapidly growing market with increasing builds of terrestrial fiber, new submarine cables along both the west and east coasts of africa, new numbers of people who can buy their first $65 Android phone with an LTE radio in it... I'd wager good money that if you picked a dozen random AFRINIC members and talked to their neteng people most if not all of them would have never even heard of ycombinator. Maybe if the context is in some new software-as-a-service startup, sure...

ycombinete 6y ago

It is difficult to speak of “Africa”. It is not a country. That said there are a set of common historical experiences (colonisation, coupled with gaining independence during the Cold War being a big one) that have managed to line up a lot of common philosophies. One of them is a pervasive academic/intellectual mistrust of international funding. I am a South African. I studied African political history, public policy, and political philosophy at a number of South African universities. At most institutions as an undergraduate I was taught about the peril of IMF and World Bank loans etc. So I’m not surprised that this kind of thinking is being applied to private investment via bodies like YC.

benjaminjosephw 6y ago

> "the accelerator occupies an ambiguous position within the continent’s startup ecosystem, at once bringing in necessary funding and attention..." One of the biggest problems with startup ecosystems outside of SV is the perception that funding is a necessary step to start a disruptive high-growth company. Talent and time are the only two things that founders really need and it's the main thing that early-stage investment buys anyway. There are lots of ways to collect and organize these two resources - heavy capital investment is just one of them. In places where the cost of living is low and where there are talented people the investment models should look different to SV. The very nature of innovation and disruption require new perspectives and ways of thinking. Global entrepreneurial communities could rise above and beyond SV if they stepped out of its shadow.