Data & Intelligence

The Role of Seed-stage Capital and the Steps for Start-up Success

Tahira Dosani
Director of Portfolio Engagement, Venture Lab
Accion

Venture capital globally has been booming; according to Preqin, the aggregate value of investments in early-stage start-ups rose by more than 50% in 2014. According to EMPEA, the amount of venture capital invested last year in emerging markets increased 150% compared to 2013, and the trend is continuing unabated this year.

Accion Venture Lab is a seed-stage impact investor, providing capital and support to start-ups in the financial inclusion space globally. Financial inclusion is about increasing access to and quality of financial tools, products and services to underserved consumers globally.  Our companies typically leverage technology or employ some business model or process innovation to achieve this. We currently have portfolio companies that are active in the Philippines, Malaysia, Thailand, Singapore, Indonesia, China, India, Kenya, Tanzania, Ghana, Rwanda, Brazil, Mexico, the United Kingdom and the United States, and have looked at investments in many more markets across South and Southeast Asia, Sub-Saharan Africa, MENA and Latin America.

For a start-up to succeed, it takes more than money backing a good idea. As an active, hands-on investor, we have seen that the biggest challenges faced by early-stage enterprises are in the areas of sales and marketing, human capital and access to capital. These challenges exist at both the company level and at the market level.

At the market level, companies are more likely to succeed in a market that is enabling and has a strong entrepreneurial ecosystem. This includes the presence of angel investors (often successful entrepreneurs themselves who can provide mentorship and capital to startups in their earliest days); other venture capital and private equity investors (who have helped create an understanding of the value of external capital and stakeholders); open and enabling regulation (particularly relevant to investors in the financial services sector); growing mobile phone/smartphone and internet broadband penetration (again especially relevant for those in the FinTech space); strong local talent pools; and communities and support structures for entrepreneurs. Accelerators and incubators can help provide those support structures and networks; the ones we believe to be most effective are sector- or stage-focused and are able to provide entrepreneurs with targeted and tactical support instead of merely a co-working space and some generic advice. Moreover, a level of political and economic stability helps to enable all of the above. As such, countries like India, Kenya and Mexico have been major areas of focus for us since they meet the above criteria.

At the company level, entrepreneurs of seed-stage businesses must find an optimal product-market fit, determine an effective and scalable customer acquisition strategy and begin to expand their teams. These are obviously helped by market factors, but ultimately come down to execution by the entrepreneur and company. Identifying the businesses and management teams that are best positioned to succeed along these dimensions and helping them to overcome the obstacles they face is our role as emerging market venture capital investors.


Read More Views from the Field: Assessing the State of Venture Capital in Emerging Markets:

The Evolution of the Early-stage VC Landscape in India
Aavishkaar │ Noshir Colah │ Operations Partner

The Role of Seed-stage Capital and the Steps for Start-up Success
Accion │ Tahira Dosani │ Director of Portfolio Engagement, Venture Lab

GP Interest in EM VC, in Addition to a Developed Markets VC Portfolio
Amadeus Capital Partners │ Pat Burtis │ Partner

Key Drivers for Success and Challenges for the Development of an Entrepreneurial Ecosystem
Dalberg │ CJ Fonzi │ Senior Project Manager

Why LPs Should Be Paying Attention to VC in Southeast Asia
Digital Media Partners │ Dmitry Levit │ Partner

The Rise of Southeast Asia as the Next Fast-growing VC Market
Golden Gate Ventures │ Michael Lints │ Venture Partner

Evaluating the State of the VC Market in Turkey
idacapital  │ Cem Baytok │ Managing Partner

Drivers for Increased Interest in Fund Investing and Direct Investing in EM VC
International Finance Corporation │ Nikunj Jinsi │ Global Head, Venture Capital

Examining the State of the VC Market in China
Pantheon │ Jie Gong │ Partner

VC Opportunities and Challenges in Sub-Saharan Africa
TLcom │ Maurizio Caio │ Founder and Managing Partner

EMPEA represents the leading global investors in EM. I look forward to working alongside to drive much-needed capital for financing entrepreneurs and businesses worldwide.

Renuka Ramnath | Founder, Managing Director & Chief Executive Officer, Multiples Alternate Asset Management Private Limited

EMPEA plays an important and energetic role across the markets it represents, driving outreach and research initiatives, and promoting the role of private capital.

Brian Lim | Partner and Head of Asia and Emerging Markets, Pantheon Ventures

The developed markets have no equivalent to the role EMPEA is playing as a convener and source of trusted information in the emerging markets.

David Rubenstein | Co-Founder and Co-Executive Chairman, The Carlyle Group

I’m honored to join fellow industry pioneers in the leadership of an unparalleled network, filled with first movers, shaping the future of industries and communities.

Dr. Andrew Kuper | Founder and CEO, LeapFrog Investments

EMPEA's market and industry intelligence opens doors to new sources of capital.  I look forward to the future success of EMPEA and its members.

Torbjorn Caesar | Senior Partner, Actis

While there are certainly challenges for the industry, the opportunities abound in our target markets and globally, making a global association like EMPEA more relevant than ever.

Drew Guff | Managing Director & Founding Partner, Siguler Guff & Company