fusion of images from around the world – Europe, America and Asia
The fintech sector has grown rapidly in recent years, with new companies and innovations emerging around the world.
I’m coming off a series of back-to-back two-month trips, from Texas to Nairobi, Dubai, Riyadh, New York and Montreal, with the final stop today in Vegas for Money 2020.
Each has its own growing fintech ecosystems and startups. And they each offer us unique lessons.
Here are five I’m thinking about.
The power of the mafias.
The term: “startup mafia” was originally coined to refer to PayPal, given the impressive number of multi-billion dollar companies that have emerged from its alumni. Yet they were of course not the first (Fairchild Semiconductor had had a similar impact on the ecosystem a generation before) nor certainly the last. The same phenomenon is repeated globally – from Rappi in Latin America, to Jumia in Africa, to Grab in SEA, etc.
In the Middle East, Careem’s effect was palpable. Careem is the region’s ride-sharing champion and the largest exit ever in the Middle East ($3 billion for Uber)
UBER
As Mudassir Sheika told me: “Careem’s goal of simplifying and improving life in the broader Middle East has been a powerful driving force for many of our colleagues to join us and subsequently launch their own businesses. . There is still much to do to unlock the region’s potential and entrepreneurship brings creativity and innovation to old and new challenges.
But mafias don’t exist everywhere. For example, I was surprised not to see a Shopify Mafia in any significant way (yet).
Before mafias emerge, you probably need models – to first prove that expansion is possible. This also happens. For example, Nigerian payments startup Paystack was acquired by Stripe for over $200 million in 2020. This exit made Paystack’s founders role models and demonstrated that big exits are possible in Africa. And as Shola explained, a number of startups have come out of Paystack.
The power of ecosystem infrastructure.
My trip to Nairobi highlighted the importance of infrastructure in catalyzing innovation. As I discussed in my recent column, M-Pesa is now used by more than 90% of the population and covers 75% of GDP. What’s more impressive is the amount of innovation built on M-Pesa – whether it’s merchant acceptance (Kopo Kopo), loans made (M-Kopa, etc.), and even more.
Similar horizontal enabling infrastructure is being built elsewhere. In Over-Innovate, I highlighted the impact of Aadhaar (universal identification) and the associated India-Stack (set of APIs) built in India. More recently, PIX (free real-time payments in Brazil) is experiencing rapid growth. More than 100 million users, i.e. two thirds of the population have used it in just a few months, becoming the most used payment method for small transactions. What we will see in the coming years are a whole host of new, previously unimaginable use cases.
The power of ecosystem defenders.
New York’s ecosystem has exploded in recent decades. One of the reasons is undoubtedly the power of ecosystem players.
Research of Effort showed the power of founders in their ecosystem to support other players. They weren’t doing it after success, but rather in parallel – investing in the entire ecosystem while actively building. For fintech, the rich network of banks and financial services companies has created not only a treasure trove of potential partners for fintech players, but also for talent and investments.
Founders alone cannot do it. Success requires the full support of venture capitalists, government, regulators and local businesses.
The power of cultural change.
Saudi Arabia provides a great example of how quickly innovation can take off when a cultural shift occurs towards one that is more open and entrepreneurial.
About 15 years ago, I worked in Saudi Arabia when I was at McKinsey. At the time, there was no startup ecosystem (and to my knowledge, no venture-backed company would ever go public).
In recent years, the government has adopted a number of reforms, but has also invested in cultural change.
As a result, Saudi startups have proliferatedraising nearly a billion dollars. Additionally, and I would argue (and many local investors would agree), it is incredibly difficult to build a unicorn in the Middle East without winning over Saudi Arabia.
The power of connection.
The best ideas come from anywhere and spread everywhere. It’s the innovative supply chain.
Sites that can put themselves at the center of ideas are poised for innovation success. Historically, the epicenter of this dynamic has been in Silicon Valley and the broader San Francisco Bay Area.
But on the way back from Dubai, I was struck by how much more and more this is true there too. Dubai and the wider United Arab Emirates
United Arab Emirates
Events like the Canadian FinTech Forum in Montreal or the Kauffman Fellows Summit in Nairobi are also opportunities to introduce global ideas from elsewhere into local ecosystems. As Paul Desmarais III told me, reflecting on the event in Canada, “our Fintech Forum event in Montreal was an exceptional success. The three-day event was packed with practical learnings and expertise for investors and entrepreneurs from over 170 organizations. The crowd was not only Canadian, but also global.
—
The publication of this article today is not a coincidence. It’s the start of Money2020, perhaps the world’s largest fintech conference, bringing together a global community of investors, entrepreneurs, incumbents and regulators.
Stepping back and looking at many regions together gives us a unique perspective across the globe. It’s only a beginning.