Time to build innovative Iranian startups
As Iran is getting back to global business, the prospect of a growing economy is attractive for both big and small businesses. Big companies don’t have a good track record of successful innovation and are subject to the innovator’s dilemma. Startups have a big advantage: they have the freedom to choose or create their own market and business model. Instead of trying to make incremental improvements in an existing business, they can think about ways to leapfrog into world class businesses of tomorrow. This requires a much bigger vision and a moonshot mentality.
Are our startups thinking this way or are they satisfied with adapting existing successful models to the Iranian market?
I read an excellent post on Avatech’s blog titled “copycats or innovators, how the future of Iranian startups will be shaped” concluding that copying is good as long as you know why you’re doing it. It refers to China as a country that copied their way to innovation and ultimately built Alibaba. What it fails to capture about the story of Alibaba is its audacious ambition and scaling strategy. This is the biggest risk of comparing Iran to China. Alibaba became successful by adopting an innovative path-to-market and a scaling strategy that no one in the world can match. Other Chinese companies like Didi, WeChat and C-Trip are also innovating in scaling.
Chinese companies can afford to forgo innovating on tech and product because they can innovate on scale which isn’t a feasible strategy for Iranian startups. A Chinese startup with 1m users is not considered a big deal but an Iranian startup with 1m users is worthy of many articles in international press. The other risk with this approach is that copying may work on a company level but on an ecosystem level results in mediocrity. Innovation leads to abundance and exponential growth, copying to competition and mere improvements. Innovation is expensive short-term, copying is expensive in the long run.
In Zero To One, Peter Thiel discusses how the modern education system is built to reward incremental innovation and not long-term moonshot projects. Not only can moonshots be easier, but they are essential to the success of the tech ecosystem and the reason why VC business works. The “VC investment accounts for less than 0.2% US GDP but the companies it backs produce an astounding 21% of GDP.” This highlights the importance of having big hits and real innovation. To build the next global startup success story, you have to have 7 things going for your startup:
- Technology
- Timing
- Monopoly
- Team
- Distribution
- Durability
- Secrets
We’ll talk about each of these in future posts but I recommend reading Zero To One by Peter Thiel.
Another excellent framework I have seen, is the value stack by Mike Maples of Floodgate.
In his excellent post, dare to make your startup Legendary, Mike lays out how avoiding competition by building proprietary power and getting to product/market fit (product power) through insightful but visionary improvements will set you apart from the rest in helping you achieve company and category power. A position that can give you 70–80% market share.
So which one do you prefer? To build a business that makes things just a bit better and worry about competition or to take a bold view and build something that no one imagined before you brought it to market?
We believe Iranian founders have the capability to innovate on all four in the value stack. They should think about leapfroging the trap of the incremental improvement and build global startups in Iran that are category leaders. Once they have achieved initial proof, they need to keep up the good work and make sure they maintain success for the long-term. We are constantly working on the venture mindset and the support framework needed to achieve this and will be backing our startup founders all the way to become category leaders globally.
This is the third in a series of posts about our investment criteria which was also posted on LinkedIn. We’d love to hear from teams with crazy (but commercial) startups. Get in touch or attend one of our breakfast series. Finally, don’t forget to get your IV Score through our free online self-evaluation tool and prepare for your next VC meeting.
