How to Screen Startup Ideas in a Frontier Market

Source: Kevin Hale & Y Combinator Startup School
  • Popular — A lot of people or businesses have this problem. Ideally millions. And not just the upper class or upper middle class in the Tri-State, the DOHSs, Uttara and Bashundhara Residential Area, although they may be great initial markets.
  • Growing — This is another way of talking about the market. Over time, more and more people are having this problem. Think about the problems Bangladesh faces over time as we industrialise, urbanise, get wealthier, connect more to the wider world and more young people enter both the greater population and workforce. Ideally, the market is growing by double digits every year.
  • Urgent — Whenever someone gets this problem, it needs to be solved as soon as possible. He or she is looking for a painkiller that can immediately alleviate the problem.
  • Expensive— In the current way, the problem costs 10’s if not 100’s of thousands of taka to solve, particularly over time. In aggregate, this is a multi-billion dollar opportunity. It also takes a lot of time and effort to solve.
  • Mandatory — It is hard to avoid this problem, especially if this is something mandated by law and/or the law and policies have recently changed and individuals and companies have to react.
  • Frequent — This is a recurring problem that occurs daily, weekly, monthly or quarterly.
Source: Kevin Hale & Y Combinator Startup School
Source: Kevin Hale & Y Combinator Startup School
  • Network effects — as more users get on the platform, the more the platform becomes valuable to existing and new users. This is particularly true for market places. It is estimated that 70% of the value in technology is driven by network effects.
  • Switching costs — the service becomes so integrated with customers lives or businesses that is is hard to use a different service or substitute. If the service were to somehow stop, their business or daily life would be a struggle. This could be accomplished through data or loyalty systems, among others.
  • Economies of scale — as the company grows larger, it is able to spread fixed costs over a wider base of units or customers, and increase margins or pass that discount onto customers. But this will not be true if unit economics is negative. In that scenario, the company loses more money as it gets larger. I think unit economics is one of the most underrated elements that founders overlook — a subject of a future post.
  • Intellectual property — it is hard to defend intellectual property, including copyright on trademarks, in Bangladesh. Patents take a long time to prove and to get. But a brand, once created, is hard to replicate, though it can be lost with poor service. The trust create with customers can be leveraged into new product and service lines.
Shubho Al-Farooque, Co-Founder of Zantrik
  • Popular — As Bangladesh grows wealthier, its vehicle ownership and number of corporate fleets have skyrocketed. Because of high import duties, most vehicles are refurbished, creating a need for frequent services.
  • Urgent — Since most households need their vehicle for daily commuting, any down time creates difficulties and coordination problems. Uber can be a short term fix but families may not trust random drivers with their elderly members or children. Businesses also need their vehicles in good shape.
  • Expensive — For most families, a vehicle is the second most expensive asset they own, after land or apartment. Most are having to spend 10,000’s of takas every month on drivers, fuel and maintenance. Shubho has personal experience from being price gouged by both the workshop owner and his driver, often working in collusion with each other. This problem is even more expensive for companies with multi-vehicle fleets.
  • Mandatory —Certain services that Zantrik is working to automate, such as insurance and registration, is mandated by the government.
  • Frequent —If you ask a vehicle owner in Dhaka, chances are they’ll tell you that their vehicle is a source of almost daily annoyance. Something needs repair or mending every few weeks. You cannot fully trust your driver, so you have to track your car and also make sure they are not skimming off the fuel money.
  • Founder & Culture— Shubho has spent decades building software, including a profitable software development firm on his own which he gave up to start Zantrik. He has had multiple opportunities to move into other verticals, but he remains steadfast in solving the vehicle service problem in Bangladesh. He and his co-founders spent the first year talking to and understanding the pain points of both vehicle owners and garage owners. His team has experience managing fleets for corporates. He has built a performance-oriented culture, with stock options for high-risers.
  • Product & User Experience— I’ve seen few founders in Dhaka more user-obsessed than Shubho. To have a seamless user experience, the team is now moving into having Zantrik-branded workshops that adhere to quality and pricing standards. They have built a fleet management solution for corporates, allowing them to interface with Zantrik and track various services for their corporate fleets, creating transparency and lowering the chance for vendors and employees to gouge them.
  • Acquisition —Zantrik has become a calling card for me whenever I sit down with anyone from the startup and angel community. They have done a great job of building word of mouth through attractive branding and advertising, which they have conscientiously managed and is looking to lower on a per capita basis over time, as well as a superior user experience. Now, they are working to make their franchised workshops and customers the referral sources, rather than the other way around.
  • Monopoly —As more workshops come under the Zantrik network, the more valuable Zantrik becomes for customers, especially corporates that have vehicles all over Dhaka and the country. To increase switching costs, Zantrik is building solutions for fleet management and more frequent services such as refuelling.

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Nirjhor Rahman (Bangladesh Angels)

Nirjhor Rahman (Bangladesh Angels)

Bangladesh Angels Network (BAN) is the first platform to connect Bangladeshi start-ups with smart capital via individual and institutional investors.