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Free Example of Third-World Startups Essay

During the last decade of the 20th century, there was a frenzy about taking part in the booming telecommunication business. At that time, there were many young entrepreneurs who were able to establish companies worth millions of dollars. The phenomenon was made possible by venture capitalists. However, many of the newborn companies, that were based on the promise of technology and aggressive investor spending, went bankrupt and came to be known throughout the business world as failed startups.

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One of the entrepreneurs who experienced such a major setback was Monique Maddy. She was born in Africa and went back to the continent where she was born in order to help make it a better place. But after six years in operation, her company, called Adesemi, had to be shut down. Maddy said that she learned four major lessons when it comes to third world startups and she hopes to use these insights to guide her in future business ventures.

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The four major lessons she learned were borne out of failure to launch her telecom business in Tanzania. She failed because one of her principal investors pulled out the money they invested and forced Adesemi to sell a significant portion of their assets, which practically crippled their operations.

The investor pulled out the funds because he could not see any kind of profitability in the near future. The reason why Adesemi could not make serious money was that they were unable to secure the necessary licenses on time. But a more serious problem was that the company did not have the clout to oblige the local telephone company to pay them the agreed-upon success fee, based on the added number of calls generated through the system set up by Adesemi.

Her problems were made worse by the fact that she was unable to leverage the supposed advantage of a diverse workforce. The diversity in the company was supposed to create a pool of diverse talents that could readily solve a problem encountered by the company. But in reality, Maddy spent most of her time putting out fires and taking care of hurt feelings. It was not the ideal corporate culture that she hoped to establish in that situation. It was an experience that Maddy would never forget.

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The first major lesson she learned was to steer clear from do-good lenders. She said that this type of venture capitalists is “terrified of risk and deeply enmeshed in bureaucracy” (Maddy, 2000, p.11). Her advice, on the other hand, was to look for the do-well investors who had a better understanding of risk and were willing to assume greater risks in exchange for greater rewards in the long run.

The second major lesson she learned is that a diverse workforce is an asset if you know how to handle cultural misunderstanding. If not, then it becomes the drain of time and money in the company. Her advice is nothing new – she suggests hiring a competent HR manager, who is also an expert when it comes to molding the team into a workforce that is cross-culturally tolerant and understanding toward each other.

The third major lesson she learned was the importance of local partners. She clarified this statement by saying that local partners should be compelled to invest in the proposed startup. If they are not obligated to invest, then they will simply disappear should some serious problems appear; hence, they will not contribute to the success of the company.

The fourth lesson that she learned was the realization that “a new venture in the third-world needs a patient and visionary investor” (Maddy, 2000, p.11). A non-visionary investor will never be patient enough to wait out the struggling years in order to enjoy the rewards of future profit.

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It was a bittersweet experience for Maddy. It was “bitter” because she failed in her first major venture as an entrepreneur. She also acknowledged it as a form of public death because of the many people that were disappointed by her. Consider the promises made to investors and the failure to deliver when so much was expected from her. On the other hand, it was a “sweet” experience because she now knows the pitfalls that she would have to watch out for if she will ever set up a company in a third world country.

She learned the importance of social capital and networks in a third world country. In third world countries, it is not what you know but who you know. It means that there are problems that cannot be solved through legal means or through the use of technology. There are problems that can only be resolved with the application of force coming from a politician or a person of influence. Maddy learned this principle late in the game. It was a costly mistake for her. She said that in the future she would have to establish good relationships with business partners in her own terms.

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She did not forget the importance of local partners, but she used Western values to develop a partnership with them. It was the wrong strategy. As a result, the local partners that were supposed to help were nowhere to be seen when the going got tough. But there were many times when she was able to use her vast network of friends, acquaintances, and classmates in business school to get help through some of the tight situations that she encountered. Maddy said that she would keep everything in mind and was upbeat when she talked about future business ventures.

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