Facebook CEO Mark Zuckerberg made his first trip to Africa this summer with stops in Nigeria and then Kenya. In June, the Chan Zuckerberg initiative---the philanthropic foundation of Zuckerberg and his wife Dr. Priscilla Chan---invested $24 million in Andela, a company that trains top software developers in Kenya and Nigeria. This trip and investment is a departure from the prevailing mindset in Silicon Valley, where top venture capital firms are investing in companies making products and services---like monthly deliveries of cannabis products or on-demand set-up of personal karaoke parties---to address increasingly minor "first world" problems with some of the country’s best talent.
True innovation now comes from places and people that are typically overlooked by Silicon Valley---for example, from capital-constrained places---and maybe it always has. As Sand Hill Road continues to hold its unicorns dear, you’ll have to look much further east or west or south to find new (or at least newly recognized) sources of innovation.
Often times, breakthroughs come from resource-deprived environments. That's what my organization, Sustainable Health Enterprises (SHE), has learned in Rwanda. Our first initiative, SHE28, aims to make affordable maxi pads, since the existing ones cost girls a day’s worth of wages. To keep costs low, we turned local waste material (banana fiber) into absorbent fluff to replace the most expensive part of the pads. With that material, we were able to use minimal amounts of water, which is a scarce commodity in Rwanda, and electricity, which is expensive. Compared to products made by multinational companies, ours is environmentally sustainable---at a "moneyball" price.
When I initially pitched investors the concept of SHE28, I had to describe the context of menstruation in the developing world multiple times. Few people were aware that if girls and women don’t have access to affordable pads, their health, education, productivity, and dignity can all suffer. Since half the world menstruates for the majority of their lives, and since women and girls in more than 25 countries lack access to affordable menstruation supplies, low-cost pads are a huge market opportunity--- the best "subscription model," if you will.
When we presented our idea to major consumer products companies in the US, their engineers doubted that our material, banana fiber, could be turned into an absorbent fluff that would be comparable to the industry standard of wood pulp that was used for 50-plus years, let alone do it with no chemicals and minimal water and electricity. In some cases, I was able to raise capital and convince partners to join in our efforts thanks in large part to the Harvard degrees on my resume. But what happens to people and ideas when that is not the case?
Innovation is sometimes recognized in overlooked places, but not until many decades and dollars later. In 1992, two American families of Liberian and Sierra Leonian descent started Sundial, a company that makes hair and beauty products from materials like Shea butter that are not well-known by typical investors. At first, their products were relegated to the "ethnic" aisle, and few people thought they would succeed. Almost 25 years and $200 million in annual revenue later, Bain Capital took a minority stake in the company, which is now valued at approximately $700 million. As Sundial CEO Rich Dennis has said: "It's a big win because it validates the concept that a black business can rise to the same level of any other business, as challenged as we are for obtaining capital, for access to capital, access to the same opportunities as other entrepreneurial groups."
Silicon Valley wasn’t always so focused on backing a delivery product for every whim. Initially, it was solely a source of innovative products and services that changed vital systems. Some of the first great inventors out of Silicon Valley, like Bill Hewlett and David Packard, invented a wide variety of hardware and software components to increase the efficiency of consumers, small- and medium-sized businesses and large enterprises like the government, health and education sectors. Corporations followed suit by hiring a new breed of businesspeople dubbed innovation consultants. They also formed innovation departments to come up with strategies for new product development. And if that failed, corporations started looking at acquiring smaller companies to provide a pipeline of innovative products. Despite the breadth, most of the sought-after sources of innovation had a familiar background: traditional education pedigree, male, white, and rarely outside of North America, Europe, Australia, and Japan.
Venture capital supporters might respond that the industry recognizes innovation from different places and people, but their ideas aren’t as good and scalable as people and companies they currently fund. (According to CrunchBase, only 12 percent of venture rounds and 10 percent of venture dollars globally between 2010 and 2015 went to startups with at least one woman founder.)
The current venture-focused approach isn't a foolproof system, and that's why everyone from multinational companies to individuals are turning to crowdsourcing platforms to find and proliferate great innovation. This ranges from Unilever, which asks customers to suggest improvements to existing products and recommend new products, to Kickstarter, which allows users to seek capital for their new products and services by offering pre-sales of those products and services. Not only can sourcing innovative ideas for products and services from the crowd provide better ideas, but it can do so more cost effectively, because of the ability to vet thousands of ideas for the amount it previously cost to vet one.
While institutional investors' capital has ensured that companies like Snapchat and Seamless make it to our smartphones, I wonder what great innovation is being overlooked that could significantly change the world like Hewlett and Packard once did. Mark Zuckerberg may be trying to change that with his Andela investment: "Talent is spread evenly but opportunities are not," he said in a statement upon the Andela investment. If talent alone does not motivate Sand Hill Road to start investing in the overlooked, maybe competition with Zuckerberg will.
