A web 2.0-based business idea that works for Pakistan, and any place that needs it

Note: I was supposed to post this back in early September but just remembered it was lying here. Enjoy.

I was reflecting recently on how flat even the playing field really is for Pakistani entrepreneurs: Can you become a $MM success starting in Islamabad today, as compared to starting in, say, Palo Alto?

I was also thinking about a business that can truly use the internet for its strengths. Not something that is online for the sake of it, but somethign that uses everything good about 2.0 technology to create value for online Pakistanis.

And with that I got an interesting idea.

Since Green & White is all about sharing free advice and ideas, here is the paper-napkin sketch.

Note: Think of this post as having an open-source license : you can use it if you want, but please dont plagiarize — at least let me know.

The Premise:

The key difference between Palo Alto and Islamabad is that in Silicon Valley there is a very high concentration of talent, investment capital, and ideas in a very small amount of space. Also, you have the right delivery channels or support for startups, in the form of incubation as well as support for funding.

If you look at Pakistan, though, you find that all of the basic ingredients still exist – investors, ideas, passion, talent, and advisors.

The only key asset missing is the physical space where all of the ingredients can connect, because in Pakistan all of these ‘right people’ are spread out across the country.

The idea:

Wouldn’t it be great if someone creates a ‘virtual incubation center’ for Pakistani Entreprenuers, where all the stakeholders relevant to the venture space can get together on the same place.

Using the internet, the Virtual Incubation Center (VIC) can offer the last missing asset in the puzzle.

The Market Demographics:

If you look at the demographics of the internet users in Pakistan, broadband is being used primarily by people in the tech/telecom industries, by entreprenuers, or otherwise by people who can be advisors, experts, or consultants in the Incubation Center.

This is the majority of the broadband market — anyone serious about working on ventures would not mind paying high bandwidth prices. The majority of the rest of the internet space in Pakistan is either Torrent-fans, or littered by youth trying to transcend household boundaries by exploring IRC.

Thus, almost all the stakeholders that could be interested in using VIC can be found online.

The Environment:

I only know of two official incubation centers in Pakistan (not counting CDF) – TMTVentures and TIC (Nust). I do not want to consider them competitors though – it makes no sense for an adolescent industry. In fact the VIC in some ways competes with my own company CDF but I still dont think competing on incubating startups by witholding trade info is smart.

Unofficial incubation (i.e. places where you can receive parts of the total incubation package) include SMEDA, P@SHA, PTCL R&D fund, PSEB, ETC (Islamabad), and even the Govt, who now has a VC fund of its own.

What is the value created by the VIC?

Businesses exist to monetize created value.

Incubation centers provide an entreprenuer with a ready-made facility to support and get the idea off of the ground.

Typically, office space is provided where the entreprenuer can invite customers or investors, where employees can be hired and kept. The office space also provides standard facilities such as a professional phone connection, fax, web hosting etc.

Incubation centers often also provide ready access to industry veterans or domain-area experts who can act as on-demand advisors or consultants, usually for monetary charges. A person may be available who is an expert in data mining, and he might help your review your software’s data model.

Most importantly though, the asset that incubation centers provide (and hence charge for either in equity or cash) is ready-built functions to help your company. They can give you access to professional accounting, legal, adminsitrative, financial and project management functions that your startup company can use.

Finally, some of the incubation centers in Palo Alto are run by VCs, which means they also provide access to further investment capital as and when needed.

Whether the incubation center is a real facility or a virtual one, as long as the center can provide the same set of assets, the incubation center should be able to charge for use of that service.

In fact, basing an incubation center on the internet allows for much better sourcing and distribution economies, which means your price-point to entreprenuers can be a lot lower.

Basic VIC features

I could go into more detail here (Func Specs level) – but hey we’re only having coffee — treat me to dinner somewhere for that.

• Let entreprenuers and investors register as such, and be able to connect them in a workflow that suits the investment due diligence process
• Let people register as advisors and consultants with their areas and charges — let entreprenuers use them on-demand
• Let entrepreneurs get together in meet-and-greet sessions
• Invite industry veterans to present at online seminars for all the stakeholders where entrepreneurs can participate interactively
• Most importantly, provide key assets to entrepreneurs, and protect the value created.

Key VIC Assets

So what are key assets for the VIC?

1. Functions

As I mentioned, functions and the quality of advisors are the most important asset for an incubation center.

The great part of being online is that you can provide all the functions for incubation by sourcing and integrating a number of online modules.

The VIC can provide a fully deployed ERP system hosted online and available through the VIC. It can provide integration with Salesforce.com for xRM facilities.

It can also have a connection with Webex or some online collaboration tool to let the enterpreneur connect & present professionally to their customers.

It can provide Wikis, blogs, calendar apps and even project management apps from the web2.0 space from within one portal, maybe with some exclusive partnerships with people like zoho.com

Any entreprenuer incubated by the VIC will have all the key business software tools to support his idea.

2. Workforce

VIC will provide a connection with oDesk for global sourcing and management of a workforce as needed.

VIC will also connect with LinkedIn, or Rozee’s professional networks to allow for searches for top talent.

VIC can also provide web-based ‘desktop anywhere’ clients.

3. Resources

VIC can provide licensed connections to online knowledge bases for research — such as IEEE or lexis-nexis subscriptions.

4. IP Protection

Entreprenuers will invariable store their business data with VIC, and thus VIC will ensure the protection of the value created. It will also provide legal support and advise on filing for IP.

5. Legal Protection

VIC, as a business, will provide legal support to investors and entrepreneurs in framing investment contracts.

Strategies to create 2.0 Economies

The great thing about the 2.0 web space — and the reason why so many VCs in the US are jumping on it — is the fact that 2.0 economies can give you potentially massive returns to scale.

For VIC, major returns can be seen once more of the content can be reused across the board — If there is a mechanism to search across all the blogs and wikis to find out non-confidential knowledge (e.g. best practices) created by any company or entreprenuer etc.

The other major management innovation of web 2.0 is that it makes the users of the web-applications both producers as well as consumers. Thus, the participation of everyone in the system together continuously makes the applciation more valuable. This is the reason for the appeal of photo sharing / social networking sites.

For VIC, these gains will be seen when a professional-networking twist is added to the portal. “Trust” can be made the basic currency on which transactions are done within VIC. An advisor or consultant can earn “trust” by referring investors to the site, which would eventually help them win contracts from entrepreneurs. Entrepreneurs can give “trust” to the investors that are part of company boards. Entrepreneurs can gain “trust” either from the board, or by agreeing to share knowledge publicly (this knowledge then helps to catalyse the first types of gains from reuse). Advisors can also validate the public knowledge created by the new entrepreneurs in exchange for more “trust”.

These elements can have a catalysing effect on the growth of the portal, and the reuse can help reduce support costs per user.

The Pricing Model

There are different types of rewards VIC receives from its consumers.

Investors, Advisors and Consultants actually provide non-monetary rewards by creating more value for VIC.

Incubated Entrepreneurs provide financial rewards (as a monthly fee) against the services provided / used.

Exploring Entreprenuers (i.e. non-incubated people that are participating in meet-and-greets, seminars, or perhaps pitching ideas to investors hoping for investment) can be allowed to participate in an advertisement-supported experience of VIC. They may otherwise be charged for the pitches they make to investors.

In addition to this, any external facility that the incubatee uses (e.g. research journal subscriptions, salesforce etc.) will be charged separately, and the charge relayed onwards by VIC. The value VIC provides in this case is having one al-a-carte bill to manage for all of those services.

The Cost Model

By horizontally integrating with popular internet-based software, the VIC portal can be built at much lower cost than the functions in a real incubation center. The only custom parts is the investment workflow implementation.

Operating costs include the high legal support, small amount of international bandwidth, but decent sized pipes for local tranport of traffic.

The Operations Model

Other than obviously maintaining the product and offering it as a service to all the stakeholders, there is a significant sales process involved in filtering through and adding the right set of willing investors to the portal, and running checks on all potential entrepreneurs before their pitches are sent to investors (maybe from interviewing them in person before the ‘incubation pitch’ can be distributed.)

I will leave this at that — I think there is more than enough detail here for someone to build this successfully.