A High-Tech Entrepreneur in a Low-Tech World

by Monique Maddy

Monique Maddy

Liberian-born, American-educated Monique Maddy and her Harvard Business School classmate Côme Laguë left HBS with a plan to blanket Africa, and then the rest of the developing world, with desperately needed wireless communications services. But after six years, their start-up company, Adesemi, crashed to earth, leaving the founders with hard lessons about starting businesses in emerging-market countries. In this excerpt from her article in the Harvard Business Review, Maddy (HBS MBA '93) talks about two of the lessons she learned: the importance of distinguishing between do-good and do-well lenders; and the strengths—and challenges—of a diverse workforce.

Do-Gooders and Do-Wellers

Understand that there are two breeds of emerging-market venture capitalists, and accept the fact that they are separate and unequal. Adesemi raised money from two kinds of sources—VCs who are do-gooders and VCs who are do-wellers. Do-good investors and lenders are typically quasi-government agencies (though some are multinational banks) that provide equity capital and loan capital for ostensibly idealistic purposes: generating economic prosperity in emerging-market countries and stimulating further influx of capital from other investors. Do-gooders generally don't embrace the fundamental idea of reward for risk that underlies entrepreneurism. They tend to see third world countries as their turf, and they want to promote growth at their own pace—putting little money into enterprises like Adesemi and therefore allowing little opportunity for real return. In other words, do-gooders lend money to start-ups but don't necessarily trust them to do the right thing with it. To complicate matters, do-good VCs are staffed by career bureaucrats who stand to gain nothing if their agencies' investments do well. An agency may even be penalized if one of its startups shows a huge return: the government, or whoever is funding the agency, may be less inclined to give the VC more money to invest.

The do-gooders understand emerging markets—they know the competition and how consumers act—and they are familiar with government rules and regulations. But they are terrified of risk and deeply enmeshed in bureaucracy and their own rigid methods of investment and analysis. They are not necessarily looking for big paybacks on their investments. They are more preoccupied with adhering to their established procedures.

Do-wellers are another animal entirely—they're your classic, hungry, "show me the money" investors, who believe business is a high-stakes game. They may like worthy causes, but "doing good" is not a front-and-center concern. They see untapped opportunity in the third world, and they want to join forces with the first companies to seize it. Those firms are staffed by savvy financiers who understand that high risk is par for the course. Without it, there's very little chance of high reward. And high reward is what they are after.

Because of their limited experience in emerging-market countries, do-wellers frequently are not as well versed in the intricacies of doing business in these areas. Often they have trouble understanding how horrendous the bureaucratic morass in certain emerging-market countries can be. But the do-wellers are patient and willing to pour money into investments that look as though they might score big.

In hindsight, it's easy to see the distinction between—and implications of—the two kinds of capital available to emerging-market companies like Adesemi. For several years, I was blissfully unaware of the critical differences between venture capital sources. Money was money—I was happy to get any. And I never would have guessed that Adesemi would be brought down by the very investors—the do-gooders—that I intuitively trusted to act in the best interests of our target markets. After all, those were the people—or so I thought—who shared my dream of changing the world. I was wrong.

The lesson I learned, sadly, is that start-ups in the third world should stay away from do-good investors. Of course, few entrepreneurs have the luxury of turning down money. But I would say that taking money from do-good quasi-government institutions simply isn't worth it in the long run. They understand neither the concept of risk nor the concept of the long run.

Every smart, ambitious MBA today wants to work for a start-up, but very few want to work for a start-up in Dar es Salaam, Tanzania. Those who do usually want and expect the kind of generous relocation, housing, and compensation packages offered by large multinationals. Adesemi, therefore, had to pick its managers and staff from a very small pool of people. It also had to hire under intense time pressure and financial constraints. In the first phase, the company needed about eight managers and dozens of staff people who would eventually be assigned to various locations throughout Tanzania. Côme and I hired people mainly through word of mouth and advertising, and we ended up with a crew of highly skilled and very talented adventurers from countries all over the world—Norway, Britain, Czech Republic, and New Zealand, to name a few. We also hired 50 people in Tanzania. Eventually, although we were an American company, there was not one American among our overseas staff.

Diversity is a tremendous strength, and such a heterogeneous workforce should have been a real boon to Adesemi. In recent years, management gurus and business academics have heralded the creativity and innovation spawned by heterogeneous teams. People who come at a business problem with different mind-sets, it is said, are likely to generate new, exciting solutions. I myself believed such a notion—back in the comfort of my HBS classrooms.

But in practice, Adesemi's diversity was also a huge headache. One reason was that people on our staff had different attitudes toward work—or, more specifically, toward the concept of empowerment. To me, it was obvious that each of Adesemi's employees had to show a great deal of initiative. After all, the company was in its early stages of growth and nothing was routine. Moreover, its operations were far-flung, and I was constantly on the road talking to investors. I wanted—and needed—people to act like mini-CEOs themselves.

Instead, cultural habits got in the way. Our Tanzanian employees, whose attitudes had been shaped by colonial rule and then socialism, expected to be told exactly what to do every minute of the day. Then they did just that and no more. And it was not uncommon for some of our employees from Scandinavia to take off for five weeks at a time—the typical length of a vacation for their friends at home.

There was another, just as frustrating, reason that cultural diversity wreaked havoc among the Adesemi team: call it balkanization. Employees of the same nationalities formed cliques that disliked and frequently disrespected the other nationalities' cliques. Political correctness—with its rhetoric about honoring differences—was nowhere to be found. I am convinced, in fact, that today North Americans are the only people who practice political correctness.

Adesemi's balkanized employees made an art of flinging stereotypes at one another. The British were accused of being snobby and of withholding information. The Tanzanians were called inept. The Scandinavians were regarded as cold and aloof. I was considered an American—despite my African birth—and therefore arrogant and bossy. It did not help that in societies where age and seniority still matter substantially more than individual merit or accomplishment, Côme and I were younger than most of the people we were managing.

Moreover, people made little effort to learn about or accommodate other employees' cultural sensitivities. I will never forget when one of our British employees returned from vacation and a Tanzanian employee remarked, "Madame, you have put on a lot of weight." The British woman gasped, but the Tanzanian woman only smiled. In her culture, such comments about weight are considered complimentary. The British boss did not understand, and the two employees rarely spoke again.

The misunderstandings spawned by the cultural diversity of the Adesemi team caused a huge drain on my time and energy. As the CEO, and as someone who had lived in many countries, I was constantly called upon to settle disputes or simply to smooth feathers. I was forever placating warring factions. My main method was to reinterpret people for each other and to remind them of Adesemi's higher purpose. Sometimes it worked, but often it only resulted in a temporary calm before another storm. Our heterogeneity was part of our strength. But next time I will create an extremely high-level position for a person who will focus on helping employees overcome or work around cultural misunderstandings. A start-up does not have the luxury of waiting for the ingredients in its pot to melt.

· · · ·

Excerpted with permission from the article "Dream Deferred: The Story of a High-Tech Entrepreneur in a Low-Tech World" in the Harvard Business Review, May-June, 2000.

[ Order the full article ]