Global Startup Ecosystems and the Challenges in Emerging Markets

Startup Genome identifies Beijing, London, Silicon Valley, Stockholm, and Tel Aviv as leading global startup ecosystems. Their rankings are based on a comprehensive evaluation of factors including performance, capital availability, market reach, connectedness, talent pool, and knowledge resources.

The Gap in Emerging Markets

Last year’s rankings from the data and research organization revealed that startup ecosystems in emerging markets – excluding China and India – were absent from the top 40. A significant disparity exists in all six key factors, suggesting a considerable timeframe before these regions attain comparable standards.

Pariti: Bridging the Divide

Pariti, a B2B management startup originating from Kenya and founded by Yacob Berhane and Wossen Ayele, aims to address this gap. The company focuses on improving access to capital, knowledge, and talent for startups in underserved regions.

Capital Access Disparities in Africa

The challenge of securing funding is particularly pronounced in Africa. Only 25% of funding is allocated to early-stage startups in Sub-Saharan Africa, a figure considerably lower than the 50% or more observed in Latin America, the MENA region, and South Asia.

Pariti’s Mission

Berhane, the CEO of Pariti, explained to TechCrunch that their goal is to empower startups that might otherwise lack essential resources. He emphasized the platform’s applicability to founders across emerging markets, specifically those operating within immature startup ecosystems.

An Unbundled Accelerator Approach

Ayele describes Pariti as functioning similarly to an unbundled accelerator program. Traditional accelerators often deliver a broad range of information, covering numerous aspects of startup development.

In contrast, Pariti provides founders with precisely the information and resources needed to advance to their next business milestone. This targeted approach ensures relevance and efficiency.

Founders receive only the information or resources immediately applicable to their current needs, streamlining the learning process and accelerating growth.

A Tripartite Marketplace Platform

Founders who onboard with Pariti undergo a comprehensive assessment process. This involves submitting their company’s pitch decks and relevant business information for evaluation.

Pariti then analyzes each company based on over 70 distinct data points, covering aspects like the team’s expertise, the target market, the product’s viability, and the company’s financial projections.

Following assessment, each company is benchmarked against comparable entities. Comparisons are drawn between businesses operating in the same industry, at similar stages of product development, with comparable revenue, and seeking funding at equivalent levels.

The founder receives a detailed report, including constructive feedback on their pitch materials, insights into key metrics for business development, and an evaluation of their potential to secure future investment.

“This methodology provides us with a remarkably detailed understanding of each business, identifying its strengths and weaknesses, and enabling us to allocate appropriate resources to founders based on their specific requirements,” stated Ayele.

The support doesn’t conclude with the assessment. Pariti facilitates direct connections between founders and members of its extensive global expert network.

These experts possess diverse backgrounds, spanning finance, marketing, product development, and technology, across numerous industry sectors. Furthermore, Pariti offers access to a vetted pool of freelance professionals for founders needing specialized support in areas like product construction.

Ayele emphasizes that founders can repeatedly engage with this process, receiving ongoing assessments, implementing feedback, and connecting with valuable resources and talent.

Conversely, Pariti enables investors to register on the platform, allowing the collection of data regarding their investment preferences.

When a startup seeks capital, the platform intelligently matches them with investors whose profiles and preferences align with the startup’s needs.

“We have developed a matching platform driven by algorithms, which delivers curated investment opportunities to venture capital investors,” explained Ayele. “We also streamline the outreach process for founders, a significant challenge – particularly within this ecosystem.”

Essentially, Pariti empowers founders to connect with cost-effective talent, gain access to funding, and refine their business strategies.

Professionals can discover engaging opportunities to mentor startups and secure paid project work. They also gain increased visibility within the early-stage ecosystem, track their progress, validate their skills, and enhance their earning potential.

Investors benefit from streamlined operations, access to exclusive deal flow, automated deal filtering, and on-demand experts to assist with due diligence, research, and portfolio management.

The COO reports that the platform has already facilitated substantial value creation. Kiiru Muhoya, founder of Kenyan fintech startup Fingo Africa, shared with TechCrunch his experience of securing a $250,000 pre-seed round through the platform.

Muhoya revealed that, following Pariti’s assessment prior to fundraising, he recognized that his initial target market was insufficiently large.

He also identified a need to better understand the criteria that venture capitalists prioritize. Consequently, he shifted his focus.

By joining Pariti’s expert network, Muhoya began evaluating companies and providing feedback to fellow founders. This experience prompted him to temporarily refocus on refining his business model, incorporating insights gained from Pariti’s initial assessment and the expert platform.

After another assessment on the platform, he successfully closed the funding round.

Since its launch in 2019, the company has experienced considerable growth. It currently supports over 500 companies across 42 countries, boasts a network of 100 freelance experts, and serves 60 investors.

Berhane further notes that five funds are currently utilizing Pariti’s operating system for their deal management processes.

“We believe we are establishing the foundational infrastructure for building and scaling ventures in emerging markets,” Berhane stated. “We have established partnerships across emerging markets, including Latin America and India, and are also seeing strong interest from the United States, where we recognize a significant need for our platform.”

Pariti operates on a subscription model for investors, though specific pricing details remain undisclosed. The company plans to introduce subscription fees for founders as well.

Additional revenue is generated through transaction fees paid by investors or founders when utilizing Pariti’s freelance experts for projects, or when a fundraising round is completed through the platform.

Recently, the company secured an undisclosed amount of pre-seed funding from angel investors and venture capital firms, including 500 Startups, Kepple Africa, and Huddle VC.

However, Pariti has encountered challenges, notably concerning trust between founders and investors. Berhane reports that founders have shared negative experiences with investors, while investors have expressed concerns about the accuracy of information provided by founders.

To address this, Pariti provides Non-Disclosure Agreements (NDAs) to both parties, ensuring that founders’ data is not shared with investors without their consent. Furthermore, investors only receive access to deals that have undergone Pariti’s rigorous vetting process.

Both founders, Berhane from Eritrea and Ayele from Ethiopia, share East African roots and have crossed paths previously, though they pursued distinct career paths before establishing the company.

Ayele began his career at a consulting firm with offices throughout East Africa before returning to the U.S. to pursue law school.

During this time, he gained initial exposure to the early-stage startup landscape and worked with a venture capital fund focused on emerging markets.

“I recognized the potential of technology and innovation to positively impact communities, whether through financial inclusion, access to essential goods and services, or connecting individuals at the base of the economic pyramid to markets,” he explained.

After completing his legal education, Ayele returned to Nairobi to engage with the burgeoning African startup ecosystem, where he and Berhane co-founded the company.

The CEO, with a background in finance and investment banking in the U.S., relocated to Africa to launch a pan-African accelerator in Johannesburg, South Africa.

While holding managerial roles at organizations like the African Leadership University and Ajua, Berhane dedicated much of his time to facilitating deals for these companies, ultimately inspiring him to create Pariti.

“Having assisted businesses in raising over $20 million and witnessing the resulting job creation and economic advancement, I realized I could pursue a meaningful career within finance,” Berhane said. “I continued to contemplate the growing disparity in access to capital, talent, and knowledge within the startup ecosystem and the lack of infrastructure to address it. Pariti represents our solution.”

Early Stage is the leading event for startup entrepreneurs and investors seeking practical guidance. You will learn directly from successful founders and VCs about building businesses, raising capital, and managing investments. Sessions cover all aspects of company development: fundraising, recruitment, sales, product-market fit, public relations, marketing, and brand building. Each session includes dedicated time for audience questions and discussion.