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If you’ve been reading startup tech blogs and news outlets, you might think it’s an exciting time to be a fintech startup in East Africa and India. There are some notable exits coming out of India, like the 2016 acquisition of Citrus Pay by Naspers’ PayU for $130 million, one of the largest-ever acquisitions for the country’s fintech industry. There is also a narrative, eagerly picked up by tech optimists, about the innovative technologies spreading across Kenya and other East African countries, like Safaricom’s M-Pesa mobile payments platform .

The reality is different. Despite all of the hype, most startups in India and East Africa are failing to attract the investment capital they need to grow and scale. For example, although startup investment in East Africa is at an all-time high, in the past two years 72 percent of venture capital went to only three startups. The vast majority of startups in these regions are not being given a fair shot.

Why? As my firm found through interviews with dozens of entrepreneurs, investors, researchers, and entrepreneur support organizations, there is a fundamental disconnect between entrepreneurs and (often foreign) investors in East Africa and India. All too often, investors are using a “one size fits all” mental model of venture capital – made for Silicon Valley-style consumer technology companies – to invest in markets that operate under an entirely different set of rules.

There are three major barriers to scale for entrepreneurs in East Africa and India. Each barrier stems from investors’ reliance on these patterns, which were developed in the United States and other established markets.

1. Speed of return. The first barrier to investment, and scale, has to do with investment structure. Investors in India and East Africa tend to seek Silicon Valley-style timelines for returns, along the lines of a 10x return in three to five years through equity investments. Yet the on-the-ground reality for these startups makes such expectations unlikely. In East Africa, for example, there are very few mid-sized companies that could acquire startups. Investors looking for equity-only style investments are asking themselves, where is the acquisition opportunity?

Investors should consider alternative financing mechanisms that may be better suited for these markets. For example, revenue-share agreements or debt instruments are often a better fit.

2. Human capital. We found that entrepreneurs face a “chicken-and-egg” problem: Investors won’t back them unless they have a great team, but they can’t hire a great team unless they have money. At the firm level, investors and foundations that care about the success of early stage ventures ought to use grants and investment to back human capital at an earlier stage than they are currently doing. At the sector level, foundations and investors ought to strengthen the infrastructure of the human capital ecosystem. As one example, the Argidius Foundation and the Aspen Network of Development Entrepreneurs teamed up to fund five initiatives to improve human capital ecosystems.

3. Pattern recognition. Investors fall back on known patterns to find companies and make investment decisions – relying on networks and indicators like prestigious universities or accelerator programs. In East Africa, 90 percent of disclosed investments over the past two years went to startups with one or more European or North American founders. In India, 78 percent of companies that raised follow-on investment in the past two years had a founder that attended one of a few prestigious universities. If you’re not part of a well-connected elite, it’s difficult to build trust and relationships with investors, advisors, and other partners. Due to this unconscious bias, investors are missing out on the best ideas for reasons we’re entirely unaware of.

These barriers all relate to a one-size-fits-all mentality that is bad for companies, who miss out on capital, and bad for investors, who miss out on high-potential ideas that need more time, cash, and support to grow.

It is essential we break these patterns to help more startups reach their potential – and to unlock the potential of entrepreneurs to solve major challenges, like access to financial services, in emerging markets across the world.

Ross Baird is president of Village Capital, a global venture capital firm that finds, trains, and invests in entrepreneurs solving real-world problems.

Dave Kim is a Program Officer on the Financial Services for the Poor team at the Bill & Melinda Gates Foundation and leads the team’s product innovation strategy.

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