Enabling Environment
- Payment. Getting paid for products and services offered online is challenging for producers without access to traditional bank accounts or laptops. Online payment systems, such as PayPal or Alipay, are not available in many countries.
- Logistics. In developed countries, entrepreneurs that sell on platforms like eBay, Alibaba and Etsy can rely on large express delivery companies to deliver packages. In many developing countries, potential customers do not even have a mailing address. Thus, fully building out the postal system—or something to replace it—can help digital entrepreneurship. Innovative solutions involve delivery by bicycle and motorcycle to locations mapped by GPS and cellphones.
- Capital. Digital entrepreneurs access international markets faster than traditional ones, which implies that they can scale very quickly. However, in order to scale, entrepreneurs need working capital. While this constraint is not unique to digital traders, financial constraints are particularly acute for startups. Banking sectors have not developed financial products that cater to young firms that require rapid growth capital and lack collateral, including physical assets. Venture capital markets are only emerging in many developing countries, and angel networks are mostly nonexistent. Without access to capital, firms cannot fully leverage the opportunities that access to international markets has opened up to them.
- Information asymmetries. Investors need information. How can they find out the financial position of a small firm in a developing country? Or their track record? In the context of high-growth emerging economies, the risk-and-return profile of startups means that they are less attractive as an investment asset than alternative investment opportunities in mature economies, even if those only offer low growth rates.
