Every industry has its jargon. In venture capital, there’s traction, scale, product market fit, etc. The problem with jargon in venture capital is it’s purposely elusive and nebulous.
The core of private equity markets is information arbitrage. There’s information asymmetry between capital and operators. As a result, different stakeholders create different definitions and everyone ends up talking past each other.
Why am I starting this conversation with jargon? It’s important we have a unified definition of what I mean by scale. Scale, from an operators and investment perspective, means I know what inputs I put in and I can predict my outputs/outcomes with reasonable certainty.
Emerging markets present unique challenges when it comes to scaling. They transcend business types and sectors. It makes scaling super challenging for emerging market companies and sometimes create zero-sum industry dynamics. This is why I’m launching a series on the 5 dangers of scaling in emerging markets and how to overcome them. The five dangers we’ll be diving into are:
- Customer distribution – Most of the time, market organization is one of the core challenges for companies. How do you organize your market in ways that are scalable and repeatable? Is repeatable important at this point?
- Customer education – While building/organizing a market, you might have to do more education to customers which might lead to higher acquisition costs. How do you teach customers but still keep your cac down?
- IC ramp up – how do you train people fast enough to execute on your behalf?
- Management / scaling operations – How do you create management expertise so your operations can scale with the market opportunity?
- Irrational Competition – How do you compete/navigate irrational competitors? what are irrational competitors?
Over the next couple of weeks – I’ll be diving deeper into these areas and exploring potential solutions.