Adaptation is commonly the determiner between survival and extinction within the animal kingdom, and in line with Alexandre Lazarow, the managing associate of Fluent Ventures, a world early-stage fund, the identical precept applies to startups.

“I believe innovation at present capabilities extra like a world provide chain. Concepts journey, however they require native adaptation to succeed,” he instructed TechCabal on a name. His funding thesis may be summed up as: product–market match could also be common, however monetisation and supply have to be tailor-made to native contexts.

Fluent Ventures is deploying $40 million by way of a fund, an incubator, and a structured co-investment car with restricted companions. Its cheques vary from $250,000 to $2 million throughout pre-seed to Sequence A levels with plans to again 22–25 startups in fintech, healthtech, and e-commerce with capital reserved for follow-on investments.

Lazarow developed his investing thesis in frontier markets after backing early neobanks like Chime and Neon within the U.S. and Brazil, seeing that whereas the enterprise mannequin revolved round offering trendy and clear banking in each market, the enterprise mannequin modified relying on buyer wants. 

The work concerned in writing a e book (Out-Innovate: How World Entrepreneurs from Delhi to Detroit Are Rewriting the Guidelines of Silicon Valley) additionally helped form this thesis. After interviewing Gojek founder, Nadiem Makarim, and studying how the Indonesian ride-hailing startup expanded into meals and drugs supply, Lazarow noticed firsthand how the corporate thrived by adapting its mannequin to native wants.

“He basically fused the Uber thought with native wants and mixed it with India’s logistics insights and the tremendous app strategy from China. That hybrid strategy ended up outperforming Uber’s authentic mannequin in his market,” Lazarow mentioned. “And now, should you have a look at Uber within the U.S., its largest development space is meals supply,  an thought arguably impressed by these worldwide diversifications.”

A few of Africa’s largest startup successes have come from adapting world fashions to native realities. Paystack raced to its $200 million acquisition by Stripe by tailoring Stripe’s infrastructure-first strategy to Nigeria’s fragmented funds panorama. Whereas Jumia has but to realize profitability, it turned Africa’s first unicorn by localising Amazon’s e-commerce mannequin for the continent’s distinctive logistical and client challenges.

And it’s not simply in Africa that localising world fashions has pushed success. In 2012, 83% of world startup ecosystem worth (the sum of startup valuations and exits) was concentrated largely within the U.S. By 2023, that share had dropped to 61%, reflecting a major decentralisation of startup exercise as extra founders construct for native wants in rising markets.

TechCabal spoke to Alexandre Lazarow to grasp his funding thesis, exit historical past, how he picks founders, and recommendation for different buyers.

This interview has been edited for size and readability.

As somebody actively investing in Africa, what sectors do you imagine are most in want of native innovation at present, and why?

As a agency, we spend money on three broad however foundational classes: monetary providers, commerce, and digital well being. That focus displays our conviction that these sectors type the bedrock of rising market economies. Monetary providers alone characterize about 20% of the African economic system. That’s the place we spend most of our time as a result of the necessity is huge, and the innovation potential is deep.

Inside these sectors, are there any particular enterprise fashions you’ve discovered particularly efficient in rising markets?

We’ve made two investments in Africa to this point, and I count on that quantity to develop considerably over time. One enterprise mannequin I’m actually enthusiastic about really comes from India — B2B marketplaces. In India, 4 of the ten largest unicorns are vertical B2B marketplaces. The core thought is to empower small patrons and sellers, giving them the instruments and benefits that usually solely massive companies take pleasure in. 

These platforms mix vertical software program (for issues like stock and order administration) with embedded monetary providers resembling credit score. The precept is identical: present small companies with infrastructure that helps them scale like a lot bigger enterprises.

I imagine that very same mannequin has much more potential in Africa. As an example, we’re early buyers in Matta, which I see because the African localisation of OffBusiness. We additionally invested in Sabi. 

These B2B platforms are vital as a result of they don’t simply supply digital entry; in addition they deal with structural limitations that small companies face on daily basis: poor entry to capital, fragmented logistics, and weak provide chains. By fixing these issues in a approach that’s tailor-made to the native context, they’re doing one thing very significant and really scalable.

One factor I’ve observed in Africa and plenty of different rising markets is that concept usually doesn’t line up with actuality. Have you ever come throughout a sector that appeared promising on paper however didn’t fairly scale the way in which you anticipated? What made it troublesome?

I’ve some scar tissue on this space, notably from the off-grid photo voltaic sector. I used to be genuinely obsessive about the promise of small-scale residence photo voltaic programs throughout rising markets, particularly in Africa.

Right here was the pitch: You had this huge hole in energy infrastructure. The centralised grid wasn’t dependable, wasn’t reasonably priced, and wasn’t reaching sufficient folks. In the meantime, applied sciences had been bettering: photo voltaic panels had been getting cheaper, cellular cash was enabling pay-as-you-go fashions, and there was a rising consciousness of the necessity for power resilience. On paper, it regarded like the right enterprise alternative.

We evaluated and invested in a number of firms within the house. The pitch decks had been compelling. The unit economics regarded workable. All of it appeared aligned. However when it got here time to scale, actuality hit arduous.

Affordability turned out to be a large barrier. The programs themselves, even the essential ones, had been nonetheless too costly for most of the goal customers. The equipment you possibly can add on, like followers, TVs, and fridges, had been usually unreliable or cost-prohibitive. And even when prospects may pay, the customer support and upkeep infrastructure had been fragile. It was arduous to maintain issues working in distant areas. It simply didn’t add as much as a pure venture-scale enterprise — not in that wave, anyway.

Are you saying it wasn’t the concept that was flawed, however perhaps the timing?

Precisely. I nonetheless suppose the perception behind decentralised photo voltaic is extremely highly effective — the thought of extra resilient, home-based power manufacturing makes much more sense at present. We’re seeing those self same rules resurface in different geographies. 

For instance, in Europe proper now, one of many fastest-growing firms within the power sector is Octopus Power. They’re targeted on sensible, decentralized programs — battery backups, sensible home equipment, and distributed technology. It’s not the identical as what was being in-built Africa, however the underlying perception is analogous.

Whereas off-grid photo voltaic didn’t take off the way in which we hoped the primary time, I wouldn’t rule out a resurgence. I believe we’re at a degree the place the ecosystem is lastly catching as much as the ambition. The instruments are stronger, and the urgency is larger.

Briefly, some concepts fail not as a result of they’re flawed, however as a result of they arrive earlier than the ecosystem is prepared. As buyers, we should be humble about timing. What didn’t work 5 years in the past may be precisely what takes off at present.

Let’s discuss concerning the folks constructing these firms. In your view, what sort of founder profile tends to achieve the markets you’re targeted on, notably in rising markets?

That’s a very vital and nuanced query. And whereas I can solely converse from my expertise, I’ll attempt to break it down. The founders I’ve backed usually share a couple of key traits, no matter geography. These traits aren’t unique, however they’ve persistently proven up within the individuals who’ve constructed enduring firms, particularly in robust, fragmented, rising markets.

Deep area experience. I search for founders who’ve “gritted their tooth” on an actual drawback. They’re not beginning an organization as a result of it’s fashionable or as a result of they need to be a founder; they’re doing it as a result of they’ve lived the issue and are obsessive about fixing it.

Usually, they’ve labored within the sector earlier than. They perceive the nuance. Possibly they had been operators in a legacy trade, or they noticed one thing damaged and knew how you can repair it. Regardless of the case, they’re not vacationers. They’re locals, not simply geographically, however in mindset.

One other factor I search for is a demonstrated sample of entrepreneurial behaviour. That doesn’t imply they should have been a CEO earlier than or had a giant exit. It means they’ve proven hustle. Possibly they began one thing in class. Possibly they constructed a product inside one other firm. Possibly they’ve simply proven resilience and creativity in arduous environments.

I’m on the lookout for indicators that they know what it takes to construct one thing from scratch and hold it alive. I need to know: Can they recruit? Can they ship the product? Can they promote?

The third is cultural agility and humility. This one is especially vital in rising markets the place buyer bases are various, infrastructure is uneven, and growth usually means crossing linguistic, regulatory, and financial boundaries.

The most effective founders are sponges: they hear obsessively to their customers, are humble sufficient to course-correct, and might lead multicultural groups. They construct organisations, not simply merchandise. They’re always studying and reanchoring.

This high quality additionally reveals up in how they scale. In smaller markets, say, Kenya or Senegal, you may’t simply win your property nation and cease there. It’s worthwhile to suppose regionally from day one. That calls for adaptability and a powerful sense of imaginative and prescient.

Lastly, I’d say storytelling issues. Not within the superficial, pitch-deck sense; I imply the power to rally folks round a giant, arduous imaginative and prescient. Good storytelling is important for recruiting, fundraising, onboarding prospects — every part.

Founders have to persuade sensible folks to stop their jobs and be a part of a dangerous mission. They should assist VCs see not simply what’s, however what could possibly be. That tender talent — articulating the journey — is a tough requirement.

There’s no excellent founder archetype. However the ones I’ve seen succeed usually mix technical and emotional intelligence, cussed optimism with strategic flexibility, and a relentless concentrate on each person wants and company-building fundamentals. In rising markets, the place volatility is the norm, these traits aren’t simply helpful — they’re important.

So, it’s not simply that native startups are competing with world firms — they’re reinterpreting the mannequin and successful.

Precisely. And we expect this pattern is accelerating. Let me provide you with a way of how a lot: once I first began investing in rising markets a decade in the past, the variety of cities globally that had produced a unicorn was 4. In the present day, it’s 156.

This explosion shouldn’t be random. What’s taking place is that ecosystems are maturing. Founders who labored on the first wave of unicorns are spinning out to construct new firms. These native “mafias” — just like the PayPal Mafia in Silicon Valley — are forming everywhere in the world. They usually’re backed not simply by overseas capital however by robust, homegrown VC ecosystems.

After I have a look at Africa, notably Nigeria, Kenya, Egypt, and South Africa, I see a area that’s precisely at this inflection level. You might have seasoned operators beginning their second or third firms. You might have expertise flowing in from native universities and the diaspora. You might have extra VC funds with Africa-specific information than ever earlier than. And the price to construct and launch a startup has dropped dramatically because of AI and higher infrastructure.

How does that influence your funding course of? Do you search for localised variations of already-proven fashions, or do you attempt to spot utterly new concepts?

It’s a combination. Let me provide you with two examples from Africa to make this actual. We’re early buyers in Matta, a B2B market, and in Sabi, which is fixing last-mile distribution and aggregation within the casual sector. Each firms are constructing fashions which have analogues elsewhere, however the way in which Matta and Sabi are going about it’s totally context-specific.

We begin with world macro insights — concepts we all know are confirmed and huge. Then we search for ache factors which can be extra intense in rising markets. And at last, we seek for founders who should not simply copying however innovating due to these native constraints. That’s the place the alpha is.

You talked about your LPs embrace operators from Nubank, Creditas, and Sabi. How precisely do these skilled founders assist your portfolio firms?

That’s been an enormous a part of how we function. It goes again to the launch of my e book, Out-Innovate. That venture took me throughout the globe, interviewing over 100 entrepreneurs constructing exterior Silicon Valley — unicorn founders, tech operators, and coverage leaders. After I launched Fluent, I reached again out to a lot of them to turn into LPs within the fund.

The response was overwhelming. And now, our neighborhood performs a significant position in 3 ways:

a)Sourcing: Lots of our greatest offers come from this community. These are founders and operators deeply embedded of their ecosystems. Once they refer an organization to us, it’s virtually at all times high-quality. For any startup founder seeking to get on our radar, getting a heat intro from somebody in that neighborhood is extremely efficient.

b) Diligence: Once we’re evaluating a startup, we don’t simply depend on spreadsheets or market sizing decks. We flip to our community and ask for insights which can be usually extra useful than any third-party analysis report.

c) Put up-Funding assist: That is the place we attempt to be most useful. We open doorways not simply to future buyers, however to potential prospects, mentors, and even staff. A founder constructing a fintech in Nigeria may be related with somebody who scaled the same product in Mexico or Indonesia. That form of cross-pollination is highly effective.

We even have over 20 VC funds as LPs: funds whose GPs are plugged into native geographies. They’ve been useful in co-investments, sharing notes on related companies, or simply serving to us suppose by way of regional nuances.

As an early-stage investor, what sorts of exits or secondary gross sales have you ever skilled? And what have you ever learnt about timing and managing liquidity from these offers?

That’s an amazing query — and one we take into consideration rather a lot at Fluent. One of many design rules of this fund is that we begin each funding with the exit in thoughts.

We ask ourselves: Is that this a market with an actual path to exit? Is there a historic precedent or structural situations that make a significant acquisition or IPO believable? Or much more tactically, is there house for secondaries that give our LPs interim liquidity?

That lens — the “exit-first” lens — informs how we consider firms, geographies, and enterprise fashions. We usually see three sorts of viable exit paths: IPOs (Preliminary Public Choices),  strategic acquisitions, and secondaries. 

We’re very open to early secondary gross sales — in truth, we expect they’re important in rising markets. First, they de-risk the cap desk. Founders and early staff can take some cash off the desk and hold constructing. Second, they create interim liquidity for buyers, particularly in geographies the place IPO timelines could also be lengthy. And third, they’re a sign of confidence. If present buyers are shopping for extra, or if exterior secondaries are taking place at a premium, that implies momentum.

We’ve already participated in a couple of of those. I received’t go into specifics as a result of some are confidential, however we’ve seen secondaries work effectively as each a return mechanism and a bridge to later-stage capital.

Within the firms the place you’ve seen exits or secondaries, did these alternatives come up organically, or did you design them?

It’s a little bit of each. In the very best instances, we’ve designed for it, which means we backed a workforce that was constructing in a class the place we may already see comparables and eventual acquirers. However we additionally stay opportunistic.

Generally an organization takes off, and out of the blue a late-stage investor is available in with a proposal for secondaries. If that helps everybody — staff, founders, seed buyers — and the phrases are wholesome, we are saying sure.

What do world buyers persistently get flawed about backing startups in Africa, or different rising markets?

You may’t do rising markets investing recreationally. It’s not one thing you may dabble in—doing one or two offers right here and there, whereas your essential focus is on 30 others in Silicon Valley. That simply doesn’t work. It’s a very totally different terrain. You may’t deal with rising markets like a vacationer.

The one option to be actually profitable in enterprise, particularly in markets like Africa, Southeast Asia, or Latin America, is to be obsessive about the ecosystem. It’s important to stay and breathe it. That degree of immersion can’t occur over Zoom.

A giant mistake I see world VCs make is pondering, “I’ve achieved effectively within the Valley, so I’ll be nice in Africa too.” That mindset results in poor judgment.

What would you advise U.S. or Europe-based early-stage buyers who need to get higher at understanding these markets?

For those who’re severe about rising markets investing, it’s worthwhile to decide to it. Which means investing in native relationships and making journeys usually. This could’t be Zoom-only. It’s worthwhile to go to the market. See the infrastructure, really feel the friction, discuss to customers. Sit with founders in Lagos or Nairobi, or Dakar. There’s no substitute for that form of immersion. 

Rent enterprise companions or scouts on the bottom. You want folks embedded within the ecosystem—ideally, former founders or seasoned operators—who can act as your eyes and ears, sense rising tendencies, and assist validate assumptions.

One factor we’ve achieved at Fluent is to carry founders from throughout rising markets into our LP base. These folks aren’t simply monetary backers—they’re energetic contributors. They assist us supply offers, consider firms, and open doorways for our portfolio. It creates a flywheel of belief and shared upside.

Investing in Africa—or any rising market—isn’t about simply catching the following unicorn. It’s about enjoying a task in constructing the entrepreneurial infrastructure itself. For those who can’t decide to that, you shouldn’t be doing it.

What are some investments you handed on that you simply now want you hadn’t? And what did you be taught from these misses?

I’ve a reasonably large anti-portfolio. Let me provide you with two examples from totally different sectors—every of which taught me one thing vital about my framework and the way I consider alternatives.

I’ve by no means invested in ride-hailing firms. Which means I handed on alternatives to again Gojek, Seize, and others at a number of levels as a result of I’ve at all times gravitated towards startups that emphasise robust unit economics, capital effectivity, and long-term sustainability over blitzscaling. 

These are the issues I worth in my funding thesis. So naturally, ride-hailing didn’t match. That house was hyper-competitive, capital-intensive, and closely depending on subsidising development early on. And to be honest, that strategy saved me numerous ache in lots of conditions.

But it surely additionally meant I missed out on monumental outcomes, particularly in Southeast Asia, the place Gojek and Seize created enduring category-defining platforms.

That taught me that even when a sector doesn’t suit your actual framework, some exceptions may be large enough to rethink your filters. I nonetheless stand by my reasoning, however I additionally now respect that scale and dominance, even when expensive early, can turn into defensible moats over time.

I additionally misinterpret the neobank wave in Europe—and I’ll personal that utterly. Again once I invested early in Chime and Neon, I used to be very sceptical of fashions like Revolut. As a result of on the time, there was no significant interchange income in Europe (not like the U.S., the place the Durbin Modification stored it excessive). Revolut and N26 relied closely on cross-selling monetary merchandise to generate income, and their unit economics, not less than early on, regarded weak to me. 

I made a name that Europe’s mannequin was too dangerous. However I used to be flawed. What I underestimated was the facility of product breadth and person engagement. 

The ride-hailing and European neobank misses had been very totally different, however they taught me the identical bigger lesson. Enterprise is about conviction and frameworks, nevertheless it’s additionally about flexibility. You may be proper for the flawed causes and flawed whereas nonetheless enjoying by your guidelines.

The purpose isn’t to remove all misses. That’s unimaginable. The purpose is to construct a constant, rigorous decision-making course of after which be taught from the place that framework falls quick.