Is now the right time?

Back in June, I wrote about WhatsApp Pay. Facebook had just launched the service in Brazil after regulatory challenges in India. Since then, Brazil’s Central Bank suspended WhatsApp Pay in the country, and just this week Facebook announced that in India they are commencing their nationwide rollout. There is, however, one catch – while the National Payments Corporation of India (NPCI) has given Facebook the go-ahead to launch, they instructed the company to do so in “a graded manner” and stipulated that any third-party app can only process a maximum of 30% of the volume of transactions via India’s united payments interface (UPI).

Amidst Facebook’s challenges with monetizing WhatsApp (via WhatsApp Pay, in particular), I am reminded of the origins of WhatsApp – its staggering growth largely a function of timing. 

As the story goes, WhatsApp launched in early 2009, shortly after Apple launched the App Store, which allowed third-party developers to build apps for iPhone users. The app originally started as a platform to update and broadcast away messages and statuses to your contacts, and it launched with middling success. Then, in June 2009, Apple launched push notifications, which enabled third-party apps to “ping” users when they weren’t using an app. WhatsApp was then able to send a notification to users when their contacts updated their status – that behavior ultimately morphed into instant messaging. 

WhatsApp 2.0 was thereafter released with messaging and the rest, more or less, is history. 

There are, accordingly, two lenses through which we can look at startup timing. 

The first is through a market lens. There are four scenarios – 

  1. Small market, not growing
  2. Large market, growth in past
  3. Small market, too early
  4. Small market, growing quickly

#4 is the market we want to build in – and, in fact, is the market WhatsApp was built in – but a small but quickly growing market has select preconditions, as outlined by the venture firm NfX – 

  1. Enabling Technologies
  2. Economic Impetus
  3. Cultural Acceptance

WhatsApp, of course, would not have found the success and scale it has achieved without the proliferation of smartphones, nor without Apple’s launch of the iPhone SDK or the implementation of push notifications. 

In regards to economic impetus, the rise of WhatsApp was also largely international, where users previously did not have a comparably affordable method to messaging friends or family domestically (via SMS), or especially across borders. 

And from a cultural acceptance perspective, WhatsApp was a benefactor of and a contributor to our current era of constant and immediate communication, aided and abetted by the proliferation of the smartphone. 

When these preconditions are not met, we’re left in market #3 – small market and too early. And it raises questions – how long are we on the flat part of the curve, and as a startup, do we have enough runway to get to the upslope? 

Was an ecommerce startup like Konga too early in a market like Nigeria? We can recall instances like their suspension and subsequent reintroduction of Pay on Delivery as an indictment on both the maturity of the market and on delivery infrastructure. Though as I wrote about previously, Konga introducing Nigerian consumers to ecommerce undoubtedly makes it easier for all those to come thereafter.

In Africa, and perhaps emerging markets more broadly, we can also look at this through an infrastructure lens. Prior to payments companies like Paystack and Flutterwave, Nigeria was a small market that was too early for other fintech products and services. 

Paystack, having built the infrastructure, is now processing 5x more online payments now than what Nigeria is doing as a country when the company launched five years ago. 

So, too, can we view from a regulatory perspective. 

Take the Nigerian Payments Service Providers (PSP) license, for instance. The Central Bank of Nigeria initially issued its draft of regulatory measures in October 2018 – meanwhile, to date, the licensing and regulation have still yet to be rolled out in their entirety. 

While payments infrastructure and regulation are two obvious examples, the work for early-stage entrepreneurs becomes determining what market they are in, and whether or not the preconditions are met. 

What makes entrepreneurs entrepreneurial is that they know to control what they can control – state of the market and regulation being two things that they cannot – and they build accordingly. And it’s no surprise that some of the highest valued and most sought after companies are those laying the infrastructure. 

And as we see dividends in the form of new and successful startups being built on top of the rails, we can imagine the opportunities and potential for building in small but growing markets across the continent. 

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