“The important thing is not to stop questioning.” 1
Let’s go through a series of Essential BIG Questions together so we can collectively understand the inner workings of startups who build for the diaspora.
🌱 Essential BIG Question: How are diaspora entrepreneurs contributing to the entrepreneurial ecosystem?
According to the Migration Policy Institute, “Diaspora entrepreneurs are uniquely positioned to recognise opportunities in their countries of origin, to exploit such opportunities as “first movers,” and to contribute to job creation and economic growth. But many developing countries have had only limited success in attracting diaspora direct investors and entrepreneurs to their countries of origin or ancestry.”
What if the entrepreneur is at home, uniquely positioned to recognise the opportunities to meet the wants of the diaspora and satisfy the needs of local entrepreneurs ?
Research surrounding the diaspora tends to fall into one of the following categories:
⚫️ Engaging the diaspora to invest at home
⚫️ Mobilising diaspora entrepreneurship for development
⚫️ Unlocking the potential of the diaspora to invest at home
In recent years numerous governments have failed (with the exception of Israel) at attempting to engage, mobilise and unlock their diaspora. It is worth mentioning that remittances are not investments, as these are monies sent to kith and kin for personal use. Alas, some emerging market economies are remittance reliant.
👇Have a Glance 👇
Source: Visual Capitalist
Note the outflows, with the top four countries being the USA, Saudi Arabia, Switzerland and Germany. The German government seems to be taking action on this. They have been very actively working with diaspora communities to assist them with investing at home. Have a look at their remittance platform which aims to support entrepreneurs based in Africa.
👇Have a Watch 👇
Source: WIDU Africa Youtube
The German Investment Corporation (DEG) portfolio currently encompasses the key areas, which are all in emerging markets: Latin America, Asia and Africa. Africa specifically was allocated its own €1 billion fund for boosting private investments. The fund facilitates German business entry into African markets. The fund has three pillars: Africa Connect, Africa Grow and the Business Network Africa. Below is a snapshot of the DEG portfolio as of 2019.
👇Have a Glance 👇
Source: KFW Deg
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What about the entrepreneurs?
Startups like Brands Of are filling the gap(s) where many governments have been unsuccessful. Moreover, they are putting a twist on the concept of “diaspora” entrepreneur.
🌱 Essential BIG Question: What problem is Brands Of solving for the diaspora?
Alan told me during our conversation that it all began when both he and his brother left home to study abroad. He left for Argentina and his brother for Boston. As is the case when sons and daughters of the soil migrate they long for home. This is when relatives step in by sending packages to make them feel connected. Upon returning home, Alan and his brother came to a few conclusions:
Defining the Problem
⚫️ There are more Puerto Ricans living outside of the island than on the island i
⚫️ Puerto Rican Mums frequently send care packages to their children abroad
⚫️ The Puerto Rican diaspora has significant purchasing power
⚫️Puerto Ricans feel nostalgia for home, there is an unmet want
The idea was born, so it began but then it changed. The brothers entered Parallel 18 #workhardplaytropical. They met a mentor, Ken Kay who told them, “A company that caters to 6 million people is not fun, so choose something else.” He continued, “You have 60 million Hispanics in the USA, why not focus on that?” The current number is 60 million but the forecasts are telling 111 million by 2060.
👇Have a glance 👇
Back to the point….
The Inflection Point
All entrepreneurs experience the challenge of developing a product. Enter the course correction and the opportunity to take on a bigger risk: moving from 6 million to 60 million consumers.
🌱 Essential BIG Question: How will this business create value for this expanding market?
Brands of has capitalised on many opportunities along the way. They have developed a clear value flow and an ecosystem to support the companies selling on the platform. Below are the current revenue streams for the business.
⚫️ Business Intelligence
⚫️ Transaction Fees
⚫️ Fulfillment Centre
Expanding Beyond Puerto Rico
Alan told me Brands of will continue to expand into more markets. The company is currently operating in Nicaragua, Dominican Republic, Mexico and Guatemala. He told me Latinos appreciate experience, which is the path for the company’s success. The focus will be to continue growing the customer base by creating a sense of home. Alan spoke about his company in a recent Based interview. Based was Founded by this week’s podcast guest Gustavo Diaz Skoff. I look forward to introducing you to him this week. In the meantime….
👇Have a Watch 👇
🌱 Essential BIG Question: How will e-commerce entrepreneurs adapt to the evolving landscape?
The Evolution of Ecommerce
The pandemic economy has notably changed shopping habits. Not only are more people shopping online but their priorities in spending has shifted. According to JP Morgan Research spending has increased across all sectors globally.
Source: Visual Capitalist
Where I live in China video ecommerce is a major component of the shopping experience. According to a16z Social Strikes Back, “Taobao, China’s largest ecommerce platform, 42 percent of product pages already include short videos and live streaming is growing quickly. From January to August 2018, the company generated more than $15 billion in sales through livestreams, up nearly 400 percent over the year before.”
One [insert me] can easily spend hours in their Taaobao or JD app parsing through countless videos. It is quite fun but not so good on the pocket!
Community Group buying is another model which is quite popular in China. Lilian Li in her popular Chinese Characteristics Newsletter describes it as, “The hottest and least understood e-commerce model.” It is a model which leverages WeChat to enable group purchases with the help of an assigned community leader.
Entrepreneurship and migration are at the top of government agendas across the globe. The work of Brands Of and other similar startups are an important factor in the equation of economic development. It would be impossible to achieve the goals of engaging, mobilising and unlocking the diaspora without the labour of the “diaspora” entrepreneur. The biggest challenge for the diaspora community revolves around trust. When one hears diaspora they often think of those who have left. Their obligation is to send “home.” In this instance the diaspora entrepreneur has never left. He or she is at home with an obligation to send “away.” This new narrative enables home in a way that is not often explored. It also circumvents the trust issue.
I remember Alan and I briefly touched upon the social contract which exists between the diaspora and their home country. Social glue presents itself in many forms: food, music, customs and the like. In this world of copycats and declining trust, Brands Of is providing social glue to diaspora communities who long for home in a way that cannot be fulfilled by simply sending money. The best social glue is those that don’t feel like an obligation. Everyone has signed up willingly. This is the workings of the new diaspora entrepreneur. It is how Alan Taveras-Sepulveda will create the biggest catalogue of authentic LATAM brands to cater to the US Hispanic community.
Alan and I covered quite a bit in our conversation:
- Get to Know Alan
- Learn the Story Behind Brands Of
- Expanding into Other Markets
- Defining the 60M Latin American Diaspora in the USA
- Moving Beyond Remittances to Support “Home”
- Diaspora Investment as a Social Contract
- Understanding the Revenue Model
- Supporting Small Brands whilst Winning Big Brands
- A Discussion Around Government Structure
- The Future of Brands Of: Innovation & Cultural Marketplace
- Lessons Learned
- Be Comfortable with Accessing Capital
- The Importance of Patience