> Posted by Paul Breloff and Nate Gonzalez, Managing Director and Investment Officer, Accion Venture Lab
The following post was originally published on the CGAP Blog.
If we asked you to name a successful startup, who would you say?
Chances are you’ll think of a company like Google, Facebook, or Twitter, all of which followed the classic ideal for a startup trajectory: start small (ideally a garage or dorm room), get big, go public, and make people rich along the way. Who can argue with that?
Or perhaps you think of Instagram, which launched in 2010, never made a dime in revenue, but still managed to sell itself to Facebook for just over $1 billion. Also not a bad path: start small, become a little less small, and then let someone else buy you and scale. (Of course, this also made some people rich.)
In both stories, an idea conceived and hatched by a startup leads directly to big growth and widespread usage, hopefully making users’ lives better in the process. But can a startup “fail” and yet “succeed” at the same time? We think so – but you need to think a bit differently about what success looks like.
Consider Jipange Kusave (JKS). In 2010, a startup called Mobile Ventures Kenya (MVK) launched JKS, a flexible savings product aimed at solving a persistent financial problem faced by poor people: how to build sizeable savings on irregular, unpredictable incomes? (For a more detailed account of JKS, see this case study by CGAP.) Leveraging the mobile banking platform, JKS gave each customer a nominal, interest-free loan, and held back a portion of the loan in a newly-established savings account. The use of the mobile channel enabled a quick yes/no decision about loan eligibility and immediate disbursement. Customers loved this point, especially when compared with the traditional microfinance institution, which can often take two weeks or more to approve and disburse loans. The customers could also pay back their loans as they saw fit – there were no regular installments. After repayment, they were automatically granted a larger loan (with part of the loan again diverted to the savings account).
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