Navigating Frontier Markets: A Summer with Sturgeon Capital

Simmi Das

This summer, I had the incredible opportunity to immerse myself in the dynamic world of frontier markets, working alongside Sturgeon Capital to analyse startups in regions like Pakistan, Bangladesh, and Central Asia. 

The experience was nothing short of eye-opening, as I delved into the unique challenges these markets face, particularly in terms of access to capital and the emphasis on operational efficiency from day one.

Frontier markets are known for their untapped potential and rapid growth, but they also come with their own set of hurdles. The scarcity of capital poses a significant challenge for startups, making strategic decision-making crucial for survival and success. Sturgeon Capital's focus on these markets allowed me to witness first-hand how businesses navigate these challenges, adapting their approaches to thrive in resource-constrained environments. I also saw new business models leapfrogging the knowledge gaps between technology access. 

My role extended beyond the frontier markets as I delved into mature markets like India, dissecting three key sectors: fintech, marketplace, and SaaS. The goal was to uncover valuable insights and lessons that could be applied to Sturgeon's target markets in Central and South Asia.

In my analysis I covered 52 companies across India, Indonesia, Brazil, and Mexico, providing a comprehensive overview of the trends and developments that propelled these startups to the coveted $100 million milestones. We also mapped these learnings and explored business models that could be replicated into impact first businesses.  

A few general trends revealed fascinating insights:

  • The top quartile achieved this milestone in an average of four years, while the bottom quartile took nine and a half years, emphasising the varied trajectories of success.
  • The average year-over-year growth across sectors to reach $100 million ranged from 30-40%, showcasing the resilience and adaptability of these businesses.

One of the standout findings was the varying capital efficiency across different business models. SaaS emerged as the most capital-efficient, requiring approximately $130 million to reach the $100 million mark. Following closely were marketplaces at $272 million and fintech at $423 million, though the latter involved significant debt capital. 

The analysis revealed a nuanced landscape, with no single business model claiming a clear advantage. We also noticed that impact first startups such as financial inclusion apps and edtechs increasing educational access took a much shorter four years to scale to 100 million.

The summer spent with Sturgeon Capital was a journey of discovery and learning. 

The analysis not only highlighted the diverse paths to success in mature markets but also underscored the importance of adaptability and strategic decision-making in frontier markets. As Sturgeon continues its mission to navigate these challenging yet promising territories, the lessons gleaned from mature markets serve as a valuable guide.

In the ever-evolving landscape of frontier markets, the summer spent with Sturgeon Capital provided a unique perspective on the intricacies of startup ecosystems. By bridging the insights from mature markets with the challenges of frontier markets, we are not only uncovering trends but also paving the way for innovative solutions that could redefine the future of entrepreneurship in Central and South Asia.

A huge thank you to Sturgeon Capital for having me as part of the team. Last but not least,  I wanted to especially thank The Hoffman Institute for supporting me during my internship and providing me with the opportunity.

This internship experience was supported by the INSEAD Hoffmann Institute Impact Internship Stipend and gifts from alumni.