✈️ On runways, part one
TL; DR – the tech startup’s “build for growth” runway has two important lessons for the world of international development. 1) Build not only to serve users today, but to grow who you are able to serve tomorrow. 2) Try non-obvious things, that might impact a lot more people.
In startup world, the runway is one of the most interesting – and fundamental – concepts out there. It’s a simple enough idea. Based on money in the bank, how long could you survive on your negative cash flow?
Runways give startups time to build. Often quickly, burning through cash, on the premise that what’s built will lead to growth and income in the future. A decent runway is anywhere between 18 months and 4 years, as this Quora thread tells us (some surprisingly big names in there). You build until you start to generate positive cash flow from customers, or until another investor comes in with more money to extend the runway.
Runways are core to the modern world of tech startups. Particularly (but not only) for software, where most of the cost comes at the start of the journey. Programming, ops, marketing, distribution – all are at their most expensive upfront, for any startup. With less marginal cost once it ships the core product.
This dynamic – high upfront investment and then near zero marginal cost – is what creates one of Silicon Valley’s defining tropes. The ‘hockey stick’ curve of exponential growth and profit once you’ve built something that sells. Cost is sunk in the ‘build’ phase, and then gotten back several times over.
And in the world of international development?
Well, early stage tech startups and aid projects have one thing in common. They both get funding from outside, as opposed to generating it directly from customers. In the case of startups, it’s investors. For charities and NGOs, it’s from donors and philanthropists. But that’s where the similarity ends.
In international development, there’s very rarely any take off, or any exponential growth. No hockey sticks to be seen.
Check it out for yourself. Here’s a graph showing the percentage of under-nourished people in Malawi (population: 19m).
Malawi has been awash with funding from donors (at times averaging 40% of GDP), to provide her people with life’s fundamentals: food, health, education, energy, and so on. And yet, over 17 years only a further 9.6% of Malawians have gotten the food they need. Even as the world’s ability to produce food has skyrocketed. Progress has been slow, plodding, incremental. Chipping away to create a gentle, linear slope.
And this is true across the piece. Over 28 years, the percentage of men who could read and write grew by a further 7.7%, again with no uptick. Over 25 years, the healthcare access and quality index has risen from 34.7 to just 47. Over 15 years, access to basic handwashing facilities has actually fallen by 9.8%¹.
Over these large time spans, surely foreign aid should – through trial and error – have gotten better at meeting people’s basic requirements? Or new tech should have made us more effective. So why these flat slopes? Why no change to the rate of change? Why no exponential growth?
That brings us back to the runway. Or rather, the fact that funding in the world of international development isn’t perceived as a runway at all. Instead, it’s a chunk of money to give what works to those who need it, as much as we can afford with the funding we have. Rather than investment into something that might take off, it’s investment to produce more of a known quantity. 100 schools. 10,000 wells. 50,000 community health workers. It’s noble work that saves lives and precisely for that reason it optimises for certainty.
This mindset has two consequences. One, it stops you taking riskier bets on things that might have a much bigger reach and impact. Two, it stops you thinking about how what’s built today can sustain itself in the future, with its own income rather than money from the outside.
Say I had a $50,000 donation. I could spend it to build a primary school. Or spend it to build a new edtech venture, or a training programme to turn parents into home-based teachers. Why wouldn’t I spend it on the school, knowing I’ll transform at least some people’s lives?
The school won’t ‘take off’ once it’s built. You need another $50,000 donation for the next school. If they’re built well, the edtech venture or training programme can keep going, from government or users’ income. And keep growing the number of users. They have a shot at Silicon Valley’s hockey stick curve.
Building things that might generate income, growth, and non-linear impact is risky. But, to be honest, the ‘safe’ options that command most international development spend are – by their aversion to some degree of risk – depriving millions of people the chance to live flourishing, healthy lives.
I’ve tried to put this into practice when working with teams on the EdTech Hub and Frontier Technologies Hub. Nudging teams to come up with a plan for growth that isn’t limited to scrambling for the next chunk of donor money. And nudging them to be experimental with non-obvious solutions.
In Pakistan, we’re working with an NGO to create open source education content for deaf children. Our plan is to offer all the content, for a small fee, to grassroots organisations around the world. We’ll help them translate it and make it appropriate to their audience. This makes sure the team keeps growing their impact, with income coming into the system to sustain it. And it transforms our initial spend into an investment into something that might take off and reach a lot more people.
In Tanzania, we worked with a British startup to test ‘smart’ water taps. Users pay for credit on electronic tags, which they then use to collect water from dispensers. The money helps build and maintain the wells, pipes and taps that keep the water flowing. Again, from spend into incrimental impact reliant on continual donation, to something that can grow on its own.
So far, I’ve argued that the tech startup’s “build for growth” runway has lessons for the world of international development.
In the next 10 or 20 years though, I think lessons might start flowing the other way. Why? The world of tech will shift to be not only about growth, but ethical growth.
What will the runway look like in this new world? That’s what I write about in part two.
¹ Meanwhile, Malawi’s population has nearly doubled since 2000. If it was no. of people on the Y-axis (rather than percentage of population), growth would be even flatter or even negative.
🎬 Thanks to Fraser Hamilton for looking at drafts of this post.
🤔 Got thoughts? Don’t keep them to yourself. Email me on asad@asadrahman.io. Let’s figure this out together.
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