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We Are Not Alone: Silicon Valley is Donor Driven Development Too

By Wayan Vota on October 14, 2015

silicon valley donor driven development

WeWork, the hot co-working space that features exposed brick, shiny desks, and free beer, has two locations in my office building. Both are beautiful and I only wish my offices looked the same.

However, as Nitasha Tiku points out in her amazing BuzzFeed News article WeWork Used These Documents To Convince Investors It’s Worth Billions, all is not so shiny when you look at WeWork’s financials. Essentially, WeWork has used almost-fanciful numbers to convince Silicon Valley investors to value it as a “decacorn” – a start-up valued at more than $10 billion.

Yet as I read the article, I couldn’t help but realize that the Silicon Valley froth around WeWork sounded eerily familiar. Like I’d read and written many of the points that Nitasha made about investor hubris. Then it hit me.

Silicon Valley is Donor Driven Development Too

While we all seem to think international development has skewed priories because donors pay NGOs to service constituents who have little to no say in donor decisions, that’s exactly how Silicon Valley operates. Just read-read this last sentence with these substitutions:

  • VC’s are Donors
  • Start-ups are NGOs
  • Customers are Constituents

It would sound something like this:

While we all seem to think Silicon Valley has skewed priories because VCs pay start-ups to service customers who have little to no say in start-up decisions, that’s exactly how international development operates

Now let’s break down each comparison, and see how closely the Silicon Valley models our own donor driven development woes.

VCs are Donors

One could argue that VC’s are not paying start-ups, but actually investing in them to seek a financial return. Then I would need to direct your attention to the venture capital investor reality that less than 1 in 10 VC investment pays off.

The majority of venture capital investments are in start-ups that fold, or if they ever do succeed, it’s at a fraction of the original value. That’s why its called “venture capital” and the SEC tried to protect mere mortals like us from getting fleeced by it through regulation. There once was a great website that chronicled start-up failure.

So in that sense, VCs are just like donors. They pay for a vision, a promise, an idea presented by a start-up in a pitch deck that’s more aspirational than realistic. I would argue that many (most?) of the proposals we submit to donors are just as aspirational.

And I’m not talking just about USAID proposals either. All those NGO websites with “donate now” buttons besides pretty pictures of smiling kids are selling the same dreams as a start-up pitch deck, just with better aesthetics to a more gullible audience.

Start-ups are NGOs

If you spend any time around start-up founders and staff, pretty much every conversation comes back around to either money (funding rounds, investor demands, and cash burn rates) or growth (user acquisition, click-through-rates, new market entry).

Start-ups are populated by young dreamers who want to change the world, and are willing to be paid peanuts, work long hours, and go to the extreme, all in the name of a potential financial windfall.

And in any small NGO, you’ll find founders and staff obsessed by money and growth, using terms like “impact investor” and “scale”, and just as emotionally committed to their organization’s mission to change the world for a potential societal (and bragging-rights) windfall.

Customers are Constituents

But start-ups have customers, you say. Right, they do. Many of which use their services for free, and therefore are the product (data) just as much as NGO constituents are product too (pictures). Start-ups also change their product, or “pivot”, just as often and capriciously as NGOs, abandoning customers like we abandon communities, when funding models shift or donor priorities change.

I would argue that NGO constituents actually have more power over NGOs than customers have over start-ups. Just ask any city that’s been run over by Uber, or any user whose data was hacked, or pretty much any Facebook user. At least constituents have local leaders (official or otherwise) that can and do push back on NGO activities.

Silicon Valley is Development

The reality is that start-ups care more about looking cool to VCs than pleasing customers because they make the most of their money off VCs, just as NGOs care more about donor demands than constituent concerns because they make most of their money of donors.

Let’s go back to WeWork to see this in action. Here is a great passage from the original article:

There’s a formula to the narrative Gurley and the rest of his industry reveres. Your destruction target should be framed as a stodgy industry just aching to be upended by increased efficiency. Your company should appeal to coveted customers, such as young people and/or citizens of the developing world.

It should swear that it can scale on software alone (that’s why Uber insists it’s not in the transportation businesses — even as it develops driverless cars). And your narrative should impel would-be investors to look away from short-term profitability and instead gaze upon the mammoth size of the potential market (often one of the more cringeworthy slides in most pitch decks.)

Now let us rewrite it as an international development article and you’ll see just how close the two ecosystems really are:

There’s a formula to the narrative Kiva and the rest of the microfinance industry reveres. Your destruction target should be framed as a stodgy industry just aching to be upended by increased efficiency. Your company should appeal to coveted customers, such as young people and/or citizens of the developing world.

It should swear that it can scale on software alone (that’s why Kiva insists it’s not in the revolving credit or banking businesses – even as it develops consumer loans). And your narrative should impel would-be donors to look away from short-term profitability and instead gaze upon the mammoth size of the potential impact (often one of the more cringeworthy page in most proposals and websites.)

So do you agree? Or am I crazy? Tell me in the post comments!

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Written by
Wayan Vota co-founded ICTworks. He also co-founded Technology Salon, MERL Tech, ICTforAg, ICT4Djobs, ICT4Drinks, JadedAid, Kurante, OLPC News and a few other things. Opinions expressed here are his own and do not reflect the position of his employer, any of its entities, or any ICTWorks sponsor.
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11 Comments to “We Are Not Alone: Silicon Valley is Donor Driven Development Too”

  1. Laurie says:

    Development,is based on a capitalist model, maximizing economic and political gains for bilateral donors. So both start ups and development were generated by the same parent, Foundations which are not responsible to oversight are also children of and promulgators of capitalism.

  2. John says:

    The WeWork article was certainly eye-opening in terms of the BS that VCs will accept in their fear of missing out fever. However, as cofounder of a startup that is also an NGO, I don’t really see the similarities to development. Development is much more complex than the Silicon Valley investment model can accommodate, which tends to focus on a simple, easily replicable software-only market vertical. As evidence, look at the lame attempts by the tech community to move into social impact. YCombinator’s non-profit arm has so far funded:
    -Pay for a poor person’s surgery over the internet (Watsi)
    -Pay someone’s water bill in Detroit over the internet
    -Buy somebody a house in Haiti over the internet (New Story)

    Seeing a pattern here? At least Give Directly makes the model explicit and cuts out the middleman.

  3. Aaron says:

    Wayan – thanks for taking time write out this thought. Like a “projected market” or “projected impact” slide, it feels cringeworthy.

    I say that not in reference to the writing or analysis, but it’s funny sitting at a “development desk” and thinking about whether or not I’m involved in a VC model. And given that I’m writing this from one of the major international banks, there’s an added layer of interaction between donor influence, country negotiation, and client service delivery (at least we call them clients?)

    I think some of parallels you draw are accurate – your typical public health BCC project has a “destruction target” – poor use of soap when washing hands. Your typical ag-tech project has an issue with “little to no say in start up decision” – is rural Zambia really the place for a well-governed software solution?

    These conceptual questions are fun to toy with, but I’d like to share a couple notes that still keep the look and feel of development away from start ups.

    – We don’t turn profit. Investment by donors is for delivery of services and outcomes, not money. Is there an ROI on a project? Heck yes. But I don’t quite buy that a desire for liquidity for VCs, and for women’s empowerment for NGOs, makes for a similar process overall.

    – We don’t have to disrupt. A lot of the innovation-is-magical feeling comes out of start up tech spaces, and tends to link the “i-word” with new software that shoves some other paradigm out the window (getting around town, outsourcing laundry, finding music). An NGO can and should invest in institutional memory that *DOESN’T* think it has the magic bullet. Our services (*ideally*) adapt as a result of relationship with clients, and often we have to be reactive to floods, droughts, famines, civil wars, economic disasters, etc. That’s about as far away from disruptive as you can get.

    And… to end with my own thought provoking bit
    – Tech startups (ok, and Apple/MS/Intel) screw over NGOs. Zoom out to the global picture for a moment, and picture technology generation and adoption within and across countries, picture capital flows in and out of regions and the impact that has on growth and also wealth inequalities, picture industrial evolution in those countries that we will never term “developed” because no one has a legitimate definition for it. These – technology, wealth, development – are all pretty handily linked. For tech firms especially, in their very basic human fervor to produce SOMETHING that changes the world and capitalizes on the next big thing, who’s left to try and keep a place in the world for the wild percentage of the world’s people still pounding millet with large sticks? Answer: NGOs. And I suppose Kiva.

  4. Nicholas Demeter says:

    Crazy? No, but what does it mean if you are correct? Are there lessons we can extrapolate from the Silicon Valley model? Are they learning things faster, experiencing things and learning/pivoting better? Do they service their customers better than we do our beneficiaries? Do they learn from their mistakes faster than we do? Likely so, but how? What are some examples? Questions in need of a doctoral thesis perhaps?

  5. Tucker says:

    And then there is the corollary:
    – Donors are VCs
    – NGOs are Startups

    I’d argue that the later category has started to some extent: most NGO now attempt to be “agile” with some sort of MVP/lean language thrown around. Aaron’s points above on the downsides are worth noting, but I have always wondered, shouldn’t donors be more like VCs? Not in every way certainly, but are there VC methodologies, approaches, and services that are offered to startups that donors should be offering to their grantees? What do others think?

    • Wayan Vota says:

      I do think donors should embrace rick and failure like VCs do, and stop pretending everything works every time. However, I got into development, and pour my heart into it, because I love the social outcomes. VCs don’t care about people, only profit.

    • Aaron says:

      Tucker – what are some of the approaches you have in mind that could be offered? When you say “offer” in particular, are you thinking there should be some more supportive type of relationship between donor and NGO/contractor?

      And to get a little into the nitty-gritty – as long as donor RFP development –> NGO proposal review –> donor funding is the methodology, there’s ultimately something of a one-way relationship that gets this whole ball rolling. I’ve not been involved in a bid yet (oh, just waiting for the day), but would it be useful to have a donor and an NGO develop a project together? I mean, right now I think that’s illegal.

      @Wayan – yes to embracing failure, which is ideally fast, small, and teachable.