Building Lean Startups at the Bottom of the Pyramid

The slums of Lagos, Nigeria, are a world away from the sunny campuses of Silicon Valley. But Lagos, not San Francisco, is where we went in 2009 when we decided to launch our startup. After years of economic development research, strategy consulting, and engagement with at-risk youth, we, Clara Chow and Lily Rubin, had gone from friends, colleagues, and fellow social enterprise nerds in Washington D.C., to excited (and apprehensive) founders of a youth-run photo studio in Lagos, Nigeria—one of the world’s fastest-growing megacities.

Our photo studio not only would develop headshots for aspiring “Nollywood” stars, it would give the street youth of Lagos—the infamous “Area Boys”—work experience, skills training, and, for top performers, access to microfinance, putting them on the path to becoming independent entrepreneurs and socially responsible community leaders. We raised over US $25,000, developed the business model and rotational training program, interviewed some 200 local youth to gather baseline data, and conducted extensive market research. We had a plan.

Of course, nothing went according to plan. Years later, on Clara’s first day in Steve Blank’s Lean Launchpad class at Stanford, she’d be reminded that no startup business plan survives its first contact with reality. The only way to find out what works is to get out of the building and test it with real customers. Fail fast and cheaply. And adapt (“pivot” in startup speak) until you hit upon a model that the market wants, and can scale.

This is the story of how we tested, failed, learned from our failure, and adapted the model for our youth organization over four years, 40 trips, and thousands of volunteer hours. What started as a quest to help a Nigerian activist bring microfinance to urban youth became a photo studio that provided on-the-job training and credit assessment for its youth employees. That evolved into a business boot camp for government vocational training graduates. And that became Generation Enterprise today: a global network of community business labs where aspiring youth entrepreneurs refine their business ideas through the same prototyping and testing process our organization went through itself.

In Nigeria we have screened over 1,000 youth, trained 300 young people, partnered with two state governments, and launched 19 businesses, 10 of which are in our growth portfolio. This year we’re piloting our business lab model in India with the support of the World Bank. We continue to make adjustments, closing in on a replicable method for launching youth-run businesses that grow beyond the micro level. What hasn’t changed, however, is our mission to integrate unemployed and underemployed young people into the formal economy and unleash the potential of a generation—a generation we call Generation Enterprise.

Needs Finding

It was 2004, and Clara was an undergraduate volunteering at a social enterprise program. There she met a young Nigerian with a big dream and a vague business plan. He had grown up hawking newspapers and candy on the streets of Lagos, a city notorious for its roving gangs of “Area Boys,” and wanted to start a microfinance bank for street youth. After all, microfinance was lifting millions of women out of poverty in Bangladesh and India. Was it also the key to getting youth off the streets of Lagos?

Microfinance involves making small loans to borrowers viewed as too risky for traditional financial services. Muhammad Yunus’s Grameen Bank and other microfinance institutions (MFIs) developed various ways to reduce the risks associated with lending to the poor, such as lending to groups within a community (where social pressure encourages repayment), and taking nontraditional collateral (with great sentimental, if not monetary, value). The World Bank estimates that some 160 million people in developing countries are currently served by MFIs.¹

Lagos is very different from rural Bangladesh, however. The megacity is a perfect storm of urbanization, informal sector growth, and youth unemployment. Over six thousand people flood into the city every day, and its population will swell to over 25 million by 2015. Seventy percent of...