Orbit Ventures warns of the risks of Silicon Valley’s growth model in emerging markets

According to AgFunderNews, Orbit Ventures is betting on a different approach to investing in emerging markets, one that prioritizes sustainable growth, local knowledge and real commercial opportunities over the rapid expansion strategies often associated with Silicon Valley. William Bao Bean, managing general partner at the venture fund and accelerator, said artificial intelligence could have an even greater impact on poorer markets than on developed economies, but warned that the traditional venture capital model can create serious risks when capital suddenly disappears.

Orbit Ventures evolved from SOSV’s Chinaccelerator and MOX programs and focuses on startups across Asia, Africa, Latin America and the Middle East and North Africa (MENA). The firm works with more than 240 multinational companies and conglomerates, helping startups find customers, commercial partners and routes to market.

For Bao Bean, one of the biggest problems in the startup ecosystem is what he describes as “innovation theater”: corporate programs that generate events, pilots and publicity without leading to actual contracts or implementation.

“Startups have died because they engage with corporates who wanted the PR but didn’t actually want to sign contracts and implement [the startups’ tech],” Bao Bean told AgFunderNews.

Orbit Ventures seeks to address that gap by working with corporations to identify concrete business needs before connecting them with startups. The objective is to increase the chances that a pilot can become a commercial relationship.

The investment model is also designed around long-term support. Orbit invests $180,000 upfront and takes common stock, with an ownership target of between 5% and 9%, depending on the stage of the company.

The firm applies what Bao Bean describes as a process of “learn and localize,” adapting strategies that previously worked in China and India to other emerging markets rather than simply copying them.

Its portfolio covers areas including agriculture, infrastructure, transportation, logistics, healthcare, retail, distribution, commerce and financial services. The strategy is based on building connections across the entire value chain, from farmers and suppliers to retailers and consumers.

One example is Dastgyr, a platform that connects food producers in markets such as Africa, Latin America and Asia with buyers in the United Kingdom and European Union. Orbit has also invested in Atarraya, which develops high-tech shrimp farming systems designed to operate in desert environments, and companies that connect local farmers and dairies with consumers, restaurants and hotels.

According to Bao Bean, this interconnected ecosystem can reduce one of the largest expenses faced by startups: customer acquisition and sales. He estimates that more than 60% of venture capital funding goes toward customer acquisition, user acquisition, sales and marketing.

Artificial intelligence could further change the economics of these businesses. Bao Bean argues that emerging markets may benefit disproportionately because software has historically been too expensive for many businesses and consumers.

He cited a financial technology company that uses AI to help banks provide small loans to farmers. The entire process, from application and approval to disbursement and collection, is integrated through platforms such as WhatsApp and Facebook Messenger. According to Bao Bean, the cost to the bank for the full process is about $1.

“The AI is driving the product, but AI is not the product,” he explained.

For Orbit Ventures, another important factor is the founder’s connection to the market. Bao Bean said the firm prefers local founders with deep knowledge of the problems they are trying to solve, particularly in markets where companies face fragmented industries, regulatory barriers and other structural challenges.

The investor also rejects the idea that startups in emerging markets should blindly follow Silicon Valley’s growth-at-all-costs strategy.

“The Silicon Valley VC model does not work in emerging markets,” Bao Bean said.

He specifically criticized Blitzscaling, a strategy based on rapidly expanding while operating at a loss and relying on successive funding rounds to sustain growth. In emerging markets, he argues, the biggest problem is that capital can disappear unexpectedly.

A startup can therefore raise millions of dollars, build a large operation and expand rapidly, only to find itself unable to secure the next funding round when investors pull back.

Orbit Ventures instead focuses on companies with revenue and positive economics, even if they grow more slowly. The goal is to build businesses capable of surviving periods of market volatility and giving founders another opportunity to grow.

For Bao Bean, the founder remains the decisive factor. Data can help companies identify mistakes faster, but determination and urgency are essential when conditions become difficult.

“Founders fail, and hopefully with data they fail faster and get to success,” he said. “But if they’re not super passionate, if they don’t have that sense of urgency, when they fail, they tend to give up. There’s nothing that kills a company faster than a founder that gives up.”