Sure, the word has a negative connotation, but being part of a mafia is generally good for technology and startups. In startup land, a “mafia” is a group of early employees from a previously successful tech company who spin out to start other independently successful companies. Not only do members go on to create new startups and all the wealth, disruption, and job creation that comes along with that endeavor, but many also go on to become capital providers to other entrepreneurs as VCs and angel investors. This contribution to startup ecosystems became famous thanks to the “PayPal Mafia” that formed in the early 2000s. Peter Thiel went on to create Palantir and also started Founders Fund. Max Levchin was an early investor in Yelp and went on to start Affirm. Reid Hoffman started LinkedIn and went on to be a VC partner at Greylock. Elon Musk is doing everything that Elon Musk does. You get the point, innovation and wealth creation go on to create more innovation and wealth creation.
In general, this is good for a startup ecosystem! A mafia member starting a new company typically has the experience to launch and scale, avoiding the potential mistakes and growing pains of being a first-time founder. They also already have relationships with investors and mentors and name recognition to quickly get funding. Also, as former operators, those who go into the investing side of the business can (and usually do!) provide mentorship and capital to the next batch of founders and have the insights to select which of those founders will build the next unicorn, thus creating new mafias.
When it comes to emerging markets, all of the above elements are necessary to help create a robust startup ecosystem: capital, support networks, a strong startup culture, and opportunities to grow local human capital. So, where are these emerging market mafias popping up?
The easiest ones to spot are in Asia. In India, the most notable example is Flipkart, one of the biggest e-commerce marketplaces in the country, whose founders, and current or ex-employees have invested in about 50 Indian startups and have gone on to create over 200 more. India’s Paytm has joined the club more recently, with the former executives launching 11 more startups. In southeast Asia, Grab, Gojek, NOC, and Sea Group alumni have created PatSnap, ShopBack, and Carousell.
In MENA, UAE-based Careem spun out a new group of founders and investors after Uber acquired the company in 2019. By the end of 2020, ex-Careem employees have started an additional 34 companies. Last week, Cairo and Dubai-based Swvl went public through a SPAC merger, creating potential new opportunities for the regional ecosystem. LATAM has seen success through Mexico’s Linio, whose alumni went on to start Kavak (Mexico’s first unicorn) and Flat (whose co-founder was on my podcast). In Chile, ClanDescuento founders went on to create Cornershop and other startups after Groupon acquired the company.
These examples certainly don’t cover every group of founders and tech employees who have further developed a startup ecosystem. What is essential, though, is to understand just how critical the success of just one or two startups can have on a local ecosystem. Exponential growth can occur after a significant exit leads to more wealth generation for early investors and employees of a startup in an emerging market, and I wonder where the next startup mafia will be born?