Artificial intelligence is expected to democratize access to technology and be a boon for aspiring founders in emerging markets, but some investors disagree. “AI will change everything in emerging markets,” said Anton Osika, CEO and co-founder of Swedish startup Lovable. Lovable allows others to create apps and websites through prompts, no technical knowledge required. “Most of the world’s best ideas remain in the minds of people who can’t code. This is especially true in emerging markets, where many people have a deep understanding of local problems in areas like healthcare, logistics, and education, but don’t necessarily have the tools to build software solutions to address them,” Osika said. “AI will change the game and break down this barrier. Labable expects to see a new wave of founders building companies in these markets,” he added. Lovable said in July that it had reached $100 million in annual recurring revenue in just eight months, making it the world’s fastest-growing startup. The digital economy “has been limited to less than 1% of the world’s population, and now the other 99% will be able to participate in it,” Osika said in an interview on CNBC’s “Squawk Box Europe” earlier this month. He added that AI companies will grow 50x thanks to tools like Lovable. Osika said the company was last valued at $1.8 billion, but the Financial Times reported in August that the figure could now reach $4 billion. Loveable has 2.3 million active users in more than 200 countries. “Countries with the fastest growing Lovable users include Sri Lanka, the Netherlands, Taiwan, Tanzania, and Ecuador,” he added. It’s one of many startups looking to win in the vibe coding space as investors flood in. Anysphere, the company behind the popular generative coding tool Cursor, has raised $900 million from investors in a $9.9 billion Series C round. Meanwhile, OpenAI also announced the vibe coding feature of ChatGPT-5. Emerging markets need more infrastructure Building a company in less established markets can be difficult due to lack of capital, infrastructure, distribution costs, trust and compliance, investors told CNBC. As a result, appetite tends to decrease. That said, some VC firms have funds dedicated to emerging markets, where they can theoretically secure deals at lower valuations and with less competition due to the nature of younger technology ecosystems. In public markets, the MSCI Emerging Markets Index, which tracks large- and mid-cap stocks from 24 emerging economies, is up about 28.8% since the beginning of the year. “AI has reduced the implementation costs of building and shipping software,” said Emmett King, managing partner and co-founder of J12 Ventures. “What used to take years or millions can now be prototyped in weeks. Iteration cycles are getting shorter and the knowledge asymmetry that favored incumbents is disappearing.” In fact, Osika pointed to Brazilian edtech company Q Group, where two developers built a premium version of the platform in one month. “The premium version generated $3 million in the first 48 hours of launch,” he said. But AI doesn’t solve the structural challenges facing emerging markets, King says, meaning many friction points still exist, such as the availability of local funding and confidence that startups can secure profits. “This is not unique to emerging markets, but it’s definitely more pronounced,” he said. “We have yet to see further growth in capital flows into emerging markets, and there is no talk or indication that it is imminent,” King added. “It may still come, but that’s not what we’re seeing or hearing right now,” he said. A startup’s success may depend on infrastructure, such as a telephone pole in the ground, a server in the cloud, or a strong local network of investors and fellow founders who can help fund and guide the startup. According to King, this is why so many of the core elements of scaling a company rely on being in a recognized technology hub. “Given investors’ appetite to find AI winners quickly, they will naturally optimize their search and focus on established hubs,” he said. There’s no substitute for great talent For June Angelides, an investor who supports African founders through her angel syndicate, Revare Ventures, the quality of opportunity has actually declined. That may be due to “really talented people” choosing “safer options” such as working for big tech companies, he said, and “there just hasn’t been the flow of early-stage capital” to startups. While rumors of a bubble swirl in the broader tech ecosystem, Angelides, who also works as a venture partner at Samos Investments, doesn’t envision a future where investors flock to emerging markets for AI deals, creating booms and busts. Companies are leveraging AI to develop apps and technology more affordably and quickly, “but at the end of the day, we all still want to bet on really strong teams,” she said. “To have a top-notch company, you need in-house technical talent,” added Thomas Olszewski, partner at 6 Degrees Capital. The company is a seed-to-Series B focused company with €250 million ($291.5 million) under management, with up to 20% of its current funding dedicated to emerging markets. The company cut checks to companies operating in Africa, Latin America and Southeast Asia. For Olszewski, the problem is not with supporting emerging markets, but rather with technology. “The philosophy that venture capital invests more broadly is that companies develop something unique and defensible, and that competitive advantage allows them to scale faster and with better economics. Can you easily build with AI? That’s not the case,” he said. Angelides echoed King’s point, saying that for the continent to take advantage of AI, it needs additional capital to help ensure businesses and infrastructure can build and scale. That infrastructure could amount to something as simple as continuous internet access or adding more data centers, she added. Although Microsoft and Nvidia are investing in Africa, “the amount is still very small compared to what is being invested in other parts of the world,” Angelides said. Microsoft has had a presence in Africa for years, while Nvidia is partnering with pan-African company Cassava Technologies to build an AI factory on the continent. Data is also a key aspect of AI success, the investor added. Models are typically trained on data from countries in the Northern Hemisphere. This means that businesses based in the Southern Hemisphere may not get relevant results if they prompt a chatbot. “We have to think about more localized data collection and labeling, and all of that takes time, but I expect that within the next two to three years it will be commonplace for all startups to leverage some form of AI,” Angelides said. In fact, King added, “In other words, AI will democratize the ability to build, but not the ability to scale. There will be value for teams who connect models to local data and drive compliance and governance with discipline.”
