Alexander Graham Bell would be astonished at the power of today’s smart phones. Yes, the app that makes it possible to find a Starbucks along an unfamiliar highway can feel like a miracle, but the true revolutionary power of the telephone is felt most in developing countries. In Kenya, for example, the mobile phone has, to some extent, stabilized the economy for many citizens and transformed quality of life.
Nearly all Kenyan households own at least one mobile phone—not state-of-the-art smart phones, but phones “smart” enough to accommodate at least one M-Pesa account. Available to any customer of Safaricom, Kenya’s mobile network leader, M-Pesa is a money transfer service that allows a daughter at one corner of the country to send money safely and securely to her mother in a village seven hours away. Previously, she would have entrusted an envelope of cash to a bus driver heading to her mother’s village (at considerable risk) or relied on a money transfer that took days—and a daunting amount of red tape—to process.
Of course, to withdraw funds through an M-Pesa account you must have access to an agent who can disperse the cash. Happily, in response to the popularity of M-Pesa, the network across Kenya has mushroomed to 150,000 agents. Working with Innovations for Poverty Action, Associate Professor of Applied Economics Tavneet Suri, a native Kenyan, and her colleague William Jack have been tracking incomes in regions where new agents have opened for business. They compared the financial health of those regions with that of regions where agents are not as accessible.
When the International Olympic Committee settled on Vancouver for the 2010 games, Bruce Dewar, MOT ’92, wanted to make sure the region could survive it. Host cities have suffered devastating economic fallout, and Dewar was determined that the Vancouver Games would give back to the community as much as it reaped.
As CEO of 2010 Legacies Now, he developed and supported projects to help British Columbia leverage the games to strengthen local communities—an effort that the International Olympic Committee has lauded as best practice. Today, seven years after the event, Dewar is still tapping the impact of the Games. In 2011 he launched a venture philanthropy organization called LIFT Philanthropy Partners that grew out of the new enterprise climate generated by the Olympic Games.
LIFT invests in building the capacity, sustainability, and impact of charities, nonprofits, and social enterprises working to remove barriers to health, education, and employment for vulnerable Canadians. Dewar, who is president and CEO, says that LIFT is improving the fabric of society. “We’re building self-sufficiency. We’re building confidence. We’re building support networks.”
Local governments across Africa should make every effort to promote entrepreneurship, says Flavian Marwa, SF ’10, but they shouldn’t enter the risky business of picking and backing winners. Founder of Sebelda Global Development Advisors and a consultant for the World Bank Group’s Africa region, Marwa is responsible for developing sustainable models of technology-based startup incubators with a focus on Africa.
“When governments provide seed money,” he says, “new enterprises tend to rely on it rather than learn to compete in the real marketplace. They lose their incentive to make it work when they know they can get capital infusions from the government.” Marwa believes that governments can best promote a healthy enterprise culture by partnering with industry to create mentorship programs. “Governments need to facilitate connections between young entrepreneurs and seasoned business leaders who can help them anticipate and navigate thorny patches,” he says.
Marwa also stresses the importance of promoting a healthy lending climate. He notes that government investment is critical, but not straight-out subsidies. “It costs investors a relatively steep sum of money to write a loan, and that discourages them from making the small-scale loans that would be appropriate to help a startup.” He believes that governments can offset loan origination costs with incentive programs—and similarly provide economic perks in the form of tax breaks or subsidies to motivate established businesses to invest in new enterprises.
How does an isolated nation like New Zealand become a major player in the international marketplace? The short answer is that they know how to weave. Lynne Dovey, SF ’02, who has spent the last four decades working for the New Zealand government in a range of policy roles, notes that the nation’s remoteness has inspired Kiwi entrepreneurs to embrace new ideas from around the world through trade relationships, scientific collaborations, and commercial partnerships.
But the country has a prodigious store of indigenous wisdom, Dovey says, and that knowledge is a vital part of the mix. Dovey says that the New Zealand government promotes a culture of entrepreneurship that leverages proprietary knowledge in areas that have become the nation’s province like biosecurity, healthcare, earthquake science, and renewable energy. Into that approach it integrates a healthy dose of ancient, homegrown Māori wisdom, the body of knowledge first brought to New Zealand by the Polynesian ancestors of present-day Māori. Woven together, these components have made for a thriving enterprise climate.
The World Bank categorizes one in five Indian citizens as poor. But the country is making progress. In 2015, 170 million people (12.4 per cent) lived in poverty, down from 29.8 per cent in 2009, and Indian Prime Minister Narendra Modi, who was born into poverty, has made economic inequality a priority of his administration. Stand-Up India is one initiative Modi is using to correct the economic imbalance. The program provides bank loans to budding entrepreneurs from the lowest economic strata. Student Start-Up, a spin-off program, aims to create 100,000 technology-based student startups and a million employment opportunities within ten years.
“To tackle jobless growth, we must comprehend multifaceted issues, craft viable solutions, and extract answerable questions from the clutter of public needs,” says Sanjay Inamdar, SF ’05, chairman of Student Start-Up. “This requires multiple tools, one of which is energizing entrepreneurship at the university level. Governments can’t provide jobs to everyone. People have to provide jobs to other people. We’re trying to grow a whole generation of self-starters who create jobs for themselves and for others.” The initiative, Inamdar adds, will create innovation laboratories within universities and groom students to take up entrepreneurial careers and launch new enterprises that generate jobs and societal solutions.
“Work hard and keep your head down—that’s Chile’s unofficial motto,” says Rocio Fonseca, SF ’14, executive director of Start-Up Chile. “The goal of the average Chilean is to get a job working for a corporation.” Fonseca adds that small and medium-sized businesses in Chile are not innovation driven. “They tend to err on the side of playing it safe—and that complacency curbs growth and evolution. Chile is not an entrepreneurial culture.”
In 2010, the Chilean government launched the ambitious enterprise accelerator Start-Up Chile to help it turn that national attitude around. The program helps early-stage, high-potential entrepreneurs bootstrap their startups using Chile as a platform to go global. With an annual portfolio of 200-250 companies, Start-Up Chile has fast become the best business accelerator program in Latin America and is counted among the top five worldwide. It’s also the cornerstone of Chile’s national economic development strategy.
Start-Up Chile is actually a collection of three programs: a pre-acceleration program for early-stage enterprises, a seed program for startups with a functioning product and early validation, and a follow-on fund for top performing startups looking to scale up in Latin American and globally. With robust training programs, workshops, peer-to-peer mentoring, and a busy calendar of networking events, Fonseca fosters a fertile environment that connects Chilean innovators with early-stage, high potential entrepreneurs around the world.
We live in a world of matchmakers. Airbnb matches people needing a room to people with an extra to rent. Lyft matches people needing a ride to people with a vehicle and an empty seat. eHarmony matches people looking for love with other people looking for love. The bottom line is, quite simply, supply and demand…with a twist. Multisided platforms are about matching one set of customers with another set of customers. And truth be told, bringing two customer groups together does not always result in a match made in heaven.
In their book Matchmakers: The New Economics of Multisided Platforms, MIT Sloan Dean Emeritus Richard Schmalensee and coauthor David S. Evans, explain how successful matchmakers excel and how entrepreneurs in this realm can improve their chances of survival. Schmalensee and Evans were among the first economists to analyze this marketplace and have consulted for some of the most storied platform businesses in the world.
Rich with stories from phenomenal winners and ignominious losers, their much-talked-about book guides the reader through this complex area of enterprise.
Return on investment. It’s not just an economic measure. Ray Leach, SF ’02, CEO of JumpStart in Cleveland, Ohio, believes that social ROI is every bit as important—and as impactful as economic ROI in improving the quality of life of a region. A national thought leader at the intersections of public, private, and philanthropic partnerships, Leach strives to accelerate job creation and increase economic outcomes in neighborhoods, regions, and countries. Co-founder of four tech startups, he was also a founding member of the U.S. Commerce Department’s National Advisory Council on Innovation and Entrepreneurship (NACIE).
Leach founded JumpStart to work in tandem with government efforts to boost quality of life in Northeast Ohio through entrepreneurship. His diverse team of investors, marketing professionals, mentors, and advisors offers expertise to the founders of new or growing startups. CoverMyMeds, one of JumpStart’s portfolio companies, was just acquired for $1B+. With JumpStart’s nurturing, the company grew from three people to more than 500 in eight years.
Leach believes that to promote entrepreneurship, governments and nonprofits like JumpStart must first create an environment in which entrepreneurial ventures can thrive. JumpStart provides mentorship, education, and introductions to investors—but Leach says that to be truly effective, he and his team needed to get creative. “We have begun to focus on a broad variety of problems that prevent the community from thriving. We realized, for example, that a lot of startups and established companies need employees, but those companies often are located in industrial parks in the suburbs. The unskilled labor they would like to hire resides in urban centers. We need to find out how to bring the workers and the jobs together. In other words, we’re not just looking at job creation, but reducing unemployment.”
Alan Mulally, SF ’82, the legendary turnaround-artist who resuscitated Ford Motor Company, has always stayed focused on what’s next. An early proponent of 3D printing, he said in an earlier SF Leadership Blog post, “Metal is in the near future. With the level of accuracy that is possible through this process, we are seeing a sudden and dramatic improvement in the quality and manufacturability of parts. It’s both economical and efficient because spare parts don’t have to be warehoused. Almost any part can be produced on demand—and its file can live in the cloud. Three-dimensional printing will revolutionize the manufacturing world.”
The company that arguably is creating the noisiest buzz in the 3D space is Burlington, Massachusetts-based Desktop Metal—one of BostInno’s “17 Boston tech companies to watch in 2017.” CEO Ric Fulop, SF ’06, launched the startup in October of 2015 to bring metal 3D printing to design and manufacturing companies across the globe. Fulop and his team have raised $97 million in equity funding, including a $45 million round of funding led by Google, BMW, and Lowe’s. Previous investors include NEA, Kleiner Perkins Caufield & Byers, Lux Capital, GE Ventures, Saudi Aramco, and 3D printing leader Stratasys. Desktop Metal is preparing for a product launch in late 2017.
Scott Stern’s goal is to improve the global economy—one local economy at a time. The David Sarnoff Professor of Management of Technology and cofounder and director of the Innovation Policy Working Group at the National Bureau of Economic Research is working to strengthen regional economies around the world through entrepreneurship.
Stern makes a distinction in the kind of entrepreneurship he’s trying to promote—the innovation-fueled kind. Innovation-driven entrepreneurship (IDEs) involves the development of global enterprises that are commercializing technical or societal innovations with a clear competitive advantage and high growth potential. Not all new enterprises can be categorized as IDE—an individual launching a chain of dry-cleaning shops, for example, would be an entrepreneur of a small-medium enterprise (SME), not of an IDE.
Stern’s efforts are part of the MIT Regional Entrepreneurship Accelerator Program (REAP). During two-year engagements with REAP, partner regions around the world form multidisciplinary teams to build and implement customized regional strategies to enhance their IDE ecosystems.