Johanna Hising DiFabio
Director, MIT Sloan Fellows Program
“Developing policy that can help someone I have never met is a wonderful feeling. That’s what makes government policymaking rewarding—at least for me.” Those are the words of Sanjay Inamdar, SF ’05, chairman of Student Startup, a dynamic new entrepreneurial engine launched by the Indian government. Inamdar is just one of seven alumni we talked to who are working on similar projects around the globe. From Tanzania to New Zealand, Canada to Chile, India to the United States, we learned next-generation lessons from fellows who are using new enterprise to strengthen not just local and national economies—but the very fabric of society.
“Building a more inclusive innovation economy is one of the central challenges of our times,” according to MIT Lab for Innovation Science and Policy Managing Director Catherine Fazio, SF ’14. Part of the Institute-wide MIT Innovation Initiative (MITii), Fazio’s lab convenes faculty and students from across campus to study innovation systematically and identify factors that create effective outcomes. “We’ve made terrific progress on developing new metrics for entrepreneurial quality and innovation ecosystems,” says Fazio. “Now the challenge is to turn our evidence-based research into effective policies and programs.”
Fazio and her team are working to help demonstrate the power of innovation and entrepreneurship to increase economic opportunity. “We also want to use what we’re learning in the lab,” she says, “to help regional and national government agencies improve their performance in stimulating economic growth.” To that end, Fazio, MIT Sloan doctoral student Jorge Guzman, and MIT Sloan professors Scott Stern and Fiona Murray put their collective insights into a 2016 policy briefing, A New View of the Skew: A Quantitative Assessment of the Quality of American Entrepreneurship.
“Two common but divergent methods for measuring entrepreneurship have polarized public policy debates in recent years,” explains Fazio. “One approach, which tracks the sheer quantity of new businesses, shows a three-decade decline in U.S. startup dynamism. The other method uses performance outcome post-mortems that end up conflating startup potential at founding with other factors that contribute to later success, such as regional ecosystems, the supply of capital, and luck. Some analysts look at that data and say we have too much entrepreneurship.”
What’s needed, Fazio says, are indices that gauge new business quality and the potential of startups for exponential growth at the time of founding. “Equipped with such metrics, regional and national policymakers can make much more precise decisions about how to support high-potential startup activity at inception. No single strategy fits every locale, and our indices can help leaders understand the policy implications of promoting a mix of innovation-driven enterprises (IDEs) alongside small and medium-size enterprises (SMEs).”
The MIT team’s policy briefing received broad media attention following its presentation to the National Academy of Sciences. Coverage in The Atlantic, The Wall Street Journal, 538.com, and Harvard Business Review led to an invitation from the White House Office of Science and Technology Policy (OSTP). “OSTP officials asked us to host a roundtable of thought leaders from federal agencies concerned with innovation and economic development,” says Fazio. “It was a great opportunity to explore how we might extend the application of our indices into the policy realm. Now we’re working on an interactive tool that stakeholders can use to understand their existing entrepreneurial ecosystems more clearly. Thanks to some funding from the Kaufman Foundation, we’re developing prototypes for interactive mapping and web-based APIs (application programming interfaces) that enable regions to tailor economic stimulus initiatives to their particular needs and objectives.”
Give a person a job, and he or she can put food on the table. Give that same person the power of entrepreneurship and they may well feed a whole community. That’s the philosophy that regional and national governments and nonprofits around the world are embracing—and they are leveraging enterprise and invention to solve a wide range of societal problems, not just economic deficiencies.
A good place to start, many countries believe, is with a core community resource—universities. “India is experiencing economic growth but the growth is not producing a proportionate number of jobs,” says Sanjay Inamdar, SF ’05, chairman of Student Startup, an Indian government initiative. “To tackle jobless growth, we must comprehend multifaceted issues, craft viable solutions, and extract answerable questions from the clutter of public needs. This requires multiple tools and one of those tools 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.”
Student Startup, Inamdar explains, is a segment of the larger Start Up India, Stand Up India initiative launched by Indian Prime Minister Narendra Modi. Student Startup aims to create 100,000 technology-based student startups and a million employment opportunities within ten years. The initiative will create innovation laboratories within universities and groom students to take up entrepreneurial careers and launch new enterprises that generate jobs and societal solutions.
India has enviable student strength in technology-related disciplines—eight million students enrolled in more than 10,000 campuses across the country. Inamdar and his team will help shape curriculum, training, and mentorship opportunities to generate new enterprise from university-inspired technological innovation. He reports that India also has organized one of the world’s largest hackathons to challenge students in technology disciplines to develop digital solutions that address socially relevant problems. And the government has launched iMADE, an app development platform aimed at producing 1,000,000 apps as well as a US$3.0 billion banking institution for development and refinancing support.
With these ambitious programs in place, the challenge that Inamdar and his colleagues are finding is mindset. Many Indians believe that a student graduating from a technical university should immediately get a secure job with a secure company. In their view, that’s the point of an education. “Most parents tend to disapprove when children want to pursue entrepreneurship, and in India, parents have a great deal of influence. But the parents also have a great deal of trust in colleges and in teachers as the gurus of their children. So with the top-down approach from universities, the bottom-up urge from the students, and an affirming attitude from parents, India can create an environment that will be conducive to building a startup culture.”
Rocio Fonseca, SF ’14, executive director of Start-Up Chile, struggles with the same cultural obstacles that face Inamdar. “Work hard and keep your head down—that’s Chile’s unofficial motto,” Fonseca says. “We do not have an entrepreneurial culture. The goal of the average Chilean is to get a job working for a corporation. Small and medium-sized businesses err on the side of playing it safe. Generally, they are not innovation driven—and that complacency curbs growth and evolution.”
Fonseca’s ambitious enterprise accelerator Start-Up Chile was launched in 2010 to help the Chilean government turn the national attitude around. The program helps early-stage, high-potential entrepreneurs bootstrap their startups using Chile as a platform to go global. The goal? Positioning Chile as the innovation and entrepreneurship hub of Latin America.
The program has been enormously successful over its relatively short life. With an annual portfolio of 200-250 companies, it is considered by many to be the hub of the largest and most diverse startup community in the world. 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.
Start-Up Chile also offers robust training programs, workshops, peer-to-peer mentoring, and a busy calendar of networking events. But is the national mindset turning around? Fonseca believes it is. “When you asked graduating students six years ago what they wanted to do when they graduated, 95% said their goal was to work for a large corporation. Six years later, that same poll showed that 50% of graduates wanted to pursue entrepreneurship.”
Apart from dynamic outreach programs, Fonseca attributes Start-Up Chile’s success to the recruitment of international entrepreneurs. “We offer a soft landing to foreign companies from around the world who are looking for a doorway to Latin America. And those international entrepreneurs are injecting into this risk-averse culture a newfound enthusiasm for dreaming big and following those dreams. And our support systems make entrepreneurship feel a little less perilous.”
Attracting global players is also central to the strategy the government of New Zealand has adopted to promote entrepreneurship. Like Chile, New Zealand must deal with the attendant challenges of isolation. Lynne Dovey, SF ’02, who has spent the last four decades working for the New Zealand government in a range of policy roles, noted that the nation’s remoteness has inspired New Zealanders to embrace opportunities to connect internationally through trade and collaboration and to absorb new ideas from around the world. The national entrepreneurship engine grew out of that mindset. The country has made a considerable investment in helping New Zealand firms internationalize, providing mentorship, legal and marketing advice, and other essential support systems to ensure their success. It has set a goal of lifting R&D performed by Kiwi businesses to one per cent of GDP by 2018.
Dovey says that the New Zealand government considers itself a principal long-term investor in the nation’s innovation system, generating high-quality research with a wide range of benefits to society. In that, it’s looking to achieve a balance of risk, impact, and timeframes and to increase innovation in those areas where New Zealand is already an international leader—biosecurity, healthcare, geological and earthquake science, and renewable energy, for example.
Dovey notes that another of those unique resources is the Mātauranga Māori—the body of knowledge first brought to New Zealand by the Polynesian ancestors of present-day Māori. In the Māori worldview, humans are connected physically and spiritually to land, water, air, and forests. People are an integral part of ecosystems and ecosystems are an essential part of people’s heritage. Such holistic thinking can be at odds with reductionist scientific approaches, so the goal is to develop knowledge management frameworks that can mix and reconcile traditional and modern knowledge in the R&D system—integrating the best of both perspectives. “We have the ability to tap, manage, apply, and transfer that indigenous wisdom to our thinking and research,” Dovey says. “It’s a rich natural resource we intend to leverage to the fullest.”
Like Inamdar’s project in India, Dovey reports that New Zealand is investing considerable energy and financial resources into another of its existing resources—its top-notch university system. The New Zealand government has committed to creating a more far-reaching and agile R&D system that optimizes the innovation happening at science and technical universities across the country.
“The idea is to create a world-leading science system that makes a more visible, measurable contribution to our productivity and wellbeing,” Dovey says. “The government’s job is to promote, inspire, support—not to pick winners. We have no intention of channeling capital into specific enterprises and just hope they’ll take off. We want to invest in a verdant environment for invention and entrepreneurship that increases the chance of success for Kiwi enterprises.”
Flavian Marwa, SF ’10, couldn’t agree more with Dovey’s observation that governments shouldn’t be in the business of picking winners in the entrepreneurial sweepstakes. 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 particular focus on Africa.
“Governments should partner with industry to create mentorship programs. They need to facilitate connections between young entrepreneurs and seasoned business leaders who can help them anticipate and navigate thorny patches,” Marwa contends. “If governments provide seed money, 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 makes clear that government investment is critical, but not straight-out subsidies. He raises the importance of having a healthy lending climate. “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.
Like Dovey in New Zealand and Inamdar in India, Marwa thinks education plays a key role in generating new business. But in Africa, he says, the educational component must begin in an individual’s earliest years. “Governments looking to create a strong climate for invention and entrepreneurship,” he says, “must be committed to creating a world-class educational system from primary school to university that will empower citizens to develop a keen eye for opportunities and the skills and confidence to follow up on those opportunities.”
Marwa echoes the perspectives of the other government leaders we spoke with that an insular nation is bound to be a struggling nation. Communication across borders is especially important in Africa, Marwa says, where information asymmetry is holding every nation back. “There’s very little information sharing between countries about emerging best practices. Entrepreneurs could use that information to create thriving businesses. Tanzania recently discovered huge oil and gas reserves. It could learn from countries like Ghana and Nigeria about best and worst practices for developing those industries. Government programs in Africa that reach out across the continent for information and knowledge could have a significant impact on the lives of Africans—and not just an economic impact. Entrepreneurship is about more than economics. It empowers and injects new solutions into societies that raise the standard of living.”
Bruce Dewar, MOT ’92, wholeheartedly agrees with Marwa on the larger role that entrepreneurship plays in society. Dewar is President and CEO of LIFT Philanthropy Partners in Vancouver, Canada, a venture philanthropy organization that grew out of the new enterprise climate generated by the Vancouver Olympics in 2010. 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. Using that platform, Dewar says, he and his team “are leveraging entrepreneurship to improve the fabric of society. We’re building self-sufficiency. We’re building confidence. We’re building support networks.”
Dewar underlines Marwa’s point that no government can afford simply to bankroll new enterprises—every investment has to be strategic and sustainable. The LIFT model, he explains, finds successful, committed pro-bono partners in private industry to offer mentorship and advice to struggling small businesses, partners who want to contribute to a healthier society. Dewar points to a social enterprise that distributes used furniture and household goods to people transitioning out of homelessness. “They were running out of warehouse space and were looking to secure a larger, more expensive space. We introduced them to a warehouse design expert from private industry, and they were able to redesign their storage area economically to fit a greater amount of inventory.”
They key, Dewar says, is to make partners smarter, more strategic, and more self-sufficient. After revamping the warehouse space, he reports, the operation increased its efficiency by 40% and saw a record-breaking profit. “For a social enterprise, that means more dollars are now going to the bottom line, and they’ve been able to bring on new ‘social hires’—employees with some barrier to employment. These positions are often first steps for individuals who have limited skills or work experience. The positions are an opportunity to develop skills they can then build on and move up with—eventually passing that warehouse job on to someone else who is unemployed.”
Dewar notes that one of the pitfalls of government programs dedicated to entrepreneurship is measuring ROI. “Government agencies often have a traditional sense of accountability. They know that taxpayers expect solid, measurable results from government programs, but the impact of entrepreneurship is not so easy to assess, especially in the short term. And when it comes to social enterprise, risk and reward are even tougher to measure. A government enterprise initiative might yield extraordinary social benefits but not be very impressive at the bottom line. It can be difficult to communicate such a program’s worth, and yet it has improved life in the community.”
Ray Leach, SF ’02, CEO of JumpStart in Cleveland, Ohio is also focused on social as much as economic ROI. Like LIFT, JumpStart works in tandem with government efforts to boost quality of life in the community through entrepreneurship. Unlike most of the other entrepreneurial leaders in this roundtable, Leach leads a tightly regional effort in Northeast Ohio. 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 says his model has evolved over the years and has been so successful, the Obama administration asked him to be part of a national initiative, which he helped get off the ground before returning his full attention to JumpStart. Leach agrees with Dewar and the other entrepreneurs participating in this round table that to promote entrepreneurship, governments and nonprofits need to create an environment in which they can thrive—not just bankroll the expenses of a few startups.
For Leach, that means getting creative. JumpStart assists startups with many of the same support systems that other government engines around the world do—providing mentorship, education, and introductions to investors—but Leach says 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.”
Leach adds that the inadequacies of capitalism have a disproportionate impact on underemployed, under-skilled workers, which results in a climate of poverty and economic challenges. “Every day we look with fresh eyes at how we can leverage the tools of capitalism to bring resources to those who need a jump start, to those who must build core skills, learn from mentors, and enter the workforce as a productive employee.”
Leach notes that JumpStart is now working less with high-tech startups (its original mission) and more with businesses that will improve life for the people most in need. “High tech enterprises primarily hire skilled labor. If we help a 19-year-old start a landscaping business, and she ends up hiring five unskilled workers in her community, that’s an effort that has made a measurable difference. We’ve evolved in the way we measure ROI, looking less at the financial bottom line and more at humanitarian impact.”
Like Leach, Mark Anthony Thomas, SF ’14, believes that government enterprise engines can provide ladders out of poverty. In the United States, universities have sophisticated entrepreneurship programs that help students bring their new ideas to market. A recent report from the Global Entrepreneurship Monitor (GEM) found that 27 million working-age Americans—nearly 14 percent—are starting or running new businesses.
Thomas, who is Senior Vice President of Partnerships at the New York City Economic Development Corporation, believes that that impressive number actually leaves many Americans behind. He agrees with Leach that while high-tech startups produce innumerable benefits, they tend to create jobs for college graduates. “Foreign-born Americans outpace citizens in developing new businesses outside the digital marketplace. Our job as an enterprise engine is to make sure that the new crop of startups taking root in the city delivers jobs for a wide range of skill levels. ”
Thomas is recruiting international entrepreneurs to create a broader variety of jobs in a diverse array of industries. He believes that New York City is on its way to becoming an international zone of entrepreneurship, and one of the benefits of that thriving enterprise environment will be to adjust that imbalance within the new enterprise realm.
Key to achieving that, he says, is to “raise the floor,” delivering universally accessible educational and training opportunities to the unskilled workforce. The other is to encourage the growth of businesses that can employ traditionally unskilled labor. “When we think of entrepreneurship, we often think tech, but brick and mortar startups are just as important. The pizza parlor and the pharmacy franchise are more apt to hire the unemployed than that brilliant new iPhone app.”
Thomas wants to disrupt preconceived notions about entrepreneurship. “Let’s celebrate and support the pretzel vendor alongside the software innovator. Let’s take what we’ve learned from the high-tech sphere and expand it so that everyone is included in the American entrepreneurial success story.”
Bruce Dewar has more than 35 years of experience consulting for private companies and public agencies on domestic and international projects spanning 12 countries. As president and CEO of LIFT, Bruce leads the organization into the field of venture philanthropy and social innovation. Bruce was involved with the 2010 Olympic and Paralympic Winter Games for more than a dozen years, including work in the tourism, business, and social sectors. 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 deemed best practice.
Lynne Dovey has spent four decades working for the New Zealand government in a range of public policy roles, domestically and internationally. She joined the New Zealand Foreign Service after graduating from college and served at the New Zealand Embassy in Germany during the 1980s. In the 1990s she moved into public management, specializing in health and social services. These two themes, international relations and health and social services, have dominated her career path. Dovey has served as Deputy Secretary, Ministry of Economic Development, Associate Deputy Chief Executive, Ministry of Social Development, and Principal Advisor, New Zealand Productivity Commission.
Rocío Fonseca leads the world’s largest and most diverse startup community. As executive director, she is responsible for positioning Start-Up Chile as the best business accelerator program in Latin America and in the top five worldwide. The program is a cornerstone of Chile’s national economic development strategy. Fonseca fosters a fertile environment that connects Chilean innovators with early-stage, high potential entrepreneurs around the world. By recruiting and mentoring diverse teams of young and ambitious collaborators, Fonseca believes Start-Up Chile has the potential to reshape the national mindset and power the Chilean economy.
Sanjay Inamdar is a first-generation entrepreneur and founder of FLUCON, a government-recognized Star Export House. Inamdar has more than 30 years of industry and business experience that includes designing and manufacturing products and bringing them to global markets. Passionate about teaching young minds in developing Asia, he has participated in Harvard University’s Project for Asian and International Relations in China, Malaysia, and Singapore. For the past eight years, in association with Eaton Corporation, he has led a social entrepreneurship initiative called Ignited Innovators of India, which has reached more than half a million students. Inamdar now heads India’s Student Start-Up initiative, comprising 10,000 colleges and more than eight million students.
Ray Leach is a national thought leader at the intersections of public, private, and philanthropic partnerships that accelerate job creation and increase economic outcomes in neighborhoods, regions, and countries. Leach began his career at IBM and went on to co-found four tech startups. He was a founding member of the U.S. Commerce Department’s National Advisory Council on Innovation and Entrepreneurship (NACIE). Leach serves as the chair of the National Venture Capital Association’s (NVCA) Alumni Council and is a founding member of the NVCA’s Diversity Task Force. He also serves on the board of Invent Now, which educates 100,000 U.S. schoolchildren each summer in science, technology, engineering and math and serves on the board of the Global Center for Health Innovation.
Flavian Marwa has 20 years experience in the areas of ICT, engineering, and SME development. A native of Tanzania, he has worked for the US Embassy in Tanzania, Booze Allen Hamilton, and the UN’s Information Technologies Services. In 2006, he founded FRM Global Services to provide telecommunications infrastructure to NGOs in the East African public health research space. Marwa now consults for the World Bank’s Africa Region group developing sustainable technology startup incubators. He sits on the advisory board of Global Community Standard (GCS), a social enterprise that works to adapt innovative technology for affordable use in the world’s most remote villages. Marwa received the 2009 MIT $100K Development Track & Audience Choice award.
Mark Anthony Thomas began his professional career with Georgia-Pacific Corporation, managing a portfolio of economic, philanthropic, and environmental initiatives. In New York, he served as the Deputy Director of the Center for an Urban Future and developed the business model to relaunch its magazine City Limits as a startup. As publisher, he established City Limits’ new organization and governance structure and cofounded New York’s Online News Association chapter. In 2014, Thomas was selected as the city of Los Angeles’ inaugural Fuse Corps Executive Fellow, serving as a senior advisor to the city’s policy and budget leaders. He then served as director of the Los Angeles mayor’s Operations Innovation Team, a business-funded initiative to drive efficiency across the city’s operations.
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