This post features a conversation with Elmira Bayrasli, the co-founder of Foreign Policy Interrupted and a lecturer at New York University. Bayrasli’s recently-published book, From the Other Side of the World: Extraordinary Entrepreneurs, Unlikely Places, profiles seven entrepreneurs from developing countries, deriving insights into obstacles they face as well as their proven potential to solve problems, create value, and draw investment. For her research, Bayrasli traveled to more than two dozen countries meeting with investors, government officials, and entrepreneurs themselves. The Development Channel sat down with Bayrasli to hear what these startups can teach the rest of the world about entrepreneurship—and what can be done globally to encourage it.
1) What are the biggest challenges for entrepreneurs in emerging markets, compared to those that entrepreneurs face in the United States?
In the United States only 14 percent of the population is engaged in entrepreneurship. In emerging markets that number can be much higher because there are fewer good jobs available—emerging-market entrepreneurs often start businesses because they have to. Lacking alternative educational or employment opportunities, people’s survival may depend on launching their own endeavors. But we hear fewer success stories of globally-competitive companies coming from developing countries, though I saw tremendously talented people leading interesting companies around the world. I embarked on this project because I wanted to learn more about these individuals and tell their stories.
In researching startups and interviewing entrepreneurs from China to Nigeria, I saw that entrepreneurs in each place faced what I call “obstacles,” or barriers to growth in a specific country context.
These obstacles include corruption in India, weak rule of law in Russia, monopolies that stifle competition in Mexico, and a lack of collaborative space in Pakistan. Interestingly, I found that the obstacles came into play not at the point when entrepreneurs tried to start their companies, but rather when they wanted to scale them.
2) What are differences between the types of companies entrepreneurs start in emerging markets, compared to what we see coming out of U.S. startup hubs, such as Silicon Valley?
Because of the major growth obstacles, entrepreneurs in emerging markets focus on the basics. Instead of creating social apps or developing the self-driving car, they want to solve pressing problems that affect millions of people—starting businesses that fill gaps in society.
In Nigeria, for example, an entrepreneur I profiled started a mobile payment company called Paga to overcome the country’s lack of financial framework. Initially, I thought Nigeria’s entrepreneurship obstacle was poor infrastructure, but that was only a symptom of a deeper problem. Nigeria’s weak financial connectivity (66% of Nigerians don’t have access to banking services, according the World Bank) was the main factor preventing reinvestment into infrastructure and other capital-intensive projects. Paga focused on expanding financial access for the poor and middle class by working to create this larger financial connectivity framework for Nigeria.
Many of the entrepreneurs I profiled also looked at where they could add the most value in their markets. In Mexico, entrepreneurs who wanted to avoid competing directly with existing monopolies and major U.S. players decided to focus on green technology, alternative energy, and business-to-business (B2B) enterprises.
Once entrepreneurs are able to overcome immediate market obstacles, the combination of a problem-solving approach with tapping unfilled niches creates the basis for thriving business models that can scale domestically and beyond.
3) Emerging markets received an influx of capital in recent years (now dwindling due to a slowdown in emerging-market growth). Did any of this capital make its way to entrepreneurs?
In several countries I profile—including India, Turkey, and Russia—capital inflows helped to pull up the middle class over the past ten to fifteen years, and where I see entrepreneurship taking off now are markets with real middle-class growth. Because typically, it is not the elite or poor behind globally-competitive startups—it’s the educated middle class.
There is also a changing tide in how some emerging-market elites view entrepreneurship. They realize that for their countries to stay competitive in attracting foreign direct investment (FDI), they need to pull entrepreneurs up with them. Family foundations in emerging markets are starting to invest in entrepreneurs, which is a new phenomenon.
And in China and Mexico, two other countries with a rising middle class, governments are starting funds for entrepreneurs, guaranteeing investments in new companies. For instance, in Mexico, organizations like The National Entrepreneurship Institute (INADEM) and Nafinsa, a national development bank, encourage investors to lend to startups and local small- and medium-sized enterprises. There is a recognition that: “if we can pull in outside capital to invest in our entrepreneurs, it will ultimately help us grow.”
4) How can U.S. foreign policy support entrepreneurship as a path to economic growth in developing countries?
Entrepreneurship is not only about a talented individual with a good idea—it is about networks. Traveling to two dozen countries confirmed how important it is to establish an ecosystem for entrepreneurs. So the best thing the U.S. Department of State and other agencies can do is offer space for entrepreneurs to come together and share ideas—through angel networks or mentoring collaborations, for example. They can also help to connect foreign entrepreneurs to investors and other innovators here in the United States.
A crucial element of success for several entrepreneurs I profiled was the networks they formed while studying and working here. However, U.S. foreign policy should ultimately help encourage an emerging market “brain gain,” rather than a brain drain. As one venture capital investor I interviewed for my project said: “where you see a lot of expats going home, that’s a place you should invest.”
Another aspect of our foreign policy that affects entrepreneurs globally are U.S. regulations that have extraterritoriality or create ripple effects in other markets. I found most successfully-scaling companies in emerging markets aim to expand to the United States, so they look to our business practices.
Because of the U.S. focus on transparency, through the Foreign Corrupt Practices Act (FCPA) and similar laws (as well as U.S. tax filing and IPO requirements), companies that want to do business here follow similar standards. In India, where corruption is the major obstacle to entrepreneurship, the IT company Infosys replicated U.S. practices because they wanted U.S. customers.
5) What is the role of entrepreneurship in the global economy moving forward?
The economy of the twenty-first century, whether ’globalized, ’new,’ or ’shared," is unprecedented. The twentieth-century models that made the assembly line and Fortune 500 companies thrive are no longer relevant, and new jobs increasingly come from businesses just five years old. Today’s digital and dynamic economy is not beholden to top-down corporate structures. Instead, it is contingent upon ideas and self-initiative. It is an economy being fueled and powered by entrepreneurs.