What support interventions works best to scale job-generative enterprises? This is a perennial question that few have attempted to solve conclusively- which is understandable because there is no easy way to resolve this question. Endeavor Insight and the Bill and Melinda Gates Foundation have provided critical insights into a sub-section of entrepreneurship activity through their report: Fostering Productive Entrepreneurial Communities: Key lessons for generating jobs, economic growth & innovation.
The report studies entrepreneurial communities mainly in the technology (software) space, with a particular focus on specific thriving communities- such as Nairobi in Kenya and Bangalore in India. Each of these lessons carry a level of resonance with the communities of very young entrepreneurs with which we work through the Anzisha Prize, from which perspective we offer a view on some the lessons. The five lessons are as follows:
- Entrepreneurship Communities are not destined to follow a single development path.
- Entrepreneurship communities become productive generating a relatively small number of companies that reach scale.
- Founders of the fastest growing companies are much more likely to have received experience, support, and investment from leaders of companies that reached scale.
- Patterns of influence shape the development of entrepreneurship communities
- When people who have led firms that scaled are more influential, it empowers entrepreneurship communities to be more productive.
In this article, we will deep dive into lesson 1 on the development path of entrepreneurship communities. We draw lessons from some of our experiences working with very young entrepreneurs and offer some questions for consideration.
Entrepreneurship Communities are not destined to follow a single development path
The choices of local decision makers have a direct and significant influence on the development of entrepreneurship communities. From a study of the communities of Bangalore and Nairobi which highlight the results of different approached used by decision makers working to support entrepreneurs.
Bangalore: Tech firm founders are the primary catalysts for new firm development.
Bangalore has produced some of the most successful software companies in the world. The influence here seems to be primarily the influence of founders of tech companies that create an environment where their employees (and others) launch businesses that scale. One such player in Bangalore is Infosys- former employees of Infosys have started around 200 local tech companies, including Daily Hunt, Blowhorn, Flipclass and others.
Tech Founders in Bangalore who succeed in building large companies often reinvest their resources into the wider community by supporting former employees who launch their own companies- by acting as mentors and investors.
Nairobi: Partnerships & Accelerators drive productivity
Nairobi offers a different example: When MPESA was launched almost a decade ago, it seems to have kick-started the tech boom in the city. MPESA was fundamentally created by a partnership that brought together Safaricom, Vodafone & The UK Department for International Development. The MPESA product grew to over 10 million customers in just a few years, which increased local access to financial services. In just a single decade over 20 local tech support organizations have been opened in Nairobi, which equates to one incubator accelerator or support organization launched for every 32 tech companies in the city. Making Nairobi one of the most heavily supported software communities in the world. Most of the firms supported here are typically less then three years old, and do not yet have investors or many employees.
Context Matters: Available support can shape the very sectors that entrepreneurs choose to participate in
Over the past 8 years of selecting and supporting very young entrepreneurs from over 30 unique African countries, we have seen different patterns in the factors facilitating growth and scale in the different geographies. The key take-away from this lesson is that context matters. That is one of the most critical foundations of our organization and the Anzisha Prize.
Very young entrepreneurs mainly operate in sectors where there is a huge need or gap in their communities. This results in a diverse sector mix, with particular industries being more prevalent in countries or geographies where there is a greater need or support for the particular sector. For instance, technology entrepreneurs tend to come from countries such as Kenya, South Africa and Nigeria- where there is already significant support for those particular sectors.
The challenge here is to figure out how best to create a context-relevant support mechanism that will ensure that a particular community generates jobs and contribute towards economic growth.
Support is a form of investment & Vice-Versa
Both the examples of Bangalore and Nairobi bring up an interesting question of what support for very young entrepreneurs could or should look like. Each of these present very different approaches to support, and the implications of this cannot be left unaddressed.
Entrepreneurial support organizations often put together a “package” of entrepreneurship support services which often reflects some of the areas they identify as priorities for entrepreneurs in those communities. Some of the most common are concerned with increasing access to finance- or investments into individual entrepreneurs.
Direct financial investment is indeed important for entrepreneurs, but It is also important to recognize support services as a form of investment and investment as a form of support. This is one of the most critical lessons we have learnt about supporting very young entrepreneurs.
At selection, Anzisha Prize fellows are around the ages of 15-22. One of the most common features of this young group of entrepreneurs is that they typically wouldn’t have had any or significant work experience outside their own businesses at the same time, the majority would have also never raised funds from external investors.
Part of the objective of offering support services for very young entrepreneurs is to reduce the gap in some hard skills that the individual entrepreneur may not have due to lack of access to a particular form of education or lack of work experience. At the same time, it is also empowering the individual entrepreneur with the ability to identify gaps, prioritize and identify their own support needs as an individual business.
What becomes apparent is that one can never take a one-size-fits all approach to offering support to entrepreneurs, and different forms of support yield similar outcomes in productivity once we get them right.
In the next article in this series, we will be exploring the second lesson- entrepreneurship communities become productive by generating a relatively small number of companies that reach scale. Find the full report here.