In many cases, the challenges faced by entrepreneurs around the world are the very same ones holding back innovators and potential business owners in the United States: limited access to financing and talent, a dearth of information and resources, and a mindset in which the high risk of failure outweighs the potential rewards.
But while much has been done to try to break down those barriers at home, some say U.S. policymakers could — and should — do more to help break them down abroad.
“Most developed countries have programs that constantly feed a national innovation system and help produce entrepreneurs,” Neil Parsan, ambassador of Trinidad and Tobago to the United States, said during an event Tuesday at the Meridian International Center in Washington. “Unfortunately, many under-developed countries, they don’t have that, and there’s an opportunity there to help.”
During the event, which coincided with Global Entrepreneurship Week, Parsan and several other experts outlined a number of ways U.S. foreign policy could help sprout innovative and socially impactful companies around the world, particularly in countries with underdeveloped or emerging economies. Here’s a look at some of their ideas.
Adam Zuckerman, founder of Fosterly, a start-up and entrepreneurship organization based in Washington:
Zuckerman urged policymakers to more aggressively pursue opportunities to partner with nonprofits and the private sector on programs designed to promote new businesses globally. He pointed to examples like NASA’s Launch Conference, in which the agency each year flies in entrepreneurs from foreign countries, along with key government officials and corporate leaders, to brainstorm ways to tackle specific challenges shared by underdeveloped nations.
“One a few years ago focused on the cookstove, which is used in many parts of the world that don’t have electricity, to provide heat and a way to cook, but they can be dangerous and pump a lot of pollution into the air,” he said. “So NASA brought in great minds from the public and private sectors, and people from around the world, to work on it.”
He noted that the companies were introduced to international problems they may not have been aware of or tackled otherwise, and those entrepreneurs leave with ideas and connections that can help them pursue potential new ventures or business partnerships.
“It’s one of the most innovative and interesting partnerships around,” Zuckerman said, adding that other agencies have similar initiatives, but there are opportunities for more.
Lona Stoll, acting director of the Global Development Lab at the United States Agency for International Development (USAID)
Stoll says a recent tactical change at her agency has fueled more entrepreneurial activity aimed at some of the world’s most pressing challenges. Six months ago, USAID launched the Lab program with the goal of identifying serious challenges and sparking a wider discussion among individuals and groups around the world to try to tackle them.
“So, rather than saying there’s a challenge and here’s our solution, we instead ask, ‘What’s the problem?” Stoll said, noting that the first grand challenge was a hunt for ways to reduce infant mortality rates. “Rather than pretending we knew the answer, we opened up that question and let thousands of people from around the world put forward their ideas and helped them test those ideas.”
Through the Labs program, the best ideas receive small amounts of staged funding, and the ones that take off are aided in their search for additional rounds of private funding.
“I think this is one of the best ways the government can foster entrepreneurship and innovation, by providing the initial funding to build evidence, show impact and test business models that enable entrepreneurs to get follow-on private financing,” Stoll said.
Christopher Schroeder, an entrepreneur, author and former State Department official under President George H. W. Bush:
“I don’t think the government should ever pick winners and losers,” he said, arguing that public officials don’t have the time or resources to vet or follow up on new ventures. “However, having said that... what they can do is help fund funds.”
Schroeder stumped for more public backing of private equity funds, especially those targeting potentially risky but socially advantageous enterprises in areas where start-up capital is hard to come by. He noted that small business loan programs sometimes receive public funding, but that innovative, technology-driven businesses are often looking for equity investors, not debt financing.
With even a small amount of financial support from the public sector, which wouldn’t eliminate but would slightly reduce the risk for private backers, “conservative investors, who are much happier investing in real estate or other more structured businesses, be willing to take that risk and help fund some of these foreign companies.”
Shelly Porges, former senior adviser to the Global Entrepreneurship Program at the State Department and currently entrepreneur in residence at Georgetown University
“When we talk about funding, one of the narratives that we need to change is this notion that you can’t make it happen if you don’t have venture capitalists,” Porges said.
She noted that, even in the U.S., only 12 percent of start-ups receive venture funding, and that only 3 percent of venture capital flows to companies with female founders. Most are self-funded, especially during the first few years, yet a perception remains in some parts of the world that building a company can’t be done with outside capital.
“We need to build a narrative that encourages entrepreneurs and innovators here and around the world to think about bootstrapping, and we need to prepare them for how to do that,” she said. “We have to have programs that teach them how to identify markets and identify customers that will help them fund the early years of their business.”
Parson, who is also the director of the Young Americas Business Trust, a youth entrepreneurship nonprofit based in Washington
“I think we need to start with a re-culturization, a change in the mindset, that lets folks know that it’s okay to fail,” said Parson, noting that roughly three in four new companies go out of business. Yet while the United States and other entrepreneurial nations generally embrace and even applaud risk-takers, such individuals are looked upon negatively in other parts of the world.
Of course, simply facilitating more dialogue between U.S. business leaders and would-be entrepreneurs in places like Trinidad and Tobago wouldn’t change that cultural difference overnight, Parsan said, but it could go a long way to encourage some innovators to pursue idea that might otherwise have remained on the shelf.
“I think that will help spread the virus of entrepreneurship and innovation and increase prosperity for these countries,” he said.