Xconomist of the Week: Linda Rottenberg on Global Tech Boom
Tech blogs typically cover startups in North America and Europe that want to be the next Facebook-style success, but the innovation ecosystem is far more diverse and far-reaching. Linda Rottenberg, CEO and co-founder of New York nonprofit Endeavor Global, has spent the last 15 years or so championing an effort to connect mentors and investors with what she calls high-impact entrepreneurs at high-growth companies in developing countries. Now Endeavor is advancing its mission through the new donor-based Endeavor Catalyst fund.
In February, Endeavor Catalyst made its first investment as part of a $2 million financing of software maker Globant in Buenos Aires, Argentina. Rottenberg says Argentina’s tech sector is thriving, even though the devaluation of the peso and political upheaval has made the country a challenging place to build businesses. Nine-year-old Globant, which has more than 2,500 employees around the world, is one example of an ambitious company in Argentina creating revenue and new jobs. Rottenberg says the momentum among high-growth businesses in Argentina can also be seen in such countries as Chile, Indonesia, Egypt, and Jordan. “Good ideas have no boundaries,” she says.
Endeavor Global looks for entrepreneurs in developing countries who can serve as inspirations for other startups that may have little homegrown support. Over the last fifteen years, Rottenberg’s organization has screened some 30,000 companies spread across fifteen economies around the globe. Out of that group, just 600 entrepreneurs from about 400 companies have been selected as Endeavor Entrepreneurs. They receive support through advisory boards, mentors, peer networking, and other professional services.
Endeavor wants to find more companies with the potential to have significant economic impact. In 2011, the 400 companies that Endeavor worked with collectively generated $5 billion in revenue and created 180,000 jobs. Rottenberg says those jobs pay two to ten times the local average wage.
To help increase support among investors for these growing companies, Endeavor is taking a more participatory role. Through the new Endeavor Catalyst fund, the organization invests up to ten percent of each funding round it chooses to participate in alongside other investors. “It is a way for us to encourage other investors to come in,” Rottenberg says. Thus far Endeavor Catalyst has raised $10 million and plans to raise $40 million. Endeavor does not take a board seat when it invests through the fund, she says, so it does not directly influence the decisions of the companies and the entrepreneurs.
High-impact entrepreneurs who are willing to take risks will drive innovation and create more jobs in today’s volatile world economy, Rottenberg contends. She says there is a belief that some growing companies in developing areas may even leapfrog some of the incumbent mobile technology platforms and gaming companies found in the United States and Europe. “[High-impact entrepreneurs] see oligopolies being broken up in the shifting economy,” she says. “They like disruption; they like the instability and see this as an opportunity.”
By comparison, Rottenberg says, America’s up-and-comers tend to crave stability and seem more anxious about the ebb and flow of the global economy. She believes it is time to embrace the enthusiasm among high-growth startups in developing countries that’s increasing as the economy evolves. “We need to think like emerging market entrepreneurs these days,” she says.
This is not to say that every startup in a developing country is going to succeed, let alone drive substantial job creation. Some success and failure trends seen in the U.S. still hold true in emerging markets. “Let’s be honest, five percent of entrepreneurs generate 80 to 90 percent of the growth,” Rottenberg says. “It really is the five percent that move the needle.”
She says Endeavor wants to support that group of high achievers, because such success stories are rarely celebrated in emerging markets. Furthermore, while talent, new ideas, and money can be found in emerging markets, there are few local mentors and role models available. Fear of failure also hinders the growth of startups in these countries, as does a common conception that only entrepreneurs from particular families can make the right business connections. “Once you break those cultural obstacles there is huge opportunity to be found,” Rottenberg says.
Regardless of such challenges, Rottenberg says, there is palpable confidence among entrepreneurs in emerging markets. She believes the momentum in these markets has shifted drastically during the fifteen years since Endeavor began. “We [were] trying to take the magic of Silicon Valley, bottle it up, and spread it across the globe,” she says. Endeavor’s entrepreneurs, Rottenberg says, now believe they will be sources of new innovations that U.S. and Western European companies chase.
Endeavor continues to evolve along with the companies and markets it seeks to support. Last year the organization named Fernando Fabre, managing director of Endeavor Mexico, as its president responsible for overseeing day-to-day operations. Rottenberg also says the organization plans bring its programs and services to countries such as Saudi Arabia and Greece. Endeavor wants to expand its programs to 20 countries by 2015.
It has not been easy gaining support for Endeavor’s cause. In 1997 when Rottenberg co-founded Endeavor with Peter Kellner, her venture capitalist friends compared Silicon Valley to Florence, Italy during the Renaissance, and were reluctant to look elsewhere for investment opportunities. “I was a crazy girl,” she says. “Emerging market entrepreneur seemed to be an oxymoron to most people.”
By 2003 perceptions changed about overseas opportunities and innovation, particularly in India and China she says. These days Rottenberg wants to introduce investors to entrepreneurs building high-growth companies in South Africa, Turkey, and Brazil. “We just brought 25 U.S. investors to Brazil this past week,” she says. “There’s no better way to see these markets than through the eyes of these entrepreneurs.”
All cheerleading aside, more work is necessary to build up local support for these emerging markets. Rottenberg says regulatory and infrastructure changes are needed in developing countries to make it easier for companies to launch. Local investor networks and venture and growth capital firms are also forming in these markets, but would welcome mutual collaboration with individual and institutional investors in the U.S. “These economies still need help,” she says. “These entrepreneurial ecosystems are still young.”