The Inequality of Entrepreneurship

posted in: Entrepreneurship | 2
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Heloisa Helena

In the middle of a favela in Rio de Janeiro, Brazil Heloisa “Zica” Assis stood in her tiny house mixing the latest hair treatment designed to tame her frizzy hair.  Her husband, Rogério, would be the guinea pig for the concoction.  Everything seemed fine until Rogério’s beautiful hair began to fall out.  It would take Zica 10 years to perfect her hair treatment.  She convinced Rogério to sell his VW Beetle and the couple invested the $1,500 in their first beauty parlor.  Today, Beleza Natural, has revenues of $80MM, 1,400 employees and 12 salons all over Brazil.

Zica and Rogério are known as high impact entrepreneurs, a term coined by Linda Rottenberg, Co-Founder and CEO of Endeavor, a global non-profit that finds the highest potential entrepreneurs in growth markets and helps them to expand globally.  Endeavor’s belief is that entrepreneurs are the best drivers of economic growth in any economy.

Politicians love to claim that Small and Medium Enterprises (SMEs) are the backbone of the American economy.  According to the 2009 US Census, 99.7% of firms had less than 500 employees.  Clearly, there are more SMEs than large firms.  The Bureau of Labor Statistics found that these firms accounted for 64% of net new jobs created between 1993 and 2011, but that is not the whole story.  The reality is most businesses stay small and only 49% of companies survive 5 or more years.  While studying Global Entrepreneurship Monitor data, Endeavor’s research arm, Endeavor Insight, found that the 4% of companies that are classified as high-growth (growing at least 20% a year for the past three years) accounted for almost 40% of job creation.  The focus should not be on the bulk of entrepreneurs, but rather on those that grow from micro to small to medium to large.  Those are the entrepreneurs that are creating the greatest impact in the economy.

Endeavor has used this philosophy to search for the next Steve Jobs or Richard Branson in places like Egypt, Indonesia and Greece.  During the past 16 years, the organization has reviewed over 37,000+ entrepreneurs and selected just 888 high impact entrepreneurs from 569 companies in 19 countries.  These entrepreneurs have created 225,000 jobs and generated $6 billion in revenues last year.

Curious how Endeavor does it?  This is what they look for:

Entrepreneur – What is the entrepreneur(s)’ bold vision and does the team have the capabilities to reach the vision?

Business – Is the business model scalable?  Is the timing right such that Endeavor’s involvement can actually help the company expand rapidly?

Values Fit – Would the entrepreneurs be a good fit with Endeavor’s values?  Would they be willing to reinvest their time and capital in other entrepreneurs as Endeavor plans to do with them?  Are they coachable?

Lastly, Endeavor’s focus is not on startups but on “scale ups.”  Typically candidate companies have revenues between $500,000 and $15 million.  For years, Endeavor has been honing its thesis that going deep with a few high potential entrepreneurs is more effective than giving a little support to lots of entrepreneurs.  The organization continues to prove that all entrepreneur businesses are not created equal.

 

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2 Responses

  1. Calvin
    | Reply

    Endeavor’s mission is laudable and it is not easy to find entrepreneurs in that category. Entrepreneurship is risky and people who start organizations require a network of human and financial resources. Certainly all entrepreneurs can benefit from good advisors and investors.

  2. Joel
    | Reply

    Thanks Calvin for your comment. For those who don’t know, Calvin Chin was the Director of Redeemer’s Entrepreneurship Initiative for six years. Redeemer is one of the few churches I’ve come across that actually seeks to both mentor and invest in high potential entrepreneurs in their city.

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