Overview:

Entrepreneurship has been shown to be a major driver of economic development in markets like Israel, India, Singapore, China, and Estonia. These success stories highlight why promoting entrepreneurship globally has become an important policy agenda. From the perspective of entrepreneurs and investors, however, little research has been devoted to providing insights into how to successfully navigate these markets. While the strategies of lean experimentation, minimum viable product, bootstrapping, and staged investment are critical to startups in these emerging ecosystems, one needs to adapt the lessons from mature markets like Silicon Valley, New York, and Boston that receive the majority of attention in the media and in the classroom. Entrepreneurship Outside the Valley develops strategies for entrepreneurs and investors in these emerging ecosystems around the globe. The course will have cases from 26 different countries on every continent. The course examines the multifaceted nature of entrepreneurship in emerging ecosystems, highlighting the areas of context that affect the decisions of players in the sector. These areas will be highlighted in six modules which include differences in industry structure and the macroeconomy, availability and access to talent, financing sources, legal and regulatory environments, local culture, and exit markets.

Career Focus:

Entrepreneurship Outside the Valley (EOV) is a course for a variety of students. First, individuals potentially exploring careers in startups or venture capital in these emerging ecosystems will gain valuable insights into how to adapt strategies. These actionable insights will improve decision-making by providing a framework for adapting to local market context. Second, those who intend to pursue startups or venture capital investing in developed markets can gain a deeper understanding of what factors likely influence success and failure. Many startups in developed ecosystems eventually enter other markets and understanding constraints can aid this expansion. Additionally, venture capital investing has transitioned to a global phenomenon and being able to evaluate which emerging ecosystems are likely to be sustainable provides a roadmap for expanding an investment footprint. Finally, for those interested in evaluating economic and business environments generally, EOV provides a robust macro setting in which to understand how various levers aid or hinder economic development by examining one of the engines for such development, the entrepreneurial sector.

Educational Objectives:

Entrepreneurship Outside the Valley is intended to provide critical knowledge and frameworks for founders and investors to navigate the complex setting of startups in emerging ecosystems around the globe. The course will provide institutional understanding as well as apply strategic and analytic tools to make important decisions.

Course Content and Organization:

The first module explores how the significant differences in industry structures and the macroeconomy affect the types of startups that we see in different markets. Emerging entrepreneurial ecosystems often exhibit diverse and evolving industry structures. Understanding this structure is critical to finding and developing startup opportunities. Unlike mature economies with established sectors, emerging markets are marked by rapid changes and the emergence of new industries.

There are several common types of opportunities that we see across emerging ecosystems. First, digitization and technology can allow certain sectors to be modernized in a way that is different from more mature economies. In areas like fintech, supply chain, and agriculture, technology can be used to modernize various elements of the economy and provide value to businesses and consumers. For example, 73% of Egypt is unbanked, having no access to financial services. In Mexico, that number is 50.9%. The increasingly pervasive nature of mobile connectivity and access to big data tools provides the opportunity to increase financial inclusivity through fintech startups. Mobile payments, saving, and lending are sectors in which we see startups flourishing. Startups in the fintech sector are often either hindered or helped by the responsiveness of government regulators like central banks. Similarly, in some countries, the financial sector is dominated by large family-owned banks that can become a barrier to market access. Many emerging markets also have very inefficient supply chains that dramatically hinder the efficiency of a variety of industries. By investing in technology and logistics, these supply chain startups, both in the B2B and the B2C space, can create tremendous value. Monetization of these types of opportunities, however, can prevent certain challenges. Finally, in many countries, agriculture still represents a large share of the domestic economy. Small farms and lack of resources often means that agriculture is highly inefficient. Technology can dramatically improve productive capacity of farms and increase food security in a country.

A second type of opportunity that entrepreneurs in emerging ecosystems develop are those that are imitations of successful startups in other geographies, both developed and emerging ecosystems. Imitation of a successful business model provides a roadmap for what types of opportunities may success. For example, the Saudi-based food delivery startup Jahez was founded in September 2016, three and a half years after Doordash was founded in Palo Alto. Careem, a ride hailing service in the MENA region, was founded in the UAE in 2012, three years after Uber was started in San Francisco. Similarly, MecadoLibre, an Argentinian-based ecommerce company often called the Amazon of Latin America, was founded in 1999, five years after Amazon itself. We also find that entrepreneurs will imitate startups from other emerging ecosystems. WeChat became the first superapp when it launched in 2011 in China. Startups like Grab (Singapore/Indonesia) and Gojek (Indonesia) soon evolved into similar offerings over time. The critical element of imitation startups is how they adapt to the local market in which customer tastes, buying habits, and willingness to pay may differ. For B2C companies, are customer buying habits and tastes similar? What are logistical constraints that differ? Are there legal or regulator concerns? For B2B companies, similar concerns must be considered. Additionally, in countries where the cash economy is prevalent, startups must consider how they can convince businesses to enter the formal economy.

A third type of startup that exists in some, but not all, emerging entrepreneurial ecosystems are deep tech companies. These types of startups rely on specialized technical skills that exist in a particular country and often develop startups that can have global reach. Sectors like biotechnology, artificial intelligence, quantum computing, and advanced materials find centers of excellence in a number of emerging ecosystems. The quality of STEM education as well as the government support for basic R&D can create opportunities to found companies that can have global impact. Often these companies enjoy a cost advantage as local labor may be cheaper than similar technical talent in developed ecosystems. Countries like Singapore, Korea, Japan, Poland, Hungary, Estonia, Argentina, and South Africa have pockets of technical domains that are world class. Key to exploiting these opportunities is ensuring that not only does the startup have access to quality technical talent, but that the company can recruit the necessary business professionals to access global markets.

Finally, all founders and investors in emerging ecosystems need to understand broader macroeconomic factors like declining investment in startups, rising interest rates, high inflation, and currency devaluation. The retrenchment in the global venture capital investing landscape hit emerging entrepreneurial ecosystems especially hard. Companies that could have easily raised follow-on funding only a year before suddenly found it impossible to raise capital. This sudden change means dramatic shifts in operating strategies for startups, often leading to reduced headcount and a focus on becoming profitable. Similarly, in countries with high inflation and currency devaluation, managing revenue and expenses can become difficult. In certain sectors, the cost of funds, for example in fintech lending, can become prohibitive. While the macroeconomy effects startups in all markets, the volatile nature of the macroeconomy in emerging ecosystems makes such strategic choices even more painful.

The second module of EOV examines where the talent for startups comes from in various countries. One of the critical factors influencing entrepreneurship in emerging markets is the availability of the right type of talent. These regions are characterized by a diverse pool of human capital with varying levels of expertise. Entrepreneurs must deal with talent shortages in certain specialized fields while harnessing the potential of a young and eager workforce. Moreover, cultural nuances and language barriers can impact team dynamics, requiring entrepreneurs to cultivate a deep understanding of local work environments and adopt effective cross-cultural communication strategies. Module 2 will examine strategies that founders can undertake to identify key technical and business talent to develop and grow their companies.

The third module deals with sources of financing for entrepreneurial ventures across different ecosystems. Access to financing remains a pivotal challenge for entrepreneurs in emerging markets. Traditional funding avenues, such as venture capital and angel investors, may be limited, prompting entrepreneurs to explore alternative financing models. We will examine the role of government programs in jump starting a venture capital sector as well and how those programs can be effective. Crowdfunding, impact investing, and government-sponsored initiatives become crucial lifelines for startups seeking capital in many geographies and understanding where and how they fit into a startup will be explored. Entrepreneurs in emerging markets must be adept at navigating these diverse funding sources and developing resilient financial strategies to weather the uncertainties inherent in such economies.

The fourth module examines differences in legal and regulatory environments and how they affect startups. Navigating the legal and regulatory landscape is a complex aspect of entrepreneurship in emerging markets. Regulatory frameworks may be less established or subject to frequent changes, creating uncertainty for businesses. Entrepreneurs must be agile and proactive, staying abreast of legal developments and building relationships with local authorities to ensure compliance. Bureaucracy and corruption are often major hurdles that affect entrepreneurs and investors. Similarly, legal frameworks around the types of securities, bankruptcy regulations, and taxation can be major impediments to startups.

EOV’s fifth module examines how cultural differences affect the vibrancy of startups and how entrepreneurs and investors can succeed despite these cultural differences. Understanding and integrating with culture is a cornerstone of successful entrepreneurship in emerging markets. Culture often affects the desire of individuals to start companies. For example, in Japan, failure historically was severely punished. The most sought-after jobs were in large companies in which title and compensation were determined strictly by tenure. Similarly, in other countries, like Hungary, a pervasive attitude of the lack of personal opportunity and a lack of creativity provide a difficult context in which to start companies. In Francophone countries like Cote d’Ivoire, risk aversion also runs deep. De-risking the startup process may be important for fostering pioneering entrepreneurs. Cultural nuances also influence consumer behavior, market acceptance, and even team dynamics.

The sixth and final module examines exit strategies. Once a founder takes professional investment capital, they are committing to an exit at some point in the future. The availability of exits, however, is a pervasive and perplexing problem for many ecosystems globally. Given that much of the global growth in startups is less than a decade old, few ecosystems have solved this dilemma. As such, many of the venture capital investors still manage their venture capital funds with little realizations flowing back to investors. Ultimately, if attractive exits cannot be executed, then these venture capital firms will not be able to continue to raise new funds. As such, the exit issue is critically important to solve.

Grading / Course Administration:

The grading for the course will be 50% class participation and 50% final exam.

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