Doing Business in Baghdad

The risks and rewards of building a luxury hotel in Iraq; more "exit" opportunities for angel investors; looking to student entrepreneurs to buoy Appalachia, and more

by David E. Gumpert

How Do You Spell Entrepreneurial Risk?

How about I-R-A-Q? A group of entrepreneurs is wading in with a proposal to raise $5 million from investors to convert a 58-room building into a five-star hotel in Baghdad's Green Zone by this August. Jim Cook, a founder, paints a romantic image in a flyer for prospective investors: "Guest rooms will be outfitted with the most comfortable bedding, state-of-the-art communication and entertainment machines, and the bathrooms will have custom steam bath-shower attachments and accessories…. The environment will be one of refined luxury and comfort to foster the business, intellectual, and cultural relationships amongst the ruling classes that are commonplace during and after a period of war in a major metropolitan area."

Cook says his team's market research over the last year identified more than 4,000 prospective guests, whose main choices now are two large Baghdad hotels that "have the equivalent to U.S. roadside motel standards."

To the obvious question, Cook says the group promises "the most effective security procedures and provisions in the world…. Security is our largest cost and the foundation of the experience of our hotel."

Oh, and the price for this experience? $1,500 a night for a standard room, $5,000 for a suite. "These rates will make our hotel the most expensive in the world," says Cook. "We have put a price on making important people comfortable in a very uncomfortable place." And if the venture is sucessful, those kind of rates will create profits of $1 million to $4 million monthly, he adds.

Angel Investors: Flying Higher

According to a survey of more than 120 angel-investor groups conducted by the Angel Capital Assn., "Just under 30% of the angel groups reported distributing returns to their member investors in 2006, nearly double the 15% reported in 2005."

That sort of activity has encouraged more investing—an average of 7.4 investments were made in 2006, with average total funding of $1.78 million, vs. an average of $1.45 million in 5.5 deals the previous year. The most popular investment targets: medical devices, software, and biotech.

Can Student Entrepreneurs Help Lead the Way in Revitalizing the Appalachian Region?

Organized efforts to stimulate entrepreneurship over the last decade have provided only modest help to the chronically depressed Appalachian region. More than 1,200 new businesses have generated 5,200 jobs, but "high growth companies haven't materialized…to significant levels," says Debbi Brock, a professor at Berea College in Berea, Ky., in a research paper.

Among the obstacles Brock blames are poor infrastructure, insufficient broadband, lack of support services, and geographic isolation. She also points to "a collective mentality [that] discourages individualism and standing out from others."

The region is now hoping a two-summer program at a local college "can make a concerted effort to teach students about entrepreneurship and develop their leadership skills" to help the region economically, says Brock. Students will have to develop a plan for a real business, and present it to a panel of judges. A key program goal: "To encourage students to develop their own 'entrepreneurial mindset'…to stop thinking and acting by the old rules, and start thinking with the discipline of a habitual entrepreneur," she says.

While it's too soon to assess the impact of the program, which started in 2004, Brock says students in self-assessments showed significant improvement in self-confidence, presentation skills, and dealing with ambiguity and uncertainty.

Building an Emotionally Satisfying Business

In his new book, Small Business, Big Life (Thomas Neslon; May, 2007), author Louis Barajas argues that, "The purpose of your business is to give you not just more money but also more life." Barajas encourages owners to develop a "vision" that then leads into developing a "business blueprint," which he defines as "all the various functions that must be accomplished to keep your doors open." Then it's time to move on to business systems, to make the blueprint "automatic." The advice isn't especially new, but the focus on using a business to create lifelong satisfaction is refreshing.

David E. Gumpert covers business/health issues and also writes the biweekly What Entrepreneurs Need to Know column.