Boosting Emerging-Market Entrepreneurs

A non-profit is offering small, high-growth companies know-how, connections, and encouragement to think big. Revenues are growing

by Jeffrey Gangemi

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In 1997, CORE, an Argentinian computer-systems security company, was contracted to develop software for Secure Networks, a Canadian security company that made tools to scan networks for security holes. When that company sold for $25 million to Network Associates (MFE), CORE co-founder Jonatan Altszul and his five partners, who had developed almost 50% of Secure Networks's software, only received $150,000 from the deal. Though happy to get a cut, Altszul couldn't help thinking his company should be the one making the big bucks.

Altszul realized that developing software on a contract basis alone wasn't the way to build a company with legs. But he says he and his partners lacked the connections and the business know-how to get started doing what he thought would lead to sustainable growth: developing new products and selling them internationally. "There were no companies in Argentina I could use as models," says Altszul.

So when Endeavor, a non-profit with an unusual approach to international economic development, contacted Altszul to interview him for its development program, he agreed. Soon a team of MBA students was helping the company rethink strategy, businesspeople in Argentina and the U.S. were providing advice for free, and the company formed a management team in Boston. In the process, Altszul raised rounds of angel investing and venture capital.

Few Make the Cut

Endeavor provides all the services a traditional U.S. VC firm might provide, except for direct capital investment or demanding a stake in the company. Participants are hand-selected through arduous rounds of interviews, with about 267 entrepreneurs out of 15,000 making it in since the organization was founded in 1997.

Startup by startup, Endeavor is hoping to prove that by supporting small companies with high growth potential from emerging markets, job and wealth creation will help develop a strong middle class. At the same time Endeavor, with offices in Argentina, Brazil, Colombia, Mexico, South Africa, Chile, Turkey, and Uruguay, is creating new markets for venture capital by playing matchmaker between VCs and the companies it helps build, while promoting equity investment for entrepreneurs.

Why doesn't Endeavor provide financing? Its philosophy is that high-potential businesses, especially in the developing world where there is less of an entrepreneurial environment, benefit most from a serious strategy overhaul. And Endeavor's non-profit status allows it to help its entrepreneurs without planning a quick exit strategy or an initial public offering. "As odd as it may sound, the money part of the VC market has become a commodity," says Nick Beim, general partner at venture capital firm Matrix Partners and a member of Endeavor's board of directors.

Ten Times Minimum Wage

Of course this doesn't mean Endeavor companies wouldn't benefit from an infusion of cash. They just need other things more, including management advice, strategy consulting, and mentorship—or so the thinking goes. Endeavor's most important benefit? Its help in showing small companies how to start thinking big, a virtual prerequisite for companies seeking venture funding in the U.S., says Linda Rottenberg, co-founder and chief executive officer of Endeavor.

Often, after just one year or so of support, Endeavor-backed companies grow like crazy. Between 1997 and 2006 Endeavor's 267 entrepreneurs and about 160 companies have created 75,000 jobs in the eight countries where it operates. On average, Endeavor companies pay 10 times the minimum wage. And Endeavor companies also provide more training and benefits on average to their employees than their non-Endeavor counterparts.

Each Endeavor business employs an average of 214 people, 86% provide training, and 91% provide more benefits to their employees than is required by law in their respective countries. Participating companies generated $1.5 billion in revenues in 2006 alone.