Small Business

Commentary: A New Global Growth Engine


Entrepreneurs running sophisticated companies with the potential to create millions of jobs in the developing world are often overlooked by outsiders, say Deirdre Coyle Jr. and Anne Habiby

Phanindra Sama will tell you the reason he became an entrepreneur is that he missed a bus. In 2005, he was trying to get from Bangalore to his hometown of Nizamabad for Diwali, the annual Hindu festival of lights. But tickets, available only at the bus station, had sold out before he could buy one.

That inspired Sama, then an engineer designing digital chips for Texas Instruments (TXN), to create redBus, a website and a network of kiosks, newsstands, and small retailers where customers can see schedules and buy tickets for thousands of bus routes across India. RedBus, which sold 1.8 million tickets in 2009, now has more than 200 employees and is heading toward sales of $30 million this year from commissions and fees paid by bus lines. "The operators had never used any technology of any kind," says Sama, 30. "We demonstrated how [we] could help them grow their business."

Young, dynamic entrepreneurs like Sama are showing up all over the emerging world, building companies that could create new industries—and millions of jobs. But fast-growing developing-world companies like Sama's often stall out because few outsiders know they exist. And their markets offer little in the way of entrepreneurial infrastructure such as venture capital firms eager to invest, small business banking services, and targeted government programs such as loan guarantees. Hoping to identify the most dynamic businesses in the developing world and raise their profile, we teamed up with Harvard management professor Michael E. Porter to found AllWorld Network. We have surveyed 300 fast-growth companies from Africa, the Middle East, and South Asia.

Those companies grew at an average of 40 percent annually over the last three years, and most of them powered through 2009 even as the global economy remained in a funk. In industries ranging from technology to transportation, fashion to finance, media to medicine, they collectively employ over 50,000 people. And they're not just in hot markets such as India and South Africa, but also in Pakistan, Afghanistan, and other troubled countries. While these companies are prospering, to reach the next level they need greater visibility to attract capital, talent, and opportunities. Our research indicates there are at least 2,500 other companies with similar potential to drive economic progress in the next five years.

Our findings challenge popular assumptions that paint entrepreneurs in emerging markets as running tiny operations with few prospects for growth. Though thousands of such companies exist, and governmental and philanthropic efforts are working to help them, we found many genuine growth businesses are often overlooked. Very little outside assistance is available for these companies because many fly below the radar of development agencies and investors.

When we compared the entrepreneurs leading these ventures with their counterparts in the U.S., we discovered that both groups look very similar. Most have graduate degrees and several years experience working for multinationals, their average age ranges from 30 to 33 when they form their companies, and most are self-financed. Because many emerging market founders have worked for U.S. and European corporations, they know how to shape products and services for different cultures. Such adaptive innovation could create breakthroughs in improving the lives of millions of people—and help spawn companies with immense promise. Developing countries often have underserved niches that can offer rich rewards to those who cater to them.

Just as important, successful entrepreneurs can fuel a nation's aspirations. The companies we have surveyed often serve as a training ground for entrepreneurs, giving employees the skills and financial resources needed to spin off their own companies. And over 70 percent of the CEOs we have interviewed plan to start another company in the next two years.

What holds back entrepreneurs in emerging markets is not a lack of skill or a misunderstanding of business but lack of visibility. If no one apart from their customers know they exist, it will be difficult for them to grow and grab the attention of investors and partners, both at home and abroad, who could help them realize their full potential. By assisting these companies in boosting their profiles we can unleash a new wave of global growth.

Deirdre Coyle Jr. and Anne Habiby are cofounders of AllWorld Network, which researches and ranks fast-growth companies in emerging markets.

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