World Peace through Entrepreneurship… But Only if You Fund It

by Steven Koltai on March 13, 2013

Consider a worrying fact: the Middle East and North Africa (MENA) suffer from a twenty-five percent youth unemployment rate—the world’s highest. Add this: two of every three Arabs are aged twenty-nine or younger, and half of those are under fifteen. These ingredients create a volatile brew. The largest, fastest growing, and arguably most politically active segment of MENA’s population struggles mightily to find gainful employment, leaving it frustrated, angry, and with lots of spare time. Is it any wonder then, that a desperate, young, Tunisian vegetable seller set himself on fire in a public square in 2010, triggering a tidal wave of political transformation that continues to boom through the Arab world? The big news flash for the world is that Arab youth have made it clear they no longer tolerate chronic unemployment and economic hopelessness. They are demanding change.

The fact that escalating, crushing youth unemployment could induce political change might seem obvious. For example, the World Bank reports that fifty percent of youths who participate in rebel movements point to unemployment as the primary reason for joining. As for MENA, an International Labor Organization report on youth and unemployment cited the region as particularly prone to social unrest, since a “jobs crisis further threatens the well-being of households and young workers through rising levels of social discontent and instability.”

In June 2009—before the Arab Spring began—President Obama surfaced a bold and prescient idea for an exciting new tool in American foreign policy: entrepreneurship. Entrepreneurship is one of the key drivers of job creation both at home and abroad. According to the Kauffman Foundation, all net job growth in the U.S. from 1985 to 2005 occurred in small- and medium-sized business, almost all of which were begun by entrepreneurs. This is even more the case in developing countries, where the number of multinationals or large enterprises—especially those not owned by the state—is usually tiny.

It was thus an extraordinary confluence of events that the administration’s new initiative to promote entrepreneurship around the world—particularly the Muslim world—pulled me to the State Department in August 2010, only to be followed in short order by the tidal wave of the Arab Spring that was in very large measure a reaction to precisely this lack of jobs for a rapidly growing young generation. The problem and its solution appeared to fit together hand in glove, and I was optimistic about being part of the development of this solution by creating and managing the Global Entrepreneurship Program (GEP) at the State Department. Little did I realize, coming from a thirty-year career in the private sector, that just because an idea is timely, much needed and, indeed, much touted, does not necessarily mean it will also be properly funded.

The Global Entrepreneurship Program (GEP) is an effort to promote entrepreneurship in Muslim countries with a focus on Egypt, Indonesia, Turkey, Lebanon, Jordan, and the Maghreb countries of Tunisia, Algeria, and Morocco. The essential premise for the program is that spurring entrepreneurship is about much more than providing start-up capital or training programs. Rather, it is about creating an ecosystem in which entrepreneurs can thrive. From this idea grew a framework I developed and continue to use in my private consulting practice today: the “Six + Six Entrepreneurship Ecosystem Model.” The model describes six actions required to build a successful entrepreneurial ecosystem (Identify, Train, Connect & Sustain, Fund, Enable, and Celebrate entrepreneurs) and six actors who must be involved in their implementation (NGOs, Corporations, Foundations, Government, Academic Institutions, and Investors). Only by engaging all pillars can true progress toward a healthy entrepreneurial ecosystem be achieved.

An example of a practical program that combines several of these pillars is an “entrepreneurship delegation,” which brings twelve to fifteen successful entrepreneurs and early-stage investors to a foreign country (usually an emerging market seeking growth and stability) to meet face-to-face with aspiring local entrepreneurs. These programs are quite comprehensive: they identify entrepreneurs with a business plan competition; include training workshops; connect entrepreneurs through networking events; sustain startups through mentoring; and often result in residence at an incubator or funding from delegates (international and local) who get excited about the startups in their very midst. I have led five official, State Department–sponsored entrepreneurship delegations to eight countries. The most recent trip, to Turkey in June 2012, spurred more than $100,000 in immediate commitments from investor delegates, as well as several ongoing mentoring relationships.

In Egypt, there is now a successfully functioning business incubator, Flat6 Labs, that has housed over two dozen companies, several of which have been funded for an aggregate amount currently in excess of $1 million, despite Egypt’s ongoing chaos and uncertainty. Notwithstanding the success of this program, GEP received virtually no direct funding. I quickly learned that Washington and the State Department march to the beat of an entirely different drummer than does business, particularly the startups that have fostered growth and innovation over the last thirty years. I started referring to this as the difference between “the way we do things in America” versus “how the State Department functions.”

GEP now suffers from inadequate budgeting and staffing and struggles to see substantial achievements in promoting entrepreneurship worldwide. Unfortunately, notwithstanding clear evidence of entrepreneurship’s benefits, political officials and other key stakeholders have failed to turn the idea of entrepreneurship as a foreign policy tool into a reality. I hope and believe that in the years to come, the U.S. will embrace entrepreneurship development as a fundamental part of its foreign policy to resolve socioeconomic, political, and, ultimately, security challenges, both in the Middle East and throughout the world.

 

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