Everywhere you look today, countries are trying to develop entrepreneurial ecosystems to drive economic flexibility, diversification and growth. While entrepreneurs are not the panacea for all that ails an economy, a dynamic ecosystem can provide the ideal conditions for it to create and scale ventures.
Unfortunately, there is no formula for developing an entrepreneurial ecosystem and trying to emulate Silicon Valley is a waste of time. The challenges and opportunities of our region vary from those of other emerging economies and certainly from developed ones. Therefore, we need to create our own formula based on our local realities and advantages.
Our success rests on establishing the right foundation. The following are three important requirements for establishing an ecosystem to promote and nurture entrepreneurs and help them to build remarkable companies.
Heavy investment in education
While the private sector usually takes credit for innovation, the reality is that large and sustainable government spending has a more significant impact on innovation. Smart governments choose strategic sectors for large-scale investment that they believe will drive long-term, sustainable economic growth. Private sector participation usually follows and commercialises early technologies developed by the government. Just look at the history of the internet, GPS, renewable energy and artificial intelligence in the United States; Massive government spending led to breakthroughs that the private sector then used to build companies such as Apple, Microsoft and Tesla.
Given the nature of our economies, government investment should focus on emerging technologies, renewable energy, transport/logistics, and financial services. We have a tangible opportunity to drive innovation in these areas with sustained investment in education and research and development. Once governments commit to developing these areas, significant resources will be mobilised by the private sector. This will eventually lead to an increase in the quantity and quality of start-ups.
Robust financing options
Funding is the lifeblood of creating and scaling an early-stage company. Financial resources are necessary to hire a great team, invest in sales and marketing and for product development. Without funding, an entrepreneurial ecosystem will not create enough early stage companies nor scale successful ventures. While progress has been made, we need to do more to increase the liquidity for entrepreneurs whether they are starting a company or scaling one.
We need structured and sustainable governmental programmes to funnel funds to start-ups directly and indirectly. Government and government related entities should allocate capital to directly support early stage companies in the form of equity investment, grants, free services, subsidies or contracts. Indirectly, the government should bolster the venture capital industry by providing capital to the best firms. This will not only lead to the efficient and effective distribution of capital to start-ups but will also develop strong local venture capital firms.
Abundant and accessible human capital
Without the appropriate workforce, it is difficult to build companies that can compete in today’s competitive markets. The best economies have excellent and evolving tertiary education to ensure they are creating the employees of the future. Additionally, they implement flexible immigration policies to attract the best global talent to their shores.
Unfortunately, workforce quality and quantity are a significant weakness in our region. We need to dramatically change course should we want to drive innovation rather than copy innovation. We must urgently build our workforce both organically and inorganically. Tertiary education must focus on future jobs rather than those that are dying. We need strong educational institutions that are geared towards the strategic sectors mentioned earlier and that teach the required technical skills. We need well-funded research institutions that develop and attract students who are passionate about experimentation and pushing boundaries. We also need to allow regional and global talent to participate in our workforce with limited costs especially those with specialised skills necessary for the development of our ecosystem.
Amjad Ahmad is founder and managing partner at Precinct Partners