Another successful Forum, other interesting Lessons Learned, Check it out:! September 12, 2014 EcoSystem Forum Championing the Ecosystem The third EcoSystem Forum series, powered by J.E. Austin Associates, was so well attended that we barely had enough room for all, nevertheless, this created a more intimate afternoon with our facilitator Ahmed El Alfi. With a broad range of participants, including some first time Georgetown students, this forum focused on how, passionate and committed private sector leaders/ champions, can drive entrepreneurial ecosystems to thriving hubs of innovation. Having founded some of major ecosystem organizations in Cairo, Ahmed El Alfi is a perfect example of a true entrepreneurial ecosystem champion. With his no-nonsense style, Alfi is a force to be reckoned with. During the revolution, most investors were backing out of Egypt and tuning away from the political and economic uncertainty. “Nobody knew what was going to happen next,” recalls Mike Ducker, who worked as the Entrepreneur-in-Residence in Egypt during that time. But Alfi chose to do the opposite and instead founded Sawari Ventures in 2010 (an early stage Tech venture company), Flat6Labs in 2011(Egypt’s first Accelerator), and his flagship venture Nafham, a nonprofit that makes K-12 educational courses free online (like Khan Academy). Sawari Ventures and Flat6Labs have invested in close to 60 companies in the past 3 years. At that point, Alfi decided to double down his investments but still with the objective to give back to the ecosystem; he leased part of the American University in Cairo’s Greek campus and transformed it into a technopark. But why does he do it? “I just have a really strong belief in the young people there [in Egypt],” he says. This statement arose from the question on everyone’s mind, how can they help the way that Alfie has? Steven Koltai, founder of Global Entrepreneurship Program and Koltai and Company LLC, warned that the efforts of large institutions/donors working with small businesses is sometimes like being in “a dance between a hippo and a mouse. It always ends badly for the mouse.” The irony of large donors trying to help small entrepreneurs is one, that very few donors have the personnel with experience in entrepreneurship, and two, the programs are too large to fit the individual needs of a small business. What then can aspiring donors do to help champions help ecosystem development? Alfi recommends four important ways to successfully champion a new ecosystem: Invest in youth: Much of the discourse on youth in development, particularly in the Middle East, views it as a threat to security as increasing numbers of young and educated people enter a workforce that can’t provide for them. Alfi, however sees youth not for their risk, but for their potential. According to Alfi, youth are driving the innovation of today from the bottom up. “They feel empowered; they want to start their own companies. They don’t want the typical government jobs anymore.” Investing in youth and nurturing in them the dream of self-determination is critical to fostering an ecosystem. Provide alternative education: Nevertheless, the issue of strained institutions in the face of a rising youth population is very real. In Egypt alone Alfi says the government will have to double its current number of classrooms to keep up with the future wave of youth seeking education. Investing in alternative and creative forms of education now is an important way to relieve pressure from government institutions and mitigate potential obstacles to the ecosystem. Organizations like Nafham that provide free educational material online, are just one example of ways people can supplement educational efforts. Nafham currently provides 85,000 lessons a day to users who watch an average of 8 videos a month, indicating alternative education tools are in high demand. Helping the government find its role in supporting entrepreneurs: Governments’ antiquated regulatory frameworks, and stifling bureaucracy prevent growth, hurting young businesses. A thriving ecosystem thus means leaving the government out whenever possible. In Egypt, Alfi says, young businesses enjoy lower valuations and multiples than large businesses because they have to wade through so much arduous bureaucracy on the way up. Likewise, once a company becomes large and has passed through the regulatory hurdles, they enjoy a protective barrier to entry from new competitors, thus enjoying higher valuations. In response to an official who claimed they were cutting the red tape in government to streamline business processes, Alfi said, “You’re cutting it lengthwise, into even more strips.” Alfi also says that governments are motivated more by fear than by opportunity. Champions who can either bypass governments or push for reforms that reduce the political leaders risk will be more successful. Direct funding to early stage companies: Funding that focuses on enabling the enablers of the ecosystem will be more efficient than funding entrepreneurship through governments. Rather than compete with governments in the private sector, Alfi seeks to supplement what they do by providing direct funding. Investing directly in early stage companies and other corporate funding intermediaries consistently shows more follow-on investments than investing though other routes. The idea behind this is that these private companies, particularly companies that provide social value, know best how to foster and grow innovation. Thus there is less likelihood for funding to get caught in an intermediary layer of bureaucracy and politics. The discussion following Alfi’s talk sparked further insights from others on obstacles they experience in enabling business environments. Bill Baldridge, head of the Economic Growth Department of USAID’s Middle East Bureau, concurred that government receptivity to suggested reforms to enable entrepreneurship in Egypt has been a major obstacle he has experienced. Matt Gamser of the IFC/SME Finance Forum said that the Corporation mostly assists SMEs through financial institution intermediaries, most commonly banks, but also private equity funds of various types. They are interested in doing more to help young entrepreneurs in Egypt and the MENA region. “Our constraint is less in finding funds than in finding capable institutions serving this market sustainably.” John May of the Angel Capital Association asked Alfi the ultimate question: “What do you see for the future?” To which he responded, “The possibilities are infinite.”
Posted on: Tue, 30 Sep 2014 20:40:47 +0000
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