Steven R. Koltai
Senior Advisor for Entrepreneurship, U.S. Department of State
The ancient proverb, often attributed to Lao Tzu, tells us that when you give a man a fish, you feed him for a day, but when you teach him to fish, you feed him for a lifetime. While rarely cited as the foundation for foreign policy, these common-sense words capture the spirit of entrepreneurship as a core component of American efforts to advance economic development around the world. This focus is especially appropriate given that millions around the world observe Global Entrepreneurship Week annually every November and as the United States celebrates the launch of the Global Entrepreneurship Program in Jakarta with one of our fastest-growing trading partners, Indonesia (see page 163 for an essay by one of the driving forces of Indonesia's entrepreneurship transformation).
The new emphasis on entrepreneurship stems from a long-held American belief in the power of individuals and their ideas. Entrepreneurs and the new businesses they create are the engines of economic growth and job creation, which, in turn, are the underpinnings of stability and opportunity. Applied to an international context, as Secretary of State Hillary Clinton has explained, it's an approach "based on investment, not aid; on supporting local leadership and ideas rather than imposing our own."
In the spirit of fulfilling a pledge that President Obama made in Cairo in June 2009, the administration aims to spark a cooperative international effort by governments, NGOs, and private-sector participants to improve the environment necessary to allow entrepreneurs to flourish. In April 2009, the President hosted the first-ever Summit on Entrepreneurship, gathering 250 entrepreneurs from fifty-five countries in Washington. One of the delegates to this Presidential Summit on Entrepreneurship likened the experience to "getting an MBA from the best global university in the world." The Summit has sparked many follow-up conferences.
The administration's international entrepreneurship effort is being led from the State Department, where we have created the Global Entrepreneurship Program (GEP). This program harnesses a variety of tools and instruments that support and empower potentially high-impact entrepreneurs overseas. The GEP catalyzes, coordinates, and consults with private partners and government agencies in the United States and in target countries around six key areas considered essential to creating successful entrepreneurial ecosystems.
In some countries, the GEP is driven by Entrepreneurs in Residence (EIRs) and local GEP offices. EIRs will help to coordinate and expand partner programs on the ground, and also act as role model mentors based on their business experience both in the United States and in their host countries. While EIRs have long existed in venture capital firms and universities, they are new to the world of international economic development.
GEP partners are drawn from five key sectors: NGOs, corporations, colleges and universities, foundations, and financial institutions (especially private equity, venture capital, and other investment capital firms). These partners will work with U.S. agencies, especially the Agency for International Development, the Overseas Private Investment Corporation, and the Millennium Challenge Corporation, along with key institutions in the target countries. This new methodology is a dramatic departure from approaches taken in the past, engaging the private sector in a leading and innovative way.
Supporting entrepreneurship not only helps emerging economies where we work, but also is good for American businesses and investors.
The six areas of focus for the GEP will be to identify, train, connect, and facilitate funding for entrepreneurs as it works to provide better support in the public-policy sector and publicly celebrates entrepreneurs' successes. In each of these six areas, GEP aims to generate partnerships that extend what already is being done. For example, to "identify" many new entrepreneurs, one partner may run a competition for business plan ideas while another provides aspiring entrepreneurs with training that gives them a better chance at attracting funding. Both partner programs will be strengthened through the coordination of their efforts.
Some GEP program areas bring new or expanded tools to emerging markets. For example, angel investing is nascent or non-existent in many developing countries. Yet, according to the Angel Capital Association, which was spun off from the Kauffman Foundation a few years ago, more than 90 percent of U.S. startups benefit from angel investment. That's especially interesting because fewer than 20 percent ever receive traditional venture capital backing.
The GEP initiative is extending the model of angel investing that has developed
in the United States by helping to start investor groups in several of the countries where it is operating.
Supporting entrepreneurship not only helps emerging economies where we work, but also is good for American businesses and investors. It develops new customers in new markets, and allows U.S. investors to participate in the growth of these countries.
As President Obama put it, nurturing entrepreneurship is about helping individuals "take a chance on a dream—taking an idea that starts around a kitchen table or in a garage, and turning it into a new business, and even new industries, that can change the world." The administration's Global Entrepreneurship Program is a bold new effort we expect to become a permanent part of American foreign economic and development policy.
This essay is an excerpt from the Kauffman Thoughtbook 2011.