Entrepreneurship and Millennials Are Thriving in Emerging Ma…


In America, millennial entrepreneurship is down. Despite the apparent strength of the startup and technology sector, millennials are projected to be the least entrepreneurial generation: Entrepreneurship rates for people under 30 have fallen by 65 percent since the 1980s.

Plenty of ink has been spilled on the root causes behind this troubling phenomenon, from high student debt to the rising costs of healthcare. Yet there is one part of the world where entrepreneurship is alive and well: emerging markets. In such nations, millennials are both a powerful consumer demographic with well-defined tastes and on the cutting edge of the entrepreneurial revolution. In these areas, millennials help drive economic transformation by opening a wide range of businesses and catering to diverse needs.

So why is millennial entrepreneurship on the rise in developing economies? The answer is a confluence of complex factors, including capital, demographics and innovation environment.

Demographics and attitudes.

First, emerging markets simply have more young people than developed markets. By one estimate, emerging markets account for some 89.8 percent of the global population under 30. For instance, despite talk of a rapidly aging population, China’s working-age consumers (ages 15-59) are estimated to expand by 20 percent — nearly 100 million people — over the next 15 years.

And in emerging markets at least, millennials are more optimistic about the future. In a survey of 8,000 millennials across 30 countries, emerging-market millennials expected to be better off financially (71 percent) and emotionally (62 percent) than their parents. In contrast, pessimism was rampant in developed economies, where only 36 percent of millennials expected the social and political situations to improve over the next year. Many more millennials expected to be worse off than their parents.

Another catalyst for entrepreneurship may be the potent mixture of perception and ambition. Though 76 percent of millennials emphasized that business was a positive force in the world, the majority believe that large corporations can — and should — do more to alleviate widespread concerns such as conflict, inequality and corruption. In a similar vein, 65 percent of millennials in emerging markets believe their development needs aren’t being met by employers. The vast majority of millennials (69 percent in southeast Asia and 80 percent in Latin America) perceive entrepreneurship as a sign of success.

It’s easy to see how this dissatisfaction with the status quo, combined with a hunger to do better, can translate into a greater number of entrepreneurs.

Increased innovation.

The most recent Global Innovation Index, a survey of 128 countries, showed serious gains for emerging markets: China rose three spots to 22nd place, with additional gains by the United Arab Emirates, Vietnam and India (which rose six spots to 60th place). Other innovation indexes show similar results, with notable gains by emerging economies such as Malaysia, Poland and Thailand.

Part of this increase likely stems from leapfrogging — a byproduct of emerging markets and large, tech-savvy millennial populations. Leapfrogging bypasses the lack of existing infrastructure by skipping stages in development, often with the help of smartphones. And leapfrogging is growing faster in emerging markets than anywhere else, thanks to low production costs and cheaper data. Kenya, for instance, overcame its lack of banks simply by introducing a mobile e-payment system (M-Pesa), while China’s Rizhao leverages rapidly improving solar energy tech over a centralized utility grid.

Related: Amazon’s Lesson About Disruption: Rattle Any Market You Can

Access to capital.

Even in the most developed of economies, venture capital is on the decline. Funding for U.S. startups fell 25 percent from the third quarter of 2015 to the first quarter of 2016, leading to a sharp drop in total valuations — a high of $61.5 million to just $18.5 million.

This trend isn’t limited to the United States. European startups also have seen a similar, if less drastic, slowdown, declining from 15.4 billion euros to 12.2 billion. Though this may be due to in part to the increasing availability of incubators (which tend to delay the onset of venture capital funding), it’s undeniable that capital is far less powerful (and less common) than it used to be. In fact, Harvard Business Review suggests that crowdfunding and angel investors are starting to supplant venture capital as the primary source of funding for startups.

Emerging markets, however, are a different story. In the second quarter of 2017, Asia’s venture-capital scene outpaced America’s. Much of that growth went to unicorns worth $1 billion or more. According to KPMG, Asian VCs invested a cool $39 billion into area startups, with China alone accounting for $31 billion. Chinese tech companies (particularly Alibaba, Tencent and Chinese Uber competitor Didi Chuxing) are looking further afield and investing their deep pools of capital in southeast Asian startups. For instance, Didi Chuxing (itself valued at $50 billion) invested $2 billion into southeast Asian startup GrabRegional startups took the lion’s share of VC funding for the fintech sector during the second quarter of 2017.

Related: 6 Things You Should Know If You’re Exploring Emerging Markets

Female entrepreneurship.

Lastly, in several emerging markets, the number of female entrepreneurs matches or exceeds that of their male counterparts. In Vietnam, some 30 percent of board members are women. Leaders such as Nguyen Thi Phuong Thao (the billionaire CEO of budget airline VietJet) and Ngoc Vu (co-director of incubator HATCH!) are household names.

The key to female success? Funding — albeit not in the form of venture capital, which continues to sport a pronounced gender gap. In the United States, 1,864 male founders have received VC funding, compared to only 141 women.

Instead, funding in emerging markets often comes in the form of microfinance. These modest, low-interest loans spur small businesses. The concept is simple: Nonprofits bet that lending small sums to female entrepreneurs in underdeveloped areas can help individuals — and in the process, stimulate local economies. One such organization, Kiva, has loaned more than $690 million to over 1.3 million borrowers across 86 countries. Even more impressive? Kiva’s 98 percent repayment rate.

Granted, microfinance is not the end-all of international aid. At times, it can be hampered by stringent repayment terms, insufficient government regulation or violations of terms (such as replacing a roof instead of starting a business). Still, for women in these underserved areas, microfinance is a lifeline. Access to credit institutions, insurance and savings are highly limited. Even if small loans aren’t a silver bullet, they’re certainly a catalyst for both entrepreneurship and a heightened standard of living.

Related: Want a Great Way to Win Over Millennials in Africa’s Emerging Markets?

Surging entrepreneurship has a number of diverse causes, all of which yield some interesting lessons. If anything, these successes illustrate that a nation’s level of development isn’t a prerequisite for entrepreneurship. Nor is age a determining factor in tenacity, drive and business success.

Source link

About Rev_Rod

Check Also

Telltale Signs That You Shouldn't Be Raising Venture Ca…

[ad_1] Most entrepreneurs think they need VC funds to start a business, but the reverse …

Why Emotional Fundraising Is Bad for Your Business's He…

[ad_1] Bespoke Investment Group co-founder Paul Hickey on how to stop the capital killers inside …

Why Traditional Venture Capitalists Don't Invest in Can…

[ad_1] Not all VCs are interested in cannabis companies. But some are. Find out who …

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.