Reprinted from Negocios y Economía. Original article here.
By Maria Eugenia Hernández Gutiérrez (translated from Spanish by Eunice Kim)
Given that since 2003, Mexico’s stock market value has grown 10% while Brazil’s has only grown 2%, why then has Brazil’s GDP grown 3 times more than Mexico’s during this time?
Global business experts explain that Brazil has implemented initiatives to help small to medium sized companies grow, while Mexico has not been able to implement the growth of small to medium sized enterprises. Brazil also supports the idea of venture capital firms investing in small rising companies, whereas Mexico has neglected to do so.
Creating companies is not enough; learning the tools to successfully grow the companies is what facilitates desired changes to the economy. An entrepreneurial culture that is cutting edge – and is at the forefront of what works and what doesn’t – is needed in order to create successful companies. In fact, 80% of start-ups in the world are likely to fail in the first 5 years, and 90% in 10 years. For Mexico, 75% of start-ups are likely to fail the first year, and 90% within 5 years.
This usually happens due to the lack of capital and official subsidies. The funds for the small to medium sized companies are so sparse, and those funded by the government don’t make enough revenue. With only the help of the government, 9 out of 10 companies would be able to exist but not grow. Another reason why they tend to fail is due to the state’s lack of willingness to reform their infrastructure to be conducive to positive growth of small to medium sized companies.
A solution to such problems would be through a program like Endeavor. Over the past 10 years, the Endeavor program in Mexico has striven to help reduce the high rate of failure for new companies.
Currently operating in 15 countries in Latin America, Africa, Southeast Asia, and the Middle East, Endeavor is an international NGO with a global network of business leaders, academic experts and professionals that selects, mentors, and accelerates the best high impact entrepreneurs around the world. In 15 years, Endeavor has screened and provided feedback to 30,000+ candidates and selected 708 high impact entrepreneurs from 443 companies. Supported and mentored by a growing network of 3,000+ local and global business leaders, these entrepreneurs have created over 180,000 high-value jobs and generate more than $5 billion in annual revenues. Endeavor’s support catalyzes a chain reaction in the larger economy – driving investment, creating role models, and fostering the conditions for the next Silicon Valley in Rio or Cape Town, Cairo or Jakarta. In fact, Thomas Friedman, the author of “The World is Flat 2.0,” journalist, and third time winner of the Pulitzer Prize, has described the Endeavor model as “the best anti-poverty program of all.”
In Mexico, Endeavor has been able to implement numerous projects and establish new offices in different regions of the country, such as Puebla, Yucatan, Baja California, and Distrito Federal. Linda Rottenberg, Co-Founder and CEO of Endeavor, says that the organization’s mission is to encourage public policy initiatives that help the growth of businesses.
In Mexico, Endeavor was the first of its kind to receive resources from the Secretary of Economy to work on specific projects to facilitate the growth of new companies.
Endeavor also helped change operational rules provided by the Secretary of Economy and the fund dedicated to small and medium sized companies so that the high impact, strategic projects can obtain up to 85 percent of the investment necessary to reach the next level of growth. Since 2005, Endeavor has annually received 5 to 6 million pesos from the fund dedicated to small and medium sized companies.
The success of the program can be attributed to the careful selection of the champions: high impact, innovative men and women who risk capital and create jobs. The selection process can be separated into two categories: the nomination of a company and the official decision on an Endeavor entrepreneur. Regional offices nominate companies who can benefit from strategic services in financing and the mentor network and strive for exponential growth. Statistically, the high impact entrepreneurs of Endeavor are able to generate income three times faster than those without the support of Endeavor. The companies promoted by Endeavor have registered annual sales growths of more than 45 percent and incomes of over 11 billion pesos, creating about 20,000 jobs.
Once a company is nominated by Endeavor, they have the opportunity to participate in an International Selection Panel, where they are met by a jury composed of individuals who represent Fortune 500 companies, consulting firms, and the top business schools of the U.S. If the panel comes to a unanimous decision, the nominated companies become promoted to Endeavor Entrepreneurs.
In January, the Endeavor Catalyst fund invested $2 million into Globant, a software developing company whose headquarters are in Argentina. In March, the fund completed a joint investment with Intel Capital to finance the company Minha Vida, a website promoting a culture of health and well-being in Brazil.
At the beginning of this summer in London, the International Selection Panel gathered for the 44th time and discussed the potential of 17 entrepreneurs from Brazil, Colombia, Jordan, Lebanon, Mexico, and Uruguay.
Representing Mexico at the panel, Gabriela León, CEO of Gresmex. introduced a company that produces a line of surgical disinfectants and doctors that are able to cure multiple viruses without the use of highly toxic substances.
Héctor Sepúlveda and Luis de Yturbe attended the panel on behalf of Litebuilt, which revolutionized the construction industry in 2008 with the development of a concrete blog that imitates the LEGO toy piece and provides more efficient, sustainable solutions than the traditional construction methods.
Also attending the panel were Diego Solórzano and Jimena Pardo, founders of Carrot, a company that issues car rentals via a monthly pay that includes rent, gasoline, insurance, service, etc. and can be used for hours or days in specific locations within Mexico.
During the remainder of 2012, there will be two more International Selection Panels, one in Istanbul in October and the other in Miami in December. Representing Mexico will be Marco and Alexandra Gallardo, whose company PowerPet produces snacks without additives or conservatives for pets, along with scientist Alberto Osorio who created the first safe technique to correct farsightedness. Edna Fong created Jaztea, which produces tea ice cream and drinks with natural flavors. Roberto Quintero and José Irigoyen successfully created Cinemagic, a company that brings movie theaters to the most isolated parts of the country, and even succeeded to obtain an international certificate in 2010 at a panel in South Africa. Mauricio Pariente and Alejandro Chiliub have sold canned tuna, using a new packaging that offers consumers with cans with higher quality and no conservatives. The recent discovery of natural gas, including shale gas, in the Gulf of Mexico has motivated the state of Veracruz to conduct studies on the feasibility of starting a regional Endeavor project to contribute to the development of innovative projects in the agriculture, energy, education and technology industries.