why becoming large matters

WHY BECOMING LARGE MATTERSHow Scalable, High-Growth Entrepreneurs Can Help Solve the Jobs Crisis

THE POWER OF HIGH-IMPACT ENTREPRENEURSHIP

a report from:

2

I.

II.

III.

written byJelena Djordjevic Endeavor Insight

3Endeavor InsightWHY BECOMING LARGE MATTERS: How Scalable, High-Growth Entrepreneurs Can Help Solve the Jobs Crisis

The Jobs Crisis

Why Entrepreneurs Who Scale Their Businesses are a Critical Part of the Solution

Examples of Entrepreneurs Creating Jobs Around the World

About

I. 4

II. 8

III. 12

IV. 26


The Jobs Crisis: More than 500 Millions Jobs are Needed by 2020

I.

U.S. & Canada

Latin America& the Caribbean

Sub-SaharanAfrica

Europe

Middle East& North Africa

Oceania

Asia254M

new jobs neededby 2020

38Mnew jobs needed

by 2020

66Mnew jobs needed

by 2020

27Mnew jobs needed

by 2020

3Mnew jobs needed

by 2020

45Mnew jobs needed

by 2020

133Mnew jobs needed

by 2020

Job Growth Needed to Reach Full Employment by 2020

6

I. The Jobs Crisis

The world needs to create more than 500 million new jobs by 2020 to provide career opportunities for those who are currently unemployed, as well as young people who will join the workforce.1 The bulk of job creation falls to countries in the developing world. In fact, close to 90% of new jobs needed in the next eight years must be created outside the United States 1 International Labor Organization, Global Employment Trends 2012.

and Europe. Asia and Sub-Saharan Africa both re-quire more than 100 million new jobs by 2020. Latin America must create more than 50 million new jobs. In most countries, the current pace of job creation can account for much of the job growth needed in the next eight years, but the total amount of jobs needed is unprecedented. In fact, almost 200 million people are

Source: International Labor Organization.

Close to 90% of the new jobs needed in the next eight years must be created outside the United States and Europe.

U.S. & Canada

Latin America& the Caribbean

Sub-SaharanAfrica

Europe

Middle East& North Africa

Oceania

Asia254M

new jobs neededby 2020

38Mnew jobs needed

by 2020

66Mnew jobs needed

by 2020

27Mnew jobs needed

by 2020

3Mnew jobs needed

by 2020

45Mnew jobs needed

by 2020

133Mnew jobs needed

by 2020


currently unemployed.Unfortunately, young people are often among

the hardest hit by both current unemployment and the lack of jobs for new workers starting their careers.2 Individuals between 15-24 years old are now three times more likely than other workers to be unem-ployed. In many countries, the unemployment rate 2 International Labor Organization, The Youth Unemployment Crisis 2012.

within this group is more than 25 percent. This acute lack of opportunity is frequently cited as a reason behind political instability in Europe, the Middle East and Latin America.

8

Globant employees at their office in Buenos Aires, Argentina.

9

Photo courtesy of Globant

Endeavor InsightWHY BECOMING LARGE MATTERS: How Scalable, High-Growth Entrepreneurs Can Help Solve the Jobs Crisis

II. Why Entrepreneurs Who Scale Their Businesses are a Critical Part of the Solution

Identifying Sources of Job Creation in Developing Countries

BrazilThe

Philippines Turkey Germany UK USA

10

0

20

30

40

50

60

70

80

90

100

110

10–249

Small & Medium (SME)

250+

Large

0-9

Micro

Employees Employees Employees

10

Source: Organisation for Economic Co-operation & Development.

Source: Country level economic census data. See page 26 for more information.

In developed countries, like the U.S., large companies are very

important job creators.

In countries without a substantial base of large companies, entrepreneurs who can scale SMEs

into large businesses are critical for job creation.

Unfortunately, developing countries don’t have as many large firms as countries like the U.S.

The OECD classifies companies into three categories based on number of employees:

Number of large firms per million people

108 97

333427

104

11

II. Why Entrepreneurs Who Scale Their

Businesses are a Critical Part of the Solution

Enabling entrepreneurs to scale their enterprises into large businesses is one of the most important mecha-nisms for solving the job creation crisis. Small and medium-size enterprises (SMEs) are plentiful in both developed and developing economies and exist across an array of industries and sectors. The potential im-pact of an entrepreneur who can scale a high-growth SME or start-up is quite significant. On average, an SME that grows into a large business creates more than 200 jobs.

While new micro-businesses and SMEs create jobs, they do so on a much smaller scale. On average, micro-businesses employ 2-3 people. The typical SME employs 20-30 people. It would take an enormous number of new 2-3 person or 20-30 person compa-nies to have a tangible impact on the hundreds of millions of new jobs needed around the world.

Unlike these small firms, companies that have already grown to be large, defined by the Organisa-tion for Economic Co-operation and Development as

having 250 or more employees, have been shown to be important job creators in countries like the United States.3 However, the base of large businesses is not significant in many of the countries that need jobs the most. Greece and Ireland, for example, each have less than 500 large companies. In developing countries, the proportion of large firms is particularly small. High-income countries with strong economies, such as the United States, Germany and United Kingdom, tend to have close to 100 large firms per million people. The middle-income countries of Brazil, the Philippines and Turkey each have less than 50.4 The proportion of large firms in low-income countries where economic census data is not readily available, such as Kenya, Cambodia and Bolivia, is also likely to be very low.

3 Bureau of Labor Statistics, February 2012.

4 National Economic Census Data. Endeavor Insight analysis, see page 26 for more detail


Source: Country level economic census data. See page 26 for more information.

A new microenterprise

2–3 jobs

20–30 jobs

200+ jobs

A new SME

A high-growth SME becoming

a large firm

Potential Job Creation Impact

12

Plant employees at Husk Power Systems in India.

13

Photo courtesy of acumen fund


III. Examples of Entrepreneurs Creating Jobs Around the World

14

10755%employeesannual job growth

average over last three years

Tekcom is one of the first companies in Vietnam to provide film faced plywood sheets. Tekcom both manufac-tures and distributes its prod-uct to consumers in country. In December 2011, the company also began exporting their products internationally.

“It is exciting to know that busi-nesses and offices are being built better because of our products. We hope that our continued expan-sion continues to benefit our employees and the communities around us.”

Photo courtesy of tekcom

Hoang Ich Tuan

YEAR FOUNDED

2007

SUPPORTERS

COMPANY

Tekcom

COUNTRY Vietnam

INDUSTRIALS & MANUFACTURING

III. Examples of Entrepreneurs creating jobs around the World

Endeavor and other ANDE members have supported a diverse group of scalable, high-growth job creators. This report provides examples across a variety of industries and geographies from Endeavor, Omidyar Network, Acumen Fund, New Ventures, SEAF and Ignia. These short case study examples are organized by industry to highlight the effects of entrepreneurs who create jobs. Each of the firms highlighted in this section have either grown into a large firm (i.e. 250 employees or more) and are on track to become large in the next 3–5 years.


Le Quang Canh

264

30%

The Hoa Binh Corporation (HBC) was founded in 2001 to assemble and provide genera-tors and agricultural machinery to consumers and farmers via its network of more than 160 distributors throughout Viet-nam. In addition to its sup-port of the agribusiness sector, HBC is the country’s leading producer of electric generators. HBC’s expansion over the last decade has resulted in a steady increase of assembly and pro-duction returning to Vietnam, providing a large number of low-skilled workers with jobs and mechanical training.

employees

Oscar Carillo

1,075

14%A former Formula 2 racecar mechanic, Carillo is the founder of MexQ. By deploying quality assurance teams to work directly in auto-motive manufacturing plants, MexQ reduces the likelihood and duration of production line failures. Now Oscar is taking MexQ to other high-volume manufacturing sectors including ceramics, home ap-pliances, and aeronautics.

“As our company grew, we made the decision to bring more of the as-semblage back to the local economy. That has led to an expansion of jobs that we are thrilled to see.”

employees

annual job growth average over last three years


Photo courtesy of seafPhoto courtesy of mexQ

YEAR FOUNDED

1999

SUPPORTERS

YEAR FOUNDED

2001

SUPPORTERS

COMPANY

MexQ

COUNTRY Mexico

COMPANY

HBC

COUNTRY Vietnam

INDUSTRIALS & MANUFACTURING

16

Cynthia Mkhombo Paata Kikodze

182

900

42%

39%

YEAR FOUNDED

1985

SUPPORTERS

YEAR FOUNDED

2002

SUPPORTERS

COMPANY

Masana

COUNTRY South Africa

COMPANY

Delta

COUNTRY Georgia

In seven years, Mkhombo has scaled Masana’s workforce from 7 to 900 employees who earn up to 40% more than the hourly minimum wage for contract cleaners within two years of joining Masana. In an industry where employees are often paid below the minimum wage and regarded as expend-able, Mkhombo focuses on helping her cleaners achieve their potential. In fact, four of Masana’s six operations manag-ers started their careers with the company as cleaners.

Delta Comm was founded in 2002 by physicists and inter-net technology experts, just as demand for internet access skyrocketed in Georgia. Delta builds and develops fiber optic cable networks necessary for internet accessibility, focusing on western Georgia. The com-pany has introduced internet services to the Adjara region of Georgia, and has become one of the country’s leading provid-ers of internet technology and technological services in the country.

“By creating jobs we are breaking the cycle of poverty.”

“It has been re-warding to see the way our company contributes to the country’s infra-structure, facili-tating economic growth and job creation, both as our company grows, and as the virtual network throughout Geor-gia is established. We are helping individuals and businesses access the world.”

employees

employees



Photo courtesy of masana hyGeine services Photo courtesy of seaf

FINANCIAL & PROFESSIONAL SERVICES


Kenneth Mendiwelson Roshaneh Zafar

550

650

27%

72%

YEAR FOUNDED

2005

SUPPORTERS

YEAR FOUNDED

2008

SUPPORTERS

COMPANY

Refinancia

COUNTRY Colombia

COMPANY

Kashf Bank

COUNTRY Pakistan

Refinancia was founded by Mendiwelson in 2005 and purchases and services con-sumer and mortgage non-per-forming-loans (NPLs). With over 600 direct employees in Colombia, Peru and Mexico, Refinancia has more than 1,200,000 clients, investments of US$150 million and total acquired face value of over US$2.5 billion.

Kashf Holdings Private Ltd. is a group of companies in Paki-stan that provide specialized financial services, including micro-savings, micro-insur-ance, housing finance, to low-income households. As a result, more than 1 million families will have access to a suite of financial services tailored to meet their needs.

“It is great to know that we are creating so many jobs in Colombia through our work in the financial sector.”

employees

employees



Photo courtesy of dinero.com Photo courtesy of acumen fund

YEAR FOUNDED

1985

SUPPORTERS

COMPANY

Husk Power Systems

COUNTRY India

18

Gyanesh Pandey &Ratnesh Yadav

350160%

Husk Power Systems (HPS) generates clean, safe and efficient electricity at affordable rates in some of India’s most remote communities. HPS is currently serving 150,000 people in hundreds of villages across Bihar. Its plants extend villagers’ activities beyond daylight hours, reduce indoor air pollution, increase the time children can study, reduce the amount of time women spend collecting firewood, and reduce emissions. In the next five years HPS aims to deploy 2,000 plants, impacting five million people.

“For each plant, we train people from the local community, who are barely educated, and provide them comprehensive training so that they can run power plants and manage basic accounting books.”

employeesannual job growth average over last three years

Photo courtesy of acumen fundPhoto courtesy of acumen fund

ENERGY

YEAR FOUNDED

2008 YEAR FOUNDED

1999

SUPPORTERS SUPPORTERS


Sudesh Menon, Mohan Ranbaore & Indranil Dasgupta Mr. C. S. Jadhav

150

25035%

192%

Waterlife provides water sys-tems for apartments, institu-tions, contamination removal units and water supply schemes and mobile water units. The Hyderabad-based company has installed systems in more than 1,500 villages and urban areas covering more than a million people in a sustainable man-ner. Having started from West Bengal and Uttar Pradesh, the company operates in six states now.

Nandan started its journey a decade back with the ob-jective of providing sustain-able energy solutions to the world, while generating social, environmental and economic benefits. Today Nandan has become one of the largest integrated biofuel companies in India and is serving hundreds of poor and marginal farmers.

“Most of the cultivation activities of Nandan are linked to a government employment scheme for poor & marginalized people. This enables us to generate mass employment for people in rural parts of the country.”

“Initially, it was tough to convince rural people about our model, but we partnered with locals and it worked.”

employees

employees



Photo courtesy of acumen fundPhoto courtesy of Waterlife

COMPANY

Waterlife India

COUNTRY India

COMPANY

Nandan Cleantec Ltd

COUNTRY India

20

Vishal Shah Dr. Nguyen Vinh Tuong

148747

30%

75%

Tree House offers pre-school and K-12 education to children at an affordable price. The company is committed to a high standard of quality, applying innovative teaching methods, hiring and train-ing qualified teachers, using a standardized curriculum, and maintaining quality standards across its entire network of schools. Tree House currently operates 135 pre-schools in owned, as well as franchise, formats and also has manage-ment contracts for 12 K-12 schools nationally.

Victoria Healthcare (Victoria) provides medical services to patients outside the state-run hospital system in Ho Chi Minh City at a significant discount from comparable pri-vate and foreign hospitals. The clinics provide relief from the overcrowding of urban health-care in Vietnam. In addition to employing local medical personnel, Victoria also sources all of its medical goods locally. Once a year, the staff travels to rural regions to provide com-plimentary health care to 400 inhabitants.

“Treehouse has enabled thousands of women to fulfill their dreams of becoming teach-ers through the Teachers Training Course. Further-more, many wom-en have become entrepreneurs through the Tree-house Franchise Program. They become finan-cially independent and meaningful contributors to society.”

“It is exciting to see our clinics serve the community, while providing excellent jobs for our staff and supporting local economies by sourcing all of our products inside the country.”

employees

employees annual job growth average over last three years


Photo courtesy of seaf

HEALTHCARE & EDUCATION

YEAR FOUNDED

2003 YEAR FOUNDED

2004


COMPANY

Tree House

COUNTRY India

COMPANY

Victoria

COUNTRY Vietnam


Sweta Mangal, Shaffi Mather & Ravi Krishna

Prashant Tandon & Sameer Maheshwari

4,500

210

56%Ziqitza Health Care Limited (ZHL) is the first private am-bulance company in India that provides service for all, regard-less of income, and is one of just three organized operators in the country. In 2007, the company had ten ambulances in Mumbai. Today, it has more than 870 Ambulances across Mumbai, Kerala, Bihar, Rajast-han, and Punjab.

HealthKart, India’s first e-health store, provides custom-ers with convenient access to a broad selection of affordable, high-quality consumer health products and services. Health-Kart carries India’s largest selection of products across multiple categories, including beauty and personal care, home medical devices, nutritional supplements, and diabetes supplies. Additionally, Health-Kart offers various healthcare services, such as preventive health checkups, diagnostic tests, an online health maga-zine, and gym memberships, to offer a single destination for all consumer healthcare needs.

employees

employees

“We have created over 200 direct jobs, and at least another 3-5 times more in indirect employment through our net-work of vendors, logistics partners, marketing agen-cies, affiliates, content writers, media agen-cies, technology partners and other allied businesses. A lot of livelihoods depend on Health-Kart, and sustain-able growth is a significant respon-sibility for us.”


Three year job growth unavailable. Founded in 2011.

Photo courtesy of acumen fund

YEAR FOUNDED

2005 YEAR FOUNDED

2011


COMPANY

Ziqitza Healthcare

COUNTRY India

COMPANY

Healthkart.com

COUNTRY India

22

Guibert Englebienne, Nestor Nocetti, Martín Umaran, & Martin Migoya

Globant’s four founders, Martín Migoya, Martín Umaran, Guibert Englebienne and Nestor Nocetti have transformed a self-staffed IT outsourcing shop into a ballooning company of more than 3,000 employees. Based in Buenos Aires, Globant is one of Latin America’s fastest growing independent soft-ware product development companies and the leader of a new sector in Argentina. The entrepreneurs’ goal is to put Argentina on the radar of large global companies as an alternative offshore IT services country.

“As we started growing, we focused on creating an environment in which people could develop them-selves, be happy and make friends. We now have a Chief People Officer who supports all the human capital aspects of our company.”

Photo courtesy of Globant Photo courtesy of Globant

3,00041%employeesannual job growth


TECHNOLOGY

YEAR FOUNDED

2003

SUPPORTERS

COMPANY

Globant

COUNTRY Argentina


110employees

Tayo Oviosu & Jay Alabraba Jose Gonzalez

80

Pagatech’s mission is to transform lives by delivering innovative and universal access to financial services across Af-rica. The first product offering, Paga, is a direct to consumer mobile payments platform that allows any person who has a mobile phone to transact elec-tronically –turning the mobile phone into an electronic wallet. Customers can use Paga on any phone or network to send cash, purchase airtime credit, pay bills, and pay retailers.

Barared is developing Mexico’s largest correspondent banking network through micro-busi-nesses such as pharmacies and convenience stores that serve the lowest segments of the base of the socioeconomic pyra-mid. The company delivers its products and services through a telephone booth, owned and operated by Barared, located inside micro-businesses. Cur-rently Barared holds a net-works of 1,200 affiliated stores.

“It has been exciting to see marginalized communities be-come empowered through low-cost telecommunica-tions and banking services and how that can drive sustainable job creation in mom and pop stores.”

“One of the things that excites me about our busi-ness is the real way in which we help create jobs in local com-munities. Indeed we are already seeing our agents hire shop assis-tants to focus on the Paga busi-ness. Bringing good jobs will help elevate people out of poverty.” employees

Photo courtesy of PaGatech Photo courtesy of barared

YEAR FOUNDED

2009 YEAR FOUNDED

2007


COMPANY

Pagatech

COUNTRY Nigeria

COMPANY

Barared

COUNTRY Mexico

Three year job growth unavailable.

Three year job growth unavailable.

24

Quikr is India’s largest horizontal classifieds plat-form and enjoys a monthly user base of over 15MM users. The platform helps people buy, sell, rent and find things across a variety of categories ranging from real estate to automobiles to electronics to furniture to jobs, and everything in between. The company was started in 2008 and quickly grew to become India’s largest horizontal classifieds player within 2 years.

“Creating opportunities for others in society is one of the most satisfying but often one of the least discussed aspects of entrepreneurship. As you transform an idea into a young venture and then further on into a large, successful company, you keep seeing more and more people join you in your journey. The happiness you derive from seeing your team grow far outweighs many other more talked about aspects of startinga company.”

Pranay Chulet

CONSUMER & RETAIL

YEAR FOUNDED

2008

SUPPORTERS

COMPANY

Quikr

COUNTRY India

10044%employeesannual job growth



Virendra Gupta & Shailendra Sharma Goran Kovacevic

Versé offers a suite of mobile classifieds products that allows people of all socio-economic classes in India and other emerging economies to engage and access important infor-mation that can help them improve their lives. Versé facilitates deeper connections between people, their needs, and new opportunities through services such as: SMS-alerts, Hindi language option, zero-cost USSD sessions, and cus-tomized information searches powered by online and print media partners.

In 1997, Gomex was founded as a company of three em-ployees. Gradually it grew to a small grocery store chain with 16 locations across Serbia in 2007, when SEAF made its investment in the company. Today the Company has more than 800 employees and more than 75 stores. Featuring a high percentage of locally sourced products, Gomex has become the largest supermarket chain in the Northeast region of Serbia.

“We see ourselves as in a relation-ship with ourcom-munity — both with our employ-ees and our sup-pliers. As we have built trust and credibility, those relationships have grown stronger, and are largely responsible for Gomex’s success today.”

“Versé provides an entrepreneurial environment that helps employees learn & grow as true professionals in all aspects of business.”

126

800

85%

23%employees

employees



Photo courtesy of seaf

YEAR FOUNDED

2007 YEAR FOUNDED

1997


COMPANY

Versé

COUNTRY India

COMPANY

Gomex

COUNTRY Serbia

The Organisation for Economic Co-operation and Development defines micro-enterprises as having 0-9 employees, Small and Medium Enter-prises (SMEs) as having 10-249 employees, and large enterprises as having more than 250 em-ployees. Average firm size for each category was calculated on a per country basis for new micro-enterprises, new SMEs and SMEs that grow into larger enterprises, using data from the Australian Bureau of Statistics, Eurostat, Instituto Brasileiro de Geografia e Estatística, Instituto Nacional de Estadística y Geografía (Mexico), the Korean Small and Medium Business Administration, National Statistics Office (Philippines), Statistics New Zealand, and the U.S. Census Bureau.

Data on current unemployment and new workers entering the workforce is based on the following International Labor Organization sources: 2012 Global Employment Trends Re-port, Economically Active Population, Estimates and Projections (6th edition, October 2011) and general unemployment data released by the ILO Department of Statistics in August 2012.

Special thanks to the following contributing organizations:

About the Methodology

IV. About

Scan here to check out our jobs tool

or go to www.endeavor.org/insight/jobs

26

The Aspen Network of Development Entre-preneurs (ANDE) is a network of 160 plus organizations that works to promote entre-preneurship in developing countries. ANDE focuses on the “missing middle” – those busi-nesses and entrepreneurs needing investments that are too large for microfinance loans and too small for traditional bank loans. To learn more, visit: www.aspeninstitute.org/ande

Omidyar Network is a philanthropic investment firm dedicated to harnessing the power of mar-kets to create opportunity for people to improve their lives. Established in 2004 by eBay founder Pierre Omidyar and his wife Pam, the organiza-tion invests in and helps scale innovative organi-zations to catalyze economic and social change. As of August 2012, Omidyar Network has committed more than $550 million to for-profit companies and nonprofit organizations that foster economic advancement and encourage individual participation across multiple initiatives, including entrepreneurship, financial inclusion, property rights, government transparency, consumer Inter-net and mobile. To learn more, visit www.omidyar.com

Endeavor is leading the global high-impact entrepreneurship movement to catalyze long-term economic growth. Over the past ten years, Endeavor has selected, mentored and accelerated the best high-impact entrepreneurs around the world. To date, Endeavor has screened more than 30,000 entrepreneurs and selected 726 individu-als leading 455 high-impact companies. These entrepreneurs represent over 200,000 jobs and over $5 billion in revenues in 2011. To learn more, visit www.endeavor.org

Endeavor Insight is the research arm of Endeavor that seeks to deepen understanding of how high-impact entrepreneurs contribute to job creation and long-term economic growth in order to educate key constituencies, such as policy makers. In addition, Endeavor Insight seeks to serve as a knowledge center for high-impact entrepreneurs, VCs and others in order to provide useful infor-mation and tools that assist high-impact entrepre-neurs as they grow their business.

About ANDE

About Omidyar NetworkAbout Endeavor

AUTHORING ORGANIZATIONS

About Endeavor Insight


Endeavor InsightOctober 2012Copyright © Endeavor Globalwww.endeavor.org/insight

facebook.com/endeavorglobal

@endeavor_global

http://www.endeavor.org/insight

https://www.facebook.com/endeavorglobal

https://www.facebook.com/endeavorglobal

https://twitter.com/endeavor_global

https://twitter.com/endeavor_global

why becoming large matters

Documents

lack of jobs

millions jobs

jobs crisisii

jobs crisisthe world

jobs crisisthe power

highgrowth entrepreneurs

job growth

new workers