A for-profit education start-up recently launched in East Africa. Its founding team is a group of Americans, whose impressive track records allowed them to raise seed capital from an international foundation. The organization is doing well, and is now attracting interest from many other well-known impact investors and philanthropic foundations. But entrepreneurship is tough. The vast majority of start-up ventures falter and die in their infancy. In fact, a Harvard Business School study that analyzed more than 2,000 US venture-backed start-ups found that roughly 75 percent of them failed in their first two years. This education venture’s founders recognize that statistically, they are still likely to fail.
Should that happen, though, they also recognize they will probably be fine. The seed money they received negated the need for personal investment, significantly reducing their risk. And, they can return to the United States with a good story of a courageous undertaking and a fast failure. The story will play into a culture that reveres entrepreneurs and view risk-taking—and entrepreneurial failure—as signs of resilience and promise. Think Silicon Valley, where cash, hacker hostels, Zuckerbergian dreams, and a culture of fast failure form a literal and metaphoric magnet for wannabe entrepreneurs from all over the world. Think of those self-flagellating blog posts, books about start-up setbacks, and live events that recast failure as something to celebrate rather than shun. In this environment, our education start-up founders—as failures—would be well situated to secure good jobs and resume middle-class life.
The same probably wouldn’t be true if the founders were Kenyan. In Nairobi, entrepreneurs are certainly similarly celebrated. But in that country’s highly competitive employment market, failure is not revered nor easily forgiven. There is no economic safety net. And so unlike their American counterparts, failed Kenyan entrepreneurs might not be able to simply get up, brush themselves off, and start again. Being out of work would likely have far-reaching implications on them and many others, including, quite possibly, large, extended families.
The Narrow Profile of Entrepreneurs Who Can Afford to Fail
Entrepreneurship is undoubtedly a good thing. Successful new businesses have a positive impact on societies and economies. And failure is often the prelude to success. It is an important source of learning; it shouldn’t be a source of shame. So budding entrepreneurs should be encouraged and mentored. Social entrepreneurs aspiring to run a profitable business and provide a tangible benefit to society should receive even more support.
The problem is that “fail fast, fail often” is not a mantra that exists comfortably in many parts of the world. It is not a global mantra. It is a mantra only for the privileged. Research increasingly points to the profile of the entrepreneur as white, male, and highly educated—a profile that can afford to take risks and be disruptive, fail fast and courageously, and recover fast and comprehensively. That profile needs to change.
Consider a recent gathering of social entrepreneurs in East Africa. These were successful leaders, whose well-funded organizations are delivering pro-poor agricultural products, educational programs, and citizen engagement initiatives. They are providing much-needed employment and tangible social impact. They are also trailblazing innovative new business models.
They were inspiring. But many of them were actually European or American, mostly middle class and well educated. And those who were African tended to be from privileged backgrounds, credentialed in the eyes of their investors by their international educations, track records in blue chip companies, and Twitter followings.
Missing, for the most part, were entrepreneurs from disadvantaged backgrounds and areas lacking an economic safety net. Missing were those who hail from a place where failure is not yet a fashionably acceptable outcome, and most likely results in economic hardship and social stigma.
Steps to Level the Playing Field
Getting people to provide financial support for an unproven idea—the kind of support that hedges against failure—requires not only a compelling vision, but also the ability to articulate that vision in an investor-friendly manner. It requires credibility, contacts, and access to the networks in which investors move. These are steep hurdles for many, but for entrepreneurs from emerging markets, they are almost impossible to clear.
The good news is that some individuals and organizations have recognized the untapped potential in would-be entrepreneurs who can’t afford to fail. A number of foundations and impact investment firms are scouring emerging markets to find entrepreneurs with credibility, authenticity, and a transformative business model. Recently the Nigerian billionaire Tony Elumelu launched a $100 million initiative to find, train, and mentor the next generation of African entrepreneurs.
That’s encouraging, but it’s not yet enough. More need to follow suit if “fail fast, fail often” is to be a mantra for all, not just for the privileged.