The rebuild facing Egypt is undeniably immense but most agree it presents major political and economic opportunities. Among the believers is US professor John Danner who spoke at the American University in Cairo during November’s Global Entrepreneurship Week.
The senior fellow at UC Berkeley’s Lester Center for Entrepreneurship says accelerating levels of entrepreneurship, stimulating innovation, improving education and leveraging technology are the paths to prosperity and growth in Egypt and says the government needs to play a major role in supporting these agendas.
“[Entrepreneurship]’s the biggest creator of jobs, it is the most efficient way to open up opportunity for young people and it is the path to a country moving ahead of where it is today,” Danner told Business Today at the campus in November.
The revolution has not only created a clean political slate, but also presented an opportunity for the country to rethink its economic trajectory “through the lens of prosperity and opportunity for its people.”
“The post-period of a revolution is, to me, a potentially wonderful opportunity to change the rules […],” Danner says.
Conceding it was a difficult path, Danner’s confidence was buoyed by the Egyptians he had spoken with on his visit who shared that “fundamental central focus” and he believes the country is taking positive steps.
While it would take immense political will, Danner says many countries have taken steps to simplify doing business, reduce red tape, decrease costs and increase the use of technology to allow people to do things virtually and with more ease.
Egypt’s leaders now need to identify the economic issues which need to be rectified and take measures to improve the business framework.
“Just imagine if Egypt were to target that in the next 10 years. No country in this entire region will be easier to start a business in, easier to run a business in [and] easier to get information about improving the management of that business,” says Danner. “That’s a doable thing if a country chooses that.”
He refers to Chile where in a bid to make itself the entrepreneurial hub of Latin America, the government developed Start-up Chile.
The innovative program, which has already spawned copycats elsewhere, seeks to attract ‘world-class early stage entrepreneurs’ to the country from all over the world by providing favorable conditions including seed capital and visas as well as facilitating access to networks and capital in the hope that Chile will become the base for the global expansion of those start-ups.
It is also aimed at improving the approach of Chileans towards entrepreneurship and developing an ecosystem which will ultimately make starting and operating a business easier in Chile.
Danner, who also spoke in Ankara and Istanbul in November, says one of the main issues Egypt faced was the difficulty of doing business.
While the World Bank this year ranked Egypt 21st out of 183 countries for starting a business, Egypt ranked 110th in terms of the ease of doing business. It scored very low on essential needs for conducting operations including obtaining electricity, enforcing contracts and handling construction permits. On top of this, Egypt ranks 137th in resolving insolvency.
In a report earlier this year, Carnegie Europe described Egypt’s bankruptcy laws as “very unfavorable” to SMEs, saying procedures were costly and slow and that they criminalized bankruptcy by mandating jail time.
“In such a business environment, scaling up is not a pragmatic option, much less investing in technology or capital-intense industries,” it said.
Rather than discouraging people through restrictive laws and harsh punishments, Danner says the government should be focused on “giving people a new sense about what they are capable of and what they can do.”
The government has a responsibility to promote entrepreneurship and showcase what is possible.
“People rarely do what they can’t imagine themselves doing […] and people seldom do what they don’t see people like themselves are already doing.”
Promoting and teaching entrepreneurship gives people another option aside from a classic job or taking a benefit.
Most countries — developing and developed — want to increase the scale and scope of entrepreneurial activity, rectifying inequality along the way and know their future strength and opportunity depends on it, he says.
Societal attitudes towards entrepreneurship also need to be addressed, he says.
Generally speaking, many cultures have difficulty with risk and failure. If you are going to be serious about entrepreneurship and innovation, people have to come to terms with the almost inevitable fact that they will fail somewhere along the way.
“You have to be able to expect that, tolerate it, learn from it and move on from it and that’s true psychologically, financially and legally.”
Providing some protection for entrepreneurs is important, he says.
“If people feel that a failed business idea is going to be a black mark against them for the rest of their lives or the rest of their careers they’re unlikely to take that step, but if they feel that if they give it their best, give it their all and it does fail, there ought to be a way to come back and apply what they learned.”
Somewhat counterintuitively, Danner says many investors prefer to back teams that have suffered failure provided they grew from that failure, learned from their experience and took the steps to remedy the causes.
Much of it came down to education, he says. It is important to improve fluency around what it takes to start and run new ventures.
Those lessons apply whether someone is operating a sidewalk flower store or trying to launch a new high-tech business.People also need to understand what it takes to turn their idea into a profitable business.
Danner says the main problem is people exaggerate what the next step is in developing their idea as they generally believe it takes more money and talent as well as better connections than often is the case.
Egypt needs to create networks and resources to help entrepreneurs understand what those next steps are, help them take them and let them know who is available to help, he says.
One of his own initiatives with his American students was to start what he called an ‘idea factory’.
There, any student can come in with a business idea at any stage of development. The rules are that no idea gets killed and everybody in that session is there to help figure out what the next step is.
“If we can make it easier for people to understand that the next step might be a small one, might not be very risky, the sheer act of making the commitment to take that next step can carry with it a momentum and carry with it a credibility that often times surprises and astounds the entrepreneur himself or herself.”
If businesses did fail, it generally came down to one of five reasons — the wrong business model, poor timing, the wrong product or service, the wrong team or, most importantly, a lack of passion. Entrepreneurs need to be able to understand this before starting out and this is another way education and mentors help.
An entrepreneur himself, Danner says there are a number of areas where he sees opportunity in Egypt.
He points to solar power, which is flourishing elsewhere, as well as education where Egypt has a “built-in need [and a] built-in market” due to its young and under-educated population. He also says Arab economies need a non-oil business model which is more equitable and more environmentally friendly and is informed by Islamic values.
“That is a huge opportunity and in that sense it would be a matter of Egypt using its own needs, its own priorities, as a way to not only solve the aspirations of its people but potentially show a way forward for much of the rest of the Arab world.”
Danner points out that there are lots of avenues to help people convert ideas into prototypes and products and eventually into businesses. Websites like Freelancer, Kickstarter and Indiegogo — through which Egyptian nonprofit media collective Mosireen recently raised $40,000 (LE 243,880) — have flourished. Through these sites, entrepreneurs can get funding and products logos and websites designed and research done via a worldwide pool of talent and for prices which are often very low.
“And that’s just astonishing.”
In terms of funding — a major obstacle for many businesses — Danner believes local businesses should be looking for local investors who have the market familiarity and contacts that others such as foreign venture capital firms do not.
Start-ups need to find backers who understand the risks but believe in the idea enough to support it and who are also patient enough to ride out the inevitable peaks and troughs. Whatever way, it is important to encourage entrepreneurship but not try to control it.