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THE POWER OF HIGH-IMPACT ENTREPRENEURSHIP

HOW HIGH IS HIGH-IMPACT? High-Impact Entrepreneurs Growing Faster Than Their Peers

a report from:

supported by:


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TABLE OF CONTENTS

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HIGH IMPACT ENTREPRENEURS: GROWING FASTER THAN THEIR PEERS

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EMPLOYMENT IMPACT

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FINANCIAL IMPACT

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CONCLUSION

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ABOUT THE REPORT & ENDEAVOR


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HIGH-IMPACT ENTREPRENEURS: GROWING FASTER THAN THEIR PEERS

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nterest in entrepreneurship as a source of economic growth and job creation is extremely high. Many experts in the U.S. and E.U. claim that entrepreneurship can help combat the current recession by quickly creating jobs. For example, the recently passed JOBS (Jumpstart Our Business Startups) Act, in the United States supports entrepreneurs so that they can solve the economies problems. President Obama explained the purpose of the Act, saying, “America’s high-growth entrepreneurs and small businesses play a vital role in creating jobs and growing the economy.”¹ A recent study by Inc. Magazine found that this year’s Inc. 500 honorees, which encompass the fastest growing start-ups in the U.S., added nearly 36,000 jobs over the last three years, while this year’s Fortune 500 honorees,

which encompass long-established and larger companies, eliminated 821,000 jobs in 2009 alone.² Endeavor believes in the power of high-impact entrepreneurs to generate high-quality jobs and longterm economic growth. Over the past 15 years, Endeavor has selected, mentored and accelerated the best high-impact entrepreneurs around the world that are more effective at accelerating and scaling their businesses than their peers – for example, subsistence or lifestyle entrepreneurs. The emerging and growth markets where Endeavor entrepreneurs operate are experiencing rapid growth. As a result, many assume that all companies in these markets experience above average job and revenue growth. In order to understand whether high-impact entrepreneurs are actually growing faster than similar companies

1. The Enterprise Surveys, World Bank 2. White House Press Release, “President Obama to Sign Jumpstart Our Business Startups (JOBS) Act,” April 5, 2012. Accessed at: http://www.whitehouse.gov/the-press-office/2012/04/05/ president-obama-sign-jumpstart-our-business-startups-jobs-act


How High is High-Impact?

in their country, Endeavor Insight compared the job and revenue growth of Endeavor’s high-impact companies to comparable companies from a global database of over 60,000 companies in over 135 countries.³ We compared the three-year compound annual growth rate (CAGR) for jobs and revenue growth of each Endeavor entrepreneur’s company to the average three-year CAGR of comparable companies in this database when comparable companies were available.⁴ Comparable companies are defined as being in the same country, same sector, same size (micro, small, medium based on OECD definitions) and same years of data (matching to the years that Enterprise Survey data was collected).

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“The net effect of Endeavor entrepreneurs is enormous. With Endeavors support, mentor network and targeted programs, our high-impact entrepreneurs can grow revenues more than two times faster than comparable companies.” –Linda Rottenberg, co-founder and CEO

3. Leigh Buchanan, “Growth is in Overdrive on This Year’s Inc. 500,” published in Sept 2011 in Inc. magazine. Accessed at: http://www.inc.com/magazine/201109/inc-500-fastest-growing-private-companies.html 4. To ensure sufficient sample size, we only show data where we have an n>1 of Endeavor Entrepreneurs and an n>5 for comparable companies.


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EMPLOYMENT IMPACT

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he world currently needs 200 million jobs. 96% of these jobs are needed outside of the United States and Western Europe. The number of jobs that the world needs will increase to over 500 million by 2020 in order to create enough jobs for currently unemployed people, and to account for additional people entering the workforce in the next eight years. High-impact entrepreneurs are critical for creating these jobs and combating unemployment because of their above average job creation rates. Within one year, the average company of a high-impact entrepreneur will generate approximately 30 more jobs than the average comparable company. This results in 92 more jobs, on average, over three years. High-impact entrepreneurs create so many more jobs because they are growing jobs 5.4 times faster than comparable companies, with

a three-year job growth CAGR of 39% for high-impact companies compared to a 7% CAGR for comparable companies. The charts to the right compare the growth rates of high-impact companies and comparable companies. These accelerated growth rates are consistent across Endeavor network countries and industries. Job growth CAGRs for high-impact companies range from 13% (Uruguay) to 86% (Argentina). With these fast growth rates, high-impact entrepreneurs are generating jobs at least 2.1 times faster (Brazil) and as much as 22.7 times faster (Mexico). While high-impact companies are growing quickly across sectors, there is markedly faster growth among IT and Retail companies.

These findings on job creation demonstrate the power of high-impact entrepreneurs to create jobs at a faster pace than “normal�.


How High is High-Impact?

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Number of Jobs Created by a High-Impact Entrepreneur* (On Average in Three Years)

from 89 jobs

to 243 jobs

Number of Jobs Created by a High-Impact Entrepreneur in Chile (On Average in Three Years)

from 127 jobs

to 317 jobs

*Data only included for Endeavor High-Impact Entrepreneurs that had comparable companies in the Enterprise survey data.


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FINANCIAL IMPACT

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lobal GDP growth declined in 2011 and is likely to continue to decline in 2012. As a result, policymakers increasingly searching for new sources of GDP growth. By growing their businesses at far above average paces, high-impact entrepreneurs are raising countries’ GDP. On average, Endeavor’s highimpact entrepreneurs will generate approximately 1.5M USD more in revenue per year than comparable companies, or 4.6M USD over three years. These high-impact companies are growing 2.4 times faster than comparable companies, with a 35% three-year revenue CAGR for highimpact entrepreneurs compared to a 14% CAGR for comparable companies. This accelerated growth exists among both small and medium sized high-impact companies, with revenue CAGRs of 38% and 32% respectively. While we see consistent growth across countries in Endeavor’s portfolio

and sectors, there is variation. For example, Mexico’s high-impact entrepreneurs are growing revenue 3.3 times faster than comparable companies, while Chile’s high-impact entrepreneurs are growing revenue 1.7 times faster than comparable companies. From an industry perspective, we continue to see similarly impressive growth rates within the IT & IT Services industry for revenue creation, as with job creation. In this sector, high-impact companies are growing revenue 3.2 times faster than comparable companies.

These findings on the ability of high-impact entrepreneurs to grow revenue faster than their peers further demonstrate the power of high-impact entrepreneurs to make real contributions to growing economies and increasing GDP.


How High is High-Impact?

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Revenue Created by High-Impact Entrepreneurs (On Average in Three Years) from $3.8 Million

to $12.7 Million

Average Three Year Revenue CAGR*, High-Impact Entrepreneurs vs. Comparable Companies

Comparable Company Growth High Impact Company Growth

0%

*Compound annual growth rate

31%

62%


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CONCLUSION

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hese findings suggest that high-impact entrepreneurs make an outsized contribution to a country’s economy via both job creation and revenue generation. In the same country, same industry, same size and same time period, high-impact companies are outpacing their peers by growing jobs and revenue at higher rates. This greater growth among high-impact companies becomes even more impressive when we compare it to growth among comparable companies. Comparable companies are still growing – with a 7% three-year job CAGR and a 14% three-year revenue CAGR. High-impact entrepreneurs are just growing faster. The jobs that high-impact entrepreneurs are creating spur the economy by decreasing

unemployment. The revenues are directly increasing a country’s GDP and economic prosperity. In these ways, high-impact entrepreneurs really are a key driver of economic growth Additional data, including information on how Endeavor entrepreneurs are providing high-quality jobs, can be viewed on our interactive impact assesment dashboard at: www.endeavor.org/impact/assessment


How High is High-Impact?

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Job Growth of High Impact Entrepreneurs vs. Comparable Companies Revenue Growth is

2.4 Times

Faster Among Endeavor Entrepreneurs.

Revenue Growth of High Impact Entrepreneurs vs. Comparable Companies Job Growth is

5.4 Times

Faster Among Endeavor Entrepreneurs.


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ABOUT ABOUT THE ANALYSIS The data used for this study is from the Endeavor database of 422 highimpact Endeavor companies across 12 countries (Argentina, Brazil, Chile, Colombia, Egypt, Jordan, Lebanon, Mexico, South Africa, Turkey, Uruguay) and the Enterprise Survey, World Bank database, a global, company-level database of over 60,000 companies in over 135 countries. Every Endeavor company was matched with a set of all comparable companies from the Enterprise Survey database – where comparable companies were defined as being head-quartered in the same country, being in the same sector, same size (micro, small, medium based on OECD definitions) and same years of data (matching to the years that Enterprise Survey data was collected). To understand the financial and employment impact of Endeavor Entrepreneurs, the three-year compound annual growth rate (CAGR) of each Endeavor entrepreneur’s companies are compared to the average three-year CAGR of comparable companies in the Enterprise Survey database when data and comparable companies were available. Financial

impact uses revenue CAGRs. Employment impact uses job CAGRs. The average CAGR for the Endeavor companies, is calculated as the averaged individual CAGRs of each Endeavor company that had a set of comparable companies. The average CAGR for comparable companies first calculates the average per Endeavor Entrepreneur of all matching comparable companies and then takes the average accorss these individual averages. Data is only displayed when the sample size is greater than one for Endeavor companies and greater than five for the comparable companies from the Enterprise Survey.


How High is High-Impact?

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ABOUT ENDEAVOR

ABOUT OMIDYAR NETWORK

Endeavor is leading the global highimpact entrepreneurship movement to catalyze long-term economic growth. Over the past 10 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 708 individuals leading 443 high-impact companies. These entrepreneurs represent over 200,000 jobs and over $5 billion in revenues in 2011 and have inspired future generations to innovate and become entrepreneurs as well.

Omidyar Network is a philanthropic investment firm dedicated to harnessing the power of markets to create opportunity for people to improve their lives. Established in 2004 by eBay founder Pierre Omidyar and his wife Pam, the organization invests in and helps scale innovative organizations to catalyze economic and social change. Omidyar Network supports both for-profit companies and nonprofit organizations that foster economic advancement and encourage individual participation across multiple initiatives, including financial inclusion, entrepreneurship, property rights, government transparency, consumer Internet and mobile.

ABOUT ENDEAVOR INSIGHT 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 serves as a knowledge center for high-impact entrepreneurs, VCs and others in order to provide useful information and tools that assist high-impact entrepreneurs as they grow their business.

To learn more, visit www.omidyar.com


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How High is High-Impact?

IN 2011,

ENDEAVOR ENTREPRENEURS GENERATED OVER

$5.0 BILLION IN REVENUE

AND CREATED OVER

200,000 JOBS TO DATE ENDEAVOR HAS SELECTED AND SUPPORTED OVER 708 ENTREPRENEURS FROM OVER 443 COMPANIES

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Endeavor Insight September 2012 Copyright Š Endeavor Global www.endeavor.org/insight facebook.com/endeavorglobal @endeavor_global

How High is High-Impact  

High-Impact Entrepreneurs: Growing Faster Than Their Peers