Global Entrepreneurship Monitor (GEM) executive director Mike Herrington says he and his team are looking into the accuracy of various data in its annual global report.
This, after the GEM team discovered that several of the 54 countries surveyed in the year's report - released in January - had seen significant changes in the rate of entrepreneurship for adults that the report tracks.
In Malaysia the total early stage entrepreneurial activity (TEA) rate rose by a massive 16.9% from 2016 to 2017 – from 4.7% to 21.6%. The rate measures the number of adults between 18 and 64 involved in starting or running a business that is less than 3.5 years old.
This is even more strange when one considers that since 2009, the country's TEA rate has never exceeded 6.6%.
Much of the increase in the latest report has come from a supposed rise in nascent entrepreneurship - which the report defines as the percentage of the adults that have started a business that is less than four months old and that has not paid salaries or wages.
The rate in Malaysia stands at 15% - now the third highest of its kind among GEM countries surveyed in 2017/18. In 2016/17 it stood at a mere 2%.
“We are not sure what is happening in some of the countries,” Herrington (pictured above) admitted in a phone call with Small Business Insight earlier this week.
'Malaysia not concerned'
“Malaysia don’t seem to be concerned about it (the significant increase),” said Herrington. He said he had written to the teams of various countries including Malaysia, Mexico and Argentina, and was waiting for their urgent response.
Those countries that saw significant rises or falls in their TEA rate between 2016 and 2017 also include (see map):
He said with changes such as the move by more people to use cellphones over landlines, sampling is becoming a problem. He questioned whether enough youth or older persons were captured by the report, as it's common practice that many don't answer calls from unknown numbers, which survey companies might choose to use.
Curiously, this year’s report fails to point out this rather strange occurrence in the data. Herrington said the global report was written so quickly that an analysis could not be done on this finding.
While the strange data occurs just two years after an election in Argentina which saw left-wing Kirchnerists replaced and months ahead of a critical poll in Malaysia, Herrington said he was “100% certain” that there was no political interference in the findings.
Research community divided
The question over the findings comes amid growing divisions over entrepreneurship research – with the emergence several years ago of the Global Entrepreneurship Development Index (GEDI).
The index, first run in 2011, uses GEM data along with other indicators and is an attempt to create a policy tool by including a range of additional measures which influence entrepreneurship in a country.
The index was conceived by George Mason University’s Zoltan J. Acs and László Szerb, both formerly members of GEM Hungary.
The publication of the index has caused confusion in the research community, over the entrepreneurial rate and measure of support for entrepreneurs in each country.
For example, while GEM ranks Ecuador as the most entrepreneurial among 54 countries surveyed in 2017/18, GEDI in 2018 ranks the US as the country with the best entrepreneurial support.
In the latest GEDI, Acs and co-authors Ainsley Lloyd and Szerb note that: "Good policy can only be generated through focusing the discussion on innovative, growth-oriented entrepreneurship, not the self-employment captured by GEM’s TEA rate".
The team goes onto say that GEDI's definition of entrepreneurship is driven not by necessity entrepreneurship but by opportunity.
Says GEDI in the same report: "While many think of the output of ecosystems as (producing) more start-ups, like GEM, this is wrong and misleading. The dual service created by entrepreneurial ecosystems is (1) resource allocation towards productive uses and (2) the innovative, high-growth ventures that drive this process."
'Can't rely on GEDI index'
GEM no longer includes Hungary among the countries it covers. Herrington said GEM had asked them a few years ago to leave as (Acs) "had tried to use GEM data for GEDI”.
"A number of organisations say they don't want to use a composite index and can't rely on GEDI's (index)," he said,
However he admitted that GEM's new Entrepreneurial spirit measure is the first attempt to form a composite measure. The measure is based on a combination of a country's degree of entrepreneurial awareness, opportunity perception, and entrepreneurial self-efficacy.
Saudi Arabia is ranked number one on the index (ranked as only the 25th most entrepreneurial country by GEM). When Small Business Insight pointed out that this was rather strange, Herrington defended the country's place at the head of the index.
Commenting on the strange GEM data, Acs said he had “no idea what has caused this strange development in the GEM data”. “One reason can be a change in vendor that does things differently but I have no real idea,” he said.
The cat fight between these two groups means researchers and policymakers will be none the wiser on what is really happening in their country. The strange data at GEM now only adds to the confusion. In the end entrepreneurs could lose out.
Correction: The initial version of this post had it that the GEM team had approached the University of Michigan to get assistance in assessing the report's sampling methodology - when in fact GEM still intends to do so. We regret the error.
Timm is a South African who writes on small business. Follow Small Business Insight on Twitter at @Smallbinsight.Herrington said he and his team are looking at the report's sampling methodology and that they would be approaching the University of Michigan to get assistance in assessing this, as this may have affected the results in some of these countries.
Argentina’s Secretary of Entrepreneurship and SMEs Mariano Mayer has been awarded for his work on developing a strategy to revive Argentina's entrepreneurial spirit, including a new law for entrepreneurs.
Mayer was among several individuals honoured for their role in policymaking and drafting SME programmes by the Global Entrepreneurship Network (GEN) at an awards ceremony in Estonia earlier this week during the Startup Nations Summit.
Mayer took home the Startup Nations Award for National Policy Leadership.
“Having successfully tested entrepreneurship policy levers as an intrapreneur in the Buenos Aires city government, upon assuming broader leadership as National Secretary for Entrepreneurs and SMEs, Mr. Mayer began a bold, multi-pronged strategy to revive Argentina's entrepreneurial spirit, including a new law for entrepreneurs,” GEN said.
The three other winners were former Minister of Argentina’s province of Cordoba Jorge Lawson for the Startup Nations Award for Local Policy Leadership, the Innovation and Entrepreneurship Team from the World Bank, for the Startup Nations Award for Groundbreaking Policy Thinking and Mikk Vainik of Estonia for the Global Entrepreneurship Network Award.
Plan to grow SME numbers
In an interview in September with online publication Nearshore Americas, Mayer said Argentina now has about 850,000 SMEs – which make up 99% of all firms in the country. He said about 50,000 to 60,000 new firms are created each year in Argentina.
However, he noted that there has been no net creation of companies in the last two to three years. It's this that his government is looking to change, to put the country back on growth after years of economic instability.
Recently his government introduced a new entrepreneur and SME law (see this post), which aims to among other things boost funding and reduce the time it takes to open a new business.
A new online company registration system, which went live on 1 September (see this post), allows for the registration in Buenos Aires province of a new type of company called an SAS in just 15 minutes – down from two months to over a year that it took before. Mayer says the ministry is helping other provinces to introduce a similar system.
He says a tax reform is in process and his ministry wants to next simplify the country’s gargantuan bureaucracy.
Mayer earlier this month said the country needs to create one million new small businesses to ensure that 300,000 survive so that two million new jobs (that Argentina needs to create) can be generated. To ensure this is achieved, he pledged that his administration will add not one new regulation for enterprises.
This week Mayer's department announced the names of the 13 accelerators and three funds (see this story) that - together with the state - will invest more than $86 million into new projects through an accelerator (Fondo Aceleración) and expansion fund (Fondo Expansión). About half of this amount will be contributed by the state.
The idea is based on Israel’s successful Yozma fund (see this post), in which the state there was able to help grow a venture capital sector in the early 1990s.
Earlier this month national newspaper La Nacion reported that to qualify local and foreign accelerators have to have liquid funds of at least $150,000. In all 31 accelerators applied.
The funds, as well as a seed fund, which invests up to 250,000 pesos in firms of no more than a year old, falls under a new fund of funds Fondce (Fondo Fiduciario para el Desarrollo de Capital Emprendedor) which was unveiled in September.
In the same month the government predicted that the economy will grow by 3.5% in 2018 - with inflation falling to 10% from 24% the same month. Things are then on the up.
Likely because of this President Mauricio Macri this week called Argentina the "best place in the world to bet on".
But what many will hope now is that the red tape and corruption that Argentina is famous for will be eradicated as quick as possible. Until then nice policies such as getting the state to co-invest with accelerators will benefit little more than the elite.
Timm is a South African who writes on small business in emerging economies. He speaks Portunhol (bad Spanish) and has visited Argentina in 2010 and 2014. Follow Small Business Insight on Twitter at @Smallbinsight and on Facebook.
The number of black-owned tech start-ups in South Africa may be on the rise, yet just four percent turn a profit currently, reveals a new survey. What then should be done about it?
In the survey - released on 22 November SA tech start-up publication Ventureburn - 50% of 260 tech startup founders reported that they were black founders (black African, coloured, Indian or Chinese South African). This is up from 26% in a 2015 survey of 197 founders by the publication.
Of the current survey, four percent opted not to reveal their race, while 46% listed themselves as white.
Yet, while 16% of start-ups founded by white entrepreneurs are turning a profit, a mere four percent of black-owned tech start-ups are doing the same. In addition 61% of black start-ups have yet to generate an income, compared to 30% of white start-ups.
Added to this white start-ups accounted for 59% of all those start-ups that reported having tapped angel funding.
The survey also reveals that white start-up founders are significantly older than black founders. Over a quarter of white founders are 40 years or older, compared to just 13% of black founders. Almost three quarters of black founders are aged 35 and younger.
This might explain why so few black start-ups are making a profit compared to white start-ups. Older founders are usually more experienced, better networked and have more capital than younger entrepreneurs.
Aligns with increase in black SMEs
The survey results suggesting the growing number of black tech start-ups, are in line with a study released earlier this year by Trade and Industrial Policy Strategies (TIPS) which revealed that the percentage of black-owned formal small businesses grew from 38% of such firms in 2002 to 49% in 2015 (see this post).
The figure however still lags behind the national population where black population make up 92% of South Africans.
A lack of black angel investors means the state has to get more involved. Earlier this year Matsi Modise (pictured above), head of start-up advocacy group Simodisa, said more black high-net-worth individuals would help to grow the angel investors pool.
But this alone won't be enough. A “black tax”, where black professionals are compelled to financially support relatives, also holds many back from investing in start-ups, she says.
State support still lacking
Perhaps then the state should intervene?
To some degree the state is already doing so - by offering incubation and seed funding and by using Black Economic Empowerment (BEE) legislation to compel large IT companies (including multinationals) to support and fund black entrepreneurs.
Yet there is much the state still needs to do. Just nine* of the 62 incubators under the government’s Small Enterprise Development Agency (Seda) support software or high-tech firms. The agency added three new incubators in 2016/17, two of which are incubators aimed at the high-tech sector (see this post). It needs to fund more such incubators.
A Pretoria-based incubator and science park - The Innovation Hub - has of late broadened its reach to innovative entrepreneurs, by adding township hubs (the eKasi Labs programme) and running Startupbootcamp and Startup Weekend events.
But its head McLean Sibanda admitted in May that it’s still difficult to find black entrepreneurs with unique ideas in the township. Too many township startups are pursuing “me-too ideas” over innovative ideas. More exposure to the networks of more affluent entrepreneurs might help and better schooling could help.
The introduction of seed grants in 2012 by the Technology Innovation Agency (TIA) could well help fund more black technology start-ups. The agency disburses grants of up to R600,000 through universities and selected small business support organisations.
In the last financial year the agency channelled R74.3m to 133 innovative projects - up from R66.5m in the 2015/16 year. Though the initiative isn't aimed exclusively at black innovators or entrepreneurs, a large number of those the agency supports are black.
Black tech start-ups have also to thank the country’s BEE legislation for increased support and funding.
Large IT companies such as telecoms provider Telkom (in which the state still retains about 50% ownership), as well multinational firms such as IBM and Microsoft have introduced support programmes in recent years.
For instance Telkom Futuremakers head Litha Kutta says three hubs that the telecoms provider backs support over 1,000 tech entrepreneurs involved in black-owned start-ups.
Among IT multinationals, IBM has provided support and funding to three black-owned IT companies and four aspiring black tech entrepreneurs in the last two years. It includes R1.2m in incubation support and about R2.5m in funding to two of these IT black firms.
But Bhavya Rama, who oversees IBM’s R700-million Equity Equivalence Investment Programme, says it’s not always easy to find black-owned IT firms, says Rama. “We’re finding that the market has challenges. Every startup claims that they have ICT capability, but when you look it’s only a few that have it.”
She also notes that many black tech startups getting support currently through incubation programmes are serial incubatees.
These are the kinds of challenges to be expected initially, when black startups are still struggling
But limit state's role
In the end the state's role should be limited - to support such as training and incubation and seed funding.
Helping to nurture a venture capital sector could help too, if the state were to launch a co-investment fund. Here an idea by Discovery Health CEO Adrian Gore might be worth testing - where fund managers could be enticed to invest in black startups in return for higher management fees (see this post).
In addition the state could tweak its venture capital tax incentive - which is growing in popularity (see this post) to allow for greater deductions for those that invest in black tech startups. This might help fuel the creation of black angel investors.
Ultimately the state should be wary of any measures that distort the market. Black tech startups after all want to pitch their solutions on an equal as possible footing as their white counterparts. Some support will help. Too much might render black firms uncompetitive.
*Seda's nine high-tech and software incubators are: Sofstart, Invotech, Smartxchange Durban, Smartxchange Ugu, SA French Tech Labs, Savant, Tuksnovation, Singatha ICT Incubator College and Seda Nelson Mandela Bay ICT Incubator.
Timm is a South African who writes on small business in emerging economies. He is also the editor of Ventureburn (which conducted the tech survey). Follow Small Business Insight on Twitter at @Smallbinsight and on Facebook.
The buzzing South East Asian hub of Bangkok is currently ranked the top city for digital nomads to live and work in by Nomadlist.com, ahead of Barcelona and Berlin.
Faster internet, cheaper flights and the changing nature of work are driving thousands of people to leave their jobs and move to exotic locations to work independently - as digital nomads. Many are coming to Thailand.
In recent years authorities there have attempted to address the growing problem of digital freelancers and entrepreneurs that work illegally, by tightening requirements for education visas or by introducing stricter measures to prevent border runs.
In a new move in August the Thai cabinet endorsed a smart visa for skilled professionals and investors (including start-ups) valid for up to four years in fields deemed helpful to advancing Thailand’s high-tech development.
The measure follows the introduction in 2014 by Estonia of its e-Residents Visa, which allows those based in other countries to register a company in Estonia and continue operating outside of the Baltic state, while taking advantage of the country’s EU status to enter the European market.
A once-off fee of €100 ($118) is levied for the visa. By early this month over 27,000 such visas had been issued to people from 143 countries. About 40% of applicants apply for the visa to set up and run a location-independent business. The remainder are base in Estonia (Tallinn, the capital is ranked 119 by Nomadlist).
Affordable stay, fast internet
In measuring a city's attractiveness for digital nomads, Nomadlist.com's ranking considers a range of indicators. These include everything from a city's quality of life to whether the city is female friendly. Crucial is affordability and internet speed.
For example Bangkok has at an average cost of $1,232 a month for foreigners who stay in affordable accommodation and with an internet speeds of 40 mbps.
To lure foreign entrepreneurs to freelancers it also helps for a city to have a good nightlife and to offer plenty of fun attractions. Bangkok, Berlin and Barcelona all do that.
Bangkok is also an easy place to start a business. It takes just five days in Thailand to do so, according to the World Bank's latest Doing Business rankings. This is faster than Germany's average of 11 days or Spain's 13 days.
While most cities in Africa and South America are ranked lower down, Taghazout in Morocco is at ninth place and Cape Town at 46. Panama City (33) is the top Latin American one, while Buenos Aires is at 64 and São Paulo at 118.
Make them stay, set up
It's not clear what the benefits are for a city to attract more digital nomads. On the one hand because most stay only a short while, few pay tax directly to their host countries (but contribute via tax levied on the goods and services they buy).
Yet there's always the chance that a good number of digital nomads will stay on. Allowing them easier access to visas may entice more to stay on and even set up a business.
If these firms are then able to bring new knowledge and ideas while creating jobs and contributing tax revenue, then authorities should be doing more to attract such people to their cities and ensuring that a good number stay.
For instance Chile in April launched a tech visa (see this post). Its capital Santiago may host one of the world's top government accelerators (Start-Up Chile) and is only little bit more expensive than Bangkok (at $1,326) - yet it is at 405 spot in Nomad List's rankings.
It remains to be seen whether the new visa will make the city more attractive for what are often effectively travellers looking to combine work with a good time. Making one the continent's blandest capital's more fun might help more than just introducing special visas.
Best overall digital nomad cities according to Nomad List (with nomad cost)
1. Bangkok, Thailand ($1,232)
2. Barcelona, Spain ($2,154)
3. Berlin, Germany ($1,989)
4. Chiang Mai, Thailand ($907)
5. Canggu, Indonesia ($1,109)
6. Dallas, US ($2,190)
7.Budapest, Hungary ($1,343)
8. Miami, US ($2,902)
9. Taghazout, Morocco ($973)
10.Kuala Lumpur ($1,041)
Timm is a South African who writes on small business in emerging economies. Follow Small Business Insight on Twitter at @Smallbinsight and on Facebook.
Stephen Timm is a