Want to boost growth? Support start-ups

Though still fragile, signs of economic recovery are emerging. A powerful sense of purpose remains the name of the game – and smart government and industry leaders across the globe are focused on how to strengthen and sustain this recovery.

Many of these same leaders are adopting the emerging venture countries model – in which nations act like venture capitalists, investing seriously in compelling competitive strategies that attract the cream of the entrepreneurial crop. Think lowering the barriers for entry. Simplifying the start-up process. Actively marketing a country’s unique attributes for innovation (“We offer an easy visa process.”  “You can hire highly skilled labor here!” “Minimal taxes.” “Apply for these grant programs.”).

This is a model that mirrors the open and distributed nature of the internet, and works for two reasons: first, evidence says that entrepreneurs strengthen economies; second, innovation drives competitiveness.

Experts have said that the single most important contributor to a nation’s economic growth is the number of startups that grow to a billion in revenue within 20 years. Recent World Economic Forum data identifies the top ten most competitive countries around the globe – not surprisingly, they each also occupy a slot on a list of just 35 countries that have innovation-driven economies. What’s more – seven of these countries were ranked by the World Bank and the International Finance Corporation as in the top 20 worldwide for the ease of doing business, including starting a business.

So who’s doing this model well? Chile is one great, and perhaps unexpected, example of a rising venture country. It has received quite a bit of press for “Start-Up Chile,” a program that selects entrepreneurs and provides funding and a visa to translate their visions into reality on Chilean soil. It’s not hard to imagine that with a successful program, Chile could quickly move up from its current spot – 37^th – for ease of doing business.

Yet the venture countries model doesn’t merely apply to enticing others to their shores.

Savvy leaders know that sharp, creative minds, with the drive and energy to succeed, also live within their own borders. They’re taking advantage of political reforms and emerging openness to nurture home-grown innovation.

Egypt’s Flat6Labs, for example, provide startup funding and support, including much-needed access to facilities and mentoring, on a short-term basis in exchange for a modest equity stake. That’s not just good news for the economy – unemployment contributes to unrest, so it’s a no-brainer to see just how positive entrepreneurial programs are for a country’s political stability.

Successful venture countries also encourage people to act much like multilateral corporations – cherry picking what’s going to work best for them. Think of it as a “countries as services” or “open-source countries” model.  A Pakistani national, for example, might set up her business in Singapore to take advantage of its loan and grant programs. She could use Luxembourg’s secure cloud services to store, secure and access her data anywhere in the world. The countries involved benefit, the entrepreneur benefits – the definition of a win-win.

While start-ups and entrepreneurs are not the exclusive driver of growth, there’s no doubt that they generate a disproportionately large share of innovation. And in an uncertain economic period, when countries are jostling more than ever for position, innovation provides that competitive edge.

This post is part of a series from the World Economic Forum’s Global Agenda Council on the Future of the Internet. You can read more expert views here

To explore The Innovation Engine infographic click on the image below:

Author: Michael Fertik is the CEO and Founder of Reputation.com. He received the World Economic Forum Technology Pioneer Award in 2011 and Reputation.com was named a World Economic Forum Global Growth Company in 2012. He is a member of the World Economic Forum’s Global Agenda Council on the Future of the Internet.

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