Frontier Market Entrepreneurship: Startup Success Beyond Silicon Valley and Term Member Happy Hour

Our panelists discuss the growing amount of startup ecosystems that are popping up outside of Silicon Valley and other major economic centers, including what it takes for many of those startups to succeed amidst political or economic instability, lack of infrastructure, and little to no access to angel investors, venture capitalists, or experienced employee pools.

MODY:  Welcome to today's Council on Foreign Relations term member meeting. I am thrilled to welcome all of you today's session on frontier market entrepreneurship.

I'm Seema Mody, CNBC's business correspondent where I focus on global markets. And I'm joined by Robert Lalka, executive director of Lepage Center for Entrepreneurship and Innovation at Tulane. Alexandre Lazarow, author of Out-Innovate: How Global Entrepreneurs from New Delhi to Detroit Are Rewriting the Rules of Silicon Valley. And Sylvana Sinha, the founder and CEO of Praava Health.

Welcome everyone. I can say, as a journalist, some of the most exciting opportunities are overseas, especially in technology, a combination of a growing middle class, a young tech-savvy population, and recently more money being put to work in terms of capital outside the U.S. And there have been many wins, but with that, a number of failures due to setbacks when it comes to regulation, among other challenges.

So let's dig right into it. Sylvana, maybe I can kick off the discussion with you as a founder of Praava Health, a company that is looking and currently building medical centers and health care facilities across Bangladesh. What inspired you to start this business and the opportunity you see in this specific country?

SINHA:  Thank you so much Seema. And I'm just so happy to be here with all of you. I'm actually— I graduated from the term membership program, and I'm currently a life member. And as much as I really enjoy that experience, I have to say it's not quite as much fun as being a term member. So I'm really happy to be with all of you today, and especially to be here with you, Seema. So thank you for the question.

So I have to say one of the things I described about my experience as a term member, and about that time in my life was that I really enjoyed being around a group of colleagues and professionals, who were all still appropriately restless as I was about what I wanted to do for the rest of my life. And at that point in my life, I had practiced law for many years, I'd worked in international law and development at the World Bank and other organizations. And I was really craving impact in my life and my work. And although I had really amazing experiences, and I'm really grateful for all of them, I had a yearning to do something more.

And so I'd been visiting Bangladesh for a family wedding when my mom was hospitalized for a basic appendectomy. And I'd never lived in Bangladesh before; I was born and raised in the United States. And it was really eye-opening. I had seen from—I'd heard from other family members about the challenges and limitations of the healthcare system. But seeing it firsthand, as—you know, for my mother, was a different experience. And we were in the VIP suite of one of the fancy private hospitals in Dhaka, the capital of Bangladesh. And despite that, the surgery was delayed by ten hours. And then we had all kinds of complications afterwards, and we ended up airlifting her to Bangkok where she had to have another surgery. And then a year later, another surgery in United States.

And as someone who had studied development and advised investors on their investments in frontier and emerging markets, I knew that Bangladesh was at a really interesting point of its growth trajectory. It's a—you know, a hundred—now a hundred sixty-five million people, one of the fastest growing economies in the world. Even this year posting four percent growth during this global recession. Prior to that last year was eight percent, and five to eight percent, consistently over the last— previous twenty years. And so there was this robust and growing middle class, but no amount of money could afford you access to excellent quality health care.

And this is—this was really my original inspiration. And I really very intentionally wanting to build my company as a for-profit entity, having worked at the World Bank and other organizations, and seeing the need for the interventions that those organizations provide. I really also knew that there was an opportunity for a profitable, sustainable business model, and not just an opportunity, but a really big one. And so that was the beginning of my journey about six years ago.

MODY:  Wow, what a powerful story there.

Alex, I'll turn to you. You know, in your book, you talk about how the recipe for success, it does look very different outside of Silicon Valley, this whole growth at no cost, no need to focus on profits, that mindset doesn't typically work internationally. Can you expand on that point?

LAZAROW:  Yeah, happily and actually to even provide a backdrop on what Sylvana said because I think Sylvana is really at the front lines of building startups in many emerging ecosystems around the world.

And she's not alone. Today, there's over a million venture backed startups around the world, there's four hundred eighty startup ecosystems. The movement has really become global, and not just is it global, but some of the biggest companies around the world are coming from outside of the Valley. The biggest edtech business in the world is in India. The biggest robotic process automation business came from Romania. The biggest credit-led digital bank in the world was from Brazil, and the list goes on. And so these models are really at the forefront of innovation but also value creation around the world.

And yet, and this is what inspired my book, both as a VC by day, I also teach entrepreneurship. I was really frustrated that everything we think we know about startup as practice is rooted in a time and a place, Silicon Valley today, and for a very particular type of asset-light, software-based company that wants to move extraordinarily fast. And that model has worked extraordinarily well in Silicon Valley. But the reality is that around the world, the best entrepreneurs are operating ecosystems like Sylvana that have less capital and less resource and may face more macroeconomic shocks. And in that context, in that reality, and this is both in emerging markets, but emerging startup ecosystems here, domestically, the playbook looks different.

And so I interviewed about two hundred entrepreneurs from around the world, folks leading some of the biggest and most successful businesses. And I think that, taken together, their strategies don't just challenge conventional wisdoms. They are reinventing the playbook in meaningful ways. And one of them, exactly like you alluded to, Seema, is this notion of building sustainability and resilience in the business model, not just growth at all costs.

Essentially, the best founders around the world are doing three things. One, the types of businesses they're building look different. And we talk a little bit more about that. Two, how they're building them looks different and the sustainability and resilience point makes sense. And three, how we, as ecosystem builders and folks that are concerned around it, think about it needs to be different as well. And it's not just about replicating the value. It's about thinking critically about what works and what is required in these ecosystems.

MODY:  I like that. It's sort of refreshing too, you know, versus just taking a model like Uber and bringing it to India or the Amazon of China. Those models have worked, but in terms of looking at longevity, thinking beyond what has already worked in domestic markets certainly is an idea that carries merit.

And I'll turn to you, Rob, let's bring this back to foreign policy. We, at the end of the day, are team members at the Council on Foreign Relations, and you also served in Secretary Clinton's Global Entrepreneurship Panel. Where does American diplomacy—has it helped or hurt global entrepreneurship? Your thoughts there? If we can unmute Rob.

LALKA:  There we go.

MODY:  There we go.

LALKA:  Seema, and we've got two awesome folks I've admired, like, both of these folks for a long, long time. And it's just great to be here. So thanks to you for bringing it together.

Yeah, so I worked at the State Department a decade ago. It's scary to say that now, working in an office that was—well, if anyone knows anything about State, the office that you're in depends on how close you are to S, okay? And so it's whether you're on the seventh floor, or sixth floor, wherever that is physically, but also in terms of your acronym. So our original office was S/N/RM/CFO/GPC. We were buried in the bowels of the system.

But we were created under Secretary Rice's administration, actually, as a part of what she called transformational diplomacy. Think about it as smart power, soft power, that has different terms that been used around it. We got moved up because Secretary Clinton had something that she had seen in her personal life, which was around the Clinton Global Initiative. If you'd heard of CGI, well, we were GPI, the Global Partnerships Initiative. We became the Office of Global Partnerships, which is S/GP. And so that was nice, because we were able to work directly with her. And for me, being someone who was on a very small team there, entrepreneurship was something that early on, we decided that that was what we wanted to focus on.

But really, it all started with a speech. And that was the Cairo speech of June 4, 2009. In that speech, Barack Obama said that we were going to focus on entrepreneurship, because that's what we'd heard from Muslims around the world who we'd asked through our embassies, about what they wanted us to focus on, what they still respected us for and wanted to work with us on. It's funny they—in that speech, we said we will host a summit on entrepreneurship within a year. And the big debate amongst all of us was like, okay, this is June 4, like, do we have enough time? Is it this calendar year? Is it a twelve-month period? Like, how long do we have to do this?

And we ended up being able to do it, we did it within— we bought ourselves twelve months on that. And so we did on April 24, 25, of 2009, or 2010. It's an entrepreneur story there. We thought we were just going to do one summit. We brought together some awesome people, young entrepreneurs no one had ever heard of to meet with Muhammad Yunus and Jacqueline Novogratz from Acumen Fund and other tremendous people like that. And that convening power really is an amazing force that government has that often we overlook.

But also it started something, I think, that none of us could have realized which was an entrepreneur brought a letter from Prime Minister Erdogan. He handed it to my intern, who handed it to me, who handed it to Pradeep Ramamurthy on the National Security Staff, who handed it to Ben Rhodes, who wrote into the speech. And next thing, you know, Barack Obama is on the stage saying, Prime Minister Erdogan's going to host the next one of these things next year.

And it became—what became the Global Entrepreneurship Summit. And so here we went from a small team of five or six of us working on the speech to ending up—[makes noise imitating explosion] It became this global thing that's been to—and I looked it up before this, Istanbul then Dubai then Kuala Lumpur, then Marrakesh.

But then what's interesting was it never quite made sense as a part of a Muslim engagement agenda. Right? Because, I mean, the analogy—and Peter Mandeville wrote a really good piece this week about this, that I encourage everyone to read is it doesn't quite make sense to say we're going to engage folks around both a religion and an economic development agenda in that same sense. Like it just doesn't add up. I used to think of it like if the Chinese were to say, we are going to build relationships with United States of America and the Russian Federation and Brazil because they are Christian-majority nations, and we're going to teach you how to do state-owned venture investing like we do it. It wouldn't make sense. And so there was always something that didn't quite add up within that level of outreach that we did.

But as a global entrepreneurship agenda, it makes a ton of sense for American foreign policy. And so what does that look like? It means that we can lead by example, showing what not just Silicon Valley, but other entrepreneurs all across—in Silicon Valley, in New York, and in Washington, DC, but then also in places like New Orleans are doing. And that's something that's tremendous, that's part of the American story, because that risk-taking is not available to everyone around the world.

But that also then talks about what entrepreneurship can look like, when you really think deeply about free markets, and free speech and free ideas. Entrepreneurship is all of those things. And that's America at its best. And one of the best things, I think about when you think about entrepreneurship is that that's America's story from the beginning is that we were entrepreneurs who were trying to do new things on a new frontier. Like all those—all that language literally derives from frontier investing, derives from like the American frontier and it derives from when we think about what those first founding fathers and mothers were all doing.

And so I think that's something that we want to think about when we talk about it in terms of the diplomatic context.

MODY:  Yeah, a lot of values embedded in entrepreneurship, you could argue. And Sylvana, I'll turn back to you. When we talk about the role of investors, the power that investors play in ensuring, you know, startups are getting the funding they need to continue to grow and build their ideas. You're the CEO of a big company that is based in an emerging market, a frontier market, what's your experience been like?

SINHA:  Well, it's been a challenging experience, to be honest with you. I think that, unfortunately, when people think of Bangladesh, they still think of it as a poor country, they think of it as a country that's constantly flooded. And now they think of refugees because of the Rohingya crisis.

And the first two things are really not—first of all, it's not a poor country anymore. It's a lower middle-income country that's graduated to middle-income status. And in fact, GDP per capita has exceeded India's this year. Secondly, the floods have never really crippled the economy. And although the Western press loves to cover it. And thirdly, there is a refugee crisis at the border. But despite that, the economy has continued to grow aggressively, and is one of the fastest growing economies in the world.

And so I do think that Bangladesh suffers from a PR problem, to be honest. And so part of what I feel my responsibility is, as an entrepreneur, when I'm fundraising internationally is to actually educate people on the exciting opportunity that is the Bangladesh market. There are certainly challenges. And I think that a lot of, you know, a lot of the challenge is just lack of familiarity. And when people actually look at the opportunity, they see that—and, you know, just, you know, I mentioned four percent growth this year, even, you know, against the backdrop of this global recession. I think that, you know, there may be more risk, but there's also the potential for more reward.

And when you look across globally, emerging markets are the ones that are really posting tremendous growth compared to the more developed markets. That's where the opportunities are, because that's where the needs are. You know, when I drive, you know, in downtown Dhaka, like, you can see the opportunity. You can see the change happening.

I know, you've lived in Bombay as well. And that's really exciting. It's exciting to think like, what's going to— what building is going to be there in ten years? You know, what— when is the subway going to be ready? Those are really exciting opportunities and they're basic infrastructure projects. My company is building infrastructure, you know, that the country really needs and it's an exciting investment opportunity. So I think, number one, the Bangladesh thing is a really big challenge.

The second thing that I think we've talked about a little bit is also that there's a sense that the West needs to save countries like Bangladesh, that there's a need for charity for countries like Bangladesh and you even look at the large funders, the philanthropists that have done amazing work helping Bangladesh to get to that it's now a middle-income country. And even they are not investing their private capital into Bangladesh. Now that they've helped lift us up as an economy, it's unfortunate that there's still a view—I think this is the Washington consensus view of development, that I was educated in that system. I did my Master's in development economics, and it's a very, you know, commonly held view that, you know, the basis of which the World Bank was founded.

But I think we're—you know, we've evolved since that. And now we have the IFC, and now we have development finance institutions that recognize that there's tremendous financial opportunity in building—in private sector development. And, you know, I really value the time I spent at the Bank, but I also recognize that most of those interventions are not more than band-aids. They're needed band-aids, but the truly sustainable form of development is private sector development.

And so, you know, both from an impact perspective, but also from a financial opportunity perspective, I think it's very real. And I think investors that choose to really take the time to look at it, and not dismiss the unknown market out of hand are understanding that and that's how we've come, you know, we've come as far as we have, and we're really grateful to the investors who've believed in us and taken that chance, but eighty percent of the nos I get are just because of the market, which is unfortunate.

MODY:  Wow, that's so interesting.

And Alex, you know, as Sylvana just eloquently said, you feel that energy when you're on the ground in a frontier or emerging market, Mumbai, Dhaka, you know, among other places. And the opportunity seems unlimited, especially on the infrastructure front, and you hear these big PR announcements. I certainly get them from the KKRs of the world, raising new funds that are dedicated to investing in these countries. Yet, when you speak to founders, there tends to be this reoccurring message of a scarcity of capital. Why the disconnect?

LAZAROW:  There is undeniably a problem. There's a very large delta between how much capital is available in places like the Valley and many frontier ecosystems around the world. I will say first, the good news, which is not going to help Sylvana today, but I actually think the momentum is on our side. And ten years from now we'll see incrementally, more and more, when looking at data of ecosystems, there's a little bit of this Cambrian explosion.

In particular, I interviewed Daniel Dines who's the founder of UiPath, which is the most successful company in Romania, and arguably the fastest growing enterprise company of all times in robotic process automation. And I asked him, like, do you think that after your business and the angel investors that have made money and the folks in your ecosystem that are going to have returns of capital, because of this, will we see more VC? He said, no one is an aberration, but with many, you can't write it off.

And that's what's happening in a lot of ecosystems where—I mapped it as part of the book project. You know, China, for instance, there's one year, there's a second five, six years later, then another unicorn, kind of a few years later, and then are four or five, and then it exploded, and saw a lot more. The same pattern emerges in many ecosystems in the U.S. and in Europe, where we see some concentration.

But to your question around the VC model, it isn't just that we need more VC, which we undeniably do. And there's a lot of work that we can do to catalyze that. But I also think the VC model itself needs to be revisited for emerging startup ecosystems.

I often ask my students, where do you think the VC model emerged, and everyone will say, you know, probably Silicon Valley. The reality is the roots are much older. It originally comes from the whaling industry, where a group of merchants or modern-day venture capitalists invested in a bunch of captains who got crews and the crews got— literally their profits were whatever came back from the whales. The reason VCs get paid with carried interest is literally what you carried off the boat.

And that model has been translated very successfully in Silicon Valley. But it doesn't import necessarily to markets where exit timelines are longer than the standard ten years, or where the risk-return profile is different when people are building more sustainability to the business model or what have you. And I think that we're in the very early days of seeing evolutions in the VC model to this reality.

A couple that I'll mention. I think, one, I think we're going to see some experimentation on the model. I think the VC preferred equity, kind of my bread-and-butter type thing will continue to be part of it. But things like royalties, and revenue shares, which, you know, take inspiration from things like the mining industry that also manage high-risk portfolios. I think we'll see evolution in how funds are structured instead of being these ten-year vehicles, things like evergreens.

Or who's doing the investing. In many ecosystems around the world, corporates have a very strong role in doing that, I think, impact investors and DFIs that Sylvana was talking about have a very important role there as well. And also in many startup ecosystems around the world, some of the best ideas are replicating themselves at similar times at similar paces in different places. And so I think the best investors are going to try to do things like the investment from my work out of being born global, of working in different ecosystems supporting entrepreneurs around the world.

And so those are some of the changes. It isn't that we need more VC money, which we do. But it's also that we need some reflection on what the model looks like and how to best support entrepreneurs in different ecosystems.

MODY:  [To Sinha] Yes, please.

SINHA:  Sorry, if I could just piggyback on that comment. I think I complain a lot about how hard it has been for me to raise money for Praava.

But I also think, and this is a really important point that Alex's book brings across, that there's wonderful things that that experience has taught us for which I'm really grateful. And, you know, I think that's kind of his point is that the VC model needs to reward the resilience that you're taught when you lack access to capital, where you have more limited human resources, you know, and so I am actually, you know, maybe at a different point in my journey. I wouldn't be quite as positive about it being on the other side of it. But at this moment, I'm really grateful for all of the ways that we've been forced to grow during this time, and I do think it's made us more resilient and better businesses in the long run.

MODY:  That's encouraging to hear that.

And Rob, you know, as we look to this new administration, new appointees, what would be the number—if you're sitting down with President Biden in January, what is the number one thing you would tell him, his cabinet members on how to boost entrepreneurship, not just here, but entrepreneurs who are looking for opportunity outside the U.S. as well?

LALKA:  There we go. Sorry, it's not letting me unmute myself. Just a little bit of a lag. I guess that's the COVID reality? I would—I mean—first thing I would say is that, you know, the president elect's Chief of Staff, Ron Klein, just came from Revolution, which is Steve Case's fund. And so, it's not how, or—it's not if this will happen, it's how it will happen. It's how fast it will happen. And sort of the mechanisms through which the new administration deploys innovative ways to invest overseas, and also in the frontier markets here in the United States.

Basically, the key data point that Revolution always cites, and I know this because they invested in a fund called the Vilcap Investments Fund, which the entire thesis was rise of the rest everywhere else and rise of the rest of the United States. The entire thesis was exactly what Alex was talking about in terms of revenue share, and convertible notes and other innovative finance that's outside of preferred equity.

And it was also around, hey, the best entrepreneurs that are out there are actually probably not the ones that are knocking on your door, they're probably head down doing the work. And they're also probably not the type that are either really close to Silicon Valley and New York and these epicenters and you may just miss them. Alex calls these camels in his book, the type that, you know, instead of a unicorn, you have a camel, someone who's just doing the work and can last longer time. I love that because it gives a real sense of what these entrepreneurs are doing, which is that they're working really hard and they're hustling. But the capital is not meeting them, just to be clear, the capital is not getting to them, and it's not meeting their needs.

And so, specifically back to Revolution, Steve Case often cites the statistic that seventy-five percent, and then it became seventy-eight percent, and then most recently, in a CNN piece, he said, just this week, it was eighty-four percent of total venture capital is spent in three states, on entrepreneurs in three states, California, New York, and Massachusetts.

So there's an idea behind that I think we as Americans need to think about with this new administration, which is do we actually think that seventy, eighty, eighty-two percent of the talent is based in three states? Or do we think that they're in places like New Orleans, Birmingham, Alabama, Omaha? But also like every little, small town, right? Every Greenville in every state, because every state has a Greenville, right? Like every small town across this country has talented people that have not had opportunity.

One of the very small silver linings of COVID is that we understand you don't have to be based in Silicon Valley, or New York, to be successful in tech or successful in anything as far as I'm concerned. And I think that that's an opportunity when you think about what those communities could see with investment, not only from Silicon Valley investors, but also folks who were putting their own money behind it in their own communities in building that model.

What I always say is, like, I don't want to be the next Silicon Valley. There's a lot about Silicon Valley I don't like. Like I want to be in New Orleans and I'll be the best version of New Orleans I possibly can ever be. And I want my government to help me to do that. And so, you know, I think that there are some ways that we're going to see that from some policies domestically. I also think that you're going to see that more and more as we lead internationally as well.

MODY:  And it's been fascinating to watch.

Sylvana, you know, a flurry of these hotbed startups across the country. And, among other factors, playing into why you are moving out of Silicon Valley. Elon Musk for tax reasons, which is a whole different topic. But I want to get your thoughts on that.

The pandemic has certainly pushed a lot of us virtual. I mean, as an entrepreneur sitting in New York running a company based in Bangladesh, some of the learning lessons for others who are watching us right now, or listening into this call, on how to run a company when you're based here, but the market's overseas.

SINHA:  That's a great question. I don't know that I have a wonderful answer to it. I don't know that I'm the best example. I'll be honest, I don't get enough sleep. So I would encourage people who were keeping talk hours and running companies eleven hours ahead of us to sleep more than I do.

But it's very difficult to do, to be honest. I mean, we've been—this has been a very challenging year for us, and one that was full of—I mean, we were supposed to close around in March. And of course, I arrived in New York—the reason I was in New York—I arrived in New York City on March 12 and, of course, the world fell apart as soon as I arrived, and my meetings were all canceled within forty-eight hours of that. And then, yeah, for various reasons I haven't headed back.

My—you know, I'm—yeah—so I'm the key person for my company. I have asthma. And, you know, so my board has discouraged me from going back because the situation is quite bad there. But I think it's really—I think it's really forced us to mature as a business, to be honest. I've always been very deeply involved in operations and I initially became even more involved because of the crisis and how, you know, how we had no idea what was going to happen, and the government was sending us different messages on different days. But it really forced me to empower my team and trust them. And I think it's improved our internal communications. It's forced all of us to grow in a really different direction than we'd ever expected it.

And that's, I mean, that's the beauty I think of this experience. It's—yeah, I mean, it's just an amazing—I'm so grateful for all of it, you know. Building something from nothing—-it's one of the great privileges of life, I think. You know, like, it's one of those experiences that makes you feel like proud to be a human being, that we as human beings can accomplish these kinds of things. And I don't—I'm not talking about myself, I'm talking about the team, the people. Like I have two hundred fifty ambassadors for better quality healthcare in Bangladesh. You know, it's an amazing thing.

And during this crisis, for us to be able to step up and serve the community, we were the first private lab to get approval to do COVID testing. We've, you know, we've grown our patient base, we've tripled our patient base since March. And so it's been an incredible honor overall, but I think it's matured us in really important ways. And for that we're grateful as well.

MODY:  That's fascinating.

You know, and Alex bringing into that—injecting the IPO market into this discussion, because, you know, to watch this IPO market, raising a hundred sixty billion dollars here in the United States during a pandemic, no less. Airbnb, DoorDash last week, how do you factor what we're seeing in the IPO market into this discussion around entrepreneurship. Does that bode well for startups that are based in frontier and emerging markets going into 2021?

LAZAROW:  Yeah, and maybe just first to build on what Sylvana talked about, I think the COVID crisis, we're going to see a shift in the types of businesses that are getting built and how they're getting built. And, you know, I think questions of being remote, questions of being born global, building impactful business. I think we're already seeing this coming out of COVID on the next generation of businesses getting built and how this is going to play out. And so really echo that sentiment.

Regarding the capital markets, I think it's such an interesting question. Because what's been happening is, obviously, technology companies have gone up a lot of valuations. There's a lot of momentum around those stocks, but also the mechanism of going public, things like SPACs, for instance, special purpose acquisition vehicles, that provide more speed to IPO, more price certainty. I think we're going to continue seeing some evolutions there as well. And some of these things are actually better news for entrepreneurs outside the Valley. Because it is showing—we're seeing the stock performance from some of these unbelievable companies like Shopify, based in Ottawa, around enabling e-commerce entrepreneurship everywhere. We're seeing a lot of these big companies getting built, and succeeding and being really good data points for the next generation of entrepreneurs, role models, etc. So I actually think that bit is really interesting.

And then the SPACs story, it's obviously become a very big phenomenon and route to exit for a lot of private companies. I think that also is really exciting for emerging startups because companies that would otherwise have had a harder time getting attention for IPOs. But also, they have a harder time getting access to capital, getting price certainty, and speed towards exit.

So I think a lot of these things are reflections of where the puck is going, and will, I think, will continue to catalyze some of this down the road. So I'm optimistic about the long-term effects of it.

MODY:  We're going to have another hole bent on SPACs, but we'll save that for another time. We are halfway through our discussion, I would now like to invite all of you to join our conversation with questions.

STAFF:  [Gives queueing instructions.] Our first question will come from Faisal Ghouri. Faisal, please do unmute yourself.

Q:  All right, hi, thank you, sorry, I was having issues being able to unmute myself. So I actually help manage a kind of frontier and emerging markets fund at Consilium Investment Management. And so I had a question and a comment.

So first, my question, kind of, Rob, was for you. The success of the Egyptian Enterprise Fund, which I believe is compounded at something like twenty percent per annum despite the currency devaluation in Egypt. Do you think we'll see more of these types of enterprise funds in other frontier markets, and particularly in places like Bangladesh?

And then kind of, you know, my second just kind of general comment was to kind of Sylvana. I mean, we are, you know, still very excited about kind of frontier markets and Bangladesh in particular, and have, you know, our largest country allocation is there. And, you know, just kind of curious, kind of, you know, does Bangladesh kind of, you know, given the fact that it sits somewhere between Southeast Asia and India, does it not meet, kind of, you know, does it behave like neither fish nor fowl in that it seems to be out of place in either category where, in Southeast Asia, you know, you still have the two billion dollars of venture capital came in the market? And then obviously, there's no shortage of money that's being thrown at India at any point in time. So I'll stop there.

MODY:  Sylvana.

LALKA:  Oh, yeah, Sylvana, I want to hear your answer first because that second question is more interesting than the first in my mind. I'm really interested in hearing that.

SINHA:  Okay. No, well, I definitely think Bangladesh falls through the cracks. Faisal, thank you for the question. You know, I think it's not Southeast Asia, and it's not Indo-Pak. And I think there's a lot of money that flows into Pakistan from the Middle East, frankly, partly, just by virtue of the fact that there are a lot of bankers from Pakistan that work in Dubai. I really think that those do—those pathways are very real. But you know, I think—and I think when you talk to investors, and you know, I've spoken with some of your colleagues and you about Bangladesh, there are real challenges in an emerging—in any emerging market, right? I mean, their issues with regulations in the financial system. I think that those are probably some of the biggest issues that we're currently facing. But I don't think those issues are worse in Bangladesh than they are in countries like Pakistan. Certainly.

You know, and in Nigeria, and in many other emerging markets, you can point to and so I really do think that part of it is just that geographically, Bangladesh falls through the cracks. Many investors I meet do not realize that a hundred sixty-five million, you know, a hundred seventy million people live in the country. They don't even realize the size of the market, and the opportunity that exists there. And so, you know, like I said, I think part of what we have—what I have to do and the other—you know, there are some other really incredible entrepreneurs in the system who've raised more money than I have. And I think all of us bear a responsibility just to really continue educating people on the market. And you guys to do the same. You know, like, you guys have invest—are well-invested in the market. And so we need your support. I hope that properly answered the question. We can talk about it offline separately.

MODY:  Rob.

LALKA:  Quickly on the Egypt point, I mean, I think there are real, awesome, new tools that will be at the disposal of a new administration that were not available ten years ago, most notably, the DFC. And so the Development Finance Corporation has the ability to do equity, which OPIC, of course, the Overseas Private Investment Corporation, did not. And then that opens up an entire spectrum of opportunities for both our foreign policy goals, but then also our development goals.

The area, of course, that is just so fascinating to me is not only Egypt, all the way across the Maghreb, because that is the least integrated economic region. And when you think about that is in our interest from a foreign policy perspective, in terms of engaging folks all across that region who are very young. And when you're young, there are lots of ideas and when you're young, and don't have jobs, you need those ideas to become businesses because entrepreneurship is an answer for opportunity there. If you don't have those opportunities, then we know that there's some bad consequences that could come from that that are not what we want to be talking about in this conversation. So I think entrepreneurship is actually a tool of foreign policy and also of, frankly, proactive, thoughtful, meaningful engagement, that prevents really bad things from happening and makes it so that Defense doesn't have to be part of the factor there. And so that would be my answer is that I hope the new administration takes that very seriously. And those new tools very seriously. It's not only in our interest, it's also in the world's interest.

SINHA:  Rob, if I could just follow up on that point. I totally agree with you. I will point out that DFC is not investing in Bangladesh due to—after 2014 when the Rana Plaza incident happened, and there was a collapse of a factory and thousands of people died, which was a terrible incident, DFC pulled out on the grounds of labor rights violations. In my view, we need to constructively engage. You know, not investing in Bangladesh is not going to help companies to be more accountable when it comes to labor rights. So I hope you and I can tag team and try to encourage the U.S. government to change its stance on that.

LALKA:  Yeah. I mean, the only thing kind of additionally, I think, which is positive and kind of worth hearing, hopefully, for the group is, you know, Fari, which is now the first ever unicorn to come out of Egypt was first invested—the first institutional investor was Egyptian-American Enterprise Fund, which was kind of led by, you know, and funded by the U.S. taxpayer. And so I think, you know, these development organizations have a, you know, very critical, important role to play in helping foster and nurture this kind of entrepreneurial ecosystem, where, frankly, you know, they're willing to take the risks that the guys at KKR and TPG, frankly, are not.

LAZAROW:  And by the way, it isn't just in emerging markets to fund companies. I think that phenomenon is absolutely true to kickstart the venture ecosystem, right? Even in the U.S., the SBA's role is really big. And in Israel, the Yazma Program around funding the early-stage VCs that are now catalyzing the ecosystem. And so I think that's right, there's a really big opportunity across the spectrum, both for early-stage companies, but also in funds and in catalyzing, exits, etc. So I think that's a crucial point.

MODY:  Interesting points on all sides. I'll turn back to Meaghan for our next question.

STAFF:  Sure. Our next question is from Olivier Kamanda. Olivier, you should be able to unmute yourself.

Q:  Thanks, Meaghan. So Olivier Kamanda, currently at Facebook, in my prior life I ran a bunch of startups into the ground. So interested in this crew's feedback. One thing that I think has come through in this conversation, which I almost—I want to push back on is I think the relationship between measuring the vibrancy or depth or strength of the entrepreneurial ecosystem with the number of startups or unicorns or the amount of VC money raised. And, I think, to the extent that, yes, there are very few regions in the world that are going to be New York or San Francisco or some of these other tech corridors, there are lots of other ways for communities to invest in and promote a deep entrepreneurial bench, right? So it's great to have a unicorn, it's great to draw attention, but there are—choose your city across the world, there are tons of small businesses, which provide a ton of value to the economy in terms of hiring, in terms of productivity.

And so I'd be interested in this panel's thoughts about different ways that we actually start measuring vibrancy of an ecosystem apart from those kind of top line, vanity metrics.

MODY:  It's a good question. Alex, would you like to take that one. Looking for that valuable, meaningful growth in these markets?

LAZAROW:  Yeah, actually, I'd be interested to hear Rob's view from the policy standpoint on it as well. I'll start by saying, look, I think entrepreneurship is a very broad term that represents a lot of different things. And it can include startup land, which is building a company, in its entrepreneurship of opportunity, with an ambition of scaling a business model to be pretty large. And it extends all the way to small business entrepreneurship. And all of those are very important. And I actually I think the point is very well taken because a lot of the comments that we've been talking about here are with the lens on this side of the spectrum. The strategies you might employ to foster entrepreneurship across the spectrum and particularly on small business entrepreneurship look very different than those that you would just targeting the startup lens. And so I agree with you, we should have a conversation around that because small business entrepreneurship is one of the biggest drivers of employment, job creation, the vibrancy—and all net new job creation in the U.S. has been and is related to that. So I take the point that, I think, for the three of us, our comments were in—with that lens.

I will say that I actually also think that as we reflect on what it means to have a vibrant startup—I'll take that lens because that's the world I know. Startup entrepreneurship, I think that measuring unicorns—I actually don't even like the term. It historically meant billion-dollar businesses. I think it's now taken this almost philosophical approach on how you build a business and like what that business looks like and its growth at all costs. All this. I actually don't love the name, specifically. But I actually think we often fall prey to say how many accelerators there are, how many new startup companies there are, how many x things are outputs of it.

But also, it is a fact that as you get more companies that cycle through and become larger, successful businesses, they actually then end up anchoring the next generation of startups. It actually does matter because those folks end up creating the next generation of angel investors or folks have been trained to building a business, which then translates into the businesses they get founded. And among the ecosystems that have grown, and I actually think the list is far beyond San Francisco and New York— in the U.S., there's a lot of very strong, budding ecosystems. A lot of them take root to one or two stories like Austin and the Homeaway story, for instance, that scaled really big.

So I do think that some of those metrics really, really do matter. But I totally agree with you that as we think about the broader story of entrepreneurship, we actually need to think much more broadly, and holistically about that as well. So I'd be curious, not to put Rob on the spot. I'd be curious how you think about it from that lens?

LALKA:  Yeah, happy to. Olivier, good to see you and thanks for dialing in from a later hour than what we're at right now. So, yeah, look, you're exactly right, because Alex is saying there are four hundred eighty ecosystems around the world that are these high-growth— that are really emerging. How many small towns are there, all the way up to the biggest cities in the world? That's the number of ecosystems that are small business ecosystems. You start a business, you're an entrepreneur.

Entrepreneurship is problem solving. It's as simple as that. I always tell my students, entrepreneurship is a long, very hard to spell French word that means problem solving. That's all it means. It means you're solving a problem that adds value to someone's life, so much so that they're willing to do a magical act, which is take this thing that is fungible, money, and spend it. Which they could be spending on any of the things that they had, patterns that they were spending it on before, and choose to spend it on you, on your idea, on what you are adding value to their lives. That is every business we ever interact with. That's capitalism.

And so I think that we definitely need to be advancing that from a foreign policy standpoint, because free markets are not a fait accompli. It's not the way that it is everywhere in the world. And it's not the way that it's necessarily going to be unless we lead. Likewise, I do think people are really compelled by the Silicon Valley story. And I think that the overall venture capital, which is still a really recent phenomenon, right? We're talking about this being sixty, seventy years old. It's very recent. It's really powerful to have those high growth ventures. And so I think being able to leave reform policy standpoint, both on what does it mean to be an entrepreneur, take risks, create business, create value for yourself, your family, your community, and those customers. But then also the high growth?

The last point, I would say, is Olivier, to your point, it actually—that multi-stakeholder approach that I described in that—that you do for your community, I think actually venture has a lot to learn from that, as we're seeing with the tech lash, the tech backlash. It's because they're growing at all costs and a lot of those costs are societal costs. And a lot of those costs are at the expense of people who don't have power. And I think that that's something that America also needs to be careful about when you're advancing entrepreneurship because, frankly, there can be mistakes there. One of the people who was a presidential ambassador for Global Entrepreneurship while we were in government was Elizabeth Holmes. We see how that turned out. And so I do think we need to be careful about what growth at all costs could mean when we're advancing people as these amazing entrepreneurs, who then end up in a situation which is not so great.

MODY:  Well said. Let's go to our next question.

STAFF:  Sure. Our next question will be from Sarah Danzman. And Sarah, you should be able to unmute yourself.

Q:  Hey, everyone, I'm Sarah Bauerle Danzman from Indiana University. Seema, thank you so much for presiding over such a wonderful event. And thank you, Rob, Sylvana, and Alex for a really interesting discussion. So I was an IAF last academic year, and I was working at the State Department in the Bureau of Economic and Business Affairs. And so these issues were issues that we dealt with every day from a variety of perspectives. And we, you know, this is obviously a very thorny problem.

And for us, the sorts of problems that we were really grappling with is, first, you know, this kind of model of, from policy perspective, this private sector development model that really is focused on catalyzing global capital markets. And when we say global capital markets, we're mostly talking about U.S. capital, right?

Is that, of course, we're really, you know, worried about China. And the fact that in many of the countries where we're interested in doing this work, there's this sense that—there's this idea whether it's real or not, right, that China seems to be a bit more courageous with financing, although there is some very problematic backend consequences of that financing, and that financing is not the type of financing that entrepreneurs really want. But it's there, right? It's really hard to prepare for a strategic dialogue where you're putting together a backgrounder and you're comparing U.S. investment in the region versus Chinese investment in the region and trying to figure out, like, how might we be able to finesse these numbers to make it look better for us? Right.

And then on the other hand, there's this big growth in these deal teams, right? Kind of focused more on specific transactions versus on broader reforms at the country level around the enabling environment. I think largely because of this Chinese investment and a pushback from governments of, well, why should we be doing all sorts of private sector reforms when, you know, the Chinese are going to give us this money with no strings attached, at least on a policy side?

So I'm very curious to hear from all of you on the panel about, both from the policy perspective, as well as the private sector perspective, sort of how to like—what's the way around these problems? Like, from a private sector perspective, is this kind of deal-level kind of focus a better focus? From a policy perspective, you know, what are the problems associated with kind of going this route? I don't mean to say that it's one or the other, it's probably a little bit of both. But on the margins, there are some important trade-offs here. And I'd really like your perspective. Thank you.

MODY:  Yeah, so, Sylvana, that's a great question. Sylvana, perhaps I'll turn to you. When you're raising money, what is your thoughts about—what are your thoughts about China, access to unlimited capital for their domestic startup space there? And whether that creates a more competitive environment when you're raising money?

SINHA:  Yeah, I mean, it's a really interesting question.

I've never been in that situation. And so I don't know, like, I guess when I think about myself operating in a frontier market, and I have thought that I should deepen my ties with Chinese investor community, because the Chinese are less shy of investing in Bangladesh than the Americans, you know. And I think the Chinese and the Americans, when you look at venture generally have more imagination for what can be done in healthcare. And so my healthcare model, for example, employs technology and infrastructure in—like to call it a brick and click healthcare model, whereas most investors in the frontier are looking at, at least in Asia, are looking—non-China—are looking at either the technology piece or the infrastructure piece.

And so I really appreciate that I haven't been in a position where, you know, I've had to pit an investor, like a Chinese investor against an American investor in this way. I'm sure that there are challenges, you know, that emerged from the different approaches to, you know, to the way investors behave. But I, yeah, I mean, I haven't—I can't say that I can speak from experience in terms of having to weigh those options.

MODY: Rob, you know, look no further than Belt-Road Initiative to see the success that China has had in investing in distressed nations in exchange for, you know, funding for infrastructure projects. Is that something that, you know, the U.S. should be more concerned about from an entrepreneurship— I'm looking at entrepreneurship, and what that could mean for U.S. startups and even others in India, Bangladesh, among other frontier markets, growing at a similar pace.

LALKA:  Absolutely and always, with China. If we do not advance our values, and we don't put our model forward, they'll put theirs forward and theirs is very different than ours. As Alex alluded to, it's state-owned enterprises and with state-owned become something that's very interesting and very, very—we have to be very careful about how we understand it because it is— we assume—I think we have a lot of assumptions about what it is. And then when it turns out on the other side that, for instance, all the data is going to the state, and what they do with that data, I think there's a very dangerous thing that happens.

So I like to think of this, I've taken up golf in the midst of COVID as a way of having sort of a bit of mental health. And I think about well, you know, if I— if my data was owned by the Chinese, then there would be a situation in which my employer would probably get a message from the fact that I showed up to play golf at four o'clock instead of after hours. And do I want that? You know, do I want that for what happens? Because, think about it, when I log on to wifi there, that's going to be from—Sorry, the lights are going off here. I'll be right back. That's our LEED certification right there.

That's, I mean, that, you know—it's because when I log into wifi, they'll know where I was. When I send an email from there, they'll have me geo-located. When I use that particular app to pay for it at that golf course, they will know at four o'clock if I was there. And in China, that means that they can dock your, like, your social score, what then you were seen as a valuable citizen because you chose to leave work an hour early to do something that, in my mind, is for mental healthcare.

And so again, if we put it in those personal terms of what—how is our data used? Again, I don't know that it's the best world in which, in America, the private companies are the ones that are controlling that, and that can be dangerous with that. But at the same time, when I think about freedom, and I think about what my values are and what I want to promote as an American, it certainly isn't what China is doing in terms of my kid one day not being able to have opportunities because I chose to play golf or do other things in a moment when they were thinking that I should be at work.

MODY:  Let's go to the next question.

LAZAROW:  Could I actually just jump in for thirty seconds on a slightly different angle into—is that I actually think the future of innovation and what we're seeing manifested is with the best ideas becoming global, and us getting inspiration from it.

So the one other piece that I think is really valuable, and an opportunity for us, is to take inspiration on some of the things that are really working in the Chinese ecosystem, particularly one on business models. When I started investing in fintech a decade ago, there was 2.5 billion people that are underbanked. Today, the number, by the IFC is 1.5 billion. A billion people have been given access to banking in some capacity or another and most of that is driven in China. And most of that is driven through things like Tencent, WeChat, and AliPay and things like that that gives us a model for superapps. They're now influencing some startup models in places like Bangladesh and India and Indonesia, and frankly, actually coming back to the U.S. where a lot of fintechs are talking about the superapp model. So I think there's an opportunity to learn on that dimension.

And also an opportunity in learn on how companies are getting funded. I talked about this corporate model, what Tencent and Alibaba and others are doing of inviting startups into their ecosystem, giving them acceleration, are things that we could actually learn from as well and can catalyze startups here in the U.S., and better foster cooperation and collaboration among our corporate, our very strong corporate ecosystem. That's where—that really support Middle America and a lot of these things. So I actually think we also have a big opportunity to learn as we're looking to catalyze our own startup ecosystem too. So I'll just give that lens of opportunity.

MODY:  Good point. You look at China with a watchful eye, but there are things we can learn as well. Meaghan, our next question, please.

STAFF:  Sure. Our next question is from Ben Biles. Ben, if you can unmute yourself, please.

Q:  Can you hear me?

MODY:  Yes.

Q:  Okay, great. Awesome. Hey, pleasure to be here. Thanks for hosting. Seema, nice to meet you on the panel. I founded a small business a few years ago, American Veterans Group. We're a social impact-focused investment bank, and it was very difficult to raise capital, telling investors that I was going to take a portion of my profits and reinvest it back into their military charities built in the communities where they serve. That being said, it's actually been a big part of our value proposition and allowed us to deepen our relationships with our current client base this year. So I understand what you're going through, Sylvana. That's really interesting.

That being said, I understand that, in some of these new frontiers, the risk premiums for investors might be higher than, you know, other alternatives they might have. And we talked about the DFC being one opportunity for funding. We also talk about, you know, maybe U.S. foundations or the global foundations like the Gates Foundation, and maybe some other opportunities for—to reach these investors to help build U.S. relations in these foreign countries. And they might not demand the same risk premium as other U.S. investors. Thanks.

MODY:  Who'd like to take that one?

LAZAROW:  I have a—oh, go ahead, Sylvana.

SINHA:  Yeah, well, I can just quickly say that one of the challenges we faced, and I think this goes back to the point about the focus, you know, with foundations and a lot of traditional impact investors, my business is focused on the middle class. It has been traditionally. Now that we've established ourselves, we're investing in technology that's increasing access for a broader segment of the population. But we started out really focused on the middle class, which I believe is an underserved segment of the population in Bangladesh, and in many countries, including the United States. And when foundations hear that I'm focused on the middle class, they don't want to talk to me anymore. And I think that's unfortunate, but it's the reality. And yeah, that's been my experience.

LAZAROW:  Maybe just two thoughts. One is on the risk premium. And the second is around the opportunity for blended capital. On the risk premium, I actually think that some of this is a misunderstanding on the part of investors on risk premium. I think the risk premium is not higher, it's different. So there's risk of unknown, country risk, things like that that are more challenging. But the ways businesses are getting built have more sustainability and resilience. And so there's actually much higher survivorship. So some data out of the Harvard Business School showed survivorship downside risks lower in a lot of these frontier ecosystems. And in places— even in the Midwest, return on capital, while there is less ten billion- or hundred billion-dollar Facebook satellites, it's on— there's more consistent returns, and higher cash-on-cash returns because of businesses has ingested less capital. So it's a different risk premium, not necessarily higher than I think needs to be adjusted.

And then on this question of the role of foundations. This is a growing sector, I used to work at Omidyar Network, which is a blended financial inclusion— while I was working on financial inclusion but a blended foundation, venture fund, family office together. That's part of a growing movement. It used to be that we thought of it as, this is my for-profit bucket and then this is my foundation. I actually think a lot of this work at the intersection of it is going to grow. It's becoming more and more important. There's an opportunity to think holistically about that and your impact. And so that area is growing. It's still early days, but I think will become a bigger vector for impact over time.

LALKA:  Let me just chime in really quickly. Oh, sorry, I know we're about to run out. And I know we love being on time at CFR. I'd just like to bring, as a last point, first of all, thank you for your work with veterans. I'd also like to say that this is where alpha is, folks, both in the frontier but also in terms of diverse entrepreneurs. Project Diane says that there are ninety black women who have received over a million dollars in venture ever. Okay? Like that is unjust, but is also alpha. That is a business opportunity for people to find their— same thing with Latina women as well, if you look at their website, Project Diane.

So when you think about that and the opportunities there in our own backyard with people who, you know, are fighting really hard and working really hard to build great businesses in America. But then also think about what that would mean when you think that talent's universal around the world. I mean, I think that that's the thing we can be most hopeful about.

MODY:  Ending on a strong and optimistic note, we're going to leave it there. Rob, Alex, and Sylvana, thank you for your time. And thank you all for joining us for this fascinating discussion on entrepreneurship. And now, please do stick around for a happy hour. I will turn it back Meaghan Fulco.

STAFF:  Thank you guys. Thanks so much, Seema. And before jumping into how we're going to break everybody up into small groups for the happy hour, I just want to thank our panelists for such a fascinating discussion and for sharing your expertise.