The startup that not only created itself, but its environment – Georgina Campbell Flatter

Georgina Campbell Flatter, Executive Director at MIT Legatum Center, Senior Lecturer in Technological Innovation, Entrepreneurship, and Strategic Management

From Forbes Mexico

Entrepreneurs are increasingly vital change agents in the developing world. Not only do they take on vexing social challenges like access to better healthcare and cleaner water, they’re also the engine propelling the economy and the potential antidote to a looming jobs crisis.  According to the United Nations, we’ll need 470 million jobs between now and 2030 to support new entries into the labor market. Those jobs won’t come from established companies, but rather entrepreneurs who are creating high-growth businesses.

To build a sustainable and scalable venture, entrepreneurs must innovate to compete within their market, but some will go much further than that to maximize their impact. Some will transform—even help create—the very ecosystem in which they operate.

A great example is Play Business, Mexico’s first equity-based crowdfunding site. The founders were motivated by the knowledge that Mexico was emerging as an innovation hub for Latin America, with up to 110,000 new engineers graduating from colleges every year. Moreover, Mexico’s 4 million small and medium enterprises (SMEs) constituted 72% of the country’s new job creation. And yet this critical economic engine had little access to capital—nearly 80% of SMEs were completely self-financed.

This lack of capital meant that potential innovations, which might create jobs and improve lives, were being lost. Play Business, launched in 2014, offered a solution. As Play Business cofounder and MIT Sloan alumna Fernanda de Velasco put it, “We would enable common people to invest in uncommon startups.”

Since there were no laws in Mexico around equity crowdfunding, Play Business was at first able to operate with few restrictions, but the founders also knew this could quickly change, especially as fintech grew and new governments (potentially more aggressive toward the financial industry) were elected. Fernanda’s team decided to be proactive and approach Mexico’s government about creating new regulations. This was a gamble, to say the least. The prevailing wisdom among emerging market entrepreneurs was that it was best to develop your venture while staying under the government’s radar. Concerned naysayers warned Fernanda that working with the government could result in requests for bribes, or worse, a set of intractable regulations that would kill her business.

But the Play Business team had already determined that staying under government’s radar, though it had short-term advantages, would never allow them to achieve their desired impact. “We wanted to fund more than just 10-15 companies,” Fernanda said, “We wanted to fund thousands. Our goal was to systematically create startups in Mexico.” By creating protections for consumers and a set of rules for honest businesses to follow, sensible regulatory laws could effectively create and stabilize the crowdfunding market.

Because Play Business demonstrated transparency at the outset and was able to show that its interests aligned with the government’s, the company was allowed to collaborate in drafting the new legislation. This proved vital when, for example, legislators planned to include a provision that would have forbid Play Business from accepting even a partial equity fee.

Once Fernanda’s team explained how this would render incentive-based models like Play Business’ useless, and would hurt the industry generally, the legislators revised it. The government appreciated that her team was seeking to change the legal system not just to benefit their own business, but to create an entirely new funding stream for entrepreneurs.

After two years, the collaboration between Play Business and the Mexican government finally paid off. Last February, a bill to regulate the fintech sector including crowdfunding was approved by Mexico’s lower house of Congress, the final step in becoming law. It will serve as the industry’s foundation. The benefits include reduced operations risk for businesses, more transparency for digital platforms, higher security and protection for consumers, and increased confidence in alternative financing models. It also reduces uncertainty, which could attract higher capital investments in the sector.

More recently, in recognition of their legislative leadership, Play Business was one of six private sector representatives—and the only startup—invited to join the Mexican government’s newly formed Financial Innovation Group.

Today, Play Business has 55,000 users (adding nearly 1,300 users each month) with 15,000 active investors and 3,500 startups on the platform. Of those startups, 180+ have raised capital and 105 have been successfully funded. This means that $7.5 million in venture investment has been delivered. Play Business has also enabled the formation of over 1,500 new jobs.

According to Fernanda, the new market will certainly create competition, and in fact a few of the startups Play Business has helped fund are potential competitors. Yet that’s all part of the plan, and the Play Business team is confident they are poised to compete in the fair and healthy marketplace they helped create.

The maxim “A rising tide lifts all boats” is often invoked to defend controversial economic policies, but perhaps it’s more aptly applied to the Play Business mindset, and to similar entrepreneurs who actively work to raise the water level even as they build the best boat.

Read the original post at Forbes Mexico.

Georgina Campbell Flatter is Executive Director of The Legatum Center for Entrepreneurship and Development at MIT and a Senior Lecturer at MIT Sloan School of Management. She mentored Fernanda de Velasco, who was a Legatum Fellow, during her time as an MBA student at MIT Sloan.

What Blue Apron needs to do to survive the threat of Amazon – Sharmila Chatterjee

MIT Sloan Senior Lecturer Sharmila Chatterjee

MIT Sloan Senior Lecturer Sharmila Chatterjee

From MarketWatch

For a while, it looked as though Blue Apron was destined to become a culinary juggernaut in the American kitchen.

Founded in 2012, the company APRN, +1.89%  carved out a clever business model by mailing perfectly portioned, pre-packaged ingredients and recipe cards to home cooks in need of handholding. It’s not yet profitable, but growth is impressive. Last year, the company had $795.4 million in 2016 by delivering about 8 million meals per month to customers.

Recently, though, there have been challenges. Shares that the company had hoped to sell between $15 and $17 apiece in June were priced at just $10, hurt in part by Amazon’s AMZN, +0.23%   announced acquisition of Whole Foods WFM, -0.02% earlier that month. They now trade for less than $6, pummeled in part by Amazon’s plans to launch its own meal kits.

The twin revelations about Amazon are no doubt unnerving to Blue Apron’s executive leadership team and investors. And yet, they should also see them as encouraging signs. That Amazon sees so much potential in the industry is proof positive that the meal kit represents a new American staple, and not just—pardon the expression—a flash in our collective pots and pans.

True, Amazon is a formidable rival. And yes, the meal kit business is increasingly crowded. (Current contenders include: Plated, HelloFresh, Purple Carrot, and Sun Basket.) But Blue Apron has an opportunity to differentiate itself. To do so, it must focus on the needs, wants, and values of its target audience: mainly millenials.

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Trump’s immigration ban is terrible for entrepreneurs–Samia Bahsoun

Samia Bahsoun, EMBA ’17

From TechCrunch

Donald Trump’s executive orders targeting Muslims, immigrants and refugees are moves that pander to the dangerous forces of racism and xenophobia.

These bans will worsen a worldwide humanitarian crisis, isolate us from our friends and allies, and make us even more vulnerable to terror attacks. Moreover, if these foolish actions are enforced, it will result in dire consequences for the economic well-being of our country. Immigrants of all races, creeds and national origins form a vital part of America’s economy as workers, job creators, and entrepreneurs.

I’m an immigrant of Lebanese Muslim descent. I’m also a telecom infrastructure expert, entrepreneur, and the founder and CEO of Capwave Technologies, based out of Asbury Park, New Jersey. Before launching Capwave, I helped restructure and launch several telecom startups and served as a strategic adviser to Fortune 500 companies. I hold a graduate degree in electrical engineering, and am currently enrolled in MIT’s Executive MBA program.

As an immigrant and successful small business owner, I’m living the American dream.

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MBA diary: tackling the diabetes epidemic – Stefany Shaheen

Stefany Shaheen, EMBA ’18

From The Economist

My entrepreneurial journey began on a chilly January morning in 2008, not long after my daughter, Elle, was diagnosed with type-1 diabetes. She and I were in the kitchen of our New Hampshire home getting ready for breakfast. Elle, who was eight at the time and the eldest of four children, reached into the cupboard and picked out a box of Cheerios and a bowl. I handed her a measuring cup, calculator and notepad.

The realities of living with type-1 diabetes—a chronic, autoimmune disease that destroys the body’s ability to make insulin—were just starting to sink in. Fixing a bowl of cereal was no longer a simple process; it was maths problem. Together, we needed to figure out the amount of carbohydrates in the cereal and milk and then determine how much insulin Elle would need to inject to turn that food into fuel. We also needed to keep track of the food she was eating along with her physical activity and blood sugar levels to avoid dangerous high and low blood sugars. Having blood sugar that is either too high or too low can cause serious complications and could lead to death.

Elle and I got to work but she soon became frustrated. She threw the cereal box across the room; Cheerios flew everywhere. “Why does this have to be so hard?” she asked me through muffled tears.

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How to incubate innovation – Christian Catalini

MIT Sloan Professor Christian Catalini

MIT Sloan Professor Christian Catalini

From Business Value Exchange

The first thing an organization can do to nurture innovation is to tap into its own human capital. At a high level, all organizations care about ideas, and more often than not, in corporate settings, people already have ideas. Staff have expertise, know the customers, and throughout the organization they can interface with interesting sources of data and information.  It’s just that their day-to-day requirements do not allow them to execute. Slack time can be an important lever for incubating creativity and a meaningful way for executing ideas employees have had in mind for some time.

But if you ask employees to be entrepreneurial, it’s not same – they may end up directing their own unit, but not building and scaling a multi-billion dollar start-up. It’s hard when you have the safety and surroundings of a large organization to act like entrepreneurs who have to attract capital from outside. The challenge is once you identify talent and the ideas inside to incentivize to execute an experiment as though it were a start-up. Perhaps the biggest organizational change is to think like a small start-up.

From an organizational perspective, firms can learn a great deal from university accelerators. At MIT, we have Global Founders’ Skill Accelerator, where we get students with good ideas to scale businesses. The interesting thing is that students who have no experience of entrepreneurship get feedback and advice from a set of seasoned entrepreneurs. Similarly, an enterprise may have skills and expertise on the tech side, but no track record of taking an idea and scaling it to a multi-billion project. The challenge is how to recruit entrepreneurs to train employees with the good ideas to take them to the next level. Read More »