11.

Lay the Foundation

Support the Next Generation of Entrepreneurs

The greatest challenge in building a Frontier startup is operating at the Frontier, especially when you are the first to arrive. As you have seen, Frontier Innovators are tackling tougher problems than their Silicon Valley counterparts are, and they are tackling them in more-difficult ecosystems.

The best Frontier Innovators lead heroic acts of terraforming: laying the building blocks for a future innovation ecosystem and kick-starting ecosystem development. A small minority of these entrepreneurs—those who reach scale and exit early in the life span of their ecosystem—have an outsized impact on these systems, clearing the path for future generations of entrepreneurs and lending them a helping hand. Let’s call them the older siblings of their ecosystems.

Older Siblings of Latin America

Hernan Kazah is a quintessential older sibling. He grew up in Buenos Aires and managed brands for Procter & Gamble in his first job out of college. In 1997, Hernan was admitted to the Stanford Graduate School of Business. He quickly fell in love with the technology world and the opportunity to shape a nascent global ecosystem. Instead of staying in Silicon Valley, he partnered with his business school classmate Marcos Galperin, who had the idea of setting up an e-commerce platform for Latin America. It was a bold idea when internet adoption in the region was at a meager 3 percent and there wasn’t a single venture capital firm on the continent.¹

They launched the MercadoLibre platform in 1999. It was not a smooth ride; the company operated in a challenging and hostile ecosystem. Once, fearing both the potential encroachment of US players like eBay and a number of well-funded local competitors, a few of the investors lost confidence entirely. They asked Hernan and Marcos to shut the company down and return to them what little capital was left. The two men had to fight for the life of their company and convince investors of their strategy.

Ultimately, they proved the naysayers wrong. Now MercadoLibre is the largest e-commerce company in Latin America and among the top ten in the world, boasting nearly twenty-eight million customers, more than nine million vendors (several tens of thousands of which rely on the platform as their primary source of income), and more than 181 million products traded.² The company went public in 2007 on the Nasdaq, the first Latin American company to do so, and now is worth more than $29 billion.³

After the IPO, Hernan transitioned management responsibilities to the up-and-coming leaders at the company. Instead of retiring, he chose to give back to the next generation of entrepreneurs and solve some of the problems he had faced. He partnered with MercadoLibre’s former CFO, Nicolas Szekasy, to found Kaszek Ventures. Hernan wanted to provide these entrepreneurs with the mentorship, network, support, encouragement, and, of course, capital that he had struggled to access when he first began. Kaszek Ventures started out investing only its own personal capital but subsequently accepted outside capital. Its most recent fund, its fourth, was more than $600 million.⁴ The portfolio includes the companies of leading Frontier Innovators profiled in this book, such as Nubank, Guiabolso, and Dr. Consulta.⁵ Many of these companies have a social lens, and they focus in part on giving back to the community as a whole.

In addition to his work at Kaszek, Hernan Kazah served on the board of LAVCA (Latin American Private Equity and Venture Capital Association) and co-founded ARCAP (an Argentinean association for private investing). His profound impact on the ecosystem extends beyond his involvement with ecosystem-building organizations. He and Marcos have mentored dozens of entrepreneurs. The Globant founders, for instance, credit the two men with motivating them to pay it forward again in the next generation.⁶

Just as elder siblings often face unrelenting parental resistance, first generations of entrepreneurs in nascent ecosystems often find it challenging to succeed. As they forge ahead, they create the ecosystem and environment they need if they are to realize success, and, by breaking down barriers, they benefit their younger siblings. Older siblings also look behind and actively help their younger siblings along, just as Hernan has done in Latin America. A few trailblazing older siblings can make all the difference. In Latin America, older siblings from three companies, including Hernan and Marcos, are linked to 80 percent of startups in the region.⁷

Laying the Foundation, One Brick at a Time

Of course, ecosystem building doesn’t fall only on the shoulders of those entrepreneurs who “make it,” nor does it depend on an older sibling to act as a catalyst. All Frontier Innovators are the architects of their ecosystems, and they are using every tool available to build something that lasts.

Some of the tools they use include promoting startup culture and its acceptance of failure, teaching entrepreneurship and related skills, creating collaborative physical spaces, providing mentorship and financial support in parallel to scaling their businesses, building industry organizations, getting involved in local regulations—and, of course, building highly successful businesses. Let’s explore each in turn, beginning with one of entrepreneurial culture’s defining characteristics.

Mescal and Failure

Our story starts (as all stories should) with six friends having a conversation over a bottle of mescal. When the topic turned to Mexican startup culture’s aversion to failure, the entire group agreed that it was hampering the country’s budding entrepreneurial scene. No one talked about the nearly universal experience of fracaso—failure. While would-be entrepreneurs dreamed of success, many never started because they had no idea how to succeed and were intimidated by the likelihood of failure. Every person at the table had experienced these emotions. Nor were they alone. As you have learned, failure is not often tolerated at the Frontier.

The group was not new to the Mexican startup scene. Pepe Villatoro, for example, was born and raised in Chiapas, Mexico, one of the poorest parts of the country, but he went on to found a range of startups, including a magazine and a coworking space. He was recruited to launch WeWork in Mexico, which would become one of its fastest-growing markets. In each of these experiences, he endured many failures.

Back at the bar in Mexico City, Pepe and his friends decided to tell all. Perhaps it was the mescal or the cathartic effect of discussing failure out in the open, but each of them left the conversation feeling more comfortable with entrepreneurial risks. Each realized that the outcome of the failures they shared was not that bad. Here they were, years later, succeeding in other endeavors. They left, energized to imagine their next companies, and the group began to meet monthly for honest discussions about risk and failure.

The idea went viral, and so “Fuckup Nights” (FUN) was born. Pepe and his friends created a platform for others to replicate similar events in their own startup communities. The objective was for participants to share stories of their professional or personal failures, all while creating a culture that accepts risk taking and the failure that may ensue. Over the next few years, FUN organically and unpredictably turned into a global platform for entrepreneurs to share their stories of defeat and reflect on what they had learned, thereby helping others learn and avoid the same mistakes. FUN redeemed failed projects and startups by putting their stories to use.

Pepe became CEO of the organization and set out to institutionalize it. He formed a consultancy to work with the network and wrote a manifesto. Later, FUN launched the Failure Institute, which collects and analyzes data on entrepreneurial failures in cities, tracking rates of failure by location, industry, and startup type and calculating trends in the development of resilience in entrepreneurial communities.⁸ FUN recently launched academic chapters to destigmatize failure in the education system and is working with more than two hundred corporate partners to help change their cultures and mindsets.⁹

Already, FUN events have been hosted in more than 330 cities in ninety countries. More than ten thousand people have told their stories to more than a million people.¹⁰ It has become a leading distributed entrepreneurial social movement.

Like Pepe and his friends, Frontier Innovators shape cultural perceptions of risk. They may also impact regulations (e.g., punitive bankruptcy laws), decreasing the real costs of failure. Over time, Frontier Innovators can foster a culture that accepts entrepreneurship as a viable profession, supports entrepreneurs in taking risks as they scale their businesses, and enables them to commit fully to one venture.

Of course, acceptance—and celebration—of failure is also a time-honored Silicon Valley tradition, but it is only one part of building an entrepreneurial culture.

Teaching Entrepreneurship

In many Frontier markets, building an entrepreneurial culture involves educating people about how and why entrepreneurship is a viable career path. In extreme cases, it involves introducing the very concept of entrepreneurship.

Geoffrey See, an innovator, entrepreneur, and venture capitalist, founded the Choson Exchange to promote entrepreneurship in North Korea. For the past nine years, Geoffrey has offered targeted workshops to teach business, economic policy, and law. Of course, given the political situation in North Korea, Choson operates in narrow segments. It provides critical training for a burgeoning market-oriented system in which households engage in trade activities and small business. Another option for aspiring entrepreneurs is to open businesses in partnership with a state-owned enterprise. These ventures are “state-owned with a private investor.” Typically, the entrepreneur has operating autonomy and shares 30 percent to 70 percent of their revenue with the affiliated state-owned enterprise, depending on what the enterprise contributes to the business.¹¹

Choson Exchange focuses on training young entrepreneurs and has already trained hundreds of men and women. Geoffrey also contributed to the establishment of the country’s first startup incubator. He partnered with North Korea’s State Academy of Sciences (SAS) and attracted more than twenty thousand researchers who are interested in commercializing their ideas. Geoffrey’s endeavors include a valuable cultural exchange element: the workshops are staffed by volunteer teachers from all over the world.¹²

For Geoffrey, the entrepreneurial culture needs in North Korea are completely different from those anywhere else on earth. As he explained, “In many markets, the risks to starting a business overwhelm the dream of the potential of the business. In North Korea, paradoxically, success can also be a big risk. Entrepreneurs are worried that the business will get confiscated. Therefore, in the past, they were motivated to take cash out of it and not reinvest in growth.”¹³ As a result, a meaningful portion of Choson Exchange’s work is to valiantly attempt to shape policy and legislation to enable a more stable business environment and better protection of property rights. Through his courses and student exchanges, he is slowly helping build an entrepreneurial community in North Korea.

For the rest of the world, there are organizations like Startup Weekend (now a part of Techstars, an accelerator focused on emerging ecosystems), which aims to create entrepreneurial culture in nascent ecosystems, from Bolivia to Madagascar to Mongolia to Tunisia. Startup Weekend organizes weekend events to demystify the entrepreneurial journey. Over fifty-four hours, the program immerses would-be innovators who are considering starting a new venture into the world of entrepreneurship. The events promise to give participants the opportunity to “experience the highs, lows, fun, and pressure that make up life at a startup,” bringing together a unique set of mentors, advisers, and ecosystem participants as part of the setting.¹⁴ So far, Startup Weekend has organized nearly three thousand events for more than two hundred thousand prospective entrepreneurs in 150 countries.

Some Frontier Innovators want to offer both a launching pad and a safety net for potential founders. Yasser Bashir, founder of Arbisoft, a successful technology company in Pakistan, incubates his employees’ startups internally. Yasser allows potential entrepreneurs, often his own employees, to become “entrepreneurs-in-residence” while still receiving a salary. If it works, the new idea is spun out into its own entity, and Arbisoft receives equity. If not, the would-be founder can get another job within the company. Yasser has incubated five successful companies.¹⁵ Savaree, a ride-hailing startup for the local ecosystem, was incubated within Arbisoft for eighteen months. It was spun out and ultimately was acquired by Dubai-based ride-hailing platform Careem.¹⁶

Demystifying, teaching, and incubating entrepreneurship all help entrepreneurial culture grow and thrive. But many regions struggle with a lack of critical educational infrastructure.

Teaching the Skills, Finding the Training

As you have seen in previous chapters, one of the largest resource gaps at the Frontier is the shortage of trained, experienced talent. Both prospective entrepreneurs and their future employees suffer from a lack of opportunities locally to learn necessary skills and gain experience.

Enter Fred Swaniker and his company, African Leadership Group. Fred is fostering the next generation of entrepreneurial leaders for Africa.

Fred once described the arc of modern African political leadership to me this way: “The first wave were those leaders that bravely led Africa out of colonialism in the 1950s and 1960s. The second were the dictators that arose out of warfare, corruption, and lack of governance. Many countries have witnessed the emergence of a third generation of more democratically accountable leadership that has stabilized governments region-wide.” Fred says that Africa is now approaching a fourth wave of leadership—one in which the next generation of young Africans tackles complex economic, social, and governance challenges through entrepreneurial solutions.¹⁷ This generation will also build crucial institutions to drive social and economic inclusion and prosperity.¹⁸

A key challenge stands in the way of this vision: the limited opportunities for the fourth wave of leaders to learn and get trained. More than 120 million Africans will seek to enter the continent’s workforce in the next decade, and they are sure to be looking for meaningful and competitive opportunities.¹⁹

One major bottleneck is university capacity. To train this generation of emerging young leaders, Fred launched the African Leadership University (ALU).

Fred is not new to the education and leadership development space. Born in Ghana, at a young age he fled with his family during a time of political turmoil, first to the Gambia and then to Botswana. His mother, herself an entrepreneur, built a grade school there. By the age of eighteen, Fred was serving as headmaster of the school, having just completed high school himself.²⁰

Nearly fifteen years ago, after completing his MBA at Stanford in 2004, Fred launched the African Leadership Academy (ALA) with the hope of creating the premier high school on the continent. The competitive two-year program is open to only 250 students per year. Roughly 85 percent of the students attend virtually for free, the tuition funded through donor-backed forgivable loans. The loan agreement stipulates that the student must return to Africa to work for at least ten years after completing university; otherwise, they must fully repay the approximately $60,000 in total tuition.²¹ So far, ALA has graduated 983 students from forty-six African countries.²² They have gone on to attend some of the best universities in the world, and many are already back in Africa tackling challenges in refugee camps, entrepreneurial finance, and primary school education.²³ In addition, Fred launched the African Leadership Network to connect influential leaders from across the continent.²⁴

ALU is his boldest venture yet. It is not a traditional university. For one thing, the curriculum was built to cultivate specific “twenty-first century skills” (skills like leadership, entrepreneurial thinking, quantitative reasoning, critical thinking, and communication) required in the market. The learning model is project based and student driven. Rather than choose majors, students at ALU choose a mission from a set of fourteen “grand challenges and opportunities” facing Africa and the world, which range from governance and health care to urbanization and wildlife conservation.

Fred also worked with leading corporations to develop customized curricula and guarantee employability of ALU graduates.²⁵ For example, there is the ALU School of Insurance, which prepares students for careers at partners like Swiss Reinsurance, Africa Reinsurance, Allianz SE, and Liberty Mutual.²⁶ Similarly, ALU’s computer science program integrates technical skills with leadership so that students practice not only coding but also the entrepreneurial thinking required to develop and scale new products.²⁷

So far, ALU has raised $80 million and has campuses in Mauritius and Rwanda.²⁸ Fred sees opportunities for South-South knowledge exchange and hopes to expand in India and Brazil. If he succeeds, he will have made an important dent in creating the fourth generation of leaders in Africa and beyond.

After fledgling entrepreneurs take advantage of all these opportunities and get started, the next ecosystem challenge is to help them find one another.

Creating a Physical Space for Culture and Partnership

In 2010, Erik Hersman, one of the early pioneers of the Kenyan technology ecosystem, turned his attention to the problem that Kenya’s community of entrepreneurs, technologists, and investors was disjointed. Erik’s belief that proximity breeds strength, improves communication, and creates community motivated him to found iHub in 2010.

A coworking space in the middle of Nairobi, iHub is open to entrepreneurs, programmers, investors, and anyone else interested in the technology community. Since its inception, more than 170 companies have grown and connected in the space, which now boasts sixteen thousand members. iHub also offers a range of services to its members—including innovation consulting services as well as a testing lab (so that entrepreneurs can test their apps on various types of phones)—and hosts a research center and a number of corporate partners looking to connect with the ecosystem.²⁹ Additionally, iHub runs more than twenty events per month that cater to individuals at all stages of the startup and tech community.³⁰

iHub helped catalyze the Kenyan ecosystem by giving people in the burgeoning entrepreneurial movement a location to come together in community. It has since inspired others to replicate its success in other geographies.³¹ Erik has gone on to lead other initiatives, including founding BRCK, a startup whose ambition is to increase internet access in Africa.

Tighter-knit entrepreneurial communities can assist with another key challenge: finding a co-founder. Entrepreneur First (EF) is an innovative startup launcher and talent investor focused on solving this problem. CEO Matt Clifford explained its rationale: “In Silicon Valley, conventional wisdom is that you can’t start a startup with a stranger. In many ecosystems, network density is weak, making it hard for talented people to find the right co-founder for them in their network. We wanted to shift this dynamic. We lower the bar to starting with a stranger, but also lower the bar to get out.”³² EF is focused on the Frontier, with locations in Bangalore, Berlin, Hong Kong, London, Paris, and Singapore.

In the early phases of the program, entrepreneurs are encouraged to work with many people and identify compatible working styles quickly, in a process much akin to speed dating. If things don’t work out, no problem, and on to the next idea. The data suggests EF is on to something. In its eight years of existence, it has launched more than two hundred companies, collectively worth more than $1.5 billion.³³

The opportunity to bounce ideas off of others who are going through similar challenges is a critical advantage of proximity. It can also enable another key element of fostering entrepreneurial culture: mentorship.

Mentorship in Parallel

They say it takes a village to raise a child. The same is often true of startups: a strong mentorship community directly impacts success. An analysis of the Bangalore startup ecosystem found that mentorship from leading innovators doubled the odds that a startup would succeed.³⁴ In Argentina, a similar analysis of mentored entrepreneurs determined that they grew revenue and jobs nearly three times as fast and sixteen times as fast, respectively, as their peers. Mentorship also feeds on itself: entrepreneurs who receive mentorship are eight times as likely to mentor others.³⁵

In Silicon Valley, mentorship follows the ladder of success: founders receive mentorship from those further up the ladder and, if they become successful, mentor the next generation located a few rungs down. In many emerging ecosystems, however, the ladder is not yet crowded enough. The existing cohort of successful founders is far less robust, and in some cases nonexistent.

Frontier Innovators therefore often build their own companies and generously support others in parallel, becoming angel investors and advisers to up-and-coming startups while still scaling their own. Take Ben Gleason, whom you met in chapter 2. Almost as soon as he started Guiabolso, he started investing in other entrepreneurs and giving them advice. Similarly, Erik Hersman is an active investor in the East Africa ecosystem at the same time he is running his own startup BRCK.

A study that sought to explain the take-off of the New York tech ecosystem uncovered a similar phenomenon. More than a quarter of co-founders of startups in New York were also angel investors in other companies. Entrepreneurs represented nearly half of the total angel investments in the ecosystem—an impressive number, given that most entrepreneurs are investing everything they have into their own businesses and taking serious pay cuts.³⁶

Some Frontier Innovators have made it their singular mission to fulfill the mentorship need for entrepreneurs. Endeavor is one of most successful organizations tackling this challenge. Founded by Linda Rottenberg and Peter Kellner, Endeavor identifies leading entrepreneurs (typically at companies that are at the beginning of scaling), matches them with some of the best mentors in business in their local market, and supports them through their scaling phase of development. The organization creates local chapters that raise money primarily from the local business community. The centralized office manages information sharing, specializes in particular industries, and helps select entrepreneurs through its global selection process. Endeavor’s model hopes to create a virtuous cycle: success stories inspire new entrepreneurs to join its ranks and attract capital, thereby feeding the next generation of entrepreneurs and mentors, promoting entrepreneurship at the ecosystem level.

Endeavor is twenty-two years old and has supported nineteen hundred entrepreneurs (of sixty-five thousand applicants). Its track record is enviable; Endeavor companies generate more than $20 billion in annual revenues and have created more than 3 million jobs.³⁷ While Endeavor’s roots are decidedly in emerging markets, having started in Latin America and expanded across Africa, Asia, and the Middle East, Endeavor is now bringing its model to developed markets as well, including in early startup ecosystems in Europe and the United States.

Setting Standards, Creating Regulation

Frontier Innovators often need to build collaborative structures to give themselves, and their nascent competitors, a voice at the table and in the industry at large. In some places, this looks like an industry association, such as the Food Safety and Urban Agriculture Coalition (FSUAC), colaunched by AeroFarms. Another such organization is GOGLA, whose members include Zola, Fenix, d.light, and M-KOPA; its mission in the offgrid energy space is to “build sustainable markets, delivering quality, affordable products and services to as many households, businesses and communities as possible across the developing world.”³⁸

Collaboration can also take the form of a standard-setting body, a lobbying organization, and other forms of direct engagement with policy makers to advise them on how to regulate their industries. Adolfo Babatz, CEO and co-founder of Clip, worked with the Mexican government on the country’s new financial technology law. Similarly, Tayo Oviosu, founder and CEO of Paga, the leading mobile payments company in Nigeria, actively engages Nigeria’s central bank on mobile banking and financial inclusion regulation. These varied permutations play a critical role when the ecosystem is not used to working with startups or, worse yet, is hostile toward them.

Clearly, Frontier Innovators are engaging proactively with the question of how to build their ecosystems and approaching the issue from many different angles. Every contribution is a necessary part of the whole. That said, building a highly successful company can be one of the most exponentially powerful things an entrepreneur can do for a local ecosystem.

Older Siblings of the Middle East

Back in the 1980s, Fadi Ghandour’s goal was to build the FedEx of the Middle East. He co-founded Aramex, and by the 1990s, it was a one-stop shop for its customers as well as the best provider of domestic, express, and freight services in the region. In 1997, Aramex was the first Middle Eastern company (outside Israel) to hold an IPO on the Nasdaq. Now Aramex employs more than fifteen thousand people in more than six hundred offices and sixty-five countries. The company is a leader in comprehensive logistics and transportation solutions worldwide.³⁹

But Aramex is only the preface to the tale of Fadi’s contribution to his regional ecosystem.

Maktoob, the Middle East’s first technology startup success—and Fadi’s most celebrated investment—started as a wrinkle in Aramex’s first IPO. When the company went public in 1997, bankers identified a small investment in a loss-making entity that seemingly had nothing to do with the core business of the company. The bankers suggested selling it before the IPO, and Fadi decided to purchase the stake himself.⁴⁰

The subsidiary was, of course, Maktoob, an early webmail service (think Hotmail) that was unique in offering support in Arabic. Maktoob was founded by Samih Toukan and Hussam Khoury alongside Aramex as a website development company and grew rapidly under Fadi’s mentorship. In 2009, the company was acquired by Yahoo for $164 million, at the time the largest acquisition in the region.⁴¹

Amazingly, this story repeats itself one more time. One of Maktoob’s small internal projects was a marketplace called Souq, an online auction website hoping to become the Amazon of the region.⁴² The project became a company, and it tailored its model to the region, developing alternative payment methods, in-house logistics, and multimarket operations. In 2017 it was sold to Amazon for $580 million and now operates in seven countries, serving more than 135 million customers.⁴³

Fadi, Samih, and Hussam each used his outsized early success to support his ecosystem in a unique way. Fadi has become an investor and mentor to the next generation of startups, launching Wamda Capital to work with entrepreneurs. Samih is a founding investor in Oasis500 (the largest incubator in Jordan) and, with Hussam, a regional investor through Jabbar. Endeavor studied Maktoob’s direct impact and found more than twenty companies that have received mentorship from its founders, gained direct investment, or were founded by former employees. Its indirect impact has been even wider. And Maktoob was only the beginning.

One of Fadi’s other investments was Careem, the local ride-sharing leader. It was purchased in 2019 by Uber for $3 billion, the most successful startup exit ever in the Middle East (excluding Israel).⁴⁴ This sale represents a watershed moment for the region. As Chris Rogers, an investor with Lumia Capital and co-founder of Nextel Communications, explains, “As the region’s first unicorn and now its first multi-billion-dollar exit and largest acquisition by over a factor of five . . . Careem’s exit is sure to motivate top talent in the region to more aggressively pursue entrepreneurial endeavors. Already we see Careem alumni building the next generation of exciting regional startups.”⁴⁵ The direct and indirect effects of this unprecedented exit are predicted to have a far-reaching impact in the region.⁴⁶

Success Enables Exponential Success

Older siblings like Fadi and Hernan equip the next generation of innovators with the skills, networks, credibility, and capital to launch their own ventures. These older siblings accomplish this just by bringing their scaled companies to an exit, even before they engage in the proactive ecosystem-building initiatives explored earlier in this chapter.

Their successful companies, like Maktoob, MercadoLibre, and Careem, act as informal schools of entrepreneurship. Endeavor studied job creation in startups and determined that a small percentage of companies drive most of the employment growth in any given region. In Nairobi, for instance, eight companies—fewer than 1 percent of the more than 650 local technology companies—scaled to more than one hundred employees between 2008 and 2018.⁴⁷ These eight companies represent more than 40 percent of the startup job creation and more than two-thirds of total venture capital raised in the country. Similarly, in Bangalore, alumni from Infosys have founded and scaled more than two hundred companies.⁴⁸ Older siblings scale their companies, and these companies become entrepreneurial schools (and badges of credibility) for a new generation.

In addition, employees of scaled companies often receive an infusion of capital at the time of exit because of the sale of their stock options. This capital enables them to start or invest in the next generation of startups. When Flipkart was purchased by Walmart, more than one hundred of its employees became millionaires. Many of them will join the next generation of angel investors.⁴⁹

Often, older siblings themselves become part of the next generation of entrepreneurs. Research from AllWorld Network suggests entrepreneurs in emerging markets start 25 percent more companies than their West Coast counterparts.⁵⁰ More than 80 percent of the emerging-market founders in its study had an intention to start another business in the next two years.⁵¹ For example, after starting his first business before he was eighteen, Divyank Turakhia, the Indian and Emirati entrepreneur you met in chapter 5, went on to found three others, selling them for between $200 million and $1 billion apiece.⁵² André Street founded his first company at the age of fourteen, going on to start and sell five others before his most recent success, Stone Pagamentos, a Brazilian payment processor that recently was listed on the Nasdaq and has a market capitalization of more than $8 billion—all before the age of thirty-five.⁵³

Unsurprisingly, older siblings were critically important in the rise of Silicon Valley as well: more than two thousand companies—including Instagram, Palantir, WhatsApp, and YouTube—can be linked to eight individuals who co-founded Fairchild Semiconductor back in 1957.⁵⁴ A staggering 70 percent of public Bay Area technology companies have some link to Silicon Valley’s metaphorical patient zero, Fairchild.⁵⁵

More recently, a group of thirteen former PayPal employees and cofounders has become a driving force in Silicon Valley. The so-called PayPal mafia includes Elon Musk (founder of SpaceX, Tesla, SolarCity, and The Boring Company, among others), Peter Thiel (co-founder of PayPal, later Palantir), Jeremy Stoppelman (co-founder of Yelp), Reid Hoffman (PayPal’s COO, later founder of LinkedIn), Russel Simmons (PayPal’s software architect, later co-founder of Yelp) and many, many more.⁵⁶ The PayPal mafia has so far been linked to more than $30 billion in businesses.⁵⁷

These days, Silicon Valley enjoys a self-perpetuating machine. However, at the Frontier, each new older sibling plays a catalytic role in accelerating their Frontier ecosystem’s momentum.

The Multiplier Effect

Of course, Fadi, Hernan, and other older siblings didn’t just build successful companies and then retire. As you have seen, they are taking leadership positions in their growing ecosystems, as culture carriers, capital providers, mentors, advisers, and advocates.

Older siblings’ efforts are often compounding, having a disproportionate impact on their ecosystems. Endeavor refers to this phenomenon as the “multiplier effect.”⁵⁸ As successful older siblings scale, they support many leaders of the next generation, who then go on to do the same. Each generation builds on itself.

Hitting the Inflection Point

It is hard to predict which companies will scale. As Hernan once told me, nine of ten times in building MercadoLibre, the company would have been unsuccessful. Yet a certain number of innovators will succeed, and they will go on to inspire and enable the next generation, which smooths the path for the next generation, and so on, often exponentially.

Looking at China, after its first unicorn scaled in 2010 it took five years to reach its fifth, and the very next year the count skyrocketed to twenty-one. As shown in figure 11-1, a similar dynamic is happening after a similar number of unicorns were created in India, the United Kingdom, and Latin America.⁵⁹

Looking at startup ecosystems around the world, there seems to be an inflection point after a critical mass of three to five older siblings bring their companies to exit, depending on the size of the market (larger markets seem to have a slightly later inflection point). Because most available data focuses only on companies valued at more than $1 billion, figure 11-2 maps the unicorn count from the year the first unicorn appeared in each geography.⁶⁰

We are starting to see a similar inflection point being reached in a few emerging ecosystems.

While I can’t pinpoint an exact reason this phenomenon manifests itself, I have three hypotheses. First, when there is one critical success, it can easily be explained away as an exception. As Daniel Dines mentioned, UiPath was occasionally dismissed as an aberration of the Romanian ecosystem. Having a few successes from a particular ecosystem demonstrates repeatability and thus increases the relevance and power of the role models.

Second, as you will explore in chapter 12, the power of capital and people lies in networks. Increasing the effect of older siblings is not linear but exponential: once there is a critical mass, there are many more network connections to be made.

The third hypothesis concerns human capital. As Amanda Lannert, CEO of JellyVision, explained, “The Chicago ecosystem is rapidly changing, because we’ve had many recent success stories. Potential recruits considering moving to Chicago have to make the calculus about what happens if things don’t work out. If there are many successful technology companies, the risk is lower. And so, a rising tide rises all boats.”⁶¹ As more innovators successfully scale, their impact across the industry is compounded.

Laying the Foundation, Together

Frontier Innovators play a direct and active role in creating the building blocks of an ecosystem. This includes laying the foundations of an entrepreneurial culture through initiatives like FUN and iHub and educating prospective entrepreneurs with programs like Choson and Startup Weekend. It also means providing skill training through programs as does ALU, mentoring and supporting the next generation as do Hernan and Endeavor, and creating ecosystem infrastructure through industry organizations like GOGLA and FSUAC. Frontier Innovators also bring up the next generation of entrepreneurs through informal schools of entrepreneurship like MercadoLibre, Maktoob, and Careem—often in parallel with developing their own ventures.

As you have seen, a select few Frontier Innovators play the disproportionately powerful role of older siblings. These entrepreneurs become role models for the next generation, and their scaled businesses train new generations of leaders. These older siblings often take an active role in giving back, as investors, mentors, and supporters.

But no older sibling (metaphorical or otherwise) succeeds without a wider group of supporters: family, friends, teachers, and good Samaritans. Similarly, ecosystem participants have a much wider role to play in helping entrepreneurs, and, by extension, their ecosystems, succeed. Chapter 12 offers concrete recommendations for all ecosystem players, including employees, corporations, philanthropies, government actors, and beyond.