Warts and all: the best and the worst bits about starting companies around the world
Communist hangovers, language barriers, political strife and an international aversion to octopus. These are just some of the barriers faced by the world’s entrepreneurs as they struggle for success
In today’s increasingly global world, it has never been easier to set up a business overseas, yet the majority of entrepreneurs still choose somewhere much closer to home.
In the UK, 86pc of start-ups are founded by Britons, according to the Centre for Entrepreneurs.
Yet the success or failure of these businesses is often determined by geography: the experience of a start-up pioneer in the US will be very different from one in Russia.
At the 15th World Entrepreneur of the Year (WEOY) event, hosted by EY in Monaco, 60 entrepreneurs from 53 countries vied for the top title. The contest provided an opportunity to compare their experiences and share stories. Many had created successful companies despite overwhelming odds.
This year’s businesses, all winners of the national EY entrepreneur award in their respective countries, all face peculiar challenges based on their home country, from high corporation or employment taxes to political tensions and language barriers. In total, they generate revenue of £25bn.
Some countries have clear advantages over others. The US is widely accepted by the finalists as the easiest place to start and run a company. Home to Silicon Valley and almost 2,000 incubator and accelerator programmes designed to support the start-up ecosystem, America not only encourages entrepreneurship, but also evangelises it.
According to American finalist Dr David Hung, head of biopharmaceutical firm Medivation (NasdaqGS: MDVN – news) , the country also benefits from a bullish attitude to failure. “You can’t be paralysed by the fear of failure,” he says. “If the worst you can do is fail, that is not such a bad thing.”
Rosemary Squire, the only woman to ever represent the UK at the EY competition, says that being a British entrepreneur has also brought benefits. She runs ATG, a £300m-turnover theatre giant, which owns and operates venues in London’s West End and on Broadway , creates and produces shows around the world and runs a ticketing business.
Rosemary Squire, co-chief executive and founder of Ambassador Theatre Group, has spent the last 21 years building up a large portfolio of British theatres, a major ticketing operation and now produces more than 30 plays a year
She cites the English language and the UK’s long theatrical history as drivers behind her success: “We had Shakespeare, and London has 400 to 500 years of theatre tradition. We’re a small country but we consistently punch above our weight.”
Oscar Farinetti’s Italian food marketplace concept, which is coming to London in 2016 under a joint venture with Selfridges, has taken traditional Italian food and brought it to global audiences, from China to Sao Paulo.
Based in Torino, Italy, he says that most domestic companies are small family outfits or lifestyle businesses and that few aspire to become multinationals.
Oscar Farinetti founded Eataly in 2007 and made £26m in his first year with 2.5m visitors
He wants to create these Italian-style small businesses but on a global scale. “The Italian kitchen is easy to replicate because it was born in the home,” he says. “What do you need for Italian food but spaghetti, olive oil and tomatoes?”
This year’s WEOY event includes entrepreneurs from Belarus, Croatia, Peru and Romania for the first time.
Alan Sumina and Zoran Vucinic, co-founders of Croatian gaming company Nanobit, have been successful despite significant domestic barriers.
“We’re at a geographical disadvantage,” said Sumina. “There are talented, educated people in Croatia but they have no experience in our industry, and while people love to go there as tourists, it’s hard to get people from the UK and Silicon Valley to move. Most of our workforce is young, hired straight out of college, and we train them up.”
The tax rate for highly paid workers rises swiftly from 40pc to 60pc in Croatia. Its joining the EU in 2013 therefore prompted a mass exodus of talent.
Vucinic credits the technological nature of the company for its survival: “We hardly have to deal with the government at all, which is an advantage because there is a lot of bureaucracy.”
Croatia’s past as part of communist Yugoslavia colours the people’s attitude to entrepreneurship and wealth.
“It’s better not to say you’re an entrepreneur because people see that as linked to corruption, that you must have stolen something,” says Vucinic. “Attitudes are slowly changing not quite fast enough for us.”
Alexey Evgenievich, boss of Russian pharmaceutical company R-Pharm, tells a similar story. “Those who tried to do business in Soviet times were considered criminals,” he says. “It was only the constitution in 1991 that allowed Russians to start becoming entrepreneurs.”
The only opportunities for start-ups in Russia lie in non-commodity-based businesses because of the domination of giant state monopolies such as Gazprom, he admits. “We want to push the state to stop competing with business,” he says. “Fine with oil and gas, which are national resources but why in retail, education, and biotech?”
All of this year’s WEOY finallists in Monaco
The tensions between Russia and Ukraine are also creating difficulties for £1bn-turnover R-Pharm, which has manufacturing facilities around the world.
“We acquired a manufacturing site from Pfizer Germany on the border of Bavaria and the major German banks that were financing the deal closed the credit line,” he explains. “They said, ‘we’re scared of what’s going on. We don’t want to be exposed’. This factory has 400 employees in Germany and there’s no risk.”
Evgenievich is not worried that sanctions will affect his ability to trade with the US or Europe, however. “This is not a threat,” he says. “I cannot believe that someone will make a decision not to allow patients to receive medicine because they need to prove something at a political level.”
There are challenges wherever you are based. Mark Roden, founder of Dublin-based Ding*, also finds it hard to hire skilled people because most are snapped up by internet darlings such as Facebook (NasdaqGS: FB – news) and Google (Xetra: A0B7FY – news) , which have headquarters in Ireland (Other OTC: IRLD – news) , attracted by the low corporation tax rate.
That rate is not extended to domestic companies, creating an imbalance, explains Roden. “We pay 33pc tax and every time another one of these big companies comes to Ireland, they target our people.”
Ding* is a micro-payments business that allows people all over the world to send mobile top-ups to friends and family. It turns over £162m and processes 100,000 transactions a day.
Being Irish has helped Roden negotiate deals across the world because “Ireland is not fighting anybody”, he says. “The Irish passport is a well-recognised calling card.”
Serial entrepreneur Mark Roden started Ding* with £3m of the £5m he made from the sale of his ATM business, easycash, which he sold to RBS (LSE: RBS.L – news)
Morio Sase, founder of Japanese restaurant chain Hotland, does not have this advantage. Speaking through a translator, he says: “When Japanese go to UK or US to start a business, he or she cannot succeed alone. You need to have a very good partner in the local area.”
In Japan, there are barriers to entrepreneurship, he explains, because the population is concentrated in Tokyo. “All the young people come to Tokyo to find work, leaving the elderly in rural areas. It is a huge problem.”
Sase is keen to bring his signature dish, octopus dumpling s or takoyaki to international markets but claims that the seafood is still treated with distaste in many markets. “If you see how an octopus swims in the water, it is frightening. It took 40 years for sushi to become popular and now I am trying to make this unfamiliar food familiar.”
In Japan, there are many socioeconomic barriers to entrepreneurship, he explains, because of the way the population has concentrated in Tokyo. “We must revitalise suburban areas if we are to create more entrepreneurs,” he says. “All the young people come to Tokyo to find work leaving the elderly in rural areas. It is a huge problem.”
Japanese firms are still reeling from the earthquake of 2011 in east Japan. “When that happened, there was no way we could be ambitious about the future,” he says. “We didn’t even know how we could keep living that day and the next.”
That some start-ups succeed in the face of such barriers underlines their creativity.
[“source-uk.finance.yahoo.com”]