I’m sitting in Buenos Aires now, but last week I was in Puyuehue. Yeah, I had no clue where that was either when I got talked into embarking on a 20-something-hour day of travel to get there. If you look at a map of South America and trace your finger to the very bottom of Chile, that’s roughly where I was.
I sighed getting on the plane just four days after I got home from India. Having already traveled to Rwanda, Israel, China and India this year in search of the world’s best entrepreneurs, the journey was now quite literally taking me to the end of the earth.
The organization that did the arm-twisting is called Endeavor and thanks to the trip they have the not-too-uncommon distinction of having proved me wrong. For a long time, I didn’t believe any government or non-profit could really help develop clusters of high-impact entrepreneurs. But Endeavor has in very tangible ways, especially here in Latin America and South America.
It started ten years ago to find and help the most promising high-growth companies in emerging markets. It doesn’t actually invest in the 270 or so companies it has selected to be “Endeavor companies,” and a lot of that “help” is hard to quantify—free consulting, coaching and mentoring, and introductions to potential investors.
Indeed, a few entrepreneurs are dubious of how much Endeavor can really do at first blush. But here are a few stats: Endeavor companies have generated some $3.15 billion in revenues, generated nearly 100,000 jobs, and 93% of them are still business. If nothing else, Endeavor has a good eye for talent. (Although you can argue that success rate means they don’t back the riskiest bets that may need them most.)
A more tangible sign Endeavor has made a difference: Nearly 30 of these entrepreneurs have helped develop startup ecosystems by starting venture funds in emerging countries and a whopping 81% of them have donated cash or equity to support Endeavor.
Endeavor pores through hundreds of thousands of entrepreneurs and makes its selections at one of five annual International Selection Panels held in far-flung places around the world. I traveled thousands of miles to this one to see the newest collection of South American candidates and also to see up close how the whole process works. The biggest surprise: It does actually work. Well, that and all the Brazilians were nice to me. (Disclosure: I paid all travel expenses and the regular conference fees.)
The real strength of the Endeavor model is the local teams. They’re staffed by young energetic—and frequently emotional—locals who scour their markets for the best entrepreneurs and nominate them for selection. I’m not quite sure how they find them all.
One of the selected companies was Medix, a medical device company that will generate more than $45 million in revenues this year. 77-year-old Jack Cheja—who never even graduated high school and doesn’t look a day over 60—used to import incubators and when Argentina placed a ban on those imports, well, he just decided to start making his own models. That came in handy a few years later when his daughter gave birth to premature triplets.
Medix now owns 90% of the Argentinean market and is going head to head with giants like General Electric in the rest of the developing world. Cheja is grooming his son, Diego, to take over. The elder Cheja says he didn’t even know he was “an entrepreneur” until the Endeavor crew reached out to him. Indeed, when Endeavor founder Linda Rottenberg started the organization there was no real word for “entrepreneur” in most of these countries. (At least none with a positive connotation.)
Meeting teams like the Chejas I was struck by a deep cultural difference: In America, we can hardly handle Christmas with our families, but most of Endeavor’s teams are like the Chejas—father-son, mother-son, or brother-sister duos. Diego Cheja even joked their succession problems were solved for the next generation too, pointing at his son snoozing away in a stroller.
That DNA-based succession planning can be a good thing and a bad thing. Many candidates are struggling with the transition from family-owned businesses to high-growth startups. For instance, the Argentinean Martinez family has roasted and sold coffee for generations. While most people consider the smell of coffee vaguely comforting, for Marcelo Salas Martinez and his brother Mauro coffee smells like his parents, his grandparents and home. But that warm and fuzzy feeling is also knotted up with a lot of ambition.
The brothers are expanding the business by building a chain of cafes in Argentina, and 
potentially other areas of South America. But the path is unclear: Building their own stores is expensive, but franchises haven’t always worked out either. That’s one reason they welcomed Endeavor’s advice. “Sometimes in a family business, you need fresh air,” Marcelo said. (Pictured right, with his mother in his grandparents’ original roasting plant.)
Here’s how Endeavor’s selection process works: A panel of experts—investors, former Endeavor entrepreneurs, executives at high growth companies— pair off and grill the entrepreneurs for a day. Then the next day in sometimes-contentious sessions, they vote on who should be selected. There’s no quota—they can select all or none of the companies. But the vote has to be unanimous.
This is where the emotion comes in. Many of these entrepreneurs have no access to mentors, capital or basic how-to’s of building a high-growth venture, so becoming an Endeavor company means a lot to them. But put the entrepreneurs themselves aside for a moment—the local Endeavor teams have investing months researching and coaching these entrepreneurs by this point, and no one wants any of their entrepreneurs turned down. They sit in the corner struggling to be quiet like nervous stage mothers.
That pent-up emotion can give way to relentless lobbying if an expert is planning on voting against a company. I’d argue this is actually a negative in the process, as some panelists said they felt bullied to change their votes. But I have to admit, I even started getting upset watching the deliberations.
Delightfully, Endeavor cuts this tension with a 24-hour open bar, evening karaoke parties and 1 a.m. pool parties. The night after their pitches, the Martinez brothers lead the room in a rousing, boozy, Spanish rendition of “I Only Want to Be with You.” Just like at a winning soccer game, one of the brothers half-ripped his shirt off at the end.
It may sounds like a junket; actually it was anything but. These were intense sessions of tough-love advice, and I was impressed at how many entrepreneurs took it in the right spirit, dutifully jotted down notes and asking follow up questions, even seeking the experts out for follow-up conversations if they weren’t selected. There was none of the defensiveness that you frequently see during pitches at US conferences.
In a future post I’ll write more about my favorite company I saw in Puyuehue, but now, I’ve got to catch a flight home.
Very interesting to see the startup mode in other developing countries. Thanks Sarah.
Very interesting article. I look forward to reading future articles about the same subject matter. Thanks.
Go away troll.
You are a sick porn peddler. Go away.
Link to Endeavor site on the page is not working. Can you fix it?
Every country you visit is a page in the book of life. Thank you Sarah for summarizing your pages for us.
Who’s the good looking guy next to you, Sarah?
Wow, that’s Sarah Lacy? Wow. No offense, but waow! Just wow!
“(Pictured right, with his mother in his grandparents’ original roasting plant.)”
Pretty sure *this* is Sarah Lacy:
http://www.sarahlacy.com/
So – wow, what happened to the ability to read a few paragraphs? Too much twittering?
Nice post Sara, and welcome to South America. I’m sure you’ll be pleasently surprised :)
Being part of Endeavor as mentor and working for an Endeavor entrepreneur in Uruguay I can attest to the awesome work they do with limited resources and unlimited energy and passion. I’ve witnessed first hand on our company the positive change they provoke and I feel very strongly the day we joined the Endeavor community was a tipping point for us.
Love the article… Always love the idea of startup hunting at the end of the earth. Who doesn’t, right? :)
stay there don’t come back!
I’m glad Tech Crunch is giving some attention to South American. However, I think there are some very serious negative realities about business down here that this article completely glosses over.
Namely, what is called “family-business” down here is rightly called nepotism and unethical behavior in the rest of the world. This type of mindset is what causes ghost employment and corruption. Qualified, hardworking people get overlooked for familial connections.
I agree with you Adam, family businesses can be a problem because not only corruption or looking for family ties instead of professional ones, but because many times the owners don’t want to retire when they have to.
One of the problems we are studying in South America is how to transfer the company to professionals. It doesn’t matter if they are from the family or not they just need to be prepared to take the business to next stage. However it’s unfair to say that family business always ends up in corruption and nepotism, I’ve seen numerous South American families grow incredible fortunes with their families as head of their companies, but asking them to be professionals and making them go through a training process. I think the main problem in South America is letting the administration to someone more qualified than you (there’s still a trust issue here).
When you get down to Punta Arenas you can call it the end of the world. You still had a long way to go to get down there!
I highly recommend it. Puerto Natales (Chile) and Ushuaia (Argentina) are two truly wonderful places to visit.
+1 to Punta Arenas. Particularly Club Kamikaze if it’s still going.
Also not being funny, but it would have been a better article with some emerging market tech.
I’d like to see more programs like this run by the individual states in the US. The state governments don’t do very much to encourage startups, other than some university-centric programs. Those programs seems very good, and more of them would be better.
I know that some of the states have effective programs for connecting businesses with the research that happens on universities. I’ve seen the research/startup hub that grew up around Chapel Hill and Durham, in North Carolina. The program is partly implemented at the level of the individual university, but it is greatly encouraged and facilitated by the state government. My understanding of the history of such programs is that 30 years ago too much research was being done in the universities and then going to waste because it was never commercialized. The programs that I saw in Chapel Hill were set up to enable better ties between the universities and the startups that wanted to utilize the research being done in those universities. But I also have the sense that all of these programs are under-funded. The US seems to be looking for ways to drive economic growth. It seems to me a rather obvious path forward would be even more money for research on campus, and even more outreach to startups that want to utilize that research.
I think its exciting that programs like Endeavor are having a positive impact in Latin America. For over a century economic development in South and Central America has lagged behind economic development in North America. It is time for Latin America to catch up, and I think encouraging home-grown entrepreneurial talent is probably the most promising avenue yet attempted. I’ve certainly an easier time imagining that this might work out better than previous approaches, which tended to rely on large amounts of foreign capital.
I will be visiting an impoverished but potentially developing region of North America called Detroit. Then I will be moving on to another third world city called Pittsburg followed by a trip through Appalaccia and then off to Calmexico. Please follow my tweets @theintrepidinvestor
This is kewl that they are giving back to the ones that helped them become wealthy
The Padrino Dot Com
http://www.thepadrino.com
Great project, nice post. Question about: “Endeavor companies have generated some $3.15 billion in revenues, generated nearly 100,000 jobs, and 93% of them are still business.”
Wondering what does Endeavor consider “still in business”?
Would that be 93% of their companies are now generating revenue and have at least 3 employees, full-time? Or is it more along the lines of: still maintain a website, and answer the phones?
Impressed either way, really. Seeking clarification.
“I will be visiting an impoverished but potentially developing region of North America called Detroit. ”
I think this bit of sarcasm is exactly right – America needs more such programs as Endeavor. America needs another big wave of innovation, like what started in the 1970s. Otherwise America is doomed.