Frustrated at the high unemployment rates facing young people in Europe, Kevin Ackermann, 25; Iman Fadaei, 26; and Martin Wetterberg, 22, decided to try to make things better. About 12 months ago they launched Aha Design, a London start-up that provides affordably priced website development and other services to clients such as start-ups, charities and the British government. They pay young people to work on projects to gain valuable work experience and, ideally, recommendations from clients so they are more employable when they send out job applications.
"We're all passionate about entrepreneurship and making money, but also about helping create a better world," said Fadaei, a law school graduate who also runs Ethical Art, a start-up that sells artwork and uses the proceeds from each sale to send a child to school in Tanzania for a year. Meanwhile, Ackermann runs another business, called BACA Jewellery, which sources pearls from cooperatives that teach survivors of human trafficking how to make a living through jewelry making; it donates some of its profits to them.
Aha Design made the GEW 50, a list of the most promising start-ups competing in the Startup Open, a contest that is part of Global Entrepreneurship Week (GEW). Winners will be announced Nov. 18 as the celebration kicks off in 139 countries.
"We're all passionate about entrepreneurship and making money, but also about helping create a better world."
Founded in 2008, GEW honors innovators around the world who are launching start-ups that foster economic growth and job creation and give back to society. It was founded by Jonathan Ortmans, a senior fellow at the Kauffman Foundation, a Kansas City, Mo.–based organization that champions entrepreneurship; Carl Schramm, Kauffman's former president and CEO; and Gordon Brown, former prime minister of the U.K. In October the Kauffman Foundation teamed up with the World Bank and the Rockefeller Foundation to launch the Global Entrepreneurship Research Network (GERN), aimed at helping policymakers and entrepreneurs around the world learn how to promote new business creation and growth.
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In the five years since the first GEW took place, the situation of entrepreneurs around the globe has changed significantly, according to Ortmans. Entrepreneurship has become more widely accepted as a legitimate career path among young people in many countries—in part, because some can't find traditional jobs in a tough economy. And easy-to-use low-cost digital and mobile technologies are making it possible for more non-techies to start businesses on a shoestring. "There's been a shift in power and confidence from institutions," he said. "Start-ups need governments and universities much less than they ever did in the past."
Start-up fever spreads worldwide
As a result, start-up activity is bubbling up around the globe. In South American countries an average of 17 percent of adults are currently involved in early-stage entrepreneurial activity, compared to 13 percent in the U.S. And in Sub-Saharan Africa, participation averages 28 percent, according to the "Global Entrepreneurship Monitor 2012 Global Report," published earlier this year by Babson College and several other universities around the world. In the Middle East and North Africa, 8 percent of adults are involved in early-stage ventures. "What has been so interesting to me about the Middle East is, so much is happening from the bottom up," said entrepreneur Christopher Schroeder, author of the book "Startup Rising." Often the efforts are sparked by young people with access to technology, he says, rather than government efforts to encourage start-ups.
In other economies, rates are lower than for the main hot spots. In the Asia Pacific and South Asian region, 10 percent of adults are involved in early-stage entrepreneurial activity, compared to 8 percent in the European Union and 7 percent in European countries outside the EU, an area that includes Russia.
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The reasons vary. In more developed economies, citizens often have many choices of work, so they aren't as driven to entrepreneurship by necessity as others where the economy is more fragile. Cultural attitudes also play a role. "In some societies entrepreneurship is not valued as a career," said Candida Brush, holder of the Franklin W. Olin Chair in Entrepreneurship and faculty research director of the Arthur M. Blank Center for Entrepreneurship at Babson College. For instance, in Japan only 30 percent of adults surveyed for the GEM report consider entrepreneurship to be a good career choice, compared to an average of 59 percent for the Asia Pacific and South Asian region as a whole, 58 percent of the European Union, 75 percent for South America and the Caribbean and 6 percent for Sub-Saharan Africa.
Centers of excellence
Guess which places are the leading hotbeds of start-up activity in the world? The Startup Genome project, a platform that relies on volunteers to gather data on new businesses around the world, ranked the top ecosystems in the world in 2012. Hot on the heels of Silicon Valley in first place were Tel Aviv, Los Angeles, Seattle, New York, Boston, London, Toronto, Vancouver and Chicago.
The ranking evaluated them on a host of factors: total entrepreneurial activity, the availability of funding, the performance of their start-ups in such areas as revenue and job creation, the talent of their founders, their regions' supportive infrastructure, how closely their entrepreneurs' mind-set mirrors great founders and how quickly the ecosystem adopts innovations such as new technologies.
With grassroots interest in start-ups sprouting, more governments are recognizing that start-ups are important to job creation and are trying to create environments that nurture them. Efforts span the spectrum. Canada, the U.K. and the Netherlands have implemented measures to reduce bureaucratic burdens, Japan has developed an extensive network of advisory services for small- and medium-sized businesses, and countries such as Australia have made efforts to increase the share of government contracts that go to these firms.
Some countries are trying to develop a start-up ecosystem by attracting start-ups from overseas. "What they are starting to do is look outside of their own borders," said Torsten Kolind, co-founder and CEO of YouNoodle, a San Francisco company that offers a platform to assist in running start-up competitions.
In early October, YouNoodle helped launch Global Startup Youth, a three-day event in Kuala Lumpur run by the organization Startup Malaysia, which invited 540 people ages 18 to 25 from more than 90 countries to come together and generate ideas for high-growth, globally sustainable ventures. It was part of Global Entrepreneurship Summit Malaysia 2013, an effort co-organized by the Malaysian and U.S. governments, GEW and other partners.
(Read more: Boosting Southeast Asia's entrepreneurial spirit)
"The start-up scene in Santiago is growing significantly, and it's becoming a major entrepreneurial hub of Latin America."
Meanwhile, Start-Up Chile has tried to attract high-growth tech start-ups to its home base in Santiago. The program, created by the Chilean government in 2010, this year will provide $40,000 of equity-free seed capital and working visas for a year to three groups of 100 start-ups, selected with help from YouNoodle and a global panel of more than 200 expert judges.
Since it was founded in 2010, it has funded 663 start-ups from 65 different countries, according to Horacio Melo, executive director. Participants agree to operate from Chile for six months. Those selected for the program share a co-working space, practice pitching, participate in events such as a demo day and give talks to local entrepreneurs.
Chris Palmer, 26, co-founder of BoxFox, an online B2B marketplace for small retailers to appraise and sell excess inventory to authorized resellers, relocated from Indianapolis three months ago with his wife, Natalie, to live in Chile as participants in the Start-Up Chile program. Though he sees international expansion as a distant future goal right now, he said he enjoys participating in the business community of Santiago, as well as the energy of the co-working space, where "there are a lot of sharp minds in one place. He added, "The start-up scene in Santiago is growing significantly, and it's becoming a major entrepreneurial hub of Latin America."
Whether government efforts to seed future Silicon Valleys will succeed in the long term remains to be seen. The key for a vibrant start-up community, said Schroeder, is an environment "where people can move quickly on an idea, have access to tremendous talent, and a cultural geography that has a tremendous amount of confidence in trying and testing."
–By Elaine Pofeldt, Special to CNBC.com