The FDI market has shrunk. Numbers of greenfield projects have decreased and so with a smaller base of potential investors, investment promotion agencies have set their sights on small and medium-sized enterprises, start-ups and entrepreneurs. Suddenly, small is sexy.
Until recently, most inward investment agencies did not consider start-up or SME support to be in their remit. Their targets focused mainly on landing big greenfield projects. Getting involved with local start-ups or trying to appeal to international entrepreneurs was not a priority. But that has changed. FDI agencies are holding start-up events, creating entrepreneur networks and launching incentives geared towards this community. The entries for fDi’s IPA Innovation Awards, published in October, were full of enthusiasm for start-ups and SMEs.
This makes sense, as it was never a great idea to ignore the importance that new and small companies have in creating jobs and boosting local economies. And they are increasingly open to crossing borders. Tough markets at home mean they look for global opportunities sooner rather than later. From August 2012 to August 2013, more than 300 international greenfield projects were announced by US companies that had not previously had a project recorded by fDi Markets since our data began in 2003. These investments created a total of 7600 jobs and generated $1.7bn in capital investment. The majority of these companies have a turnover of less than $4m.
It is encouraging that so many FDI agencies are now bullish on these smaller investors. But outreach efforts remain limited, especially at the SME level. Everyone knows who the big multinationals are. It is more difficult to identify entrepreneurs and start-ups, but they can be easily attracted by events or programmes offering advice on financing or – better yet – actual financing. Where the gap is, is in the middle. The CEO of an SME is not going to participate in start-up programmes, so has to be sought out separately, yet is often receptive to, and need of, the kind of assistance investment promotion agencies can provide.
When I talk to leaders of SMEs I am continually surprised at how few pitches they receive from these agencies, and how little contact they have with them when they make new investments. One told me he had never dealt with a single investment promotion agency, despite his company having offices on three continents. The agencies are not approaching him, and when asked if he had ever approached any of them for assistance, he said he assumes they would not bother with a company of his size.
This suggests that for all the big talk, the message has not reached the smaller companies – which is kind of a big problem.
Courtney Fingar is the editor of fDi Magazine. E-mail: email@example.com