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E&Y - G20 must back entrepreneurs

London: The world's entrepreneurs call on G20 governments to recognize their vital role in job creation and innovation in a new Ernst & Young report, "Entrepreneurs speak out" .

  • For 62% of entrepreneurs, focusing on innovation should be the number one priority
  • 80% of entrepreneurs say governments should facilitate access to funding for young entrepreneurs
  • Entrepreneurs are increasingly turning away from banks and towards business angels, VC and PE for funding
  • 70% of respondents think that students need to follow specific training to become entrepreneurs

What should the world's leading nations do to incentivize entrepreneurs, create jobs, and strengthen their economies? Entrepreneurs speak out: a call for action to G20 governments, released by Ernst & Young ahead of the G20 Young Entrepreneurs Summit (G20 YES) in France later this month examines the policies and actions that can most quickly advance a global economic recovery.

The report, based on a survey of 1,000 entrepreneurs across all the G20 countries, highlights that with economic growth slowing following the recession, there has been a significant decline in new job creation. The job drought's most pronounced impact is on young people, whose delayed earnings growth may affect their personal expenditures and the health of national economies for years to come.

Maria Pinelli, Global Vice Chair for Ernst & Young's Strategic Growth Markets comments: "They key to a global economic recovery is to support entrepreneurs. Entrepreneurs create jobs, build economies and support communities. There is a clear opportunity to support youth, through entrepreneurship in both developed and developing nations. Entrepreneurship can lift the lives of the young, alleviate poverty and can have a significantly positive impact on society."

According to the report, G20 governments need more robust tools to measure entrepreneurship and increase the impact of incentives designed to help increase innovation and tackle the slowdown in hiring, declining jobs creation and general rise in unemployment.

The report highlights five key pillars to build a successful enterprise environment: "entrepreneurship culture", "education and training", "access to funding", "regulation and taxation", and "coordinated support" between the different public agencies involved in facilitating and supporting entrepreneurship within a country.

Jean-Pierre Letartre, Country Managing Partner Ernst & Young France, one of the hosts of the 2011 edition of the G20 YES, says: "Although they should not choose winners and losers, governments should create the right platform for growth and continue to have an important role to play in facilitating access to funding for young entrepreneurs. In almost all G20 countries, entrepreneurs themselves point to the key role that government has to play, and this must be a top regulatory policy priority."

1. Entrepreneurship culture: strength breeds success — The idea of entrepreneurial failure as a stigma resonates in countries that do not have a strong entrepreneurship culture. By contrast, in other countries, failure is seen almost as a badge of honor, particularly in riskier sectors, such as venture capital. Based on our survey, the right approach for governments to foster a stronger entrepreneurship culture in the society and the business environment, is to acknowledge entrepreneurs strong contribution to innovation and job creation. The role of successful entrepreneurs is also key to inspire future generations.

2. Education and training: a broader scope is needed — Eighty-percent of entrepreneurs in the G20 rapid growth markets think that students need to follow specific training to become entrepreneurs (compared with an average of 70% across the G20). There should be more specific education programs dedicated to entrepreneurship to encourage young students to identify market opportunities and valid career option. Entrepreneurship education should start as early as primary schools, to universities, business schools but also to professionals moving from corporate roles to their own ventures. A broader education scope to recognize commercial opportunities and the knowledge, self-esteem, and skills to act on them are core aspects of entrepreneurial education. Again, successful entrepreneurs have a strong role to play by mentoring and contributing to community-based education approaches that value real-life experiences.

3. Access to funding: it is vital to tap into diverse sources — Access to funding continues to be the most significant challenge for the creation, survival and growth of successful entrepreneurial companies. Although funding instruments are developing at different rates across the G20 countries, 80% of entrepreneurs interviewed believe that governments have a leading role in creating the right environment for access to funding for young entrepreneurs. Notably, credit guarantees are emerging as a strong lever to address declining bank credit. However, with several governments' fiscal pressures mounting and bank lending increasingly risk averse, entrepreneurs are globally turning toward business angels, venture capital and private equity funding. At the same time, in 14 of the G20 countries public stock markets dedicated to fast growth companies have been launched, and have been attracting an increasing number of companies over the last five years.

4. Regulation and taxation: good progress, but regulation can improve to encourage innovation — Since the recession, it is more widely accepted internationally that governments have a substantial role to play in regulating, incentivizing and directing private sector activity. Many countries have made conditions easier in terms of the cost and ease of starting a business, and perceptions of progress about this are correspondingly positive. Leading practices are emerging. The most impactful incentives are clearly targeted at encouraging innovation and entrepreneurs, stable, multi-modal and their impact is regularly measured.

5. Coordinated support: time to team — Government agencies, business incubators, university resources and training programs have clearly improved their level of support in the last five years. But entrepreneurs expect them to better coordinate their efforts to unlock greater entrepreneurial activity. Only 44% of entrepreneurs across the G20 feel that these programs are well coordinated. They should particularly focus their support for young generations of entrepreneurs and to help them expand internationally.

Pinelli adds, "Entrepreneurs have a vital role to play in helping our economies to turn the corner. However, one of the most common barriers to future growth is the lack of funding. It is amazing to me that entrepreneurs and in particular, young entrepreneurs are not supported and acknowledged enough for the critical role they play in job creation and generating innovation. They clearly need more support and attention in fiscal and government policy."

Methodology: The Ernst & Young report was created for the G20 Young Entrepreneurs Summit (YES), which will take place in Nice, France, from 31 October to 2 November 2011. The report was commissioned by the G20 Young Entrepreneurs Alliance, a worldwide movement whose aim is to highlight for young people the vital role played by entrepreneurs in the growth, innovation, job creation and competitiveness of nations.

The report uses a combination of quantitative and qualitative measures:

  • Macroeconomic and business environment indicators of variables directly influencing entrepreneurship
  • A phone perceptions survey of 1,001 entrepreneurs across the G20 countries
  • Qualitative interviews of 27 emblematic entrepreneurs
  • An analysis of G20 recent government leading practices

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