The GEN Atlas Policy Deep Dive explores several examples similar policies introduced in different countries. By drawing out the subtle variations in approach and highlighting innovative ideas, we hope to learn more about the most effective approaches to policy making and offer a roadmap for other policymakers to learn from. Our analysis of startup support policy is built around eight overarching themes:
- Finance: New types of capital for startups and scaleups at the right time
- Education + Skills: Embedding enterprise and entrepreneurship into education and providing (both existing and potential) entrepreneurs with mentoring, training and support
- Market Access: Expanding access to markets for startups domestically and abroad
- Inclusivity + Culture: Ensuring that entrepreneurship is a culturally attractive vocation for all sections of society and in particular that people from disadvantaged groups have an equal opportunity to launch and grow a business
- Regulation: Removing regulatory barriers to innovation and startup success
- Ecosystem + Economic Development: Developing and managing local ecosystems to better support entrepreneurs, startups and scale-ups
- Science, Technology and Innovation: Utilizing the latest advancements in science and technology to improve productivity, boost economic growth and solve societal problems through innovation
- Policy Making: Maintaining a data-driven, effective and coherent policy making process that supports entrepreneurs and ensures public awareness of available programs
Economies suffer when any individual is excluded and they suffer exponentially when entire communities are excluded for reasons of historical disadvantage and discrimination. Innovative ideas emerge quickest from a diverse pool of individuals but the reality is that many potential entrepreneurs from ethnic minority backgrounds have fewer opportunities to become founders. It is estimated that in the USA alone, eliminating the racial gap in business activity could generate an additional $200 billion in revenues and a 1% increase in GDP.
Those who do become entrepreneurs face a number of barriers that can hinder the success of their businesses. Research shows that access to capital remains the critical issue for minority led startups. There are also barriers to networks, resources, and mentors. Data from the USA and UK shows us that entrepreneurs from ethnic minority groups remain at a substantial disadvantage. In the USA just 1.8% of unicorn companies have a black founder compared to 14% of the total population, likewise, black founders in the US and UK receive less than 2% of VC funding each year and are the first to be hit when funding drops. Worse still, many countries simply do not track this data so it is very difficult to assess the extent of the barriers faced by ethnic minorities within their jurisdictions.
Policies that aim to broaden the appeal of entrepreneurship to marginalized groups in society have the potential to both transform the lives of the individual entrepreneurs but also massively expand the quality and quantity of innovative startups operating within local ecosystems, generating growth, employment, and wider societal benefits.
This post compares and contrasts policies aimed at ethnic minority entrepreneurs across 8 countries including: Australia, Canada, Germany, Israel, New Zealand, South Africa, UK, and USA. The policies use a variety of mechanisms to achieve the goal of supporting minority entrepreneurs covering six different themes identified by GEN.
It is worth noting that the case studies highlighted target three distinct communities which appear to be guided by the unique histories and cultures of individual countries. For example, policies in Australia and New Zealand are targeted towards indigenous entrepreneurs. By contrast, the policies highlighted from the UK and Germany are targeted at refugee entrepreneurs. The third group are aimed at minority populations that have faced discrimination such as the black population of South Africa, African-Americans in the USA and the Arab population in Israel.
Finance
Access to finance at critical moments is widely seen as the single most significant barrier that founders of early-stage companies face with promising ventures routinely failing if they are unable to source injections of cash during the development phase. Part of the problem is that startups are likely to find it difficult to borrow from traditional lenders as they lack the assets required to secure a loan and do not have a proven record they can demonstrate to banks. This problem is exacerbated for minority entrepreneurs, with research in the USA has found that black entrepreneurs are about three times more likely to avoid applying for loans when needed through fear of having their application rejected.
The Canadian government has sought to address this problem head through its flagship Black Entrepreneurship Loan Fund which will provide CAN $352.3 million (approx. $250 million) to Black entrepreneurs and business owners with individual loans of up to $250,000 (appox. $183,000). Likewise, Indigenous Business Australia provides a startup finance package for entrepreneurs from the Aboriginal and Torres Strait Islander community which contains a mix of grants and startup loans. This can also be done on a smaller scale in local jurisdictions, as demonstrated by the Minority Business Enterprise Micro-Loan Program in Mississippi which provides loans of between $2,000 and $35,000.
Education + Skills
Despite the immense potential of entrepreneurship as a tool for self-sufficiency and empowerment, refugees face numerous challenges in their entrepreneurial journeys. One of the most significant obstacles is the legal and regulatory environment in host countries. Additionally, complex bureaucracy and a lack of familiarity with local laws and regulations can make it difficult for refugees to navigate the process of starting a business. Moreover, refugees may lack access to local networks and resources, which can be critical for establishing and growing a business. Programs in both Germany and the UK have sought different paths to use enterprise education as a solution to this problem.
The ReDI School of Digital Integration is a non-profit tech school that was established during Germany's refugee crisis. Founded in 2015, the school's primary mission is to provide migrants, refugees, and underprivileged groups free and equitable access to digital and entrepreneurial skills training. The school's unique approach to teaching involves co-creation, participation from the students, and the involvement of over 500 volunteer teachers and mentors from the IT and startup industry. The initiative has had considerable success with 75% of its graduates having found paid jobs, mostly in the tech field.
The UK Refugee Entrepreneurship Pilot Scheme was an initiative launched by the Centre for Entrepreneurs (CFE) in 2019, backed by the Home Office and The National Lottery Community Fund. The scheme was designed to provide business support to refugees, with the aim of establishing the efficacy of refugee entrepreneurship programs and exploring different delivery models across various UK cities. The scheme included launching four pilot programs in Bristol, Belfast, the East of England, and Staffordshire, which worked directly with refugees and local businesses to offer tailored start-up support. The pilot scheme was evaluated academically, and resulted in 112 refugees receiving business startup training. 25% of participants were trading by the end of the pilot, and 40% were planning to launch a business in the next 12 months.
Access to Markets
South Africa’s non-white population accounts for more than 92% of the total population of the country, yet, the legacy of apartheid means that Black South Africans in particular are underrepresented in the business world. To address this problem, the South African has a long – and controversial – policy of Broad-Based Black Economic Empowerment. This program assesses each company’s commitment to black empowerment through ownership, management, skills development enterprise and supplier development, and socio-economic development. The level the company receives determines the level of public procurement contracts that they can bid for. This is intended to both improve overall representation of Black South Africans in business and also to support the growth of Black led companies.
New Zealand has also sought to open up markets its indigenous population by launching the Indigenous Peoples Economic and Trade Cooperation Arrangement (IPETCA). This innovative project is a cooperation-based agreement between nations that aims to boost the participation of Indigenous peoples in international trade and foster their economic growth. IPETCA has been adopted in several countries including Canada, Australia, New Zealand and Chinese Taipei.
Ecosystem + Economic Development
Building an ecosystem that supports and caters to the unique needs of minority entrepreneurs is one of the most effective ways to sustainably grow minority led businesses. The Canadian government has sought to this by providing CAN $100 million (approx. $74 million) in funding to Black-led ecosystem organizations through the National Ecosystem Fund. The fund supports organizations which have either developed new services or expanded existing services they offer to provide mentorship, networking opportunities, financial or business training for Black entrepreneurs. Similarly, the Israel government has sought to promote tech entrepreneurship in the Israeli Arab community with a $70 million initiative to fund community focused incubators and accelerators.
Science, Technology and Innovation
Transformative ideas can be lost if the people in possession of them lack the opportunity to commercialize them. Even if they eventually emerge from elsewhere, the cost to society because of the slower progress of critical technologies is vast and unquantifiable. Google for Startups launched the Black Founders Fund to support innovative ideas emerging from Black entrepreneurs. The program provides funding, technical support and mentorship to Black founders who demonstrate they are building innovative businesses with significant potential to impact the world.
Policymaking
Countries such as the USA and Australia have created federal agencies tasked with promoting growth and competitiveness for minority-owned businesses. The Minority Business Development Agency operates with a mission to foster the growth and global competitiveness of minority business enterprises (MBEs) in the United States. The agency achieves this by mobilizing and advancing both public and private sector programs, policy, and research, dedicated to promoting economic prosperity for all American business enterprises. Overall, the department runs nearly 80 programs across the country designed to increase access to capital, contracts, and markets.
It is also crucial that research into entrepreneurship addresses the unique challenges faced by ethnic minority entrepreneurs. Canada has launched the Black Entrepreneurship Knowledge Hub which is a national hub for research, data, and insights on Black entrepreneurship in Canada. BEKH brings together a large network of community groups, entrepreneurs, universities and research scholars to collaborate and conduct research across sectors. Activities include conducting large-scale qualitative and quantitative research, providing a detailed map of Black business ecosystems across the country, identifying critical gaps where Black entrepreneurs are facing the largest challenges.
The policies covered in this post represent the start of a blue print for national governments interested in expanding entrepreneurial opportunities to ethnic minority communities. However, it is clear from the limited number of nations pursuing policies in this realm that considerable work remains to convince many countries of the need for a policy agenda aimed specifically at minority entrepreneurs whether they are indigenous peoples, refugees or historically marginalized ethnic groups.