The GEN Atlas Policy Deep Dive explores several examples of the same policy 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
Global Entrepreneurship Week is about instilling pride in entrepreneurial skills, drive and potential. On top of that it seeks to break down the barriers that prevent individuals and entire communities from fulfilling their true entrepreneurial potential. That’s why for this Policy Deep Dive we are taking a look at policies designed to expand opportunities to youth entrepreneurs.
Despite the common perception of successful entrepreneurs as precocious youngsters with natural genius and boundless energy, the average of a startup founder is actually 45. Moreover, young entrepreneurs often face systematic barriers to launching their own businesses whether that is due to lenders being skeptical of their lack of life experience or simply lacking the confidence to launch something in the world.
It is a simple fact that entrepreneurial ecosystems suffer when large chunks of society are excluded. Innovative ideas emerge quickest from a diverse pool of individuals but the reality is that across the world many potential entrepreneurs face fewer opportunities to become founders and often lack the self-confidence required to take the huge risk of launching a startup. 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.
Moreover, entrepreneurs who start young are much more likely to go on to create successful businesses later in life with the experience they have garnered in their early entrepreneurial careers. That’s why policymakers are keen to develop policies that both expand the number of youth entrepreneurs and increase opportunities for those who have already embarked on the adventure. Below we take a look at six different policy levers that have been implemented across eight countries.
Access to capital is one of the most significant barriers that entrepreneurs of any age face. Early-stage companies with great concepts routinely fail if they are unable to source an injection of cash that allows them to develop their product to the point of revenue generation. Crucially, 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.
One of the most common policy solutions to this problem is for policymakers to provide grants directly to startups. This means startups receive lumps of cash without any requirement to repay them or give up equity in their business. This naturally makes them popular amongst startups, however, the process of securing grants often requires significant applications with high levels of competition for finite pools of cash. It is often questioned whether the selection processes allow funds to reach the startups that policymakers are aiming for.
The ‘YouWIN!’ program in Nigeria seeks to address these challenges in an innovative way. Launched in 2011, the program distributed 1,200 grants of 100 million naira (around €28,000 at that time) to young Nigerians who were planning to start of expand an existing business. What is unique is that the program choose most of the winning applications randomly. An impact assessment conducted by the World Bank found the initiative to be highly successful, creating 7000 new jobs and empowering young Nigerians to form new businesses.
Grants can also be distributed on a smaller scale with similarly positive results. The John Cracknell Youth Enterprise Bank (JCYEB) is a micro grant scheme for young people living in Hull and the East Riding of Yorkshire, UK. The JCYEB has typically given grants in the region of £1,000 that allow young entrepreneurs to test the launch of a new business. Internal analysis of the scheme found that over a 10-year period, over half of the recipients of the grant were still in business.
Other programs that contain grant schemes as part of their offer are the EXIST Business Startup Grant in Germany and the Danish Foundation for Entrepreneurship.
Becoming an entrepreneur is a career path that often does not seem immediately obvious to pupils and students who lack exposure to immediate role models and experience of startup culture. Policymakers can rectify this by embedding enterprise and entrepreneurship into education as well as offering stand-alone courses. Likewise, providing existing and potential entrepreneurs with mentoring, training and support increases widens the skills and pool of founders creating innovative startups. Skills training also plays a critical role in providing startups with access to talented employees able to help grow the business and fill specialist roles.
Erasmus for Young Entrepreneurs (EYE) is a Europe-wide initiative that pairs youth entrepreneurs with experienced entrepreneurs in a different country, enabling them to receive direct experience of working in an established startup. The program ensures new entrepreneurs benefit from in-work training with the host company that allows them to develop their entrepreneurial skills, and gain business knowledge and experience on managing a small business from their direct collaboration with the host entrepreneur for up to six months. Similarly, the Entrepreneurship Passport in Portugal and Startup Choihona platform in Tajikistan incorporate training programs for participants in their programs.
One of the biggest barriers to truly inclusive entrepreneurial ecosystem is the challenge of encouraging individuals to consider that they themselves could be an entrepreneur. Many young people have never met an entrepreneur, and less still one that comes from a background resembling their own. That’s why some policymakers have turned to competitions to encourage young people to participate with the opportunity to win significant amounts of cash.
Ireland’s Best Young Entrepreneur (IBYE) was one such competition, run across three categories Best Business Idea, Best Start-Up Business and Best-Established Business and underpinned by a €2 million prize fund. Over a five-year period €8 million was received by more than 600 young entrepreneurs. Likewise, the Converge Challenge is a company creation competition for students and recent graduates of Scottish Universities and Research Institutes. This program has helped launch more than 300 businesses, create 800 high-value jobs and raise more than £280 million in funding.
Spreading entrepreneurial culture
Another way to encourage young people to consider themselves as potential entrepreneurs is to celebrate and spread entrepreneurial culture throughout society as whole but especially within schools and universities. The EXIST initiative is a support program run by the German Federal Ministry for Economic Affairs and Energy that is designed to fund early-stage start-ups emerging from universities and research institutes. A key aspect of the program is to support and fund universities in formulating and implementing a comprehensive and sustained university-wide strategy for increasing entrepreneurial culture and spirit. This can include the funding of university incubators & accelerators, promotional events, campus innovation challenges and encouraging researchers and scientists to engage with entrepreneurial activities.
One of the biggest barriers for anyone launching a business is finding the means to support themselves whilst undertaking the project. This problem is especially acute for young people who often lack savings to fall back on. The Entrepreneurship Passport was a Portuguese program that provided monthly stipends to youth entrepreneurs while they developed their innovative projects. The stipend amounted to a monthly grant worth €691.70 and ran for up 12 months. This project allowed 997 young people to develop their ideas while receive a guaranteed income, ultimately creating hundreds of new companies.
It is well established that for entrepreneurs to thrive it requires a lively ecosystem that provides a variety of services and functions that startups rely upon to develop and grow. In this regard youth entrepreneurs are no different and will struggle to form successful businesses if they lack access to incubators, spaces to work, advisory & mentoring organizations and access to funding organizations. Start-Up Choihona was a platform for the promotion of youth entrepreneur projects that sought to develop a youth entrepreneurial ecosystem from scratch in Tajikistan.
The project was designed to be flexible in its approach to follow the needs of entrepreneur and the current economic conditions. Consequently, the type of events it ran included; business idea contests, fairs, collaboration platforms, forums, training and mentoring programs. Start-up Choihona also included the creation of a volunteer run co-working space which acts as a meeting point for new entrepreneurs, alumni students, investors, business angels and authorities. While the program failed to deliver on many of its objectives, it remains a useful case study and an interesting example of an ambitious attempt to develop the ingredients necessary for a successful ecosystem.
For more guidance on policy guidance for youth entrepreneurship you can read this guide published by UNCTAD.