The Organization for Economic Cooperation and Development (OECD) released this month an International Compendium of Entrepreneurship Policies (2020), which examines the rationale for entrepreneurship policy, presents a typology of policy approaches, and highlights principles for policy success and the range of metrics used to measure entrepreneurship support internationally.
For policymakers responsible for overseeing their government's portfolio of entrepreneurship support initiatives, the report examines 16 case studies of inspiring practices in 12 OECD countries. Each case study comprehensively details key information, guiding policy leaders to the knowledge and lessons they need to as they design, improve or implement similar policy approaches locally.
"The report gives policymakers opportunities to draw inspiration from a small set of international policies and programs with demonstrated results or promising prospects, and learn from their experiences, considering how other countries have addressed entrepreneurship policy challenges," highlighted Lamia Kamal-Chaoui, Director of the OECD Centre for Entrepreneurship, SMEs, Regions and Cities (CFE).
The Compendium is the result of an OECD collaboration with the Japanese Small and Medium Enterprise Agency through the support of its Deputy Director of the Entrepreneurship Division, SME agency, Mr. Kou Kawaragi.
Here we share some of the key insights from the Compendium's case study of an approach tested in United States to improve access to finance in Idaho, Utah and their contiguous states.
Corporate Venturing Program: Collaborative Mentoring Geared Towards Access to Finance
Led by VentureCapital.Org (VCO), a regional non-profit organization based in Utah, the main objective of the Cooperative Venturing Program is to help entrepreneurs obtain capital for their startups. The approach VCO takes, however, is helping entrepreneurs identify both financial and non-financial resources to successfully develop their business.
A key element of the Cooperative Venturing model is "collaborative mentoring" where a team of four to eight mentors help a company to fine-tune their business model and search for investment. Its mentors have a variety of skillsets and backgrounds (entrepreneurs, chief financial officers, investors, attorneys, marketing professionals, etc.). In addition to offering diverse and tailored feedback, the mentors often open doors for entrepreneurs to engage new networks. The team dynamics underlying the cooperative mentoring methodology, VCO has found, naturally helps to weed out sub-par mentors. Moreover, for a participating mentor, the methodology offers networking opportunities while sharing responsibilities, which helps with mentor recruitment and retention.
The OECD case study notes that VCO does not invest in ventures and does not take commissions on investments made. It attributes the three-decade trajectory of its program to the active development of linkages to local and regional entities, while adopting a neutral position in the ecosystem.
The program has resulted in impressive business survival rates, in addition to other results. For example, more than 80% of supported firms created before 2008 were still operating in 2018. Such strong performance has not come without challenges, of course, which the program leaders have addressed since the program was created in 1983.
As the OECD documented, this access to finance program faced a challenge common outside startup hubs: a lack of knowledge about venture investing among entrepreneurs and also among some investors. VCO addressed this barrier by educating the entrepreneurial community about angel investing. The organization was also very active in the National Association for Seed & Venture Funding (NASVF), which, although it is now dormant, is recognized as having supported the growth of angel investor groups and educating prospective investors.
Another challenge revolves around the investor community's preference for investing in “unicorns.” While the program’s pre-screening process allowed VCO to identify firms with growth ambitions and potential, the case study's authors argue that the preference for super-high-growth startups makes it harder for new firms with the potential for only moderate near-term growth and job creation to attract investors. The OECD research team also found that the program's monitoring and measurement practices played an important role in developing linkages among investors and productive (but non-unicorn) entrepreneurs, which led to investments – a key takeaway for other ecosystems.