GETTING TO KNOW YOU - ENTREPRENEURS AND THEIR INFLUENCE ON GROWTH BUSINESSES

In November, Wales will once again be taking part in the Global Entrepreneurship Week, a series of events to publicise and promote entrepreneurship as a viable career option, with an estimated 7.5 million people participating in 130 countries around the World.

But is this enough to make a real difference to encourage more people to take the step into an entrepreneurial career? It is a sentiment that seems to be reflected in a groundmaking paper from the World’s foremost think tank on entrepreneurship.

Researchers at the Kauffman Foundation, based in Kansas, USA, has stated that more needs to be done to expose the general population to entrepreneurs, especially those entrepreneurs that grow their businesses.

Indeed, research has consistently shown that a small number of businesses create the majority of jobs in an economy – the latest Fast Growth 50 project saw the creation of over two and a half thousand jobs in Wales in just two years by fifty businesses. So the question is whether greater exposure to entrepreneurs will lead to others doing the same?

Certainly, in conversations with those running their own businesses, a common thread in terms of their motivations is a description of the role models and peers - all usually entrepreneurs - who played a role in their decision to take the plunge and start a new venture Therefore to understand this better, Kauffman undertook a survey of US residents. This showed that not only did a large number of U.S. residents know entrepreneurs, but that knowing an entrepreneur is possibly a significant factor in whether a person runs their own business.

More importantly, the survey indicated that the likelihood of knowing entrepreneurs varied widely by location, income, gender, and age. For example, respondents were much more likely to know entrepreneurs if they were male, had modest income, or were middle-aged. This is a critical finding for policymakers in determining how best to encourage further entrepreneurship not only amongst those who are thinking of starting a business but, more importantly, amongst those who are in business already but have not considered growth as part of their strategy.

More relevantly, the finding suggests that there could be an increase in entrepreneurial behaviour amongst some under-represented groups such as women or ethnic minorities, if they were exposed to existing entrepreneurs, especially peers or contemporaries. For example, women simply don’t know as many growth entrepreneurs as men do, a situation made worse by the male-dominated nature of these fields and an important issue in creating female entrepreneurial role models.

Certainly, we have seen very few businesses managed by women within the Fast Growth 50 project during the last fifteen years and it is an area that needs urgent attention to ensure that there is breakthrough not only in getting more women to start their own businesses but those that grow and create jobs in the economy.

In addition, people in lower income groups are also much less likely to be exposed to those growing their business, a finding that should have particular resonance in ensuring that there is a greater focus on promoting entrepreneurship in areas such as North West Wales, which is one of the poorest parts of Europe.

Therefore, whilst governments around the World focus on various initiatives to promote entrepreneurship, the Kauffman study suggest that perhaps the best way forward is simply helping people to get to know who are the wealth creators in their local economy. In particular, more needs to be done to expose potential and existing entrepreneurs to those growing their businesses within the Welsh economy so that they not only serve as role models, but lessons can be learnt from their experiences.

GO BE AN ENTREPRENEUR

Another great sketchbook on entrepreneurship from the Kauffman Foundation

 

GLOBAL ENTREPRENEURSHIP WEEK - A SUMMARY

Next month,the Global Entrepreneurship Week will take place in 125 countries between November 12th and November 18th.

What is it about?

Fortunately, the team at the Kauffman Foundation, who are organising the event, have made a short sketchbook to demonstrate why this event is happening.

 Enjoy!

IMMIGRANT ENTREPRENEURS - CHALLENGES AND ISSUES

Research from the Kauffman Foundation has previously shown that immigrants start companies in the United States at greater rates than native-born Americans do, and are disproportionately successful in starting high-tech firms.

This is not surprising to many of us, with studies such as AnnaLee Saxenian's seminal "The New Argonauts" demonstrating that immigrants have driven the boom in high technology companies in areas such as Silicon Valley for the last three decades

However, a report released this week by the National Foundation for American Policy shows the advantage that the USA has with regard to immigrant entrepreneurs is likely to deteriorate dramatically if legislators do not radically change their policies.

It shows that visa wait times are likely to increase in employment-based immigration categories and such backlogs, according to Kauffman, means that foreign nationals with the skills and abilities to start high-growth companies will have to return to their home countries and likely start companies there rather than in the United States.

To demonstrate the importance of immigrant entrepreneurs, Kauffman has produced this video in which the case for supporting and attracting immigrant entrepreneurs is strongly made.




Bob Litan, vice president for Research and Policy at the Kauffman Foundation, also makes a strong case in this recent article from the Washington Post.

However what applies in the USA equally applies here in the UK.

We need to be at the forefront of attracting the best entrepreneurial minds into Britain to help grow our economy and the Coalition Government will need to look very carefully at its own immigration policies to ensure that this happens. Certainly, it must examine whether the current rules and regulations are fit for purpose or whether they are dissuading individuals from bringing their business ideas to the UK.

More on this subject soon.

THE FINANCIAL CHALLENGES FOR WOMEN ENTREPRENEURS

The latest sketchbook video from the Kauffman Foundation examines the way in which women are facing greater challenges than men in getting financing for their companies, which is one of the reasons why this untapped population is not scaling businesses. It examines some of the underlying causes for those challenges. 


According to the narrator, Alicia Robb (who is also one of the authors of A Rising Tide, a new book that delves into the topic of financing strategies of women-owned firms), "You hear a lot about the number of women-owned businesses growing faster than firms overall, but that's really just a reflection of the lower base. "If you look at revenues or employment or payroll, [women-owned firms] are not growing faster than male-owned businesses; they are actually growing slower."



This reflects the findings of a paper I recently co-authored on the subject of financing for female entrepreneurship.  "Differences in perceptions of access to finance between potential male and female entrepreneurs: Evidence from the UK", published in International Journal of Entrepreneurial Behaviour and Research(Vol 18, No 1) examined whether being female increases the probability that an individual feels difficulty in obtaining finance is a barrier to starting a business.  

Although the actual financial barriers faced by female entrepreneurs have been extensively studied, this is one of the first studies to focus on the concept of perceived financial constraints faced by potential female entrepreneurs.  The results suggest that a greater proportion of women are solely constrained by financial barriers than their male counterparts. The gender of the respondent was also found to interact with a number of other personal characteristics in a significant manner. In terms of practical implications, this finding suggests that policymakers should be encouraged to market the availability of start-up finance from various sources to encourage women to attempt to obtain the necessary finance rather than being discouraged at the first hurdle.

GO FAST, GROW FAST

This is the latest sketchbook from the Kauffman Foundation.

It features Alana Mueller, who was kind enough to meet with the Global Academy when we visited Kansas City last month and with whom we hope to work in the future.

 

KAUFFMAN, START-UP ACTS AND LESSONS FOR GOVERNMENT

Last week, during an eight day visit to the United States, I paid a visit to the Ewing Marion Kauffman Foundation in Kansas City, Missouri.

Established in the 1960s by a local entrepreneur, it is now one of the thirty largest foundations in the USA with an asset base of around $2billion. More relevantly, it is focuses its activities on specifically advancing entrepreneurship and improving the education of children and youth.

In terms of the former, the Foundation works with leading educators, researchers and other partners to further understanding of the powerful economic impact of entrepreneurship and to improve the environment in which entrepreneurs start and grow businesses. It also develops programmes to train the nation’s next generation of business leaders through enhancing entrepreneurial skills and abilities.

Needless to say, the meetings we had with their research, policy and training divisions were extremely useful and whilst Kauffman does focus its efforts solely within the United States, it welcomed the opportunity to work with a small nation such as Wales in the future.

However, it is not only Wales that can learn from the Kauffman Foundation and its focus on delivering a more entrepreneurial economy should strike a chord with politicians and policymakers in the UK Government. Certainly, with the economy still stuttering, it is clear that government can, and must, play a bigger role in stimulating entrepreneurial activity to create wealth and jobs.

In particular, there needs to be more high growth sustainable businesses created within the economy.  To achieve this goal, there needs to be a continuous stream of new ideas capable of being commercialised, more bold entrepreneurs who can launch and build new twenty-first-century companies, fewer roadblocks to the launch and growth of these new enterprises, and low-cost capital available to finance them.

However, there seems to be little impetus to support more new firms within the USA, despite the evidence on their role in the economy. For example, nearly all of the new jobs created in the US economy have come from businesses that are less than five years old. More importantly, a disproportionate number of innovations during the last decade have been commercialised by new firms.

This policy vacuum by the political leaders of America has led to the Kauffman Foundation proposing a "Startup Act" to jump-start the U.S. economy and increase job creation by accelerating the growth of new and young businesses.

Some of the changes in government policy proposed by this act include welcoming immigrants capable of building high-growth companies to the United States by providing "Entrepreneurs' visas" and green cards for those with degrees in science, technology, engineering and mathematics. This is plain common sense, given that research has shown that non-Americans have founded over half of the new firms in Silicon Valley and that a disproportionate number of the 500 largest U.S. public companies were created by immigrants or the children of immigrant founders.

The Act also recognises that new, growing firms often require outside capital, in the form of both equity and debt. This is especially true for firms in capital-intensive businesses in fast growing knowledge-based sectors such as alternative energy or aspects of life sciences. It therefore proposes that any long term investments in start-ups should be free from capital gains to differentiate it from other forms of personal investments. It also suggests, to deal with the cashflow difficulties that many new firms face in their earlier years, that they should be excluded from corporate tax in the first year of taxable profits, with a 50 per cent reduction in the next two years.

Finally, there is a recognition that many new firms are faced with a disproportionate amount of regulatory burden. The Act therefore proposes that such barriers to the formation and growth of new firms can be reduced ensuring that all business regulation lapses automatically after ten years unless it is reproposed and implemented. In addition, common sense and cost-effective standards for regulations should be introduced, and a regular assessment made of state and local startup policies.

The Kauffman Foundation still has a long way to go before it ensures that such proposals become real but the job creating potential of new firms is something that policymakers in the UK, at both national and devolved levels of government, need to recognise.

Whilst much of the focus of the industrial policy in Westminster and Cardiff Bay has been on supporting larger companies, the real job creators in the economy have yet to be appreciated by our politicians. Whether the UK needs its own Startup Act is open to question but it certainly needs Government to make it easier for entrepreneurs to set up new firms and, more importantly, to put policies in place that enable them to oo sustainably over the long term.

FINANCE FOR ENTREPRENEURS

Last week, I gave a session on growth companies to a group of Irish companies.

In the session on finance, this new sketchbook from Paul Kedrosky, Senior Fellow at the Kauffman Foundation, was a perfect summary on the different sources of finance for entrepreneurs.

Yes, venture capitalists are not at the heart of entrepreneurial finance and most companies are actually funded by the entrepreneur’s savings, cash flow, friends, family and, yes, even credit cards!

THE HEART OF ENTREPRENEURSHIP - WANTING TO MAKE SOMETHING HAPPEN

The latest sketchbook from the Kauffman Foundation. Enjoy....

THREE THINGS ENTREPRENEURS DO FOR THE ECONOMY

Another "sketchbook" video from the Kauffman Foundation, this time about the important role entrepreneurs play in innovation, job creation, and economic growth.