TOPIC OF THE WEEK: TWEEK

“ASSISTING STALLED ECONOMIES”
YOUNG ENTREPRENEURS APPEAL TO G20 LEADERS

Renee Horne –London 3 November 2011

The complete meltdown of the Greek economy and the possible rejection of a bailout was the major focus at the G20 Summit in Cannes, France. However, what many news pundits had alluded to was the side event that provided suggestions on how to get economies around the world back on the track to long term economic growth. The G20 Young Entrepreneurs’ Summit (YES) hosted by the French President, Nicolas Sarkozy was held in Nice, France a day before the G20 Cannes Summit.  Four hundred young entrepreneurs exchanged ideas with G20 leaders on how best to fix economies around the world.  Vivian Prokop, founder of G20 YES, urged governments to make youth entrepreneurship a priority for stalled economies, "As the G20 leaders grapple with the continuing aftershocks of the 2008 financial crisis, entrepreneurship has proven to be vital for building a stronger economy globally, rather than simply a topic for theoretical reflection”

BOTTOM LINE MESSAGE

The bottom line message delivered to the G20 leaders is “More needs to be done to encourage entrepreneurs across the world”. The G20 YES communiqué stated that “Young entrepreneurs are eager to contribute to the prosperity and growth of the G20 countries”.  Budding entrepreneurs have faith that “the G20 Leaders will endorse ideas outlined in the communiqué as a major signal of hope to developed and emerging nations and young people in the 21st Century”.   Based on the G20 Young Entrepreneurs Alliance (YEA) established last year, under the  theme of  “Entrepreneurship = Recovery = Jobs”, which is a global initiative that brings together young entrepreneurs and entrepreneurial experts from around the world to identify and address key policies surrounding the challenges and promotion of youth entrepreneurship.  The key stumbling block for young people is an influx of young companies that do well in the conceptual phase, but cannot make it through to the post-concept phase.  According to reports, this year has been difficult for US entrepreneurs, as start-ups often fail to make it past their initial rounds of financing. Hence, young businesses receive the first round of funding for the conceptual phase, but due to limited growth success, backers are hesitant to grant them a second round of funding.  According to the National Venture Capital Association and Thomson Reuters about 859 U.S. companies have collectively raised an initial round of funding of $3.9 billion (U.S.) compared to 777 companies raising $3.5 billion this time last year, and 523 companies raising $2.3 billion in the first nine months of 2009. According Venture Capitalists, next year is expected to get worse for hundreds of fledgling businesses. In the US, there's just simply not enough venture capital to go around. Young Entrepreneurs are particularly affected by lack of funding in the post conceptual phase and this is why they are calling on G20 leaders to take action arguing that while governments are not responsible for entrepreneurship, they can offer long term support to innovative young people and their businesses which will ultimately lead to the growth of the struggling global economy. 

EASING THE ENTREPRENEURIAL STRUGGLE

The G20 Young Entrepreneurs communiqué called upon the governments of the G20 countries to recognize that young entrepreneurs have the power to change lives, communities, cultures and countries.  The government can assist in easing the struggles facing entrepreneurs such as the social attitudes that discourage risk-taking hence the need for specific entrepreneurial education in schools and universities. According to the Ernst & Young report, ‘Entrepreneurs speak out: a call for action to G20 governments’, “80% of entrepreneurs in G20 rapid growth markets think that students need to follow specific training to become entrepreneurs (compared with an average of 70% across the broader G20). There should be more specific education programs dedicated to entrepreneurship to encourage young students to identify market opportunities and valid career options”.   The report, based on a survey of 1,000 entrepreneurs from across the G20 countries, examines the policies and actions that can most quickly advance a global economic recovery, “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 to help them expand internationally”. This was reiterated in the G20 Young Entrepreneurs Communiqué, calling on G20 governments to support young entrepreneurs by entering into an ongoing discussion with organizations that represent young entrepreneurs, hence forging ways for national and international collaboration between governments and those running high-growth businesses.  Young entrepreneurs have asked for standardised regulations governing startups so that entrepreneurs know the rules of the game throughout the world. According to the Ernest and Young report, “Many countries have made improvements in terms of the cost and ease of starting a business, and perceptions of progress about this are correspondingly positive. Best practices are emerging. The most impactful incentives are: clearly targeted at encouraging innovation and entrepreneurs”.  The report indicated that “although, funding instruments are developing at different rates across the G20 countries, for 80% of entrepreneurs interviewed, governments need to play 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”.  Of course access to funding continues to be a significant challenge for the survival and growth of a company, hence G20 YES have suggested governments, explore public-private financing partnerships to create healthy markets where entrepreneurs can obtain funding for their companies.  At this stage the YES communiqué is merely words on a piece of paper, however entrepreneurs are pushing for action from G20 leaders.  YES has requested that the G20 Governments include an “Entrepreneurs’ Declaration” in the outcomes of the Cannes Summit that recognizes the vital solution that entrepreneurs bring to economic challenges, particularly with respect to job creation and youth unemployment.  The G20 YEA proposes to collaborate with the G20 governments to develop an Action Plan that will jointly be endorsed at the next summit in Mexico.  This Action Plan will establish and encourage the economic, social and cultural conditions necessary to support the development of entrepreneurs within and across all G20 countries.  YES, talks of an action plan, but one wonders if G20 leaders take YES seriously, as the centrepiece at the Cannes Summit is Greece and embattled economies?