Comment: How do we raise a generation of entrepreneurs?

With business sectors slowing their investments and economies that continue to shrink or grow at a rate close to zero, governments seem to have exhausted their resources of reviving the national economies, lowering unemployment and restoring public confidence in the health of the economy and the promise of a higher standard of living.

On the other hand, entrepreneurship initiatives support innovation, a big word for some of us, but without which, the growth in many economies would not be possible.

One way that governments can progress in their efforts is to harness the energy and knowledge of entrepreneurs, one of the main drivers of global growth.

Entrepreneurs need a friendly environment (fiscal, regulatory, financial, cultural, educational) in which to test their ideas and governments are well positioned to help remove some of the barriers and mitigate many of the challenges that entrepreneurs face.

The task of governments is certainly very complicated, because they must consider a number of factors.

The most important barrier to overcome is access to finance, which is not just a problem in Romania.

According to EY G20 Entrepreneurship Barometer 2013, released in August, 77 percent of EU entrepreneurs face financing difficulties and 62 percent believe that access to bank loans has deteriorated in the past three years.

In Romania, the percentage is even more discouraging: 92 percent of entrepreneurs believe that funding is difficult for young entrepreneurs.

Given that access to traditional financing remains limited for entrepreneurs, there is an increasing demand for alternative ways of funding, such as crowdfunding and micro-finance.

At the same time, entrepreneurs believe that the second most important source of funding after banks is state aid and other government sources.

An investment without proper guidance can be a wasted investment. Financial support only is not sufficient to enable entrepreneurs to achieve their true potential.

The development of a supporting ecosystem would be beneficial in this regard – most of the G20 EY Entrepreneurship Barometer 2013 (36 percent) survey respondents believe that the development of business incubators would have the greatest impact on the long-term growth of entrepreneurship. In Romania, 43 percent of entrepreneurs believe the development of incubators would have a huge impact.

From the G20 countries, the most encouraging example comes, maybe surprisingly, not from countries with entrepreneurial tradition, but from Russia, where one in four entrepreneurs thinks that access to this form of support for start-ups has improved significantly in the last three years.

Russia has more than 1,100 incubators and technology parks. In Romania, however, we had 58 incubators in 2010, of which, 20 in Bucharest-Ilfov region, supported by a national program for the development of incubators in the years 2002-2012. It’s hard to say how many are truly functional, but many are often started without any previous entrepreneurial experience.

The good news is that incubators are treated as a priority in the Ministry of Youth and Sports Strategy, but their development remains in the draft as a “desideratum”, the idea not being developed further in the text of the strategy.

An even more delicate task than funding and mentoring entrepreneurs is maybe the change of perception in tolerating failure. This should be seen as a cultural issue as it involves changing mentalities.

A possible approach to this problem is to promote entrepreneurs as important job creators: 84 percent of entrepreneurs believe that this approach would have a significant impact on the development of entrepreneurship in the next three years.

Not least, 83 percent of entrepreneurs believe that G20 governments must simplify the tax environment to support SMEs. In Romania, entrepreneurs continue to talk constantly about topics such as bureaucracy, low taxes and the predictability of the fiscal environment.

To raise a generation of entrepreneurs we must act now! There are lots of areas where according to EY G20 Entrepreneurship Barometer 2013, the joint action of governments, experienced entrepreneurs and even corporations can produce significant changes in society. Training entrepreneurs, improving their image, promoting their contribution to economic growth and the creation of jobs are essential actions that can make entrepreneurship a valid and respected career option.

Bogdan Ion, Country Managing Partner, EY Romania, guest writer

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