Encouraging Growth

Encouraging Growth - WEF

As the financial sector, multinationals and politicians don’t seem to inspire much confidence, could it be time to look instead to another group of potential rescuers: the world’s entrepreneurs?

It is impossible to read a newspaper or watch TV any more without getting the impression that the whole world is going to be plunged into an economic crisis that will make the Great Depression look like a minor inconvenience.

The collapse of Lehman Brothers in 2008 now seems like something of a mishap compared to the sovereign debt crises now engulfing most Western economies. Three years on, the US remains mired in problems despite the efforts of the Obama administration to kick-start it and China’s potential debt defaults could be even larger than the $700bn US bailout program during the 2008 meltdown. Meanwhile, despite massive economics growth, in many regions of Asia and Africa people still live with unacceptable levels of poverty.

So, who is going to sort the mess out? As the financial sector, multinationals and politicians don’t seem to inspire much confidence, could it be time to look instead to another group of potential rescuers: the world’s entrepreneurs?

“We are relying on small and medium enterprises (SMEs) to get Europe’s economy back on track,” EU commissioner for research, innovation and science, Máire Geoghegan-Quinn, told this year’s conference of the European Business and Innovation Centre Network. Recognising that SMEs had created 84% of new jobs in the EU from 2002-07, member countries are looking to foster entrepreneurial attitudes and make the business environment friendlier, both for existing SMEs and prospective entrepreneurs.

But where will the next generation of entrepreneurs learn their craft? Not at business school, argue those who feel that setting up your own business has more to do with nature than nurture, and that experience at the coalface of enterprise will teach you all you need to know. Not surprisingly, many established schools contend that while they don’t create entrepreneurs, they do provide the framework, access to expertise and networking opportunities to turn a good idea into a good business.

The Center for Entrepreneurial Leadership at the University of Virginia’s Darden School of Business focuses on an ‘effectual approach’ to building its MBA students’ businesses, supporting them with office space, technological expertise and legal services. “You make the cost of failure low, you make small bets, you start with things you know and then iterate,” says its director, Philippe Sommer.

This incubator approach, providing the day-to-day advice and support of an expert faculty, an alumni network and access to finance, is working well at one of Europe’s oldest incubators, at the EM Lyon school in France. Professor Michel Coster reports that only one of the 25 projects started in the past five years has ended in failure. In addition to raising capital and fine-tuning business plans to attract investors, Coster argues that the business school provides valuable support for young companies: “The entrepreneur’s business plan typically changes two or three times in the first five years of business, and the incubator helps the project to evolve. This also means help with recruiting the right team and building a company culture.”

Business schools can also bring in real-life entrepreneurs to share their experience with students. Twitter co founder Biz Stone, who dropped out of college twice, advises MBA students at UC Berkeley’s Haas School of Business on entrepreneurship and innovation, while students from Cass Business School in London interact with alumnus and easyJet founder Sir Stelios Haji-Ioannou.

But while all these initiatives in isolation no doubt contribute to the entrepreneurial cause, where can everyone come together to sort out the bigger issues? This month, at least 115 business leaders, politicians and academics will gather in Singapore for the fourth annual meeting of the World Entrepreneurship Forum. Their goal is to help provide the support that the next generation of entrepreneurs will need.

What seems to set the forum apart from other initiatives is the fact that many of its members have built their own successful businesses. And while they may not have the visibility of a Branson or Zuckerberg – not yet, anyway – they are determined to pass on the lessons they have learned along the way.

Guillaume Gauthereau, for example, is the founder of Totsy.com, a private sales website aimed at the mothers of young children, and currently one of the five fastest-growing start-up companies on the US’s east coast. “We’ve got to ask ourselves where we want to be 30 years from now, because it’s simply unrealistic to think we can fix things overnight,” he says. “But we’ve got to start putting in place the things the next generation of entrepreneurs will need to carry through the change we all want. And that means linking up people who make new business happen with public institutions to effect the sort of reforms which will underpin it all.”

Gauthereau points out how very simple changes could provide the catalyst for more people to go it alone and set up their own new venture. “Despite being French, I went to the US to get my company off the ground because there are just too many bureaucratic hassles in France – even just opening a bank account is ridiculously complicated. Any country that is serious about promoting new business activity has to tackle this, and make administration as simple and easy as possible.”

He says governments need to think about the bigger picture if they are going to develop entrepreneurial cultures. “The cities that are creating the most jobs are the ones that attract the most creative talent. And they don’t just do that by providing cheap office space and free internet connections. They do it by creating an environment where creative people want to live and work – one that’s not just supportive in a business sense, but culturally active and environmentally sensitive.”

That could be one of the reasons why the forum is meeting in Singapore, a country that has been rated by the World Bank as the best place to do business in. But can Singapore’s mix of professors, politicians and entrepreneurs realistically transform the likes of Pittsburgh and Salford into the next Palo Alto?

Forum member Ragesh Agrawal, who founded online foreign exchange and payments company RationalFX, agrees with the approach of addressing specific problems that could be quickly and effectively tackled by governments. “Just look at the UK, where Prime Minister David Cameron has talked about turning parts of London into the next Silicon Valley. That’s not going to happen unless he introduces measures such as scrapping National Insurance for companies with less than five staff, or exempting internet based businesses from VAT which they can’t pass on to customers.”

However, Agrawal sees the real value of the forum’s work in the way it seeks to redress the balance between the small, growing company and established big business. “We need to use our voice to protect small, entrepreneurial businesses because they have the potential to be the real engine of economic growth, and can radically improve the living conditions of millions of people. We currently have a system that is geared to protecting leviathans that are apparently too big to fail, but which will allow small businesses to go to the wall without a moment’s thought,” he says.

The 2011 World Entrepreneurship Forum takes place in Singapore from 2-5 November. Around 150 members from 70 countries, mainly entrepreneurs and social entrepreneurs, will gather to discuss this year’s theme: ‘Entrepreneurship – a Driver for Innovation and Technology’.

Founded in 2008 by French business school EM Lyon, international accounting firm KPMG and Singapore’s Nanyang Technological University, the forum is designed to discover specific ways around the financial, bureaucratic and resources-based obstacles that hold entrepreneurs back. It’s most recent think tank, for instance, held in February, looked at how to encourage entrepreneurship at the ‘base of the pyramid’, at the promotion of entrepreneur-friendly cities and at using education to foster the entrepreneurial spirit from an early age.

Indeed, this idea of developing relevant skills and confidence in young people is regarded as particularly important by the organisers and led to the establishment of a junior version of the forum. This year the junior version has staged events in countries as diverse as France, Ecuador and India.

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