Show me the money – and the mentoring
Helping treps tap into funding
By Maria Pinelli
5 November 2013
Financing, like friendship, can be found in unlikely places. Entrepreneurs may look at governments as bureaucrats who seem conditioned to say no – but I’d like to make the case for entrepreneurs to rethink this stereotypical view of government when starting or growing their businesses.
Our recent EY G20 Entrepreneurship Barometer finds 70% of 1500-plus respondents have difficulty accessing funding in their own country. That’s a shame, since entrepreneurs generate jobs and create added value that builds prosperous societies.
Banks are still the top source of backing worldwide for entrepreneurial startups, but they demand collateral as a condition for loans, assets that young companies rarely have. Government or public funding comes in second – yet I think the deal they offer is getting better all the time.
Take the 2013 EY World Entrepreneur Of The Year winner, for example. Hamdi Ulukaya, the founder of the fastest-growing Greek yogurt brand in the world, Chobani, needed help to buy a dilapidated cheese factory in upstate NY which he envisioned as the site for his yogurt production.
Friends and even his lawyer warned against it. In the end it was the US Small Business Administration that provided the loan to buy the factory and begin the much-needed renovation, setting his dream in motion. In five years, he reached $1 million in sales and created a category leader.
Do the right thing
With the right policies in place, we are seeing how some governments across the G20 countries are helping entrepreneurs tap into a deeper and more diverse mix of funding options. These policies are actually supporting every stage of entrepreneurial growth. Building on these creative precedents, here are some specific ways governments and the private sector can work together to put policy into action:
- Look at the full entrepreneurial landscape. Ensure the correct funding strategies and policy levers are in place and the right type of capital is available at every stage of the business life cycle.
- Boost access to funding. Sponsor credit guarantee schemes, low interest startup loans, and encourage venture capital formation as well as new approaches such as crowdfunding and performance-related milestone lending.
- Provide mentoring along with the capital. Show us the money, sure. But give us the power to connect through mentoring as well. Capital without mentorship is lost capital. Governments have a major role to play in facilitating business-friendly infrastructure, such as meeting spaces, online services and a networked ecosystem.
Given the right introductions and the right facilities, experienced role models and new players can interact around a stimulating flow of ideas. And even a fledgling business plan can be positioned for takeoff.