The EY G20 Entrepreneurship Barometer 2013
Access to funding
Access to funding is the most important area where improvements would help entrepreneurs succeed, according to the entrepreneurs surveyed. With the right policies, governments can help enable a more diverse mix of funding options.
- As entrepreneurial businesses grow and develop, the sources of finance they rely on changes.
- It is critical that the right type of capital is developed at the right stage in a company’s lifecycle to ensure success. The EY guide to funding entrepreneurial business model maps available sources of finance against the correlating development stage of an entrepreneurial business.
- It is therefore essential that governments create a range of mechanisms and institutions that provide entrepreneurs with the capital they need to support their businesses at every stage of the growth journey (emerging, rapid-growth, or market leader).
|Maria Pinelli, Global Vice Chair, Growth Markets at EY discusses access to funding.|
Incentivize new sources of funding
Countries need to support the development of more innovative funding platforms, such as crowdfunding and microfinance.
They also need to establish targeted venture capital funds and incentivize private sector investors to focus more on startups. This can be done through improved tax incentives.
For more established entrepreneurs seeking expansion capital, more can be done to incentivize non-traditional funding sources. Non-traditional funding sources might be corporate venturing, co-development projects, or supply chain financing.
“In Mexico today, probably 80% of businesses start with funding from family and friends, and the remaining 20% will get some help from the government or risk capital. It’s hard to raise money for a start-up.”
— Pablo Gonzales, Cafe Punta del Cielo, Mexico
Unlock bank lending
Credit guarantee schemes are a powerful way to finance startups that lack the collateral required to secure a bank loan.
Instead of demanding collateral, which startups rarely have, banks could base lending on each entrepreneur’s ability to reach performance milestones.
Combine capital with mentoring
Many of the most successful start-up schemes combine money with coaching and practical advice. There are various ways to facilitate this, not least by tapping into existing entrepreneurial networks to channel their experience to help first-time entrepreneurs.
This is an area where public-private partnerships are needed, with the business community providing experienced role models and advisors, while government can provide financial support and infrastructure (for example, meeting spaces, online services) to enable these networks to take off.