Beyond disruption to new innovation

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George Atalla, EY Global Government & Public Sector Leader

Bernhard Lorentz, EY Government & Public Sector Leader, Germany, Switzerland & Austria

EY and the G20 Young Entrepreneurs’ Alliance (G20 YEA) have a five-year partnership focused on shaping advice for G20 governments in the area of youth entrepreneurship and policy. Increasingly, this is centered on digital: the challenges of digital disruption, the nature of entrepreneurship in a digital-first world and the changing parameters for policy in this environment.

For the 2016 G20 YEA summit, in Beijing, China, we presented our point of view in our report Disrupting the disruptors – disrupting youth entrepreneurship with digital and data: the digital opportunity to empower young entrepreneurs for growth. This highlighted that entrepreneurship itself it also susceptible to disruption by digital forces, and that policy needs to adapt to this transformation, to give young entrepreneurs effective support to grow and scale.

The 2017 G20 YEA summit in Berlin, with its theme of “Digital trends for future business” sets the stage for further exploration of specific policies to help young entrepreneurs shape their future. The 2017 report is a continuation of our Beijing analysis, on digital, disruption and youth entrepreneurship. This year, we look beyond disruption, to new innovation, highlighting specific, actionable policies that G20 governments can deploy, to grow digital entrepreneurship and young entrepreneurs’ development of new technologies.

In this report, we present nine policy recommendations. These build on the broad issues for reform, and high-level policy areas, identified in the Digital Entrepreneurship Barometer model that was presented in last year’s Disrupting the disruptors report. Our analysis goes deeper, to look more at the nuances in access to funding, education and business environment that policy can target. These reflect consultation with young entrepreneurs across the G20 YEA network.

Through a survey of close to 250 young entrepreneurs, and also in-depth interviews, we uncovered some critical themes and key gaps and opportunities in policy, which we showcase in this report. Of course, we recognize that the G20 covers a diverse, dynamic group of economies and there is no “one size fits all” for proposed recommendations. However, our research does bring to light some core themes, and needs, for policymakers to address, and highlights some key, crowd-sourced best practices. We think these are valuable input for local strategies and detailed execution plans.

EY is the world leader in advising, guiding and recognizing entrepreneurs. For over 30 years, EY has worked with entrepreneurs and the leaders of fast-growth businesses to help them grow into market leaders. Our marquee program, the Entrepreneur Of The Year®, covers nearly 40 countries. We also run the EY Entrepreneurial Winning Women™ program, which identifies high-potential women entrepreneurs and helps them to scale their businesses.

This gives us a unique, bottom-up perspective on entrepreneurship and the policy alternatives that can support youth entrepreneurs in building their success. At the same time, our extensive experience with government and the public sector enables us to act as a bridge between young entrepreneurs and policymakers, and support more effective outcomes.

Key findings: our major recommendations to G20 governments

Digital skills, knowledge and entrepreneurship culture

  • Establish a tandem vocational and academic education system
    Entrepreneurship and entrepreneurial thinking should be integrated with all other subject areas. Course design could also be reviewed to make it increasingly practical.
  • Facilitate support and open networks
    Networks and support programs that include mentorship are a very important part of the journey to a sustainable company. Specific initiatives to boost mentorship include providing businesses with incentives to engage in mentoring schemes, and investment in a digital platform to host a “buddy system” for entrepreneurs, to support cross-border mentoring and coaching opportunities.
  • Invest in the ecosystem
    Survey respondents indicate a clear need for clusters or networks. For governments, this means playing an active role in the ecosystem, for example through using digital platforms to proactively connect schools and universities with industry.

Access to finance

  • Foster the journey from early-stage to scale-up
    Scale-up financing is undoubtedly a pain point for young entrepreneurs. For government, facilitating access to early-stage financing (angel and early-stage VC) and reinforcing scale-up is important to help ensure that young entrepreneurs’ journeys from early-stage to scale-up are smooth.
  • Invest in digital financing infrastructure
    The survey suggests that digital platforms can be an important enabler for early-stage, young entrepreneurial firms. Government can work to complement existing fintech platforms and tools.
  • Open up access to cross-border capital
    This includes breaking through regulatory barriers to foreign investment, especially tax. Exposure to new markets and best practices for young entrepreneurs is also crucial, including through a start-up mobility visa.

Digital business environment

  • Fast-track access to cross-border markets for young entrepreneurs
    Government investment in a supporting body (cross-border) to help young entrepreneurs, and their investors, with international expansions and ongoing regulatory compliance could be an effective near-term initiative.
  • Consider tax reform for fast-growth, digital entrepreneurs
    Governments can evaluate, including through consultations, targeted tax concessions for young entrepreneurs. The focus here should be at least as much on tax compliance as the overall tax obligation.
  • Drive differential investment in digital infrastructures
    The distinct, valuable role for government is in quick, responsive investment in framework policies for digital tools and infrastructure. Governments also need to think about young entrepreneurs as the digital-first customer.

Read our full report, Beyond disruption to new innovation: Policy to grow digital entrepreneurship