Global Shortage Of Entrepreneurs
The driving force behind any economy is employment, and with the vast majority of people in most countries employed by small businesses it is essential that the flow of enthusiastic young ventures is encouraged at all costs.
According to the annual Global Entrepreneurship Monitor (GEM), which has been analysing entrepreneurial efforts for the last 11 years -and in its 2009 survey looked at 53 countries, we may be facing a real crisis in the making. Globally we’re seeing a 10% reduction in small business start-ups across 20 of the world’s wealthiest nations with the US leading the pack with a 24% drop since last year, all the way to the anomaly of the analysis, Saudi Arabia, which saw a 38% rise in start-ups last year.
Confidence is of course likely to be one of the major factors influencing this drop, but means are another. Access to funding is certainly one of the major reasons why fewer entrepreneurs have been launching new businesses in 2009. Where the banks would have previously financed such launches, it is now in the hands of all too few private business investors to help them to develop and grow. The banking structure around the globe has weakened, and although we’ve talked a lot over the last year about the UK banking system failing the small business in need of funds, this is truly a worldwide issue. Private business investors are having to pick up the slack, but there are just not enough to fill the vacuum left by the banking industry.
According to the GEM, the UK entrepreneurial sprit has not fared so badly with just a 6% drop in new business start-ups in 2009 when compared with 2008, but then that may have something to do with the preparedness of our private business investors. This sector has grown from virtually nothing to become one of the most important sources of small business funding in a matter of a couple of years. And when you compare accessibility to private business investors with start-up business acceptance of this method of financing their operations, the UK leads the world.
New ventures take time to develop and grow into employers which means that with fewer starting out in 2009, there is likely to be a knock-on effect in the coming years that will probably slow any recovery that we might have hoped for.
With the most positive economic forecasts in years, 2010 may well be the year that we begin our long and possibly painful exit from recessionary times. But as Kristie Seawright, executive director of GEM said to the BBC, “Each country needs to develop the right formula to encourage business start-ups.”
So we need to encourage private business investors to continue funding our start-ups; we should recognise the importance of private business investors in our recovery. As it’s our job at Angels Den to bring together SMEs with private business investors, we see it as our economic duty to spread the word about how entrepreneurs can set their ideas loose, and give them the start they need with the help of a little private equity funding.
