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  1. Wealth
November 15, 2012

Demos Report Says Entrepreneurs are Ordinary People, not Revolutionary Risk-Takers

By Spear's

The government needs to stop basing its policies on misleading stereotypes of entrepreneurs as revolutionary risk-takers and understand that entrepreneurs in the UK tend to be ’micro-innovators’ who place ’determination’ above ’good ideas’

IF THE GOVERNMENT is to promote entrepreneurship in this country it needs to stop basing its policies on misleading stereotypes of entrepreneurs as revolutionary risk-takers and understand that entrepreneurs in the UK tend to be ‘micro-innovators’ who place ‘determination’ above ‘good ideas’, says a report published by think tank Demos today. These stereotypes both discourage ordinary people from setting up businesses, and lead to misguided policy-making, it argued.

After surveying 1000 aspiring entrepreneurs, Demos has found that only a quarter of entrepreneurs agreed that they ‘enjoyed taking risks to get ahead’ while one in five said they were ‘very cautious about taking risks — even when the potential reward is significant.’ This complicates the popular image of entrepreneurs as thriving on risk.

At the same time, 73.1 per cent of the aspiring entrepreneurs describe their business as evolutionary rather than revolutionary – agreeing that it will either build on or replicate the success of other businesses. Similarly, while 71.8 per cent ranked ‘determination’ as being one of the top two qualities necessary for success and 41.4 per cent identified ‘ambition’, only 26.7 per cent regarded having ‘a good idea’ as important.

Almost 40 per cent of entrepreneurs said they’d previously worked in the sector in which they started their business — suggesting their business is rooted in their professional experience, rather than the result of a eureka moment.

By projecting an unrealistic image of entrepreneurs, the government risks discouraging ordinary people from setting up businesses.  The image of entrepreneurs as determined, ambitious individuals rather than idea-driven mavericks provides a far more attainable role model for would-be business start-ups, the report said.

These insights are also important because it can make government policies more targeted. One step suggested by the report is that entrepreneurs find peer-to-peer networks more useful than entrepreneur mentors. When it comes to famous mentors, Richard Branson is often cited as an inspiration, precisely because his business ventures — from trains to radio — are not revolutionary.

The biggest barrier to individuals starting up business remains access to capital — no surprises there – with 60 per cent of respondents citing it as the most difficult barrier to overcome. The report said that current provisions, including Project Merlin, were insufficient, arguing that ‘Project Merlin set out ambitious objectives but missed its lending target for SMEs by over £1 billion, while the other two schemes are smaller in scope: £2.5 billion of loans through the National Loan Guarantee Scheme and £1.2 billion under the Business Finance Partnership.’

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Demos suggested that the UK could learn from the examples of other countries, including Israel’s Yozma programme, which dedicated $100 million to attracting venture capitalists to Israel. Israel now has more tech start-ups than any other country outside the USA, despite a population of only 7 million. The importance of this scheme isn’t only the availability of start-up capital, but also the advice provided to budding businesmen.

Similarly, the report noted the helpfulness of German Sparkassen (local banks) which retained a close relationship between bankers and businessmen, and the use of crowd-fundings in the US.

These findings are important as small to medium sized enterprises (SMEs) account for 59 per cent of private sector employment, and 49 per cent of private sector turnover.

There were an estimated 4.8 million private sector businesses in the UK at the start of 2012, representing an increase of between 200,000 and 253,000 firms over the course of a year, but while the number of businesses has increased yearly for over a decade, the UK has struggled to reach its pre-2008 rate of business creation.

Improving conditions for entrepreneurship could therefor have a huge impact on the UK economy, and Demos report successfully argues forcefully and coherently that when it comes to successful policy implementation, knowledge is power.

Download report here

Read more by Sophie McBain

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