Challenges Faced by Entrepreneurs and Potential Solutions: Initial Review

1. Challenges Faced by Entrepreneurs and Potential Solutions: Initial Review Colin Tomkins-Bergh and Amisha Miller

2. Entrepreneurship Support • $18.7B: How much The World Bank spent on innovation and entrepreneurship interventions over the past decade • $710 million: The annual budget of the Small Business Administration in the U.S with another $56 million invested overseas through the USAID PACE initiative alone. • 10-15 billion GBP: The rough total government spending on UK innovation and entrepreneurship policy. • All organizations in this room are supporting entrepreneurial development

3. Today’s Outline • Aims • Program Information • Entrepreneurs’ Biggest Challenges • How Programs Help Entrepreneurs • Next Steps

4. Aims Identify best practices in programs that support entrepreneurs to startup and grow their businesses Two main types of information: • 1) Literature review • On the existing evidence base - research and evaluation papers, entrepreneurship books • 2) Interviewed program leaders • On the challenges they are trying help entrepreneurs surmount and how they do so • To identify these programs and solutions, we must first better understand: • Information available from programs and the field • Entrepreneurs’ biggest challenges • Whether and how programs can help entrepreneurs to surmount these challenges

5. Methodology: Short Review of Literature • Coded the following variables • 1) Needs of Entrepreneurs • 2) What Helps / Works and What Doesn't? • 3) Beneficiary Two main types of information: • 1) Literature review • On the existing evidence base - research and evaluation papers, entrepreneurship books • 2) Interviewed program leaders • Organizations on the challenges they are trying to react to - interviews and review of grants made by e/ship team

6. Program Information

7. The Field Has Many Types of Programs Aiming to Effect Many Different Outcomes Time • Education • Training • Mentoring • Peer / cohort activity • Competitions • Participation in accelerator / incubator / co-working space • Business led / internal activities • Improve firm’s access to finance • Improve entrepreneur’s self-efficacy • Improve firm’s team capabilities and networks • Improve firm’s access to networks • Improve firm’s business model • Improve firm’s operational skills • Increase business profits • Increase business survival • Job creation • Economic growth • Poverty Reduction Examples of Stated Outcomes:

8. Programs Have Focused their Measurement on Activities and Outcomes Time • Education • Training • Mentoring • Peer / cohort activity • Competitions • Participation in accelerator / incubator / co-working space • Business led / internal activities • Improve firm’s access to finance • Improve entrepreneur’s self-efficacy • Improve firm’s team capabilities and networks • Improve firm’s access to networks • Improve firm’s business model • Improve firm’s operational skills • Increase business profits • Increase business survival • Job creation • Economic growth • Poverty Reduction Examples of Stated Outcomes:

9. Studies Have Linked Programs to Low Level Outcomes, but Not High Level Outcomes • Education • Training • Mentoring • Peer / cohort activity • Competitions • Participation in accelerator / incubator / co-working space • Business led / internal activities • Improve firm’s access to finance • Improve entrepreneur’s self-efficacy • Improve firm’s team capabilities and networks • Improve firm’s access to networks • Improve firm’s business model • Improve firm’s operational skills • Increase business profits • Increase business survival Some international impact evaluation projects attempted to link programs to high level outcomes. In all instances, the programs (mainly short-term training programs) did not affect higher-level outcomes OR effects could not be shown using current methodology in use. Examples of Stated Outcomes:

10. Entrepreneurs’ Biggest Challenges

11. We Distilled Many Different Entrepreneurial Challenges Into Three Categories • Markets • Business Validation (Validating Product / Developing and Accessing Markets) Money Access to Finance Management Learning from Others; Building a Team; Operational Skills (legal, HR, IT)

12. For Each Challenge, We Have Attempted to Answer the Same Three Questions Markets • Challenge - The key challenges entrepreneurs are facing • Programs - What programs are doing to help entrepreneurs solve these problems (and how) • Beneficiary - The types of entrepreneurs these programs are helping Money Management

13. How Programs Help Entrepreneurs with the 3Ms Markets, Money, Management

14. Training At an earlier business stage, business-planning training works well, as do discussion groups, or going through a selection process and talking about the idea to test it further Main Market Challenge: Business Validation M M M • Business Validation (Validating Product / Developing and Accessing Markets) Challenge: Industry Experts Hands on advice from specific entrepreneurs helps with both product development and business strategy Programs: Beneficiary: • True for early and late stage entrepreneurs worldwide • True for early stage businesses only

15. M M M Entrepreneurial Thought Leaders Say: “Entrepreneurs love the access to strong corporations for marketing opportunities, testing/validating their business idea, access to partners and as a potential path to acquisition.” Every company gets to a point in the early days of a business, the CEO/founder is in touch with the customers. The founder/CEO knows the customers/market, but as the company grows, CEO has to step back and lead. That’s when the company loses touch with the market. - Jeff Mounzer, Former Senior Managing Director at Startx - Bo Burlingham, Editor at Inc.

16. M M M Main Money Challenge: Access to Finance • Common Money Challenges (Access and connections to potential investors, Receiving follow-on funding, and Loan structuring) Challenges: Create exposure for entrepreneurs Identify amount of funding Training and Education Programs: *All of the information is from accelerators, and most accelerators claim this to be one of their main focus areas

17. M M M Exposure to investors Challenge: Introductions A mixture of both structured contacts (dinners) and unstructured contacts • Demo / Pitch Days • ANDE’s research suggests that this success might be due to the fact that being associated with a valuable startup brand or appearing in the media is one of the most correlator factors with attracting funding Programs: Beneficiary: • This works for all early stage companies: general, social enterprises and tech startups True for tech startups

18. M M M Identify the Amount of Funding Challenge: Follow-on Funding Participating in a program with time limits can help with follow-on funding from people that get to know the entrepreneurs during the program (program managers and mentors) Level of Funding The amount of funding that has shown the most impact, is the amount that covers entrepreneurs’ needs during the program i.e. their salaries Follow-on Funding Partnerships with existing firms to obtain financial capital; networks for accessing future resources Programs: True for all startups Beneficiary: • True for tech startups True for tech startups

19. M M M Financial Skills Challenge: Long Training Sessions Financial skills (knowing where to access finance, financial software) can be built through longer training sessions, focused on the individual business Intensive Training 13, 3 hour sessions and peer mentoring helped 47% of Interise’s entrepreneurs gain government finance Programs: Short Training Session*** A 45-minute training session with case studies and lessons learned did not help small businesses to access finance Beneficiary: • True for US SME Women Entrepreneurs in India In Peru, Bosnia and Herzegovina ***Does not work

20. M M M Entrepreneurial Thought Leaders Say: “The biggest gap is in understanding how to access funding, and what kind of funding to access. Main street businesses have different needs and different capital requirements than tech startups. We have a good variety of both in Utah, and we need to work on doing a better job of training our coaches to help these growth entrepreneurs and SMBs access capital.” “A lot of times, people will tell you that they face a financial problem, but many times the financial problems are really born from not understanding cash flow; what it is, how you generate it or where it's coming from” - ShermWilkinson, State Director of Utah SBDC Bo Burlingham, Inc. Editor

21. M M M Main Management Challenge: Learning from Others • Common Management Challenges (Self-efficacy, Business and product advice, Network development, Stigma (fear of failure)) Challenges: • Provide personalized business learning • Provide a psychological/emotional support network • Provide access to operational needs Programs:

22. M M M Knowledge and expertise in industry Challenge: Hints at Best Practices: US and UK tech founders see the quality and relevance of this advice as being difficult to replicate outside accelerator programs Entrepreneurs need to have perceived similarity with their mentor in order to develop more trust • Access to industry expert mentors • The best mentors are ex-Founders who aren’t too far removed from their company (i.e. just ahead in terms of stage) or people with deep knowledge of the market Programs: Beneficiary: • True in many contexts in multiple countries

23. M M M Developing a Psychological/Emotional Support Network Challenge: Hints at Best Practices: Importance of perceived similarity in values and personal ethics, and self-disclosure Peer Support Frequent interaction with same people - cohort or network / Based in same location Programs: Beneficiary: • True for all entrepreneurs in multiple countries

24. M M M Access to legal and professional services and technical assistance Challenge: Access to large number of contacts Offer access to a larger number of contacts that will offer new and diverse information and expertise beyond the incubator management Programs: Understand the Startups needs Incubator management needs to develop strong ties with their companies through frequent direct interactions that enable to better understand the needs of their ventures Beneficiary: • True for entrepreneurs in the US and Europe • True for entrepreneurs in the US and Europe

25. M M M What Programs CAN’T Do: Management Building a startup team Challenge: Build a startup Team Entrepreneurs do themselves Most of the literature suggests that this is something that entrepreneurs need to do for themselves. Programs can offer that advice. Bring in a consultant For equity split, programs can offer advice that entrepreneurs should bring in a consultant and shouldn’t distribute all equity at once. Programs: All entrepreneurs with a team All entrepreneurs with a team Beneficiary:

26. M M M Entrepreneurial Thought Leaders Say: “The interpersonal dynamics of the founding team are crucial. 10-15% of teams fall apart because of poor internal communication and dynamics.” “Peer-to-peer (Other entrepreneurs) is always the highest rated type of mentoring. Every single cohort has very deep conversations about how isolated every Founder feels and how much they relate to others.” – Jeff Mounzer, Former Senior Managing Director at Startx – Ross Baird, Founder of Village Capital

27. Next Steps

28. Programs Have Helped Entrepreneurs with Certain Challenges

29. Our Knowledge on How to Tackle Entrepreneurial Challenges Is Stronger in Certain Areas INITIAL INSIGHTS (Single sources or research limited to certain entrepreneurial types) INSIGHTS (Multiple Sources) WEAK (No clear insight) • Providing exposure to funders and association with startup brand, accelerated startups - money • Investing correct level of funding for tech startups - money • Providing longer-term, focused, more intensive training and education to help entrepreneurs access finance - money • No evidence thus far on helping entrepreneurs to build a team – management • Providing access to industry experts to help all entrepreneurs - markets and management • Providing a psychological/emotional support network from peers for all entrepreneurs - management • Connecting all entrepreneurs to a network with operations skills – management • Business planning training for early-stage entrepreneurs – markets

30. Kauffman’s Next Steps • Conduct systematic literature reviews on: • Entrepreneurial Education and Training (in progress) • Mentoring • Receive feedback from other researchers and practitioners • Fund RCTs and deeper dive research projects through the Innovation Growth Lab • Fund exploratory research on lesser understood areas • Provide funding for programs that tackle these three challenges (only U.S.)

31. What can you do? • Propose research in certain areas i.e. on your programs, into your partners’ programs • Partner to further understand programmatic research i.e. peer review our research, give insights from your programs, conduct and / or share your own research • Suggest people to interview • General feedback

32. Thoughts and Perspectives from the Practitioners • Amanda Jacobson: Program Associate for Village Capital Mexico • Kalsoom Lakhani: CEO at Invest2Innovate

33. Questions: • How do your views support/differ from our findings? • What are you seeing from your program experience that is working and how do you measure that? • What program characteristics/approaches would you like to see further researched?

34. Stay in Touch Colin Tomkins-Bergh Ctomkins-bergh@Kauffman.org Amisha Miller ammiller@kauffman.org The Kauffman Foundation Innovation Growth Lab