EY-G20-main-report

ContentsForeword2Executive summary14Access to funding26Entrepreneurship culture38Tax and regulation48Education and training56Coordinated support66MethodologyVictor SedovChairman, G20 YEASummit, Moscow 2013,and President, Centerfor EntrepreneurshipThe G20 Young Entrepreneurs’ Alliance (G20 YEA)was pleased to team with EY once again for thissecond Entrepreneurship Barometer that analyzesand compares entrepreneurial ecosystems in thecompiled with the assistance of G20 YEA membersand input from hundreds of young entrepreneursfrom all G20 countries. It provides G20 Leaders andother stakeholders with valuable information andbest practices on how to promote entrepreneurship,and recommendations and analysis on how topromote youth entrepreneurship and thereby easeemployment issues economies are currently facing.With the participation of EY, the G20 YEA and itsmember in Russia, the Center for Entrepreneurship,Entrepreneurs’ Alliance Summit on 15–17 June2013 in Moscow, Russia. This year, 400 youngentrepreneurs from all G20 countries participatedin the Summit, signing their communique thatwas passed on to G20 Sherpas and the B20 withrecommendations on how to increase growth and jobcreation by advancing youth entrepreneurship viaimproving access to digital infrastructure; promotingentrepreneurship education, knowledge, networksand innovation skills; easing business and laborenergy, dedication and commitment demonstratedby these young entrepreneurs to help better theworld by giving G20 Leaders a roadmap on how tounleash the initiative, drive and innovation potentialembodied by entrepreneurs was an inspiration.Join us in encouraging the spirit of entrepreneurshipworldwide.3 | The power of three

WelcomeUschi SchreiberGlobal Markets Leaderand Global Government& Public Sector LeaderEYMaria PinelliGlobal Vice ChairStrategic GrowthMarketsEYEntrepreneurs have a vital role to play in any healthy and vibrant economy. Their contributionis now more important than ever, with countries facing some of the most challenging societalissues of our time: challenging economic conditions and high levels of unemployment.Governments, and society as a whole, are increasingly looking to entrepreneurs to kick-starttheir economies and provide the jobs that stimulate growth.Entrepreneurial businesses createjobs — and on an impressive scale. Theirbusinesses account for well over half ofall employment in most G20 economies.Fostering entrepreneurship is, therefore,one of the most powerful things a countrycan do to create a strong foundation forgrowth.They also spur innovation through thecreation of new technologies, productsand services. They are a driving forcebehind globalization; spreading ideas andof markets that they serve.The good news is that policymakersare increasingly focused on the needsof entrepreneurs. Some progress hasbeen made, and the entrepreneursthat contributed to this research reportexample, many countries have developedprograms to make it easier to set upa business. But there are still manyimportant areas where governments,working together with the private sectorand other stakeholders, urgently need toimprove support for the entrepreneurialcommunity.Measuring progressOngoing measurement is critical tohelp countries monitor and assesstheir performance at creating a strongentrepreneurial ecosystem. This is whythis year we have created a new updatedversion of the EY G20 Entrepreneurshippublished in 2011.Crucially, the Barometer captures thevoice of the entrepreneur through an EYsurvey of more than 1,500 entrepreneursacross the G20. This work sees that ourexperiences of real-world entrepreneurs.At the same time, we have used the bestdata available to help countries measurehow their entrepreneurs perform today.The Barometer shows that everyG20 country has key strengths inentrepreneurship from which othernations can learn. But it also highlightsmany areas where the G20 nationsneed to do more. This represents anopportunity, as well as a challenge.By addressing some of the gaps andweaknesses in their ecosystems,countries can boost entrepreneurshipand, in the process, inject new vitalityinto their economies. In this editionwe have included more than 40 keyrecommendations across governments,entrepreneurs and corporations as wellas drawing extensively on EY’s researchof more than 200 government leadingpractices.There is, of course, no single path tosuccess. Local market opportunities anddifferent cultural perspectives shapethe entrepreneurial environment. Eachcountry has its own challenges, requiringdifferent solutions. Nevertheless, theresearch conducted for this reportprograms and initiatives that countriescan learn from and adapt to their owncircumstances.“ The need to act is clear.Entrepreneurs have thepower to create jobs andneed to give them the toolsand environment that willenable them to succeed.”| Maria Pinelli, Global Vice Chair,Strategic Growth Markets, EYWe are also delighted to once againwork with the G20 Young Entrepreneurs’Alliance. This alliance represents thevoice of young entrepreneurs. Theirentrepreneurial case stories are alsoincluded to provide inspiration totackle society’s biggest issue, youthunemployment.EY has been committed to supportingentrepreneurial businesses throughouttheir growth journey for more than 30years. We believe it is essential thatthe entrepreneur’s voice is heard if oureconomies are to thrive in the future. TheBarometer captures their insights andprovides a valuable tool for governmentsto foster entrepreneurship. We urgegovernments and the business communityto embrace its conclusion so thattogether, we can remove the barriers toentrepreneurial success in order to build abetter working world.The power of three | 1

Executive summaryIntroducing the EY G20 Entrepreneurship Barometer 2013Entrepreneurs provide one of the main engines of growth in any healthy economy. They act asproduction methods, and creating new business models and industries. They generate jobs,support local communities and build prosperous societies.For all these reasons, there is growingrecognition of entrepreneurs’ importanceacross the G20. Many countries haveintroduced a range of programs and policyinitiatives to help boost entrepreneurship.But, as this report reveals, there are stillhuge areas where G20 countries need totake urgent action to improve support fortheir entrepreneurs.The EY G20 Entrepreneurship Barometer2013 is designed to help leadingcountries benchmark their progressand performance on this vital issue.It enables each G20 nation to identifycurrent strengths in its entrepreneurialenvironment, as well as the mainopportunities for further development.As a result, the Barometer provides apowerful framework to help countriesunderstand and improve the ecosystemsthat are vital to the success of theentrepreneurs of the future.“ I am an innovator, I ameager to learn, I network.I think globally and makemy communities throughcreating jobs and bolsteringeconomies.I am an entrepreneur, aphilanthropist, 1 and I nevergive up.”Why entrepreneurs matter International entrepreneurs createworld-leading companies. Immigrantsor their children founded 40% of 2 They also started28% of all new US businesses in 2011,despite accounting for just 13% of theUS population. 3 They are a key source of jobs. Acrossthe EU as a whole, entrepreneurssupplied 67% of all jobs in 2012. 4In China, they provide 75% of all jobs. 5net job creation over the past threedecades. 6 They turn ideas and innovation intoreality. New ideas need entrepreneursto develop and commercialize them.Entrepreneurs drive investment intoimportant innovations and in theprocess also create new growth sectors:in another recent EY survey, 7 74% ofentrepreneurs said they had increasedtheir workforce over the past year as aresult of the company’s innovations.1Fidelity Charitable, Entrepreneurs & Philanthropy: Investing in the Future (Fidelity Charitable Gift Fund, 2010).2R W Fairlie, Open For Business: How immigrants are driving small business creation in the United States(Partnership for a New American Economy, 2012).3S A Ballmer et al., The “New American” Fortune 500 (Partnership for a New American Economy, 2011).4Ecorys, EU SMEs in 2012: at the crossroads. Annual report on small and medium-sized enterprises in the EU,2011/12 (ECORYS Nederland BV, 2012) p. 15.5 Ministry Of Commerce People’s Republic OfChina website, english.mofcom.gov.cn, accessed 3 July 2013.6D Stangler and P Kedrosky, Neutralism and Entrepreneurship: The Structural Dynamics of Startups, YoungFirms, and Job Creation (Ewing Marion Kauffman Foundation, 2010) p. 13.7EY, Global job creation: Survey of the world’s most dynamic entrepreneurs (EYGM Limited, 2013).“ An entrepreneur is someonewho sees a problem in theworld and tries to solve itthemselves.”| Jeff Hoffman, Serial Entrepreneur,Priceline.com, uBid.com, ColorJar.Speaking at the G20 YEA Summit 20132 | The power of three

“ Boosting entrepreneurship is one of themost powerful things policymakers cando to support the economy. By fosteringthe conditions in which the rapid-growthcompanies of the future can thrive, theywill help spark innovation, create jobs andimprove their long-term national growth | Mark Weinberger, Global Chairman and CEO, EYMeasurement mattersAlthough there have been a number ofinternational studies on entrepreneurialecosystems, there is still a need for bettertools and data to help countries measuretheir performance on this issue. Thisreport makes an important contribution tothis endeavor by capturing insights fromkey research initiatives: The EY G20 EntrepreneurshipBarometer 2013. The Barometerranks each of the G20 countries onthe level of support it provides forentrepreneurs. It does so across theentrepreneurial ecosystem: access tofunding, entrepreneurship culture, taxand regulation, education and training,and coordinated support. 8The Barometer captures the voiceof the entrepreneur, using a surveyof more than 1,500 entrepreneursacross the G20 countries. The surveycaptured insights from entrepreneursinto the rate of progress within eachcountry’s entrepreneurial environment,as well as to identify key enablers andbarriers that either help or impedeentrepreneurs.The Barometer also uses a range ofquantitative indicators to measure thecurrent level of development that eachcountry has achieved in its ecosystem.It also features exclusive insightsfrom more than 250 entrepreneurs,independent academics and experts,and EY partners across the G20countries.These quantitative and qualitativeindicators are combined to provide anoverall view of performance. Full detailsof the Barometer’s methodology can befound on page 66. Recognizing the best practices.Policymakers need to learn fromother countries’ experiences to helpthem develop a practical roadmapto improve their entrepreneurialecosystems. This is a burning issue.Access to fundingSeedStart-upExpansionGrowth capitalEducation and trainingPre-university educationUniversity educationInformal education/lifelong learningpractices and innovative initiativesthat countries can adapt to theirextensively on EY’s research of morethan 200 government leading practices,which details the most importantinitiatives that each G20 countryhas implemented to support localentrepreneurs.Coordinated supportMentors, advisors, networksand clubsBusiness incubators,clusters, parks, businesscentersTax and regulationTaxation incentivesEase of starting a businessBusiness-friendly legislation/policiesEntrepreneurship cultureTolerance of risk and failurePreference for self-employmentInnovation and research cultureCelebration of self-made wealth8 The power of three | 3

Executive summaryThe EY G20 Entrepreneurship Barometer: overall resultsRankings and scores — pillarsRankingAccess tofundingScoreEntrepreneurshipcultureScoreTax andregulationScoreEducation andtrainingScoreCoordinatedsupportScore1 United States 7.12 United States 7.67 Saudi Arabia 6.40 France 6.58 Russia 6.232 United Kingdom 6.86 South Korea 7.53 Canada 6.34 Australia 6.53 Mexico 5.893 China 6.75 Canada 7.45 South Korea 6.34 United States 6.50 Brazil 5.874 Canada 6.62 Japan 7.28 United Kingdom 6.19 South Korea 6.40 Indonesia 5.845 Australia 6.48 Australia 7.18 South Africa 6.10 EU 6.25 India 5.766 South Africa 5.95 United Kingdom 7.00 Japan 6.07 United Kingdom 5.98 China 5.757 Japan 5.81 Germany 6.88 Germany 5.84 Germany 5.89 Turkey 5.668 South Korea 5.75 EU 6.07 Australia 5.75 Argentina 5.85 South Africa 5.659 Brazil 5.67 France 5.68 Russia 5.65 Canada 5.81 Argentina 5.6410 Indonesia 5.53 Russia 5.05 EU 5.48 Brazil 5.78 Germany 5.5311 India 5.48 India 4.95 Turkey 5.45 South Africa 5.67 France 5.4112 EU 5.41 Brazil 4.88 Indonesia 5.38 Saudi Arabia 5.66 Saudi Arabia 5.3913 Saudi Arabia 5.25 Italy 4.67 United States 5.33 Italy 5.47 EU 5.3714 Germany 5.23 South Africa 4.33 Mexico 5.21 Russia 5.46 South Korea 5.3615 Russia 5.04 Turkey 4.30 France 5.12 Mexico 5.32 Australia 5.3116 France 4.74 Argentina 4.06 China 5.07 Japan 4.72 Canada 5.2917 Turkey 4.57 Mexico 3.96 Brazil 4.83 Turkey 4.39 United Kingdom 5.1918 Mexico 4.42 China 3.88 Italy 4.76 China 4.35 Japan 5.0419 Italy 4.03 Indonesia 3.80 India 4.39 Indonesia 3.88 Italy 4.9720 Argentina 3.27 Saudi Arabia 3.38 Argentina 4.31 India 3.49 United States 4.854 | The power of three

Executive summaryOverall country rankingsThe following represents the overall ranking of the G20 countries by quartile. *(access to funding, entrepreneurship culture, tax and regulation, education and training, coordinated support)were weighted equally to provide an overall country ranking.Quartile 1 Quartile 2 Quartile 3 Quartile 4Australia EU Brazil ArgentinaCanada France China IndiaSouth Korea Germany Mexico IndonesiaUnited Kingdom Japan Russia Italy* Note: Countriesare listed inalphabetical orderper quartile.United States South Africa Saudi Arabia TurkeyAbout the EY Entrepreneurship Barometer modelThe EY G20 Entrepreneurship Barometer2013 introduces a model for scoringentrepreneurship. 9 The purpose of thismodel is to help identify areas ofrelative strength by country and whereopportunities for improvement lie.The model is composed of qualitativeinformation (from our survey ofmore than 1,500 entrepreneurs)and quantitative data based uponentrepreneurial conditions across theG20 economies. For each pillar, excludingcoordinated support, this informationis weighted 50-50 between qualitativeand quantitative inputs. For coordinatedsupport, given a lack of quantitativeindicators, this is based solely upon thesurvey responses.The advantage of integrating both thesurvey results and quantitative datais the ability to provide an assessmentof the current level and the trends in aG20 entrepreneurial ecosystem basedstatistics (for example, on the averagetime taken to start a business or thetax burden) provide a baseline for eachmember country.Survey information is an importantcomplement to the baseline picturethese statistics provide. Entrepreneurs’feedback on the pace of improvementor deterioration in conditions in theircountry’s entrepreneurship ecosystem isincorporated in the model alongside thehard statistics.9Note: As per the G20 membership, this list comprises 19 individual countries and also the European Union (EU), as an additionalmember. Our rankings show the performance of each country, along with an aggregate performance for the 27 EU member states.The power of three | 5

Executive summaryMature countries providethe best ecosystems forentrepreneurship todayMature countries lead most of thepillars of the Barometer overall. Theirdominance can be explained by the factthat they start from a higher base levelmeasured in the Barometer. For example,relative to most rapid-growth economies,they have deeper and more extensivefunding options, stronger educationsystems, and a more mature and stabletax and regulatory environment. They alsotend to have a more established historyand culture of entrepreneurship.Rapid-growth markets areclosing the gapImportantly, our research shows that itis the rapid-growth economies that aremaking the fastest improvements to theirentrepreneurial environments. This trendsuggests that rapid-growth markets areworking hard to close the gap with thecurrent Entrepreneurship Barometerbeing able to learn from the successesand failures of entrepreneurial policiesand approaches already implemented bymature economies. Rajiv Memani, Chair,Global Emerging Markets Committee andCountry Managing Partner, India, EY,agrees, “Rapid-growth markets todayrecognize the pivotal role played bytheir entrepreneurs in sustaining higheconomic growth rates and are thereforeincreasingly taking measures to fostergreater innovation and entrepreneurship.This should further accelerate theirmature economies have already oftentaken the basic steps to improve theirentrepreneurial environments, making itharder to deliver impactful changes.All G20 countries haveopportunities to improveTurning to the more detailed rankings forBarometer, an important point emerges:that there are one or more areas wherethey score relatively low and thereforehave scope for improvement.For example, the US outperforms othercountries in terms of the quality of itsfunding environment and cultural supportfor entrepreneurship, but it is belowaverage in terms of its tax and regulationenvironment, not least due to thecomplexity of its tax code. Furthermore,its entrepreneurs are largely pessimisticabout whether improvements are beingmade on coordinated support. 10 Inanother example, Saudi Arabia is ratedhighly on the tax and regulatory pillarranking, partly because of its low tax ratesand its ongoing efforts to improve thelocal business environment. But it lagson the entrepreneurial culture ranking,largely due to the limited role privatesector entrepreneurs have played in itsoil-dominated economy.10Note: When analyzing the pillar rankings, it is important to understand that the coordinated support ranking differsfrom the other four in its approach. The rankings for access to funding, entrepreneurial culture, tax and regulation,and education and training all combine both quantitative indicators with sentiment data derived from the survey. Dueto a lack of timely comparable data to measure coordinated support, the ranking for this pillar is derived purely fromthe survey results, and therefore solely measures current sentiment.Access to funding is the toppriority for global actionThere is huge scope for countries to makeimprovements across the board in theirentrepreneurial ecosystems. But onearea in particular emerges as a priority.According to entrepreneurs themselves,access to funding is the single area whereimprovements are most urgently needed.Seven out of ten entrepreneurs in ourstrongly across the G20. But while accessto funding may be the greatest concern,there are many other areas in need ofattention. It is important to avoid lookingat problems in isolation; instead, countriesinterrelate. Countries therefore needto focus not only on individual pillars intheir ecosystem, but also on providingcoordinated support across all these vitalareas.“ A range of initiativesand measures — aimedat supporting access tofunding, simplifying taxand regulation, bolsteringeducation and training, andmuch more — have helped toimprove the entrepreneurialecosystem in many countries.But more can be done, notleast given the potentialfor governments to learnfrom each other, exchangebest practices and avoidany pitfalls or unintendedconsequences that othershave already encountered.”| Uschi Schreiber, Global Markets Leader andGlobal Government & Public Sector Leader, EY6 | The power of three

Executive summaryA call to actionAccess to fundingIncentivize new sources of fundingCountries need to support the development of more innovative funding platforms,venture capital funds and incentivize private sector investors to focus more onentrepreneurial businesses (through improved tax incentives, for example). Formore established entrepreneurs seeking expansion capital, more could be doneto incentivize non-traditional funding sources, such as corporate venturing, co- 11Unlock bank lendinglack the collateral typically required to secure a bank loan. These tools could beextended. Banks could also offer greater support by developing a different lendingmodel for entrepreneurial businesses. Instead of demanding collateral, which youngcompanies rarely have, for example, banks could base their lending on the ability ofG20 entrepreneurs’ views:70% entrepreneurs to access funding intheir country.Half say improved access to fundingis the most effective way to accelerateentrepreneurship.Almost half (46%) of entrepreneursthat are aware of crowdfunding saythat it has improved in their country.Top-ranked country:USCombine capital with mentoringMany of the most successful start-up schemes combine money with coaching andpractical advice. There are various ways to facilitate this, not least by tapping intoentrepreneurs. This is an area where public-private partnerships are needed, withthe business community providing experienced role models and advisors, whilespaces, online services) to enable these networks to take off.“ In Mexico today, probably 80% of businesses start withfunding from family and friends, and the remaining 20% willget some help from the government or risk capital. It’s hardto raise money for a start-up.”| Pablo Gonzales, Cafe Punta del Cielo, Mexico11 The power of three | 7

Executive summaryEntrepreneurship cultureRemove the stigma of failureSetting up a business is inherently risky, and countries should not penalizeentrepreneurs excessively if they fail. Repeat entrepreneurs who have failed oncebefore have been shown to have a higher chance of success than those trying for 12 Bankruptcy laws, therefore, need to strike the right balance betweenprotecting creditors’ interests and offering entrepreneurs another chance.Open the door for excluded talentWomen, young people and immigrants can make a huge contribution, yet todaythey are often under-represented in the entrepreneurial community. Young peopletypically face extra hurdles in securing funding, while talented immigrants maybe discouraged. Targeted strategies designed to attract each of these groups intoentrepreneurship can broaden the entrepreneurial base and accelerate success.Showcase successGetting local role models to participate in events and campaigns is a relativelysimple and cost-effective way to help inspire a new generation of entrepreneurialentrepreneurship, from job creation through to innovation and broader economicgrowth.G20 entrepreneurs’ views:84% think that raising awareness ofentrepreneurs’ role as job creatorsto entrepreneurship.Two thirds (67%) view businessfailure as a negative experience,with only a quarter seeing it as anopportunity to learn.Only 15% of entrepreneurs saytheir country has a culture that fullysupports entrepreneurship.Top-ranked country:US“ Governments and business need to work together inpartnership to celebrate entrepreneurial success andinspire a new generation of entrepreneurs. They needto promote an environment that removes the stigmaof failure and showcases entrepreneurial talent.”| Dave Read, EMEIA Leader, Government & Public Sector Center, EY12Journal of Financial Economics,Vol. 96, No. 1 (Elsevier B.V., 2010).8 | The power of three

Executive summaryTax and regulationTarget reforms and incentives for each step of the entrepreneur’sjourneyPolicies must be designed to support early-stage and more establishedentrepreneurial ventures. For example, reducing the burden of indirect taxes (whichoften be more helpful to early-stage businesses than reducing corporate incometax. Later on in the growth journey, simplifying rules to help companies raise equityand debt capital can help smooth their transition into the rapid-expansion phase.Reduce the administrative burden of tax and regulationentrepreneurs. Simplifying tax codes might be as impactful as reductions inheadline tax rates, particularly for smaller businesses. Creating convenient onlinehubs to help busy entrepreneurs to navigate regulations can also help them getgoing more quickly. It is also important to create certainty and predictability; itchange.Give entrepreneurs a voice on reformresources of large companies. By actively seeking out and listening to entrepreneursthrough forums and other feedback mechanisms, governments can do more toensure entrepreneurs are not overlooked and to minimize the impact of unintendedconsequences from new rules.G20 entrepreneurs’ views:84% want tax systems to be83% say that an increase in taxincentives focused on innovationwould improve the health ofentrepreneurship in their country.38% of entrepreneurs say thatthey want the ability to voice theirconcerns on business regulations,making this their top suggestion forhow countries could improve theirregulatory environment.Top-ranked country:Saudi Arabia“ Entrepreneurs recognise their responsibilities in payingthe taxes that are due. Indirect taxes can create areducing the impact of these indirect taxes would be verywelcome.”| Aidan O’Carroll, Global and EMEIA Leader, Global Complianceand Reporting, Tax, EYThe power of three | 9

Executive summaryEducation and trainingEntrepreneurs are made not bornskills can and should be taught. Schools therefore have an important role to playin equipping the potential entrepreneurs of the future with the right skills andattitudes at an early stage. Policymakers need to encourage schools to bring in rolehands-on approach than with traditional academic subjects.Develop an integrated approachAt the university level, science and technology students with innovative ideas areoften separated from the business students who could help commercialize them.Programs should target a multidisciplinary approach and create support for theentrepreneurial ideas that emerge. It is also important to give these studentsexperience of real-world business challenges. Large corporations, philanthropistscontribute time or money to support educational courses, as well as business gamesthat give young people an early experience of what it is like to be an entrepreneur.G20 entrepreneurs’ views:84% agree or partly agree that theysuccessful entrepreneurs.52% say that university and businessschool courses for entrepreneurshiphave improved in their country.Sharing success stories is rankedas the most impactful way to inspirepeople to become entrepreneurs.Top-ranked country:FranceEncourage lifelong learning for entrepreneursEntrepreneurs will need to learn a whole range of managerial and businessskills as they grow their businesses. The good news is that access to mentoringopportunities, peer-group clubs and other informal networks is improving in manycountries, according to those entrepreneurs surveyed for this study.“ We all have a strong interest in ensuring that our youngpeople are as well-equipped as possible to grow oureconomies. By exposing students to entrepreneurial skillsand opportunities during their education, we increasetheir potential to create and leverage technological andbusiness innovations.”| Julia Deans, Co-President, Canadian G20 YEA andFoundation10 | The power of three

Executive summaryCoordinated supportCoordinated support creates the foundation for entrepreneurialsuccessA robust ecosystem for entrepreneurship fosters strong links between the public,private and voluntary sectors. Coordination needs to take place between a range ofstakeholders, including universities and research laboratories, business incubators,non-governmental organizations (NGOs), investors and existing entrepreneurs. Thechallenge is to ensure that these disparate stakeholders are better orchestrated formaximum effect.Champion entrepreneurship with united thinkingTo be effective, policies to stimulate entrepreneurship need to be coordinatedacross government ministries responsible for business environment, tax, regulation,champion in government, for example through the creation of a dedicated ministerfor entrepreneurship.Clusters can thrive with the right kind of supportactivity. There is an array of tools that can help create an environment in whichentrepreneurial business can thrive, ranging from local economic incentivesthrough to business parks that provide plug-and-play infrastructure combined withmentoring and advisory services.Business incubators can play a pivotal roleBusiness incubators are a powerful means of teaching and mentoringentrepreneurs, while introducing new contacts, investors and networks. Our surveyshows that access to business incubators is broadly improving across the G20, butmore could be done. The goal is to help businesses acquire the skills, resources andG20 entrepreneurs’ views:More than half (53%) ofentrepreneurs report someimprovement in access toentrepreneur clubs and associationsover the past three years, versus only8% who saw a decline.Nearly half (46%) have usedentrepreneur clubs and supportgroups to improve skills.Business incubators are a toprankedtool for acceleratingentrepreneurship, according to36% of entrepreneurs surveyed.Top-ranked country*:Russia* Note: Coordinated-support rankingis survey-based and does not includequantitative indicators. Russia emergesas the country in which entrepreneursperceive the most rapid improvements incoordinated support.“ Time has gone where entrepreneurial ecosystemstakeholders could work separately and on their own.Economic growth, business development and job creationare now the results of a joint approach regroupinggovernments, businesses and educational systems withinnovation and globalization at its heart.”| Jean-Louis Grégoire, Sherpa of the French delegation in Moscowand Managing Director of Les Journées de l’EntrepreneurThe power of three | 11

Executive summaryThe ecosystem’s impact on business creationResearch clearly shows that countries with strong ecosystems toCountries that score highly on the EY G20Entrepreneurship Barometer 2013 alsoperform well in terms of creating newbusinesses. Several countries at the top ofour Barometer, including the UK, Canadaand Australia, also have the highestlevels of new business entry density (newregistrations per 1,000 people ages15–64). By contrast, many rapid-growthmarkets, such as Argentina, India, Turkeyand Brazil, tend to lag mature economies,both in terms of the rate of establishmentof new businesses and in position acrossthe Barometer.The implication is clear: those countriesthat succeed in improving theirhigher rates of business formation,as more individuals will believe theconditions are right to start a company.Creation from innovationFundamental to the economicclimate across the G20 today is theentrepreneur’s role in creating jobs andstimulating recovery.Small and medium-sized enterprises(SMEs) with fewer than 250 employeesrepresent the majority of all businessesand employment. Across the OECDarea, they account for approximately99% of all enterprises and two-thirds ofemployment. 13These businesses also add jobs at abouttwice the rate of their larger rivals. In theEU between 2002 and 2010, 85% of totalemployment growth was attributableto SMEs, and SMEs have a much higheremployment growth rate (1% annually)than large enterprises (0.5% a year). 14SME contribution to employment sharesArgentinaAustraliaBrazilCanada*FranceGermanyIndonesiaItalyJapanMexicoRussiaSaudi Arabia**South AfricaSouth KoreaTurkeyUnited KingdomUnited States17%20%28%34%33%37%47%47%51%59%60%59%58%69%66%72%74%81%72%31%63%41%40%41%53%19%34%28%83%80%42%26%67%49%53%0% 20% 40% 60% 80% 100%Up to 250 employeesMore than 250 employees* Data for Canada up to 300 employees** Data for Saudi Arabia for up to 200 employeesNote: China, EU and India are not included in the above, as there is no available data.Source: The World Bank, OECD, 201313Organisation for Economic Co-operation and Development, Issues Paper 1: Innovative SMEsand Entrepreneurship for Job Creation and Growth (Bologna+10 Meeting Brief, 2010).14EIM, Do SMEs create more and better jobs? (EIM Business & Policy Research, 2011).12 | The power of three

Executive summaryA call to actionEntrepreneurs have a unique and vital role to play in the local community, nationalsociety and in the global economy as a whole. They are highly motivated, innovative andresourceful — qualities that enable them to overcome the sizeable barriers that confrontevery growing business.We do not claim the path forward will be easy. Each G20 country has its own challengesand will need to address entrepreneurship in a local context. Creating solutions will requirea concerted effort, not just from policymakers but also from private sector businesses,investors, the voluntary sectors and entrepreneurs themselves. Nevertheless, the need toneed to give them the tools and environment that will enable them to succeed.| The power of threeFor a thriving entrepreneurial ecosystem, governments,entrepreneurs and corporations must work together.RegulationEntrepreneursSchool/educationInvestorsCultureCorporationsGovernmentMediaOrganizationssupportingentrepreneurship“ It’s no secret that unemployment is a huge problem. And entrepreneursare the solution. The key to dealing in unemployment in South Africa is toincrease the number of entrepreneurs who can create new jobs.”| Lance Fanaroff, Joint-CEO Integr8 IT, Johannesburg, South AfricaThe power of three | 13

Access tofundingAccess to funding is the mostimportant area where improvementswould help entrepreneurs to succeed,according to entrepreneurs surveyedfor this report. Improving accessto funding is not a straightforwardtask, and governments can onlydo so much to ease conditions.But with the right policies in place,governments can play an importantrole in enabling the emergence ofa deeper and more diverse mix offunding options to support everystage of growth.14 | The power of three

In the EY G20 EntrepreneurshipBarometer 2013, mature countries holdto funding. The US ranks highly, thanksto its rich and diverse funding ecosystem.Financing options have historically beenmore limited in rapid-growth markets,but the Barometer shows that the gap isclosing. China comes third in the ranking,development of a strong venture capitaland private equity ecosystem. Meanwhile,more mature economies, such as Italyand France, score less well, as do rapidgrowtheconomies Argentina and Mexico.EY G20 Entrepreneurship Barometer 2013:access to fundingG20 countryRankingUnited States 1United Kingdom 2China 3Canada 4Australia 5South Africa 6Japan 7South Korea 8Brazil 9Indonesia 10India 11EU 12Saudi Arabia 13Germany 14Russia 15France 16Turkey 17Mexico 18Italy 19Argentina 20The power of three | 15

Access to funding7/10of entrepreneurs have foundKey insightsAccess to funding remains acritical barrier to entrepreneurialsuccessin accessing funding, but in somecountries, the challenges are particularlyformidable. In Italy and Argentina 45%and 40% of entrepreneurs, respectively,very difcult to access funding,whereas only 15% of entrepreneurs saythe same in the US.Banks need a new lending modelfor entrepreneursAcross most G20 countries, bank lendingis by far the most important source offunding for entrepreneurs, but only aminority believe it is becoming moreaccessible. Start-ups do not have thecollateral to meet traditional lendingcriteria. Banks need to developfrom the high-potential businesses ofthe future. Innovative approaches mightinclude enabling the use of intellectualproperty as collateral to secure lendingand encouraging the emergence of morespecialized banks that understand thedynamics of younger businesses.Government funding can helpclose the funding gapEntrepreneurs say the second-mostimportant funding source after bankcredit for fueling entrepreneurship ispublic aid and government funding.Government start-up programs are alsoviewed as one of the most valuablesources of help. Public money can actas a powerful catalyst, especially whendelivered in partnership with the privatesector.Innovation is required tobroaden the early-stage fundingecosystemMany entrepreneurs still rely on friendsand family for early-stage funding.The emergence of crowdfunding andunlock entrepreneurial opportunities,but these platforms are still in theirinfancy and require regulatory supportto achieve scale. Almost half (49%) ofyoung entrepreneurs surveyed noticedimprovements in the availability ofcrowdfunding.Capital without mentorship islost capitalIt is important to combine funding withhigh-quality mentoring so that oncebusinesses are established, they havethe skills to make good on this initialinvestment. The combination of fundingwith advice and information has beenkey to some of the most successfulprograms covered in government leadingpractices, including the US Small BusinessAdministration, as well as severalcountries’ start-up programs (for exampleStartUp Chile).Encourage corporations toecosystemAll players in the funding ecosystemneed to think more creatively aboutincludes providing greater access to nontraditionalsources of funding. Corporateventuring enables large companies toboost their innovation pipelines whilesupporting entrepreneurial businesses.Other examples include joint developmentfunding programs as well as supply chainbank lenders, such as asset managementbusiness models by lending directly toentrepreneurs.“ We need to work on supporting access to funding throughthe vast array of incentives available for each stage of theentrepreneurial life cycle, and develop integrated initiativesassistance.”| Alessandro Cenderello, Advisory Leader for Government & Public Sector, EY16 | The power of three

Access to fundingFinancing growth: the funding ecosystemfor entrepreneursAs entrepreneurial businesses growthey rely on changes. It is thereforeessential that governments create arange of mechanisms and institutionsthat provide entrepreneurs with thecapital they need to support theirbusinesses at every stage of thegrowth journey.RevenuesThe EY guide to funding entrepreneurial businessesPublic stock marketsPrivate equityFormal VC/growth capitalGovernment export schemes, grantsGovernment grants (e.g., R&D), SME purchasing focusCorporate acceleratorsCorporate VCIncubator/acceleratorSpecialty bank loans and guaranteesSeed/early stage VCCrowdfundingAngelsEntrepreneur, friends, familyPre-seedSeedStart-upEmergingDevelopment stageRapid-growthExpansion /market leaderStage 1: emerging businessAccess to early-stage funding isstarting to improveCompanies at the seed and start-upare signs, however, that this situationis slowly improving. Across the G20economies, entrepreneurs say that accessto early-stage funding has improvedover the past three years, although thepace at which this is taking place varies.Countries that perform well in providingfunding for start-ups include the US,Canada and Australia, as well as, perhapsmore surprisingly, Saudi Arabia andIndonesia. According to a survey by theWorld Economic Forum, across the G20,Saudi Arabia lags only the US on theease of access to venture capital, with aGovernment scheme to guarantee 50%of certain bank loans and a corporateventure capital fund backed by SaudiAramco, a state oil company, as someexamples. In Indonesia, the Governmentguarantees 70% of loans in its KreditUsaha Rakyat scheme, with lendingexpected to reach US$2.9b in 2013.Access to funding for start-upsTop performers in the Barometer do better at providing funding for start-upsBarometer score9876543210Source: EY G20 Entrepreneurship Barometer 2013G20 averageMature marketsRapid-growth markets5.8The power of three | 17

Access to fundingemergingOne reason for the easing of fundingconstraints for start-ups is the emergenceto entrepreneurs who lack access totraditional bank services, has grownin rapid-growth markets. Crowdfunding,which uses online platforms to facilitatesmall amounts of funding or donationsdirectly from multiple investors, is a morerecent phenomenon, explains AndreaVogel, EMEIA Strategic Growth MarketsLeader, EY: “Crowdfunding shows how thecombination of technology and innovativethinking can help overcome fundingbarriers for early-stage businesses. Butcountries need to develop supportivepolicies to ensure that crowdfundingseveral years, a number of promisingservices have emerged, such asKickstarter and Crowdfunder in the USand Crowdcube in the UK. Between itslaunch in 2009 and the time of writingin June 2013, Kickstarter claims to havefunded more than 44,000 projects,totaling more than US$680m in pledges. 15Almost half of entrepreneurs (46%) in thesurvey that knew about crowdfunding saidit had improved in their country.The growth of crowdfunding has caughtthe attention of policymakers. In theUS, for example, provisions underthe JumpStart our Business Startups(JOBS) Act mean that entrepreneurs arenow able to accept and pool donationsfrom multiple investors. The EuropeanCommission is also seeking to advertisethe sector by creating a Europeannetwork of crowdfunding platforms.Despite this support, challenges remain.As crowdfunding grows, regulators willincrease their scrutiny of the sector andwill seek assurance that investors areprotected and there is full transparency.They will need to tread a line between15 Kickstarter website,kickstarter.com, accessed 3 July 2013.providing protection and giving the sectorAngel investors provide an importantstepping-stoneOnce a business starts hiring staff anddeveloping products and services, ittypically requires additional injectionsof capital to reach the next stage onthe growth journey. Securing thisfor early-stage businesses. Businessangels, who typically invest betweenUS$25,000 and US$500,000 in earlystagecompanies, provide an important38% of entrepreneurs in our survey thinkthat access to business angel funding isimproving. In some countries, such asBrazil, Indonesia and Germany, that trendis particularly positive.More could be done, however, toencourage business angels to invest.Helpful policies would include taxcredits or deductions for investment inentrepreneurial businesses and morefavorable capital gains treatment on thesale of those businesses. Education andnetworks can also play an important role.Potential business angels should be ableto access information about opportunitiesand the mechanisms of making aninvestment, while platforms and networksthat bring angels together can create adestination for entrepreneurs wishing toseek out potential angel investors.Angel investors compared with venture capitalists in the USWhoSource offundsSize of stakeRoleSuccess rateSource: The Boston Globe, 2013Angel investorsWealthy individuals with a networth over US$1mUse their own money for theyoungest start-upsTypically between US$10,000and US$50,000Usually not active in day-to-daymanagement52% of deals usually losemoneyCash plus mentoring: the US SmallBusiness AdministrationThe Small Business Administration (SBA)is one of the oldest and most successfulinitiatives designed to bridge the gapbetween venture capital funding andsmall companies. It has become anfor entrepreneurial businesses in the US.US$30.25b in loans to small businesses.At the same time, the SBA has beenstreamlining and simplifying theseloan programs to help create moreopportunities for lenders and smallbusinesses. These efforts, along withother loan enhancements, have resultedin nearly 1,300 lenders returning toSBA lending, many of whom had beeninactive in the sector since theOne of the main reasons for the SBA’ssupport with education. The agency’snational network of experts providessupport to entrepreneurs throughmentoring, training, legal adviceand even assistance with securinggovernment contracts.Venture capitalistsProfessional investorsFunds from institutions to moreseasoned entrepreneursUS$7m on averageClose oversight and activeboard member40% eventually fail18 | The power of three

“ Securing venture capital funding improvesa company’s ability to access debt and| Bryan Pearce, Americas Director, EY Entrepreneur Of The Year and Venture Capital Advisory Group, EYAccess to fundingStage 2: rapid-growthAccess to traditional bank lendingcompaniesAt the rapid-growth stage, entrepreneurscan demonstrate a market for theirproducts or services and may already beearning revenues. In theory, more fundingoptions should now be available, includingbank loans and venture capital. Since thehave continued to face major hurdlesin accessing funding. Banks are underpressure to boost regulatory capital, andthis is encouraging them to shrink theirassets by reining in lending. Perceived asbeing higher risk, smaller businesses arefeeling the pinch of these tougher creditconditions, which remain below peak2007 levels though they have improvedsteadily in recent years. On the ground,the entrepreneurs in our survey remaindownbeat about the outlook for banklending.Government credit guaranteeschemesAt the same time as encouraging banks toshrink, G20 governments are also seekingways to unlock bank lending as a wayof stimulating growth. Credit guaranteeschemes, in which the governmentunderwrites a portion of the risk bankstake in lending to entrepreneurs, havebeen one prominent example of thistrend. Some of these schemes have beenin existence for over a decade and havealready had a substantial impact. Mexico,Turkey, Indonesia and South Korea alsohave sizeable credit guarantee programs.Similar schemes have been launched orextended in developed markets. Since2012, the UK’s National Loan GuaranteeScheme has helped businesses accessbank loans by 1%. So far, the scheme hasprovided £2.5b (US$3.85b) in cheaperloans to more than 16,000 businesses.In the EU, entrepreneurs will be able toaccess funds through the Program for theCompetitiveness of Enterprises and Smalland Medium-sized Enterprises, whichwill run from 2014 to 2020. A budgetof €2.5b (US$3.28b) will be available,much of which will be deployed to fundentrepreneurs (in particular those willingto launch cross-border activities) throughbanks.Banks need to developnew lending models forentrepreneurial businessesMany start-ups and early-stagebusinesses struggle to secure banklending. One idea is that banksschemes that enable them tothe high-potential businesses ofthe future. Instead of relying oncollateral so extensively, lendingwould be tied to other indicators ofperformance and future potential.Innovative approaches might alsoinclude enabling the use ofintellectual property as collateralto secure lending.This kind of shift would requirebanks to develop new competenciesand expertise in early-stagebusiness. For that reason, it wouldmake sense to encourage morespecialized banks to emerge (suchas Silicon Valley Bank and Square1 Bank in the US), that understandthe dynamics of younger businesses.The banks might also work in parallelwith early-stage venture capital todirect such loans to businesses withthe highest potential for growth.Stimulating venture capitalactivityA challenging venture capital fundingenvironment is showing signs ofimprovementVenture capital plays a vital role in thefunding ecosystem by providing growingbusinesses with larger injections of equitybasedfunding than are typically availablefrom business angels. A strong venturecapital sector is particularly desirablewhen a company secures investment froma high-quality venture capital fund, it alsobecomes easier to access debt and otherHowever, as with other funding sources,accessing venture capital remainschallenging. Between 2011 and 2012,global venture capital investmentsdeclined by 20%. There are signs,however, that the situation may beimproving. Among our respondents,63% of Indian, 48% of Russian, 42%of Indonesian and 41% of Brazilianentrepreneurs also think access toventure capital is getting better.The power of three | 19

Access to fundingAcross the G20 as a whole, an average of34% of entrepreneurs believe access to beeither greatly or somewhat improved (seechart).Improvement in access to venture capital% of entrepreneurs selecting “greatly” or “somewhat” improvedBarometer score70%Venture capital is less established in rapidgrowthmarkets, but some have madefrom a low base. In India, for example,venture capital investment more thandoubled from US$600m to US$1.4bbetween 2006 and 2012. Regulatorychanges, including the elimination of taxon capital gains and the relaxation ofrules preventing foreign investment, havebeen key drivers of this growth. Overall,a striking 63% of local entrepreneurssurveyed believe access to venture capitalin India has improved.60%50%40%30%20%10%0%G20 average34%Mature marketsSource: EY G20 Entrepreneurship Barometer 2013Rapid-growth marketsGlobal venture capital investment by amount invested and number of roundsGlobal annual VC investment 2006–2012*Totals**:(Rounds) 4,870 5,584 5,245 4,588 5,112 5,403 4,970Totals:(US$b) 42.0 48.8 49.8 34.6 45.2 51.7 41.50.62.51.56.31.70.93.9 5.11.92.27.67.70.92.80.90.96.11.97.01.76.31.86.81.43.71.05.75.731.134.5 33.124.329.335.129.72006 2007 2008 2009 2010 2011 2012‡United States Europe Israel China India* Global numbers include United States, Europe, Israel, China, India** Total number of rounds includes restart‡All-site Israeli companiesSource: Dow Jones VentureSource, 201320 | The power of three

Access to fundingAlmost1,000corporate venturing unitsworldwideGovernments can use tax andregulation environment to encourageventure capital investmentSome G20 countries are taking stepsto encourage greater venture capitalinvestment. For example, Europeanregulators are seeking to create ainterests in funds throughout the EU,rather than needing to register themin every country where they want tooperate.Some governments are taking moredirect action by creating governmentsponsoredventure capital funds to makedirect investments in new enterprises. InMarch 2013, for example, the AustralianGovernment pledged AU$100m(US$104m) to local venture capital funds,which will be matched by private sectorinvestors. Others are considering changingregulations to allow government orpension funds to invest in venture capitalassets or adapting the tax and regulatoryenvironment to encourage investmentCapital gains taxes are another importantconsideration for governments. Manycountries, including Canada, Australia,Japan and the UK, have recognizedthis and put in place capital gains taxdeductions to ensure that entrepreneursare not excessively penalized onsale or exit. For example, in the UK,Entrepreneur’s Relief allows qualifyingindividuals to claim tax relief on gainsmade on the disposal of a business, orshares in the company, while Australiaprovides capital gains concessions tosmall businesses, such as the ability todiscount a capital gain by 50%. In Canada,the taxable portion of capital gains andthe deductible portion of capital losses is50%. Each of these measures is designedto drive investment into important areasfor the economic growth and to ensurethat entrepreneurs make more moneythat can be reinvested or saved.A bigger role for corporateinvestmentCorporate investment in start-upsfunding gapInvestment by corporations in newventures, or corporate venturing, hashistorically accounted for around 6% to10% of all venture capital investmentglobally. This form of investment helpsand gain early access to promising newtechnologies and intellectual property.With many companies sitting onhungry than ever for new ideas to enablegrowth, this form of investment couldbecome even more important in thefuture.Global Corporate Venturingalmost 1,000 corporate venturing unitsworldwide, and that number is growing. 16Prominent examples include GeneralMotors, which founded a US$100mventure capital subsidiary in 2010.In 2013, Qualcomm Ventures, thecorporate venturing unit of the US-basedsemiconductor company, netted a tenfoldreturn from its investment in the Israelisold to Google for a reported US$1.3b. 17Corporate venturing is also becomingmore widespread in rapid-growthmarkets. In China and India, large localcorporations, such as ZTE and Tata, arelaunching funds that will challenge thelocal venture capitalists and their foreignrivals.Corporate venturing typically involvescompanies taking an equity stake instart-ups, but there is also a growingtrend for companies to provide creditto new ventures. Dell, for example, hasprogram for venture capital- and angelbackedstart-ups. The Dell fund providesto encourage innovation amongentrepreneurial businesses. For example,Orange and Publicis Groupe recentlypartnered with Iris Capital to create amajor new venture capital investor with€300m available to invest in the digitaleconomy.Larger corporations are also supportingsmaller entrepreneurial businesseswhich allows suppliers to receive earlypayment on their invoices in return for 18 These approachescan provide a win-win solution, smoothinghelping larger companies secure theirsupply chain and earn a yield in excess ofwhat is possible from a cash account.Governments can help to encouragecorporate venturing and other investmentmechanisms by contributing to anecosystem that encourages companies toconsider these options. Tax regimes thatare favorable toward equity investmentwould provide a boost to corporateventuring, as would the creation offorums through which companiesconsidering corporate venturing or otherinvestment options could receive adviceand support.16Global Corporate Venturing website, globalcorporateventuring.com, accessed 11 June 2013.17Global Corporate Venturing website, globalcorporateventuring.com, accessed 14 June 2013.18EY, Drought or drowning? Cash challenges for CFOs at both ends of the liquidity spectrum (EYGM Limited, 2012).The power of three | 21

Access to fundingAn engine for growth capitalBrazil: the INOVAR programSince its launch just over a decadeago, the INOVAR program has beencritical to developing a venturecapital ecosystem in Brazil. It broughttogether several agencies to establisha single institutional framework fordeveloping and nurturing a venturecapital investment culture in thecountry. Key components of theprogram include the INOVAR FundIncubator, Brazil Innovation Forum,Brazil Venture Capital Investmentwebsite, INOVAR Business Prospectingand Development Framework, and thedevelopment of capacity-building andtraining programs for venture capitalagencies.INOVAR has been instrumental inbuilding the skills and knowledgeof the venture capital ecosystemin Brazil. It has provided trainingand advice for limited partners,investors, fund managers and CEOsof innovative companies. It has alsohelped to facilitate an increase in theinvestment of pension funds in privateequity and venture capital. Petros, thepension fund of Petróleo Brasileiro(Petrobras, the semi-state-ownedBrazilian energy company), invested2005 after participating in INOVAR’sfunds panel.Overall, INOVAR has facilitated morethan US$1b in investments in privateequity and venture capital fundsand more than US$2b directly incompanies. The program has beenwidely recognized as a role modelfor other governments that aretrying to stimulate private equity andventure capital funding as part of theentrepreneurial ecosystem.Stage 3: expansionCapital markets are hugely important forbusinesses in the expansion phase. Theyhave the potential to help companiesfuel exponential growth by providinglarger amounts of capital. An IPO canacquisitions, create opportunities toexpand the business into new markets,provide exit opportunities for privateequity and other investors, improveperception of the business and brandwith customers and suppliers, as well asacting as an incentive to employees withstock options. Historically, companies thathave completed IPOs accelerate their jobUS more than 90% of job creation occursamong countries after they go public. 19Access to expansion capitalChina has performed particularly strongly in providing expansion capitalBarometer score876543210Source: EY G20 Entrepreneurship Barometer 2013G20 averageEntrepreneurs are downbeat on IPOprospects but may be too pessimistichave been sluggish and entrepreneursin the survey were considerably morepessimistic about this type of fundingthan others. Only 19% of those surveyedfelt that IPO market conditions wereimproving in their country, versus 32%who felt they were deteriorating.Despite gloomy perceptions of IPOmarkets among entrepreneurs, thereare signs that conditions are improving,owing to steadying global economicconditions. Recent data for IPOs in Q2Mature marketsRapid-growth markets4.419M Kenney et al., Post-IPO Employment and Revenue Growth for U.S. IPOs, June 1996–2010 (Kaufmann Foundation, 2012) p. 7.22 | The power of three

Access to fundingThe outlook for IPOs is improvingand momentum in the US, while theoutlook for Asia and Europe is alsoimproving. Based on EY analysis, globalIPO activity by end of Q2 was up 92% interms of deal value and increased by 27%in terms of deals numbers, comparedto Q1 2013 comments Maria Pinelli —“The IPO window is reopening thanksto rising equity markets and a waveof recent megadeals, which is havingIf this trend is sustained, it will helpunblock an important source of fundingfor entrepreneurial businesses on theirroute to becoming market leaders.IPO capital raised (% of global investment)US tops the leaderboard30%US issuers dominatedthe global IPO market,accounting for 30% ofglobal fundraising.US$5.0bBB SeguridadeParticipacoes SA(Brazil)US$2.1bBTS Rail Mass TransitGrowth InfrastructureFund(Thailand)US$1.8bSinopec EngineeringGroup Co Ltd(China)Junior markets have a vital role insupporting entrepreneursNot every company will be able to makethe step from being a private companyto the main stock market. Juniorexchanges, such as AIM in the UK,can play an important role in bridgingthe gap by providing a mechanism foraccessing public equity investment.Listing on a junior market can also havean eventual listing on the main market.In the last 10 years, many stockexchanges around the world, in bothmature and rapid-growth markets,have established junior markets or newplatforms to foster capital-raising byhigh-growth entrepreneurial businesses.Examples from rapid-growth marketsinclude Mainland China’s ShenzhenChiNext market, which was establishedin 2009; India’s Bombay SME platform,set-up in 2012; and South Korea’s KoreaNew Exchange (Konex), created in 2013.In the developed markets, one exampleis the introduction of the High GrowthSegment (an additional segment to theMain Market) by UK’s London StockExchange in 2013 to assist midsizedUK and European companies withVolume of dealsCentral andSouth AmericaNorthAmerica32%Top three exchanges by funds raisedUS$New York21%Source: EY, Q2 2013R$BM&FBOVESPA10%37%EMEAHK$HKExAsia-PacificTop three countries by deal volume39USAsia-Pacific37%Number of deals10UKAmount ofglobal fundsraised9Australiaand ThailandThe power of three | 23

Access to fundingpublic capital and to join the Premiumsegment of the Main Market at a laterstage.A central factor in the success of anyjunior market is the creation of theright environment for entrepreneursto tap that market. To achieve this,governments must ensure that stockexchanges encourage regulation thatincentivises and allows for investmentin entrepreneurial companies. Oneexample is the US JOBS Act, enactedin 2012 to give private companiesgreater access to capital and make iteasier for emerging growth companies 20(EGC) to go public on US exchangescertain regulatory requirements during 21 Anotherexample is that European policymakersare working on better EU-wide capitalmarket access for European companiesso that they can list easily and maketheir shares accessible to a range ofinvestors.On the investors’ side, regulators andgovernments must ensure that largeinstitutional investors can invest inshares and debt from newly listedcompanies or those on junior markets.They should also promote liquidity ontheir capital markets and other featuresof well-functioning capital markets, aswell as improve regulations that protectinvestors’ interests.Key insight: The start-up funding journeyScott Walton, CEO, Enovex, Canada — G20 YEA 2013Enovex is a start-up based in AtlanticCanada that is developing a new classof gas production absorbents.Scott Walton has been on a long — butfruitful — journey to raise money forhis start-up business. He started outtapping friends and family, using thisseed funding to establish a proof ofloan from the Canadian Youth BusinessFoundation. A few months later, Enovexwas a winner of the New BrunswickInnovation Foundation business plancompetition, which helped generatemore funding while attracting privateangel investors. To date, Enovexhas raised US$2.5m, along with anadditional US$2m of equipment andinfrastructure investments.Walton attributes the company’sfundraising success to the quality ofits advisory teams, which includesas executives, entrepreneurs andengineers. “It’s something a lot ofcompanies lack, but this team has notonly provided us with tremendoussupport and strategic guidance, butit has also had a huge impact on ourMore broadly, while recognizing thatthe Canadian Government is doinga good job in general in supportingentrepreneurs, Walton believes morecould be done to help companies like histo raise funding. He argues that mostGovernment programs need forwardcommitments, such as term sheets andinvestment offers from other investors,before they are even willing to makean offer. “If they were able to providea letter of intent that we could take toinvestors, that would really speed up thesuggests.Government could sometimes even takethe lead on investing in projects. “If theGovernment could put an investmentoffer on the table, conditional on furtherinvestments but with all the paperworkdone in advance, it would be a huge helpsays Walton. “There is also great scopefor the Government to allocate money toprojects by matching public money with20 21 24 | The power of three

Access to fundingA call to actionMake your voice heardJoin the debateTweet #G20eyey.com/G20eyGovernment action: where to focus Conduct a self-assessment of your entrepreneurial landscape.This will help to ensure that the correct funding strategies and policylevers are in place and the right type of capital is available at everystage of the entrepreneur’s life cycle. Provide mentoring along with capital. Capital without mentorship islost capital. Boost access to funding. Encourage venture capital fund formation,support the creation of specialist banks, sponsor credit guaranteeschemes and low-interest start-up loans, and encourage innovative newapproaches such as crowdfunding and milestone lending. Support stock markets. Stimulate access to capital and a greaterpotential for exits for entrepreneurial growth companies.The entrepreneur perspective: key issues to consider Ensure that your capital source is the right one. Seek the rightfunding depending on where your company is in its life cycle. Consider stock markets. Rapid-growth entrepreneurs should assesswhether the stock markets are an appropriate source of capital to scaleyour business.A corporate perspective Set up a corporate venturing unit. Support and access innovativeentrepreneurial businesses through corporate venturing. Trade with entrepreneurs. Strengthen your supply chain bypurchasing from entrepreneurial businesses or providing loans, tradecredit or other forms of support, particularly to those in the earlystages of the growth cycle.The power of three | 25

EntrepreneurshipcultureCulture forms an important partof the entrepreneurial environment.To encourage more people to startand grow a business, a country needsa set of beliefs and customs thatmake entrepreneurship a valid andrespected career choice.Would-be entrepreneurs also needsupport for their efforts and, if theyfail, that they will not be excessivelypenalized or stigmatized.26 | The power of three

Countries that prize innovation andrisk-taking and that have an abundanceof inspirational role models tend toinspire more individuals to start andgrow new ventures. This celebration ofentrepreneurial success is an importantfactor that helps to put the US at thetop of the Barometer on entrepreneurialculture. Other mature markets, includingSouth Korea, Canada, Japan andAustralia, also score highly. In general,rapid-growth economies tendto perform less well on the Barometer.EY G20 Entrepreneurship Barometer 2013:entrepreneurship cultureG20 countryRankingUnited States 1South Korea 2Canada 3Japan 4Australia 5United Kingdom 6Germany 7EU 8France 9Russia 10India 11Brazil 12Italy 13South Africa 14Turkey 15Argentina 16Mexico 17China 18Indonesia 19Saudi Arabia 20The power of three | 27

Entrepreneurship cultureKey insights84%of entrepreneurs say that raisingawareness of entrepreneurs’ role as jobattitudes toward entrepreneurshipGreater emphasis shouldentrepreneurshipTo create a more positive image forentrepreneurship in society, respondentsto our survey argue that there shouldbe a stronger focus on emphasizingtheir impact on the broader economy.Demonstrating that entrepreneursunemployment and fostering economicgrowth is particularly important incountries where entrepreneurship hasnot traditionally been seen as a desirablecareer.Celebrating success isinspirational and effectiveHalf of survey respondents identifythe need to improve communicationaround entrepreneurs’ success storiesas a key factor in creating a supportiveentrepreneurial culture. Starting abusiness needs to be positioned as avalid alternative to more traditional jobs,particularly in countries where largecorporations dominate the economy andas a route to success and wealth creation.To help achieve this, some governmentinitiatives enable entrepreneurial successstories to be shared more widely betweenregions and countries.Helping entrepreneurs recoverfrom failure removes a culturalbarrier to business creationbarrier to entrepreneurial activity.The cost and stigma associated withinsolvency varies hugely between G20countries. One reason the US scoreshighly in the Barometer is its tolerantattitude toward business failure, bothfrom a regulatory perspective and alsoin terms of the lending practices of localbanks and investors. When a businessfails in the US, the costs of resolvinginsolvency are relatively low. By ensuringthat insolvency regimes do not excessivelypenalize honest businesses that fail,while encouraging private sector lendersand investors to take a similar approach,governments can directly reduce one ofthe biggest barriers to entrepreneurship.This policy stance also reinforces theidea that business failure can be part of alearning process.Women and the young canaccelerate entrepreneurshipWomen have a more positive outlookon the economy than their maleinitiatives around the world have shown,if you give them the tools they can havea major impact on business creation. Theyoung are statistically more likely to takethe risks involved in setting up a business,but there is less support for youngerentrepreneurs from investors. Targetedstrategies are required to help individualswithin each of these groups discover theirbusiness potential.Migrant talent should bewelcomedImmigrant communities have a hugeand well-documented impact onentrepreneurial activity. They are morelikely than non-migrants to set upbusinesses, and the companies that theylocal economy. In the US alone, migrantentrepreneurs have created more than500,000 jobs. 22 For all these reasons, itmakes sense for countries to ensure thattheir immigration policies do not excludethis vital source of entrepreneurial talent.Fear of business failureis entrenched in manycountries’ culture:only 1 in 4 entrepreneurssee a failed business as anopportunity to learn22S R Xavier et al., Global Entrepreneurship Monitor: 2012 Global Report (Global Entrepreneurship Research Association, 2012).28 | The power of three

Entrepreneurship cultureChanging perceptions of entrepreneurshipViews of entrepreneurship vary widelyacross the G20 countries. In our survey,US entrepreneurs are the most positiveabout their country’s environment forentrepreneurship, with 79% agreeing thatit has a supportive culture. Entrepreneursin China, Canada, the United Kingdomand Mexico were also very positive,with 70% or more of respondents inthese countries agreeing their country’sculture provides for entrepreneurship.In other countries, entrepreneurshipis less established and celebrated, andmany respondents complain that theircountry’s culture is not supportive of theirchoice of career. For example, only 27% ofentrepreneurs in Italy and 22% in Franceagree that their country has a culturethat encourages entrepreneurship.Japan also suffers from very negativeattitudes. Social attitudes change overtime, however, and policymakers in manyG20 countries understand the needto improve the popular perception ofentrepreneurship.My country has a culture that encourages entrepreneurship% of entrepreneurs that fully or partly agreeBarometer score90%80%70%60%50%40%30%20%10%0%G20 averageSource: EY G20 Entrepreneurship Barometer 2013Mature marketsRapid-growth markets56%Herb Engert, EY’s Americas StrategicGrowth Markets Leader, highlights acommon error when companies expandacross borders: “Western companies canbecome complacent when expandinginto rapid-growth markets. Localization isimperative, not just in relation to productsand consumer insights, but everythingfrom research and development to thebusiness model must be adapted to the“ As the world becomes more globalized, it isimportant we take a serious view of the importanceof cultural dynamism and relevance. The surveyresults, therefore, need to be interpreted withcaution. There is a reluctance to identify problemsor gaps in order to present a positive facade.an entrepreneurial movement which needs tobe supported and nurtured to create jobs andbusiness leaders of the future.”| Michael Lee, G20 YEA President, South KoreaThe power of three | 29

Entrepreneurship culture“ When the Soviet Union collapsed in 1991,we had to go through the process of buildingup entrepreneurship and to start to reallymove towards development of the market| Alexander Ivlev, EY’s Russia Managing Director and advisor to theRussian Government on entrepreneurial issuesPolicymakers are having somesuccess in shifting cultural attitudesThis last point resonates particularlystrongly with those surveyed: highlightingthe positive impact on job creation andinnovation was viewed as by far themost powerful way to improve nationalperceptions of entrepreneurship.Governments can play an importantrole in increasing a nation’s celebrationof entrepreneurship. For example, thework of the European Commission andthe EU’s Program for Competitivenessof Enterprises and SMEs includes alarge number of awareness-raisingactivities designed to encourage a moreentrepreneurial culture in member states.European SME Week is another keyinitiative; it aims to inspire more people,in particular the young, to considerbecoming an entrepreneur. In 2012,European SME Week held 1,500 eventsacross 37 countries in the region.A country’s entrepreneurship culturedepends in large part on its history. Incountries where the state has traditionallyplayed a major role in the economy,theconcept of entrepreneurship is stillrelatively new. Russia, for example, is stilldeveloping its culture of entrepreneurshipfollowing the 1991 collapse of the SovietUnion and the move to a market economy.Before these changes, entrepreneurswere viewed with suspicion and couldeven be criminalized in some cases. Thestructure of the economy also matters.In South Korea, for example, largeconglomerates, or chaebol, dominatethe business environment. This canbecause talented graduates automaticallygravitate toward careers in chaebol,where they are guaranteed stability andrespect from family members and peers.Across the G20 as a whole, entrepreneursof their community’s success stories(87%), and the role they play in creatingjobs (84%), as the two culture-relatedinitiatives that would do most to changemind-sets in the coming three years.“ At EY we have a deep commitment to promotingentrepreneurship. We have been working with entrepreneursfor over three decades, supporting them with our servicesand celebrating them through our Entrepreneur Of The Yearprogram. We make this investment because we passionatelybelieve that entrepreneurs play a crucial role in building abetter working world.”| Ringo ChoiThe National Entrepreneurship Movement, IndonesiaLaunched in 2011, the NationalEntrepreneurship Movement (NEM) is akey initiative supporting the IndonesianGovernment’s objective of increasingthe number of entrepreneurs in theyears. The program forges stronger linksbetween new entrepreneurs, successfulbusinesses and educational institutionsthrough a range of training programs,exhibitions and fellowship schemes.A key strength is its multifacetedapproach: the NEM coordinates supportbetween 13 Indonesian ministries,together with the Central Bank, butalso works closely with state-ownedenterprises, banks and communities inIndonesia.Building a culture of entrepreneurshipis very valuable in a country wheretraditional careers tend to be valuedmore highly. Nadya Saib, Founder ofWangsa Jelita, an Indonesian socialenterprise that produces natural beautywith this. “Indonesian culture is verymy business, my family and friendsdidn’t understand. They thought I should30 | The power of three

Entrepreneurship culture87%of entrepreneurs believe thatimproving communication aroundsuccess stories would improvethe image of entrepreneurshipThree characteristics ofsuccessful governmentprograms to changecultural attitudes They encourage successfullocal business leaders to give uptime to act as mentors and rolemodels. They create networkingopportunities so that aspiringentrepreneurs can learn fromother businesses in otherregions. They highlight entrepreneurship’svital role in the communityand the broader economy,encouraging people to be proudof this career choice.Key Insight: Spreading the entrepreneurial cultureAlex Lim, Founder, Coollapsible, South Korea — G20 YEA 2013Coollapsible sells collapsible waterbottles that fold into the size of ast and can be carried in the pocetdramatically reducing the use ofdisposable bottles.Since returning to South Korea afterseveral years studying in the US,Coollapsible’s Founder, Alex Lim,has been constantly reminded of thedramatic difference in the culture andattitudes toward entrepreneurs betweenthese two countries. “In South Korea,the goal for young people has been todo well at university and get a job in aLim says the term entrepreneurshipwasn’t even understood by most peoplein South Korea until a few years ago.“In Korea, trying to start and establishyour own business used to be regardedas something very radical, let alone thefact that most start-ups were mainly forhe says. But attitudes are changing:“In recent years, largely because ofa wide range of Government supportprograms — seminars, conferencesand workshops for entrepreneurs —there has been a lot more interest inentrepreneurship and new businesscreation. The whole scene has begunThe media also have an importantrole in helping to stimulate interestin entrepreneurship in South Korea,according to Lim. “Rather than focusingon executives who have made money atlarge Chaebol companies, for example,the media have begun to focus onstories of self-made people. But we stilllike Steve Jobs or Mark Zuckerberg,which would really make young peoplesit up and see that they can take theRemoving the cost and stigma offailure is critical for successAs part of the efforts to create positiveattitudes toward entrepreneurship,countries must also address attitudestoward risk and the cost of businessfailure. Among our respondents, 46%say that people and institutions in theircountries view business failure as abarrier to future business projects or as asee failure as a learning opportunity. Thisis unfortunate, especially given that thesuccess rate of repeat entrepreneurs,who have failed previously at a venture,entrepreneurs. 23Policy can help to create a healthytolerance for failure. Although outsidethe G20, Israel provides a clear exampleof an approach that actively encouragesentrepreneurial risk. Funding fromthe venture fails, no repayments arerequired. 24 OCS funding also requires noequity to be passed over in return forfunding and does not interfere with thecompany’s management. OCS-fundedcompanies are only required to repaytheir debt if the company succeeds.Payment takes the form of modestroyalties on future sales.23 Journal of Financial Economics, Vol. 96, No. 1 (Elsevier B.V., 2010).24 LexisNexis Legal Newsroom website, lexisnexis.com, accessed 16 March 2013.The power of three | 31

Entrepreneurship cultureAttitudes toward failure*Barometer score9876G20 average5.6543210Mature marketsRapid-growth marketsSource: EY G20 Entrepreneurship Barometer 2013* A high score indicates greater tolerance and lower penalties for business failure.EU recommends another chance forfailed entrepreneursTough bankruptcy laws can also act asa brake on developing entrepreneurialculture. Research has shown that reformof personal bankruptcy laws, for exampleby reducing the time period after whichbankrupts can be discharged from theirindebtedness and make a fresh start,have a pronounced effect on increasingrates of self-employment. 25 As a recentreport from the European Commissionconcludes, “A second-chance policy thatenables formerly bankrupt entrepreneursto restart may represent one of themost promising and under-exploitedpolicy options for company creation and 26 The same report citesresearch showing that businesses set upby restarters grow faster than those setjobs created.“ If the cost of failure is extremely high, then peoplewill not become entrepreneurs. So we want tocushion the cost of failure and give people incentivesto take the risk despite the fact that they’re likely tofail. A lot of countries have really poor public policywhen it comes to bankruptcy. If we want people totake a risk, then we have to think through whatare the consequences of what would happen if theywould fail for their families and for their future.”| Eric Ries, a Silicon Valley entrepreneur and authorrecognized for pioneering the Lean Startup movement25 University of Cambridge Working Paper, No. 300(ESRC Centre for Business Research, 2005).26European Commission, A second chance for entrepreneurs: prevention of bankruptcy, simplication of bankruptcyprocedures and support for a fresh start32 | The power of three

Entrepreneurship cultureKey insight: The right appetite for riskMarcos Galperin, CEO, MercadoLibre, ArgentinaInternet entrepreneur Marcos Galperingot his big idea while studying atStanford University. In 1999, JohnMuse, Co-founder of the Hicks Museprivate equity fund, was on campus asa visiting speaker. While traveling tothe business school together, Galperinpersuaded Muse to back an eBaystyleventure in Argentina. Today,MercardoLibre is Latin America’s No.1e-commerce site, with more than 43million users.Galperin believes there has been adramatic change in the entrepreneurialconditions in Argentina, with a muchstronger entrepreneurial community.“But barriers remain, including theyou have a good idea, it’s much morelikely that you will fail than succeed. Ifyour company goes bankrupt, you arestigmatized by banks and the businesscommunity, by your neighbors and byGalperin says governments seekingto promote entrepreneurship shouldreduce the pain of business failure.“You need to have an environmentwhere people are willing to take risks.A company that has just started andhas a small number of employeesshould be treated very differently fromPolicymakers need to targetsupport across all sectionsof societyEntrepreneurship must be accessible toeveryone in the population. But in manycountries, there are large sections ofthe population that lack the awareness,an entrepreneurial career. For example,the young are more likely to be willingto take the risks involved in becomingentrepreneurs, but it is harder for themto obtain funding according to thesurvey. Women have a more positiveoutlook on the economy than their malecounterparts, and they are statisticallymore likely to repay loans — yet in manycountries they face major cultural barriersto becoming an entrepreneur.What is your level of condence in the economic direction of your headquartercountry?1%0%8%6%Source: EY, 20136%20%25%33%0 10 20 30 40 50 60 70 8046%55% The power of three | 33

Entrepreneurship cultureThe young: Argentina shows the wayEntrepreneurs under 40 in the surveymature entrepreneurs in securingfunding. Argentina’s National Program toSupport Young Entrepreneurs is a goodexample of how help can be targetedat this group by providing seed capitaland training to young entrepreneurs.Its Godmothers initiative advocatesnetworking between young entrepreneursand established companies. The entirethrough its 3000 projects and theprovision of learning to over 9000entrepreneurs.Women: China sets an exampleFemale participants in our survey citedtailored support for women as one ofthe best interventions that governmentscould make to support womenentrepreneurs. In China, for example,the Tianjin Women’s Business Incubator(TWBI) helps female entrepreneurs todevelop and nurture business ventures.Since being set up in 2000, TWBI hasgraduated 29 enterprises and providedemployment to about 6,300 people.The unemployed: UK scheme helpsunemployed people start their ownbusinessUnder the UK’s New Enterprise Allowancescheme, aspiring entrepreneurs receivementorship to help them develop abusiness plan, along with a Jobseeker’sallowance (the UK’s main unemploymentapproves the business plan and funding.Finally, the Jobseeker’s allowance iswithdrawn and an allowance is paidfor the following 13 weeks. The totalpackage of support could be worth up toUS$3,593 to each participant.Attract migrant entrepreneursGovernments around the world need toconsider their approach to attractingglobal talent. Immigration is a complexand politically charged issue, but itis impossible to ignore the role ofinternational talent in entrepreneurialactivity. According to the GlobalEntrepreneurship Monitor Global Report2012, migrants exhibit a higher rate ofentrepreneurship than non-migrants. 27The study also highlights that, in theUS alone, migrant entrepreneurs havecreated more than 500,000 jobs. Otherresearch shows that migrants started28% of all new US businesses in 2011,despite accounting for just 12.9% of theUS population. 28 Immigrants also seemto be more likely to possess the drive andPrevalence of total early-stage entrepreneurial activity (TEA)of migrants vs. nationals around the worldWorld regionrisk appetite required to create successfulbusinesses — a view supported by the factthat immigrants or their children founded 29 It is not justabout attracting migrant entrepreneurs,but also moving entrepreneurship intorural areas explains Bala Vissa, AssociateProfessor of Entrepreneurship, INSEAD’sAsia campus in Singapore — “Growthoriented entrepreneurship is largelyan urban phenomenon in markets likeIndia. This needs to be spread into ruralareas as well because it would stem theovercrowded cities. Policymakers need topartner with start-ups like Head Held Highthat are pioneering this area to realize its1st generation 2nd generation MigrantsTEA-rate(%)% of all TEA-rate(%)% of all TEA-rate(%)US 16.4 11.7 12.3 15.9 12.9Western Europe(with Israel)Eastern Europe,Russia8.2 107 7.9 16.1 6.18.0 4.7 9.9 13.3 8.2Asia 11.7 3.9 9.8 7.5 9.4South and CentralAmericasMiddle East andNorth Africa17.1 1.5 17.5 3.5 18.810.6 1.4 12.3 4.2 9.3Sub-Saharan Africa 31.3 1.8 30.4 3.5 26.8Source: Global Entrepreneurship Monitor, 201227S R Xavier et al., Global Entrepreneurship Monitor: 2012 Global Report (Global Entrepreneurship Research Association, 2012).28R W Fairlie, Open For Business: How immigrants are driving small business creation in the United States (Partnership for a New American Economy, 2012).29S A Ballmer et al., The “New American” Fortune 500 (Partnership for a New American Economy, 2011).34 | The power of three

Entrepreneurship cultureAttracting and retaining talentMigrants also provide a steady supplyof science, engineering and technologytalent that is so critical to manyinnovative companies. The US, forexample, has traditionally attracted alarge foreign-born contingent into itsscience and engineering workforce. In1990, foreign-born workers made up just11% of the US science and engineeringrisen to 21%. 30 More recently, however,visa requirements have tightened, makingit harder for innovative companies toattract and employ the talent they need.H1-B visas, which foreign workers requirein order to work in the US, are capped at85,000 a year, including 20,000 set asidefor graduates of US universities. In 2013,the application opening date. 31As the competition for international talentdeveloped schemes that are designedto attract key skills and entrepreneurialtalents: Start-up poaching. Canada has astrategy of combining visa reforms andthe strength of its local venture capitalmeans transportable small businessesaround the world can become targetsfor Canadian investors should they wishto relocate there. Venture capital fundsselect the immigrant entrepreneurs toinvest in, and the Government assiststhem by granting visas on an immediatebasis.More degrees are gained by immigrantsPercent of the population ages 25 and older with a bachelor’s degree or higher bynativity and eld of degree, 201050%40%30%20%10%0%All science andComputers,mathematics,and statisticsBiological, agricultural,environmental sciencesSource: United States Census Bureau, 2012Physical andrelated sciences Full-scale internationalization.UK Trade and Investment’s GlobalTechnology Taskforce runs a programto attract international talent that canhelp UK businesses. Reverse the brain drain. Governmentsalso need policies to retain homegrowntalent. China, for example, is seeking toreverse an exodus of talent by offeringattractive positions and incentives forpeople to return. The One ThousandTalents Scheme aims to attract 2,000scholars who have been educatedoverseas and motivate them to returnhome.PsychologySocial sciencesEngineeringMultidisciplinarysciencesNative bornForeign born30C Gambino and T Gryn, The Foreign Born With Science and Engineering Degrees: 2010 (United States Census Bureau, 2011).31 Los Angeles Times, 5 April 2013.The power of three | 35

Entrepreneurship cultureUK streamlines visa applicationsfor entrepreneursBy developing targeted strategiesto advance and attract talent,policymakers can help individualsand, at the same time, acceleratejob creation and create a powerfulspur to economic growth. Doing thisoften involves making immigrationeasy for entrepreneurs and skilledtalent. In the UK, the Tier 1 visaprovides an accelerated stream forentrepreneurs who want to investin the UK by setting up or takingover the management of a business.Importantly, entrepreneurs arealso able to be absent from theUK for 180 days under this visawithout losing their right to apply forpermanent residence (this period is90 days for other visas).Key insight: China’s emerging entrepreneurial cultureXu Rong Chan, Founder, Sasseu (Shanghai) Holding Co Ltd, ChinaInitially set up as a bar in Shanghai in Sasseur expanded into cafsbars and fashion boutiques and nowencompasses several commercialshopping malls across China.Having built up a business fromscratch over many years, Sasseurperspective of Chinese attitudestoward entrepreneurship. “In general,young Chinese would prefer to takethe Government exam, to work inGovernment and to have a very stablechanging. Today, more and more youngpeople want to become part of the newHe points to several reasons behindthis shift. One has been the media,which have given a lot of attentionto successful entrepreneurs. “This isparticularly true for entrepreneurs thathave been successful with internet,Mr Xu. Furthermore, growing numbersof young graduates have been inspiredto follow in the footsteps of the foundersof national internet giants, such asAlibaba or Tencent Weibo.Despite this progress, successfulentrepreneurs in China remain relativelyscarce. “Young people need experiencedentrepreneurs who can teach them orgood for Chinese society to have youngpeople willing to work harder to makemoney. They just need to have moreThe Government has been verysupportive of entrepreneurship in China.It has increased the availability of smallloans to businesses, offered free trainingencourage business start-ups. Althoughrate of growth in the money supply, Mroptions for the emerging high-growthChinese companies. This includes raisingmoney abroad and tapping a growingsupply of local venture capital andprivate equity.36 | The power of three

Entrepreneurship cultureA call to actionMake your voice heardJoin the debateTweet #G20eyey.com/G20eyGovernment action: where to focus Promote the power and value of entrepreneurship as the engine ofeconomic growth. Celebrate entrepreneurs and position them as rolemodels through marketing campaigns and events. Remove the stigma of failure. Statistics show that entrepreneurs aremore likely to succeed the second time around — promote the view thatfailure should be viewed as a learning opportunity. Create networking opportunities. Facilitate opportunities for aspiringentrepreneurs to learn from other businesses.The entrepreneur perspective: key issues to consider Share your story.publicizing successes in areas such as job creation and innovation. Help the next generation of entrepreneurs. Participate and supportformal/informal collaborations and networks to develop entrepreneurs’ideas and form valuable relationships.A corporate perspective Sponsor incubators and accelerators. Corporations can offersponsorships or other private programs that support entrepreneurs. Recognize the contributions and success of entrepreneurs. Highlightinspirational entrepreneurial case studies to emphasize the importanceof entrepreneurs.The power of three | 37

Tax andregulationTax and regulation are key leversfor improving a country’s businessenvironment. Those countries thatoffer favorable tax rates, simplifyprocedures and provide support forentrepreneurs are more likely toups. In turn, these ventures go on toand tax revenue as they progress upthe growth curve.38 | The power of three

Low corporate income tax rates, businessfriendlyregulations, and the availabilityof good information and resources to helpentrepreneurs navigate the regulatorysystem combine to put Saudi Arabia atthe top of our rankings among the G20for the quality of its tax and regulatoryframework. For many jurisdictions,however, the tax and regulatory burden isexcessively onerous and deters would-bebusiness owners from starting a venture.This is particularly true in rapid-growthmarkets, of which only Saudi Arabia,South Africa and Russia make the top10 ranking for tax and regulation. Othermajor markets, including India, Brazil andChina rank lower. Although these marketsare making progress in developing theirtax and regulatory systems, there isconsiderably more to be done.EY G20 Entrepreneurship Barometer 2013:tax and regulationG20 countryRankingSaudi Arabia 1Canada 2South Korea 3United Kingdom 4South Africa 5Japan 6Germany 7Australia 8Russia 9EU 10Turkey 11Indonesia 12United States 13Mexico 14France 15China 16Brazil 17Italy 18India 19Argentina 20The power of three | 39

Tax and regulationKey insights62%of entrepreneurs in China sayit became easier to start abusiness in the past three yearsIt is becoming easier to start abusiness in many marketsA simple, streamlined process forregistering and starting a businesscan be a powerful tool for creatingan environment that supportsentrepreneurs. Overall, just over onethirdof entrepreneurs (35%) believethat it has become easier to start abusiness in the past three years. But intops 50%. Online portals and otherinitiatives that minimize the need to liaisewith multiple regulatory agencies areparticularly helpful in making it easiertoward success.the entrepreneurial wish listMore than half (56%) of entrepreneursbelieve that decreasing the corporateincome tax burden on small businesseswould be one of the tax and regulatorychanges that would have the greatestimpact on the long-term health ofentrepreneurship in their country. Asimilar portion (54%) think simplifyingtax rules and regulations is also vitallyimportant.Policymakers must target taxand regulatory reform at everystage of the growth journeyGovernments need to ensure that taxbusinesses and more established ones.For example, countries that focus ondelivering corporate tax rate deductionsyounger businesses that have yetconcerned by indirect taxes, such asproperty or payroll taxes. Other initiativesthat will help early-stage companiesinclude incentives in the form of cash forresearch and development (R&D) whenthere is no tax liability, location incentivesthat offset capital investments andtraining credits that offset labor costs.Governments should also ensure that allbusinesses enjoy greater certainty aroundinvestment.Entrepreneurs want help innavigating regulation and abigger voice in its developmentSteering a path through complexregulation is a challenge forentrepreneurs at every stage of thegrowth journey, from incorporatinga business to managing its growthacross multiple jurisdictions. Policiesthat streamline this process are alwayswelcome. Entrepreneurs also want morethrough a direct line of communicationbetween entrepreneurs and regulators.By directly listening to entrepreneurs,governments can ensure new rules do nothamper entrepreneurial growth.“ Brazilian entrepreneurs, whilst managing a fast-growingcompany, have the challenge of dealing with multipletaxes and their frequent changes.”| Luiz Mattar, TIVIT, Sao Paulo, Brazil40 | The power of three

Tax and regulationShaping tax and regulation to encourageentrepreneurshipMany G20 countries are makingprogress in creating a tax and regulatoryframework that supports entrepreneurs,for example by reducing the cost andburden of starting a business. However,more could be done. In some cases,the perception that a country imposeshigh taxes still acts as a deterrent toentrepreneurial activity, and the burdenof regulatory compliance can be veryhigh for small companies. With carefulplanning, however, tax incentives andregulatory reforms can act as a positivespur to entrepreneurship.Stage 1: emerging businessStructuring tax and regulatoryincentives appropriatelyCompanies at the seed stage are not yetgenerating revenue, which means thattaxes on net income are not a primaryconsideration. Although corporate incometaxes often dominate the discussion ontax reform, there are other importanttax issues, such as payroll and saleslevies, as well as broader regulatoryissues, which have a greater effect onbusiness formation. If governments getit right, they will facilitate the creationof more new ventures and provide theireconomies with a strong foundationfor future growth. Get it wrong, andentrepreneurial culture.The sheer volume of regulation thatentrepreneurs have to manage can be apowerful deterrent to starting a business.An August 2012 survey in the EU, forexample, found that nearly three-quartersto start their own business because ofadministrative complexities. 32Creating hubs for business start-upsAt the most basic level, governmentsneed to ensure that it is relatively quickand straightforward to start a business.One way to do this is by providing onlineservices and convenient hubs (sometimesknown as one-stop shops) whereentrepreneurs can access all the permitsand licenses they need in a single place.In the EU, the European ServicesDirective obliged countries to simplifyall procedures involved in starting andcarrying out a service activity, andcountries are also pursuing their ownapproach to creating online hubs or onestopshops: France: in 2009, an auto-entrepreneursystem was set up to reduce theon small businesses. As part of this,the social charges and income taxpayable by small enterprises islinked to turnover, rather than to aParticipating businesses are exemptIn 2011, 290,000 of the country’s550,000 new business registrationsused this system. Canada: BizPaL is an online serviceand license process for entrepreneurs.Canada also deploys the OneStopBusiness Registry, which is an easyto-usecomputer program that allowsbusiness owners to complete important Indonesia: OSS business licensingcenters provide a faster andcheaper licensing procedure sothat entrepreneurs do not haveto visit multiple local agencies toobtain permits. The centers aim tostreamline business licensing byintegrating the authority to issuelicenses, commonly located in variousGovernment department. The countrynow has 445 such providers, covering85% of the country. Russia: the Nizhny Novgorod regionhas set up a Ministry of InvestmentPolicy (MIP), which acts as a onestoporganizational support systemfor entrepreneurs and investors. Thetime and effort spent by prospectiveentrepreneurs in obtaining licenses,permissions and approvals. Forexample, to obtain land or premises,an entrepreneur deals directly withthe MIP, instead of being required toliaise with more than 20 Governmentagencies, as before. Saudi Arabia: the Government hasentrepreneurs can, among other things,submit documentation for opening abusiness, pay their registration fee, jointhe Chamber of Commerce, register forsocial security insurance and registerfor the Department of Zakat (forreligious wealth tax).“ In countries such asAustralia and Canada,establishing a business isquick and simple. It takesjust two days to register abusiness in Australia and| Annette Kinnett, Managing Partner,Melbourne, EY32 Flash EurobarometerThe power of three | 41

Tax and regulationProviding easy access to free adviceIn addition to having a simple processfor starting a business, inexperiencedreceiving advice about how to approachthe structuring of their venture. Forexample, they may choose to be asole proprietor, form a limited liabilitypartnership or incorporate as a company.advice about this and other issuesthrough the Commercialization Australiaprogram, which, in additional to providingfunding, helps entrepreneurs reviewa business plan, determine suitablecorporate structures and undertake arisk analysis. Such services would attractlegal and professional services fees inmany other countries. CommercializationAustralia also offers grants for keystages of development, including proofof concept grants of up to AU$250,000(US$230,950) and early-stagecommercialization grants of up to AU$2m(US$1.84m). 33Lowering the barriers to entryThe removal of capital requirements tostart a business can also have a powerfulimpact on creating an environmentconducive to entrepreneurship. In thepast, a number of countries requiredentrepreneurs to have minimum capitalrequirements in place. In recent years,however, many countries have abolishedthese rules. The Japanese and Mexicangovernments, for example, have recentlyeliminated their capital requirements forlimited liability companies. 34Stage 2: rapid-growthAs they grow, companies face a barrageof licensing and registration requirements,tax rules, industry standards, and laborand employment laws, to name a fewissues. For most, navigating throughvarious levels of bureaucracy betweennational, regional and local governmentscan be a daunting task. Inexperiencedentrepreneurs may be confrontedtime, and because dealing with themis extremely time-consuming, they caneasily be distracted from the activity thatreally matters — managing and growingtheir business.associated with indirect taxesValue-added tax (VAT) can createserious administrative headaches andbusinesses, and some countries havetaken steps to resolve this. Since early2013, for example, the EU has operated ascheme under which member states canoffer a cash accounting option to smallbusinesses with a turnover of less than€2m (US$2.62m) per year. This meansthat entrepreneurial businesses will beable to pay their VAT when they receiveor make payments, instead of when theyissue an invoice, offering an immediateIn Canada, small businesses are oftenallowed to pay their harmonized sales tax(HST), the local VAT equivalent in half ofthe country’s provinces, at the end of theyear, as opposed to quarterly. This greatlyreduces the tax administration burdenand allows for HST contributions based onthe real collection of the tax, as opposedto an estimated collection based on theprior year’s income.84%83%50%want tax systemssay that anincrease in taxincentives focusedon innovation wouldimprove the health ofentrepreneurship intheir countryof entrepreneurssay that decreasingindirect tax rateswould be one of ahandful of measuresthat could acceleratelong-term growth ofentrepreneurship intheir country33 Commercialisation Australia website, commercialisationaustralia.gov.au, accessed 3 July 2013.34 42 | The power of three

Tax and regulationR&D credits and super deductionshelp businesses to get establishedCompanies at the start-up stage,particularly those in innovative hightechsectors, need to invest in people,equipment and research. To help with theburden, a number of countries now offerR&D tax credits and tax relief on the costsassociated with product development.Some will also allow companies to treatcapital expenditure as immediateexpenses, rather than amortizing thecosts over a period of time.Across the G20 as a whole, 35% ofentrepreneurs say that the availabilityof innovation incentives has improved(see chart). Respondents from Braziland China are particularly likely to haveseen an improvement. And 48% say thatan increase in the tax breaks focused oninnovation would improve the health ofentrepreneurship in their country. In theUK, for example, the Government offersR&D relief for corporation tax, underwhich a company with taxable incomecan take advantage of an R&D credit. Ifoperating at a loss, the company maybe able to claim a 10% refundable crediton qualifying R&D expenditure. This is inaddition to cash grants offered throughthe Technology Board and from the EU,as part of its Horizon 2020 program.Depreciation allowances can also helpnew businesses reduce their tax. InAustralia, for example, a small businessbuying a vehicle — a key asset for manysmall businesses — can claim up toUS$5,000 as an immediate deductionand then depreciate a further 15%the US, the 2012 Taxpayer Relief ActImprovement of innovation incentives% of entrepreneurs saying innovation incentives have improved in the past three yearsin their countryBarometer score706050403020100Source: EY G20 Entrepreneurship Barometer 2013G20 averageextended both a provision allowingsmall businesses to claim an immediatededuction for up to US$500,000 forcertain capital expenditures and a 50%property purchases, which is applicable forThese schemes can be very valuableto entrepreneurs, so it is important topublicize them. A common problem inmany countries is that tax incentives, suchas R&D tax credits, are underutilized dueto a lack of awareness, high administrativeexpenses qualify for incentives.Mature marketsRapid-growth markets35The power of three | 43

Tax and regulationGoods and services tax (GST):tax reforms in IndiaThe GST will be an important taxrelatedreform for entrepreneurs.It is expected to replace all majorindirect taxes in India, which canbe a burden for entrepreneurialbusinesses in particular. GSTby bringing together most of thetaxes imposed on goods and servicesunder a single umbrella. The GST isexpected to be implemented afterIndia’s general elections in 2014. 35Increased access to policymakersAsked which single initiative woulddo most to improve regulation forentrepreneurs, respondents point tothe ability to have a direct channelof communication with regulators.The US provides a good exampleof how governments are creatingforums of this kind. In 2011, a WhiteHouse Initiative, Startup America, setup roundtable events in numerouscities. This provided a forum forentrepreneurs and investors to discussbarriers to starting and growingcompanies. The initiative resultedin a clear set of recommendationsfor federal agencies to eliminateregulations, such as those relatedto labor laws or tax codes, whichare outdated or overly burdensometo entrepreneurs. In the UK, theDepartment for Business Innovationand Skills took a similar approachwhen it appointed two “entrepreneursfeedback on policies that affectMore than a third ofentrepreneurs think that openinga direct line of communication toexpress issues and concerns overtax regulation would improveregulation for entrepreneurs“ Entrepreneurs are willing to pay taxes that vary assuffer irrespective of trading conditions, frustrates andposes problems, especially when it stunts the growth of| Chris Sanger, Global Tax Policy Leader, EY35 Mint, 28 May 2013.44 | The power of three

Tax and regulationJust18%of entrepreneurs surveyed say thatthey have seen an improvementpast three yearsWhereas40%have seen adeteriorationStage 3: expansionEntrepreneurs focus on tax reduction56%of entrepreneursbelieve thatdecreasing thecorporate incometax burden willhave the greatestimpact on thelong-term health ofentrepreneurshipA key change for companies in the growthand therefore subject to corporate tax.Entrepreneurs in our survey say that,more than anything else, they would liketo see a reduction in the corporate taxburden on businesses. Additionally, othernon-income taxes play a large role in anentrepreneur’s return on investment.Governments can ease thecomplexity of multinational expansionMany companies at the growth stagestart to pursue expansion into overseasmarkets. This can be a vital step onthe growth journey, but it also createsand comply with multiple regulatoryframeworks in the countries in which theyoperate. This can be a costly and timeconsumingprocess that can eat into thegeographical markets.There is no easy solution to this problem,but some governments have tried tosimplify the process and cut down onthe regulatory burden. Businesses thatfrom the EUGO Points of Single Contact.These online portals are designed to helpentrepreneurs active in the service sectorby setting out information about rules,regulations and formalities and allowingthe completion of certain administrativeprocedures online. More could still bedone, however. Better harmonization oftax regulations across the EU would helpentrepreneurs to expand internationally.Tackling labor market rigidityThe economic downturn has led to veryhigh unemployment in many markets,and from a political perspective, this hasenact labor market reform, which wouldmake it easier for companies to hire andlower unemployment in the longer term. 36According to entrepreneurs, this is thesingle aspect of tax and regulation whereprogress has been most limited.Getting the right talent in place is an issuethat companies face at every stage of thejourney, but it is particularly importantat the growth stage, when companiesare creating new positions and recruitingmore quickly in relative terms than at anyother point in their development. Highgrowthcompanies are important sourcesof employment in the economy. Onestudy from the UK found that high-growthcompanies represent only 6% of all UKgrowth in jobs. 37 Flexible labor marketpolicies are therefore essential to givingdeeper pool of potential candidates andthe comfort that, should growth plansnot materialize, they have the ability toscale back head count without incurringpunitive costs.In late 2012, for example, Mexico enactedmajor reforms to the country’s restrictiveand outdated labor laws. 38 Entrepreneurswhich include making it much easierdiscouraged small businesses fromhiring workers, so the businesses insteadrelied on other measures, such as theuse of temporary workers. The law alsointroduces part-time jobs and temporarytraining contracts, both of which willhelp entrepreneurs locate and hire thetalent they need to make their venturessuccessful.36 Federal Reserve Bank of Cleveland website, clevelandfed.org, accessed3 July 2013.37M Anyadike-Danes et al., Measuring Business Growth: High-growth rms and their contribution to employment in the UK (NESTA, 2009).38 The power of three | 45

Tax and regulationKey Insight: The tax burden | Stefano Neri, Chairman and CEO, TerniEnergia S.p.A, ItalyStefano Neri, the Chairman and CEOsays that the obstacles facing Italianentrepreneurs have become worsein recent years. The country’sbusinesses are being held back, he says.“Companies have to bear a heavy taxburden. They pay tax at an aggressiverate in proportion to the number ofemployees regardless of revenue orentrepreneurs. It makes it hard to start acompany and even harder to hire peopleA related issue is weakness ofGovernment support for much-neededR&D. “We’ve invested large sums ofmoney and time into our technology.At the moment there are no deductionsfor R&D. This also discourages outsideadds. “Technology-intensive companiesshould be allowed to reinvest into furtherbusiness developments without a taxIn addition, Neri notes that high levelsentrepreneurship, arguing that a simpleronline, one-stop shop could be a majorhelp to new businesses. “We need tostreamline bureaucracy in Italy andrequired for setting up and running abusiness. We have so many differentadministrative bodies with their ownDespite such challenges, he remainspositive about the prospects for Italianentrepreneurship ahead: “Once the needfor change is recognized, it is possibleTax and regulation issues along the entrepreneurial journeyPre-seed/seed Start-up Rapid-growth/expansion Develop a business model Seek funding Utilize online registration toolsand entrepreneur developmentprograms Consider IP protection Determine legal form andincorporate* Continue to seek funding Obtain necessary federal, stateand local licenses Navigate complex tax andregulation regimes Consider labor laws when hiringemployees Pay franchise and indirect taxes Pay income tax upongenerating income Pay indirect taxes Consider international taxrates and requirements Manage large-scale severanceand redundancy; considerinternational labor lawsThere are a multitude of tax and regulatory hurdles throughout the growth process, with the issues presented abovebeing only a few. Indirect taxes, such as property taxes, VAT/GST/sales tax, and payroll and withholding taxes, etc., aredue without regard to the level of income generated. Generally, start-ups do not start generating profit until a few yearshave passed, at which point an entrepreneur must pay income taxes. In order to help companies grow, most countriesoffer tax and non-tax incentives to encourage R&D, hiring and training, and capital expenditure.* Depending on national laws, an entrepreneur may opt to incorporate as a pass-through entity rather than a corporation,in which case income taxes would be paid on an individual income basis rather than at corporate rates.46 | The power of three

Tax and regulationMake your voice heardA call to actionJoin the debateTweet #G20eyey.com/G20eyGovernment action: where to focus Reduce the indirect tax burden. Simplify the tax system. This would allow entrepreneurs to focus on what theydo best: growing their business, generating jobs and driving innovation. Make it easier to navigate the tax system. Create a single platform thatprovides practical and easy to understand guidance Give entrepreneurs a voice on regulation.regulation, ensure representation on committees and in government by creating aminister of entrepreneurship to represent their views. Simplify insolvency rules. Revise legislation to help entrepreneurs recover fromfailure by reducing the cost of business failure. Stimulate innovation. Improve R&D incentives such as tax credits, and publicizethem effectively.The entrepreneur perspective: key issues to consider compliance costs associated with paying taxes. For example, a cash accountingscheme whereby entrepreneurial businesses only have to pay VAT upon receiving Explore government resources. Seek out and make use of government-fundedresources and tools to reduce business start-up time. Know your R&D incentives. Be aware of and capitalize on investment incentivesfor R&D and entrepreneurship to further your business. Get involved. Be active and insert yourself into the consultation processes,particularly on proposed legislation that will impact entrepreneurs.A corporate perspective Share your public policy experience. Your knowledge, learnings and capabilities Drive change. Lobby government to incentivize corporations to invest inentrepreneurs.The power of three | 47

Education andtrainingEffective education — both ingeneral and, especially, relatingto entrepreneurship — can helpeconomies thrive and allowentrepreneurs to become true driversof future employment and growth.Many studies show a link betweeninvestment in education and GDPgrowth. Our research shows that,although countries are investingalways creating the best educationaloptions to foster entrepreneurship.48 | The power of three

Mature economies lead on education andtraining opportunities for entrepreneurs.Overall, France, Australia, the US andSouth Korea top the rankings fromacross the G20 in terms of their overallperformance on education and training.This is largely because the matureeconomies maintain a substantial leadon basic educational input measures,such as public spending on education andenrollment levels. However, rapid-growtheconomies across the G20 are closing thegap in the Barometer by improving theirprovision of entrepreneurial education inuniversities and through more informalnetworks.EY G20 Entrepreneurship Barometer 2013:education and trainingG20 countryRankingFrance 1Australia 2United States 3South Korea 4EU 5United Kingdom 6Germany 7Argentina 8Canada 9Brazil 10South Africa 11Saudi Arabia 12Italy 13Russia 14Mexico 15Japan 16Turkey 17China 18Indonesia 19India 20The power of three | 49

Education and trainingKey insights84%of entrepreneurs say studentsentrepreneurship trainingFormal entrepreneurshipeducation is improving acrossthe G20About half (52%) of entrepreneursreport an improvement in universityor business school entrepreneurshipcourses. These are most notable at thelevel of universities and business schools,although smaller improvements arealso seen in earlier entrepreneurshipeducation in all but a handful ofcountries. Rapid-growth marketrespondents were more likely to seeimprovements over the past three years,with Indonesia and Mexico scoring verypositively in this area.Mentoring, coaching andinformal education is alsogetting betterMore than half (53%) say their informalnetworks have improved in the past threeyears, and 48% say better mentoringopportunities are now available. This isparticularly important, as these types ofcoaching and support networks are themost commonly relied-on mechanismsfor those who start businesses, usedby about 7 in 10 respondents. Again,entrepreneurs from rapid-growthcountries report the fastest gainshere, with South Africa and Indonesiaperforming particularly strongly.Entrepreneurs believe the skillsneeded to run a business can betaughtThe vast majority (84%) of those surveyedtraining to become entrepreneurs. This isan important conclusion for many of theG20 countries that focus their efforts onthose in their 20s or older. The successof international programs such as theNetwork for Teaching Entrepreneurshipof creating the right entrepreneurialattitudes and aspirations, as well aspractical skills, from a much younger age.Integrating entrepreneurshipeducation into the schoolenvironment will improve itsperceptionDeveloping entrepreneurial skills andshould encourage schools to introduceentrepreneurial role models and establishclubs that give students the chance toat an early age. Such training is notonly relevant for students, but also foreducators: teaching entrepreneurshiprequires a different approach totraditional academic subjects, with agreater emphasis on practical, hands-onexercises.7/10 entrepreneursrely on mentoring,coaching andinformal education50 | The power of three

Education and trainingSchools and governmentsneed to improve theimage of entrepreneursEntrepreneurs believe it is crucial toimprove the perception of start-ups andcelebrate their success. In the view ofentrepreneurs across the G20, schoolsneed to do more to share success stories(cited by one-third) and to developor business school level (29%). Theseinitiatives should be integrated withinthe main curriculum so students betterunderstand the positive and negativeaspects of starting a business.Progress in providing education forentrepreneursOur survey also highlights the factrising in tertiary education worldwide.More than half of respondents notedan improvement in such courses atuniversities and business schools, farmore than the percentage who saw adecline. John Bates, Fellow, Strategy andEntrepreneurship at London Business“ Traditional schooling aims to prepareemployees, rather than creativeentrepreneurs. As a result, the moresuccessful traditional schooling is … 41School notes, “While entrepreneurshipteaching at leading business schools washistorically a marginal activity, it hascertainly moved to center stage overimpact in terms of the number of studentsnow directly pursuing an entrepreneurialcareer straight out of business schools.Governments can play an importantrole in championing entrepreneurialeducation at university level. One leadingexample is the UK’s National Centre forEntrepreneurship in Education. It aims toimprove staff ability to teach the subject.An independent evaluation of this workshowed just how valuable it can be, with a1,100% return on money invested by theprogram.| Professor Yong Zhao, Associate Dean for GlobalEducation at the University of OregonFocus on the youngEarly exposure to entrepreneurship inthe education syllabus helps childrento develop the skills and values that willbe required for entrepreneurship laterin life. In some countries, schools willbring in role models and set up gamesand competitions that give students thebusiness. Very often, students respondwell to this because learning aboutentrepreneurship involves a more handsonapproach compared with some othertraditional academic subjects.NFTE, which provides programs forteaching entrepreneurship in the USand around the world, demonstrateschildren. Amy Rosen, President & CEO,NFTE explains, “Research shows thatbusiness formation amongst youngpeople who have gone through the NFTEprogram. It helps them wake up to theorganization runs programs in schoolsin socially deprived areas and integratesstarting a business into the regularsecondary curriculum. Third-partystudies of NFTE’s work have found thatits students’ interest in attending collegeor university increased by 32% over thecourse of the program, compared with a17% decrease in the control group of non-NFTE students.41Y Zhao, World Class Learners: Educating Creative and Entrepreneurial Students (Corwin, 2012).52 | The power of three

Education and traininghave seen positive changes in secondaryeducation. On average, 28% report thatentrepreneurial training at this levelhas become better in the last threeyears, compared with just 14% who seea deterioration. Respondents in Europeare particularly likely to report aninterest in entrepreneurship educationover recent years, which has itself beeninspired by high rates of unemploymentin many European countries. UschiSchreiber adds, “Policymakerscould direct funding to establishingentrepreneurial apprenticeships andyoung entrepreneur networks. A youngentrepreneurs’ summit in every countryevery year would also help promote theconcept of entrepreneurship to youngThe EU and others are makingentrepreneurship a compulsorysubject within secondary educationStimulating entrepreneurship is oneof the four long-term objectives of theEU’s current vision for education, calledEducation and Training 2020. Alreadyin 14 out of 27 EU countries, studentsare taught about entrepreneurship asan element of a compulsory subjectduring secondary school — most oftenin the social sciences. In Lithuania,entrepreneurship is mandatory.These efforts are too new for theoutcomes to be assessed. Nevertheless,previous research shows that startingyoung can have a huge impact. 42 It reportsthat between 15% and 20% of studentswho participate in a mini-companyprogram in secondary school go on tostart their own business. For the generalsix times lower.These efforts should not be restrictedto governments. Junior Achievement,a non-governmental organization thatsends volunteer entrepreneurs intoschools to run extracurricular programsteaching entrepreneurial skills, as well10 million students worldwide per year.Often the exercise is built around thestudents starting their own businesses.On average, the group says, alumni are25% less likely to be unemployed and 50%more likely to start their own businessesthan non-alumni.Mentorships and informaltraining are invaluable toentrepreneursEntrepreneurial education in schoolsand universities is important, but muchof the support that entrepreneurs valuemost takes place in a less formal setting.Entrepreneurial meetings, clubs andinformal networks are the most commonsupport mechanisms for those who startbusinesses. More than half (53%) ofentrepreneurs polled say the availabilityof these training opportunities hasimproved.By providing specialized information atthe point when it is needed, informala vital learning need. They enableaspiring entrepreneurs to meet withmore experienced business owners andcreate opportunities for mentoring. Oneexcellent example of this is The EuropeanNetwork of Female EntrepreneurshipAmbassadors, a pan-European programthat introduces aspiring femaleentrepreneurs to successful women inbusiness. The ambassadors raise theuniversities, community groups and themedia, as well as at conferences, businessnetworks and employment initiatives. InBetween15%–20%of students who participatein a mini-company program insecondary school go on to starttheir own business42 Memo, Brussels 8 February 2013The power of three | 53

Education and trainingMore than50%of entrepreneurs say entrepreneurialconferences, informal networks andimproved over the last three yearsin 2009, 150 ambassadors participatedin over 140 national meetings, reachingmore than 7,600 participants. During thatperiod, the ambassadors helped in thecreation of 52 new female-led companies.Policymakers should championpeer-to-peer networking as the mostvaluable support for entrepreneursMentorships offer another way to expandnetworks, especially those of youngerentrepreneurs. In South Africa, theIthubalentsha Micro Enterprise Programincludes plans to encourage experiencedentrepreneurs, business consultants,managers and retired professionals toexperience. As this example suggests, thekey to success is to involve a broad rangeof stakeholders, such as experiencedleaders and managers from the corporateworld, as well as investors and establishedentrepreneurs to help bring multipleperspectives to the network.supports high-impact entrepreneurs inrapid-growth markets, also demonstratesjust how effective networks can be. WhenEndeavor launches a program in a newmarket, it engages local business leadersto form a board of directors to providesupport. It then selects a portfolio of highimpactentrepreneurs, supports them intandem with the local business leaders,and uses the impact of these companiesinvestment. In 2011, companies startedby Endeavor entrepreneurs generatedUS$5b in revenue and raised US$100min equity capital.Another new South African effort usestechnology to bridge the gap betweennetworks and education. The CapeTown branch of the Entrepreneurs’Organization — an international networkof entrepreneurs — has set up onlinetraining. The courses were created byentrepreneurs and deal with issuesdirectly related to start-ups, suchas spotting opportunities, businessplanning, marketing and HR. ThoseEntrepreneurship. 43Key Insight: Educating future entrepreneursAnthony Podesta, Founder, McMillan Shakespeare Limited,AustraliaAnthony Podesta, the Founder ofMcMillan Shakespeare, a salarya former teacher. He is passionateabout education, noting that a strongemphasis on education and training hasfactors. “If you invest in helping youryou give your business the leadingPodesta thinks that there is considerablepotential for developing entrepreneurialeducation in Australia. “I would like tofor entrepreneurs or for students whohe says. “It could be something assimple as a module on entrepreneurshipor a series of seminars with anA greater focus on education mightalso help to dispel some unhelpfulmyths. “People have this imageof entrepreneurs as get-rich-quickentrepreneurs want to work hard,make long-term change and bring realPodesta adds that mentoringhas an essential role to play andthat governments are importantin facilitating this. For example,government could create a matchingservice to enable entrepreneurialmentors from universities orprofessional organizations to beembedded within companies. “Atthe moment, the choice for mostentrepreneurs is to enroll in a businessschool or just go off and do their own43 Entrepreneurs’ Organization Entrepreneurs Bootcamp website, eobootcamp.co.za, accessed 28 June 2013.54 | The power of three

Education and trainingA call to actionMake your voice heardJoin the debateTweet #G20eyey.com/G20eyGovernment action: where to focus Embed entrepreneurial learning into the school curriculum. Not allyoung people will go on to start a business, but they will learn valuableskills that lead to other positive education outcomes. Support young people who chose an entrepreneurial career. Createpublic programs for those who are looking to start a business and need Encourage lifelong learning for entrepreneurs. Many of the skills thatentrepreneurs need cannot be learned in a classroom. Create moreopportunities for peer-to-peer learning, through mentorship programsand entrepreneur support clubs.The entrepreneur perspective: key issues to consider Look for the educational opportunities that suit your needs. This Seek out and learn from other entrepreneurs. Your idea may beunique, but you are more likely to succeed if you tap into the experienceof others. Give back to help others. Good entrepreneurship education programsrely on input from current entrepreneurs. Mentoring also activelyassists the next generation of entrepreneurs and introduces new talentinto existing networks.A corporate perspective Expand internship programs to provide more hands-on experience.EY research shows that approximately 60% of entrepreneurs havegained skills working in a corporate environment. Mentor entrepreneurs. Encourage leaders from your corporation toprovide entrepreneurs with valuable knowledge and insights.The power of three | 55

CoordinatedsupportSuccessful entrepreneurial countrieshave rich and diverse ecosystemswith strong funding options, asupportive culture, a business-education systems that encourageentrepreneurial mind-sets. Theyalso tend to have a range of highqualityresources spanning thepublic, private and voluntary sectors.Governments can help orchestratethe way these disparate stakeholderscome together.56 | The power of three

Rapid-growth countries top our rankingswhen it comes to relative improvementin coordinated support over the pastthree years. Entrepreneurs in Russia,Mexico, Brazil, Indonesia and India allreport strong improvements in theavailability of incubators, networks andmentors although the absolute conditionsfor coordinated support often trailbehind those in established markets.Entrepreneurs in the US, UK, Japan andother mature countries report limitedimprovements in comparison.EY G20 Entrepreneurship Barometer 2013:coordinated supportG20 countryRankingRussia 1Mexico 2Brazil 3Indonesia 4India 5China 6Turkey 7South Africa 8Argentina 9Germany 10France 11Saudi Arabia 12EU 13South Korea 14Australia 15Canada 16United Kingdom 17Japan 18Italy 19United States 20It is important to note that thispillar is based only on surveyresponses about the extent towhich specic initiatives andservices have improved ordeteriorated over the pastthree years. 44 In short, itreects the current trend acrossthese countries, not the baselevel of support available.44Note: The ranking, therefore, represents a qualitative measure of change in these countries, given the absence of hardrelative change based equally on both qualitative and quantitative measures.The power of three | 57

Coordinated supportKey insights20%of entrepreneurs ratedgovernment start-up schemesas the most effective form ofgovernment-tailored supportEntrepreneurs in maturemarkets feel that access togovernment start-up programsis deterioratingGovernment start-up programs across theG20 are wide-ranging: cash grants, equityand often networking or mentorship. Butmany entrepreneurs report a decline inaccess to these programs over the pastthree years, despite believing that suchschemes should be a top priority. As aresult of intense budgetary pressures,developed countries report the greatestdeterioration in access to governmentstart-up programs, with France, the US,Australia and Italy leading the slide.Among rapid-growth markets, India andSouth Africa show the greatest decline,while Russia, Argentina and Mexico areimproving.Business incubators remainextremely importantEntrepreneurs polled for this study believebusiness incubators have the biggestimpact in improving the entrepreneurshipecosystem. Encouragingly, half of allrespondents report improvements inaccess to incubators over the past threeyears. Leading the way is Russia, whereone in four entrepreneurs say access toincubators has greatly improved overthis period. Indeed, the country hasmore than 1,100 registered incubatorsand technology parks, 45 an impressivegain though plenty of scope for growthremains when compared with leadingentrepreneurial environments. 46China has stalled in a numberof key areas where other BRICnations are improvingWhile entrepreneurs in Brazil, Russiaand India all feel relatively bullish aboutthe gains in coordinated support in theircountries, their peers in China feel thatprogress has slowed. Among the BRICcountries, Chinese entrepreneurs reportthe lowest level of improvement in keyareas, such as access to incubators,educators, entrepreneurial clubs andentrepreneurial workshops.Entrepreneurs prioritizefunding ahead of other forms ofgovernment supportprograms are the most effective form ofgovernment-tailored support, followedby small business lending and loanguarantees. This reinforces the fact thatgovernment support relating to fundingis where entrepreneurs feel most in needof help, ahead of workshops, networkingprograms and government-sponsoredincubators. Nevertheless, there arealso many forms of support that canbe effective for entrepreneurs that areprivately backed, such as entrepreneurialworkshops, university incubators andeducational initiatives, such as NFTE.45 Embassy of the United StatesMoscow, Russia website, moscow.usembassy.gov, accessed 3 July 2013.46 MGIMO University website,ip.mgimo.ru, accessed 3 July 2013.58 | The power of three

Coordinated supportGrowing an integrated ecosystemSuccessful entrepreneurial ecosystemscomprise many essential components:access to funding, good skills, asupportive culture, a business-friendlyenvironment and more. But to createthriving communities of young businesses,these parts must be combined into anintegrated whole.This ecosystem must serve the needsof all stages of entrepreneurship — fromstart-up to operation as a thriving listedcompany. While early-stage venturescan be supported through businessincubators, for example, companiesthat have moved beyond the start-upphase need other types of support, suchas help accessing capital markets orinternationalizing their business. Alongthe way, support should also be in placeto help link small businesses with larger,established companies.Access to fundingSeedStart-upExpansionGrowth capitalCoordinated supportMentors, advisors, networksand clubsBusiness incubators,clusters, parks, businesscentersTax and regulationTaxation incentivesEase of starting a businessBusiness-friendly legislation/policiesEducation and trainingPre-university educationUniversity educationInformal education/lifelong learningEntrepreneurship cultureTolerance of risk and failurePreference for self-employmentInnovation and research cultureCelebration of self-made wealthEnabling entrepreneurs to learn from large corporationsFrance’s SME Pact is a jointventure between OSEO (the FrenchGovernment’s innovation agency)and 14 business organizations. Itsobjective is to stimulate entrepreneurialgrowth by acting as a bridge betweenentrepreneurial businesses and largecompanies, through commercialcontracts and R&D collaborations. Largemultinationals, such as Danone, signthe SME Pact voluntarily and committo increasing their collaboration withentrepreneurial businesses. Encouragedby the increasing number of companiesregistered for the SME Pact, theinitial target of 300 entrepreneurialbusinesses per year has now beentripled to 900.The power of three | 59

Coordinated support“ Countries need to bring together all thedisparate, but essential, components and playersin a successful entrepreneurial ecosystem,support the creation of clusters and incubatorsas vital catalysts, and create facilities and events| Franck Sebag, Partner, VC & IPO Leader, FraMaLux, EYClusters create a thrivingenvironment forentrepreneursClustering is an important driver ofentrepreneurship. The aim is to locateindustries and institutions in closeproximity to one another, allowing forClustering is a natural phenomenonon which governments can capitalizeto streamline investments. Typically,policies designed to help sectors maintainor develop a long-standing competitiveadvantage in a city or region.Cluster-related policies tend to focuson existing economic advantages. Forexample, Russia’s Skolkovo InnovationCenter is a large-scale initiative aimedat developing existing strengths insectors including nuclear technology,biomedicine, IT and space technology. Theinitiative is also attracting major foreigncompanies that can hire talent, spark spinoffsand train Russian workers. Microsoft,for example, has signed an agreement todouble its presence there by 2015. 47Clusters can focus efforts to developregional economiesSometimes, clusters of businessesdevelop naturally but hit barriers thatgovernment can help to overcome.Several regional hubs or clusters areemerging or expanding within the EU,including a number of technology hubsthat are gaining momentum. Some keyexamples include the following: London’s Tech Investment CityOrganization has helped to developthe area known as Tech City, or “Silicon Berlin’s Communication, Media andCreative Industries Cluster consistsof more than 27,000 companiesemploying more than 220,000 people. Dublin’s Enterprise Ireland is aGovernment-sponsored organizationthat helps to develop Irish enterprises.It provides an extensive range ofservices, from funding support toexport assistance, to help in boostingcompetitiveness and R&D incentives.“ by anybody. It’s a naturally evolving system. Equallyentrepreneurship and investment have occurrednaturally for as long as we’ve had human society. Oneof the big lessons for policymakers is how to facilitatethose naturally occurring acts without pretending thatthey can create them.”| Daniel Isenberg, Professor of Entrepreneurship Practice,Babson Executive and Enterprise Educationhealthy ecosystem forentrepreneurs 48 The ecosystem is tailored aroundits own unique environment. It operates in an environmentwith reduced bureaucraticobstacles, in which governmentpolicies support the uniqueneeds of entrepreneurs andtolerate failed ventures. It actively encourages and invitesventures. The ecosystem is reinforced,not created from scratch, bygovernment, academic orcommercial organizations. It is relatively free from, or isable to change, cultural biasesagainst failure or operating abusiness. It advances successes, which inturn attract new ventures. The ecosystem is oftensupported by dialogue amongvarious entrepreneurshipstakeholders.47 The Next Web website, thenextweb.com, accessed 10 March 2013.48 Harvard Business Review, June 2010.60 | The power of three

Coordinated supportEntrepreneurs identify businessincubators as the most importantorganizations to accelerateentrepreneurship in this areaEntrepreneurs rely on contacts,mentors and associationsA strong, coordinated entrepreneurshipculture requires ideas, skills and capitalEntrepreneurs polled for this Barometeruse a range of support measures,including clubs, associations, workshops,support meetings, informal support andtendency for entrepreneurs to rely heavilyon relationships with groups of people insimilar businesses or those with advancedor relevant experience.Encouragingly, our EY G20Entrepreneurship Barometer 2013shows that 53% of entrepreneurs reportat least some improvement in accessto entrepreneur clubs and associationsover the past three years. This isespecially true in rapid-growth markets.For instance, about 8 in 10 Brazilianentrepreneurs reported improvements.Endeavor Brazil provide one example: ithas developed a network of more than300 business leaders, consultants andother experts to support entrepreneurs.Russia, India and Mexico also reportstrong gains. Endeavor also highlights theto play a vital role in supporting andfostering entrepreneurship.Networks, mentoring programs andworkshops are naturally easier tofacilitate when participants are all inclose geographic proximity. In a selfperpetuatingprocess, such groupingsthen become magnets for entrepreneurs.However, these networks become morepowerful when they can draw onmore established and experiencedentrepreneurs who are willing to act asrole models and advisors.73%72%68%Key Insight: Building better supportEnrique Jacob Rocha, President, National EntrepreneurInstitute, Mexicoof entrepreneursuse or intend touse workshops andsupport meetingsuse or intend to useentrepreneur clubsand associationsuse or plan touse mentoring orinformal supportfrom otherentrepreneursThe Mexican Government has made acountry’s entrepreneurs and developa healthy entrepreneurial ecosystem.A key component of its strategy is theInstituto Nacional del Emprendedor(National Entrepreneur Institute, orINADEM), which was established inearly 2013 to develop programs tohelp Mexican entrepreneurs create,consolidate and grow their businessesin a coordinated and integrated manner.INADEM’s programs are designedto meet the needs of Mexicanentrepreneurs and promote a stablebusiness environment, explains EnriqueJacob Rocha, the organization’spresident. It provides a broad range ofactivities, from generating enthusiasmfor business ownership by offeringearly entrepreneurship education, toencouraging the exchange and sharingof successful business experiences andinternational best practices.Rocha emphasizes the role INADEMwill play in coordinating Governmentassistance. “We realize that previousGovernment policies were often“Take grants, for example. We foundthat there were 105 programs forSME’s and entrepreneurs distributedin 18 institutions. It was not easy forentrepreneurs to access these funds.INADEM will coordinate GovernmentThe power of three | 61

Coordinated supportentrepreneurship in IndiaNational Entrepreneurship Networknetwork that aims to provide criticalsupport to start-ups and early-stageentrepreneurs through high-impactentrepreneurship education, accessto mentors and experts, fast-trackaccess to incubation and funding,and learning tools and materials.With more than 70,000 members in30 cities, NEN partners with morethan 470 top-tier academic institutesin India to help them develop strongentrepreneurship ecosystemson campus. NEN also runs theEntrepreneurship Week India, thelargest entrepreneurship-awarenesscampaign in the country, to create aculture of entrepreneurship. Variousorganizations that are focusing onpromoting entrepreneurship, such asSAP and TATA, have also workedwith NEN.Universities have a key role incoordinating government-fundedactivityUniversities are another vital part ofmany entrepreneurial ecosystems.Recent research shows that the impactof university innovation increases withgeographic proximity to the university. 49For example, a university with astrong biotech faculty will typicallycorrespond with greater biotech-relatedentrepreneurial activity nearby. An OECDstudy concludes that governments shouldenact policies that directly link universityresearch and start-up formation. Theseinclude providing funds for joint research,facilitating technology transfer andcoordinating seed funding for universityspin-offs. The more general conclusionis that government policy should allowand support knowledge transfer acrossorganizational boundaries and that thiscan have a greater impact than simplyinvesting in new businesses directly. 50Networks of Centers of ExcellenceCanada’s Networks of Centers ofExcellence (NCE) offers a suite ofprograms that mobilize the country’sbest research, development andentrepreneurial expertise and focusareas. It helps budding entrepreneursto commercialize their research byproviding them with funding andvarious educational courses. It alsoaims to increase private sector R&Dand encourage greater collaborationbetween academic institutions andother public and private sectororganizations. Since its inception, NCEhas invested about US$1.8b in research,commercialization and knowledgetranslation. Those investments haveleveraged US$1.1b in contributionsfrom industry and other partners. NCEhas also helped to train more thancreate 107 spin-off companies.49Note: Impact here refers to long-run employment, payroll per worker and employment growth in industries that areclosely related to the innovative strengths of the local universities.50Organisation for Economic Co-operation and Development, Competitive Regional Clusters: National Policy Approaches(OECD Policy Brief, 2007).62 | The power of three

Coordinated supportOne in three entrepreneurs wantto see government start-upprograms and business incubatorsimproving long-terms growth ofentrepreneurshipIncubators can help businesses,customers, suppliers and strategicPunching above its weight:how Israel became an incubatorfor entrepreneursAs many entrepreneurs discover, banksbusinesses, not just bright minds andbig ideas. Business incubators help turnideas into businesses by providing muchin return for equity. They teach andmentor entrepreneurs while introducingnew contacts, investors and networks.According to those entrepreneurs polled,incubators are the support measure withthe greatest chance of driving long-termgrowth in entrepreneurship, selected by36% of respondents.Incubators are especially important inrapid-growth markets, where they cansystems while advancing a moreentrepreneurial culture. A good exampleis India’s TREC-STEP, which is part of theGovernment’s Science and TechnologyEntrepreneurs Park (STEP) program.Budding entrepreneurs enter TREC-STEP with a strong business idea but noexperience, business knowledge, team orfunds. They are also often at odds withtheir family because Indian parents oftendiscourage entrepreneurship in favor ofTREC-STEP has produced a number ofsuccessful entrepreneurs who are keento give back and help more businesses.One of these, Ananth Krishnan, was atthree of which he spent sleeping on thepremises. Like many, he did not have theblessing of his father when he joined andhe needed a great deal of non-vocationalsupport. He now runs a manufacturingplant employing 150 people whilehelping advise a new generation ofentrepreneurs. 51 First trialed in the1980s, there are now 14 TREC-STEPprograms around India, providing a vitallink between young entrepreneurs and thewider ecosystem.Israel’s position as one of the world’smost innovative and entrepreneurialeconomies holds a number ofinteresting lessons for other countries.The country has invested heavily ininnovation and entrepreneurship. Atone start-up for every 1,844 citizens,per capita than any other nation. 52Crucially, it also excels in incubatingand growing those businesses. Forexample, Israel has more Nasdaq-listedcorporate headquarters than Europe.It also draws international investmenton an unparalleled scale in relation tothe size of its population. In 2008, Israel received 2.5 timesmore venture capital investmentsper capita than the US. About 45% of Israelis go touniversity, one of the world’s highestattendance levels. Israel’s infrastructure supportsentrepreneurship with venturecapital, R&D funding, and a largenumber of scientists and engineers. Israel’s informal culturede-emphasizes status and age butrecognizes talent and drive. Immigrants boost Israel’s populationand its entrepreneurial talent base.51 The World Bank YouTube Channel, youtube.com/WorldBank,accessed 3 July 2013.52D Senor and S Singer, Start-up nation: The story of Israel’s economic miracle (Twelve, 2009).The power of three | 63

Coordinated support54%of entrepreneurs use or plan toget help from corporations andnon-governmental advisorsKey Insight: The importance of locationScott Button, Co-Founder and CEO,Unruly Media, UKUnruly Media has been at the heart of London’s Tech City, orSilicon Roundabout, since its inception in 2006. The area hasgrown substantially, from 85 start-ups in 2010 to more than53, 54300 by early 2013.This growing ecosystem helps, says Scott Button, Co-founderand CEO of Unruly Media: “There is no doubt we have learntfrom other high-tech entrepreneurs here. It has staved offsome of the loneliness of a pioneer and stopped us makingmistakes as we have grown. As you scale up, you face allsorts or organizational and management issues that thesenior team has never seen before. You can always bring insenior managers to mitigate that, but any kind of ecosystemis extremely helpful. Being here has given us some of theButton believes that the Government can play a role in theof the area and creating a stronger identify for technologyentrepreneurs. “Working for a tech start-up just doesn’t have“We need top talent drawn to entrepreneurship, hungry forKey Insight: Growing a global brandMikael Hed, CEO, Rovio, EURovio is the Finnish company behind the global phenomenonAngry Birds, one of the most successful mobile games of alltime. The company’s success shows how, in the digital age, anentrepreneurial business can come from almost nowhere todevelop a truly international brand in a matter of months.Since its release in 2009, Angry Birds has been downloadedover 1.7 billion times. Building on this, it has released eightother apps and an Angry Birds cartoon channel, with a 3-Dnow also buy a wide range of merchandise. The results ofthis strong brand-building strategy speak for themselves. Innearly 57%.According to CEO Mikael Hed, the company’s success is basedon its willingness to move into new areas and markets whilealso building on core brands: “We didn’t diversify by suddenlymaking an array of new games, but by staying within thethe competitive app market has helped spread the company’srisk. But moving into areas such as licensing and animationalso represented a steep learning curve. “All the time we’vebeen dealing with whole new areas we didn’t know, and wehave had to learn from the ground up. It’s taught us that ifKey lessons: technology-based products can reach a globalcustomer base rapidly but brands need to be nurtured anddeveloped with care if they are to endure.53 Wired magazine website, wired.co.uk, accessed 25 June 2013.54 Bloomberg Businessweek website,businessweek.com, accessed 25 June 2013.64 | The power of three

Coordinated supportA call to actionMake your voice heardJoin the debateTweet #G20eyey.com/G20eyGovernment action: where to focus Create clusters to accelerate entrepreneurship. Nurture clusters ofentrepreneurial companies in a single location to boost existing strengths,provide scale, improve productivity and enhance international visibility. Build stronger links between different players in the ecosystem. Createworkshops, support meetings, informal support and mentoring all help. Support and improve incubators and accelerators. They form a vital linkbetween aspiring entrepreneurs and existing businesses, funding bodies,mentors and support agencies.The entrepreneur perspective: key issues to consider Capitalize on networks. Be proactive about connecting with availablenetworks, and seek out a mentor or form a board of advisors. Give back. Share ideas, useful contacts and basic advice: it can make ahuge difference. Join an incubator or accelerator. This generates exposure and feedbackfor the business, and that helps to build the company. Choose your location carefully. Clusters can accelerate your growthuniversities. Look out for thedifferent support offers from entrepreneurial organizations such as NFTEand Endeavor.A corporate perspective Access innovation. The creation of corporate incubator or acceleratorprograms can help provide entrepreneurs with access to resources, testingfacilities, pilot customers and funding. Connect with entrepreneurs. Sponsoring and participating in events helpsto connect a range of people to the entrepreneurial ecosystem and to yourresources and knowledge.The power of three | 65

MethodologySurvey respondents’ demographicsRevenue (US$) IndustryBiotechnology, 1%15m to 49.9m,11%250m to 499.9m,2%100m to 249.9m,5%50m to 99.9m,7%500m to 999.9m, 2%More than 1b, 2%Less than 1m,45%Software andinformationtechnologyservices, 14%Aerospace and defense, 0%Other, 20%Automotive, 1%Real estate, 1%Chemicals and allied products, 2%Mining, metals, and oiland gas extraction, 2%Paper, printing and packaging, 2%Textiles, 2%Alternative/renewable energy, 2%Hotels and tourism, 2%Industrial and commercialmachinery, 3%Transportation, 3%Electronic and electricalequipment, 3%Financial services, 4%Communications, 4%Health care, 4%1m to 14.9m,27%Business services,10%Construction,6%Consumer products, 6%Food, beverages andtobacco, 6%Respondents’ ageGender41 and older, 35%Female, 21%40 and younger, 65%Male, 79%The power of three | 67

MethodologyAbout the EY EntrepreneurshipBarometer 2013 modelThe EY G20 Entrepreneurship Barometer2013 introduces a model for scoringentrepreneurship. The purpose ofthis model is to help identify areas ofrelative strength by country and whereopportunities for improvement lie.The model is composed of qualitativeinformation (from our survey ofmore than 1,500 entrepreneurs)and quantitative data based uponentrepreneurial conditions across theG20 economies. For each pillar, excludingcoordinated support, this informationis weighted 50-50 between qualitativeand quantitative inputs. For coordinatedsupport, given a lack of quantitativeindicators, this is based solely upon thesurvey responses.The advantage of integrating both thesurvey results and quantitative datais the ability to provide an assessmentof the current level and the trends in aG20 entrepreneurial ecosystem basedstatistics (for example, on the averagetime taken to start a business or thetax burden) provide a baseline for eachmember country.Survey information is an importantcomplement to the baseline picturethese statistics provide. Entrepreneurs’feedback on the pace of improvementor deterioration in conditions in theircountry’s entrepreneurship ecosystemis incorporated in the model alongsidethe hard statistics, per the method thatfollows.MethodologyThe EY G20 Entrepreneurship Barometer2013 provides country scores across thein turn based on several sub-pillars, eachrated on a 10-point scale.This is a four-step process: the raw datais normalized; constituent scores arecomputed on a 1 to 10 scale; sub-pillarscores are calculated for both survey andhard data scores; and these scores arethen combined (as a simple average) togenerate a pillar score.Data normalizationStatistical information is adjusted bycapping outliers at three standarddeviations from the mean value for agiven series.For survey information, questions withassigning a 1–5 score for each answerchoice, with 5 being the most positiveresponse and 1 being the least positiveor most negative. Questions presented asa ranking are transformed by assigningto the choice ranked second and 1 to thechoice ranked third.Transformation to a 1 to 10 scoreWe follow best practice, as per thetransformation methodology in the WorldEconomic Forum’s Global CompetitivenessReport, to convert the adjusted data intoscores on a 1 to 10 scale. The formulaused is:(9*(adjusted data-minimum value)/(maximum value-minimum value)) +1For survey data, the minimum andmaximum values are the minimum andmaximum possible survey responses,rather than the actual minimum andmaximum survey responses.Calculation of level and trend scoresWe use a simple average of all surveybasedconstituents of a given pillar toWe use a simple average of all statisticalconstituents of a given pillar to generateand trend scores are then adjusted toimpose a uniform mean on all scores.Each country’s unadjusted level and trendscores are divided by the pillar’s meanlevel and trend scores and then multipliedby 5.5, the midpoint of the 1–10 scale.This adjustment prevents a pillar withrelatively high, or low, level or trendCalculation of pillar scores and overallentrepreneurial ecosystem rankingAs above, we use an average of theto generate an overall pillar score. We usepillar scores to generate an overallthe 100% weighting of survey data in thecoordinated support pillar. This forms thebasis for the country rankings by quartile.68 | The power of three

MethodologyKey indicatorsfollowing table. Note that hard statistics are included as a three-year average, to address year-to-year volatility.Ecosystem component Constituents Data typeAccess to fundingSeedAccess to public aid/government funding, business angels, crowdfunding, family and friends,Start-up Venture capital availability DataAccess to venture capital, access to business angels, suppliers, customersSurveyGrowth Domestic credit to private sector, private equity (PE) deal value DataAccess to PE, bank loansSurveyExpansion IPO amount invested, domestic credit to private sector DataAccess to IPOsSurveyEntrepreneurship cultureFear of failure Insolvency implications DataSurvey respondents’ view of business failureSurveyAttitude to risk Risk tolerance SurveyEntrepreneurship as a career choice Survey respondents’ view of entrepreneurs as drivers of employment SurveyCelebration of self-made wealth Survey respondents’ view of celebration of self-made wealth SurveyInnovation and research culture DataTax and regulationDirect tax Corporate tax/mandatory contributions DataTax incentivesSurveyIndirect tax Indirect tax rate DataBusiness-friendly legislation Start-up procedures, time to start a business, cost to start a business, paid-in minimum capitalDataBusiness regulations, labor market, IP, ease of doing business, public private partnerships SurveyGovernment incentives Public support for R&D, number of documents to export, level of infrastructure DataGovernment innovation incentivesSurveyEducation and trainingPre-university education Secondary school enrollment, public spending on education DataUniversity education Tertiary enrollment DataInformal education Informal networks, mentoring, corporate engagement with start-ups SurveyEntrepreneurship education entrepreneurship chairs at universities, coaching programs for entrepreneursSurveyCoordinated supportMentorsTeaming/mentoring programs, corporate and non-governmental advisors, entrepreneurIncubators Business incubators, university incubators, government start-up/other programs SurveyNetworks Entrepreneur clubs and associations, chambers of commerce, small business administrations SurveySurveySurveyThe power of three | 69

MethodologyMeasuring entrepreneurship-basedmacroeconomic indicators is a challengingobjective, with a range of issues inherentin any such model: Entrepreneurship is a rich activitythat involves multiple factors, such ascultural and economic factors, many ofwhich are not tracked in a comparablemanner. The G20 countries do not share thebusinesses. Public and private organizationsprovide few indicators focusing onentrepreneurial activity, and whenavailable, they typically do not cover allthe G20 countries. Indicators with comprehensive coverageof G20 countries are often broadentrepreneurship.those indicators that are timely, robustand largely available for the G20 group ofcountries. The key performance indicatorsby pillar are listed in the table below.Indicator SourceAccess to fundingStart-up fundingVenture capital availabilityGrowth fundingDomestic credit to the private sector(ratio to GDP)*Private equity deal value (ratio toGDP)Expansion fundingFor entrepreneurs with innovative but risky projects, survey responses to whetherventure capital is generally available (1= not true, 7= true)Financial resources provided to the private sector, including through loans,purchases of non-equity securities, and trade credits and other accounts receivablePrivate equity deal value in a country as a ratio to GDPWorld EconomicForumThe World BankDealogic, IMFIPO amount invested (ratio to GDP) IPO deal value in a county as a ratio to GDP Dealogic, IMFEntrepreneurship cultureFear of failureResolving insolvency (% of estate) The average cost of bankruptcy proceedings The World BankInnovation and research cultureR&D spending (% of GDP)articles (ratio to population)Tax and regulationDirect taxationCompany tax/mandatory contributionIndirect taxationCurrent and capital expenditure, both public and private, on R&D, which includesbasic research, applied research and experimental developmentphysics, biology, chemistry, mathematics, clinical medicine, biomedical research,engineering and technology, and earth and space sciencesTotal tax rate (including corporate tax rate, property tax, employer-paid socialsecurity contributions and other taxes) that a medium-size company must pay orwithhold in a given yearThe World BankThe World BankThe World BankIndirect tax rate (%) The standard VAT or GST rate for each country EY, nationalagencies70 | The power of three

MethodologyOur commitment to entrepreneurshipWe have been working with entrepreneurs for more than three decades.We make this investment because we passionately believe that encouragingentrepreneurship and innovation results in economic growth and prosperity.and high-growth companies throughprograms such as EY Entrepreneur OfThe Year and Strategic Growth Forumsis a cornerstone of our brand identity.organization to form a highly integratedglobal network — Strategic GrowthMarkets — dedicated to serving the fullspectrum of entrepreneurial, high-growthcompanies. We place a high value onadvising these companies and provide thehigh levels of attention, dedication, talentand respect that many other professionalservices organizations reserve for theirFortune 50 clients. EY Entrepreneur Of The Year is theworld’s most prestigious business awardfor entrepreneurs. This unique awardmakes a difference by encouragingentrepreneurial activity among thosewith potential and recognizing thecontribution of people who inspireothers with their vision, leadership andglobal award of its kind, EntrepreneurOf The Year celebrates those whoare building and leading successful,growing and dynamic businesses,recognizing them through regional,national and global awards programsin more than 150 cities in more than60 countries. In 2001, EY createdthe World Entrepreneur Of The YearAward to recognize the global impactof entrepreneurs and to honor thepositive impact they have on their localcommunities, their countries and theworld.72 | The power of three EY Strategic Growth Forums areconducted around the world to provideleading entrepreneurs, investors,top executives with the opportunityto explore strategies for growth,expanding into new markets, taking newways to innovate.The Forums are packed with dynamicspeakers, topical and relevant sessions,panel discussions, networkingopportunities, and inspirationalentrepreneurs and executives. Wellestablished in the US, the Palm Springsevent is described by Forbes as a “must-around the world. With the EY Entrepreneurial WinningWomen TM program, we channel ourresources and convening power tohelp women entrepreneurs achievethe full potential they envision for theirand celebrates high-potential femaleentrepreneurs and provides them withpersonalized one-on-one businessinsights and advice, as well as insideraccess to strategic networks ofestablished entrepreneurs, executives,advisors and investors. Unlike manyprograms that are focused on helpingwomen to start a business, EY’sEntrepreneurial Winning Womenprogram supports women with existingenterprises to scale up and becomemarket leaders. EY has a sponsorship agreementwith Endeavororganization that works with highimpactentrepreneurs in rapid-growthmarkets to improve and grow theirbusinesses. Endeavor aims to transformrapid-growth economies and establishentrepreneurship as a leading force forsustainable economic development. EY extended its commitment to youngentrepreneurs with the expansion of itsrelationship with NFTE. Through theEntrepreneur Of The Year program inthe US, EY has provided 16 scholarshipsto NFTE’s Youth Entrepreneur Awardwinners. In 2011, we extended oursupport by funding new scholarshipsin Belgium, China, Germany, India,Ireland, Israel, the Netherlands and NewZealand. The scholarships are just oneof three strands of EY’s involvementwith NFTE. We also aim to have an EYstaff have the opportunity to volunteertheir time to NFTE.NFTE began as a program to preventchildren from leaving school beforethey graduated. The aim is to improveacademic performance among studentsschool. Working with students fromdisadvantaged backgrounds, theprogram helps them see the relevanceof their studies as they learn skills inkey subject areas alongside businesscreate business plans for their ideasand compete in classroom, citywide andnational competitions. To date, NFTEhas worked with nearly 400,000 youngpeople from low-income communitiesin programs across the US and aroundthe world.

Methodology After being asked for many years,“What do market leaders do to becomethe answer. And the ExceptionalEnterprise model (below) is the result.Through our global Entrepreneur Of TheYear program, we have the privilege ofworking with some of the world’s mostdynamic business leaders. By surveyingthis unique group, we have been ableto clarify the common challenges andopportunities that they face, togetherwith the secrets to their success. Global Center for Entrepreneurshipand Innovation. With more than 30years’ experience of working withmany of the world’s most dynamicand entrepreneurial businesses, weunderstand the enablers and barriersto growth. Our Global Center forEntrepreneurship and Innovation putsour know-how, people and services atconnections that move you ahead. Findout more at ey.com/entrepreneurship.Becoming an exceptional enterpriseCustomer focusCustomerrecruitmentandmanagementFlexibilityPeoplerecruitmentand retentionVisionResilienceQualityManagingFuturemarketleaderManagingriskTeamworkIntegrityInnovationOperationaleffectivenessPassionTransactionsand alliancesLeadershipThe power of three | 73

MethodologyThe G20 Young Entrepreneurs’AllianceEY supports the G20 YoungEntrepreneurs’ Alliance (G20 YEA)in its work to demonstrate youthentrepreneurship around the world.We are very grateful to the YEA forits input in developing the EY G20Entrepreneurship Barometer 2013 andfor its ongoing work to help publicize thereport’s conclusions.About G20 YEAThe G20 YEA is a collective of leadingentrepreneurially minded organizationsrepresenting the G20 countries that seekto leverage youth entrepreneurship as apowerful driver of economic renewal, jobcreation, innovation and social change.The Alliance was founded in 2010 as amovement to engage the G20 leadersin the cause of youth entrepreneurship,share information across borders, effectpositive policy change and create aglobal network of young entrepreneuradvocates, while building a collaborativeentrepreneurial environment worldwide.Find out more at www.g20yea.com.The G20 Young Entrepreneurs’Alliance SummitAnnually, the G20 YEA holds the G20YEA Summit prior to the G20 Summit ofpolitical leaders. After successful eventsin Toronto, Canada (June 2010); Incheon,South Korea (November 2010); Nice,France (October 2011); and Mexico City,Summit was held in Moscow, Russia,in June 2013 and united more than400 young entrepreneurs from acrossthe G20 member states. The three-dayforum provided the young entrepreneurswith opportunities to meet with theirpeers, learn best practices in growingdynamic companies, and celebrateentrepreneurship as the leading source ofjob and wealth creation, innovation andthe well-being of all nations. The goals ofthe summit included: Leveraging the vital role entrepreneursplay in the growth, job creation,innovation and competitiveness ofnations Identifying actions likely to promoteentrepreneurship among young peopleand provide input for governments byrecommending and assembling the bestproposals within a communiqué to beendorsed by the G20 political leaders attheir annual summits Bringing together entrepreneurs fromaround the world to exchange andshare their experiences with the leadersof the entrepreneurial ecosystem fromthe 20 most important economies inthe world Giving inspiration to current and futuregenerations of entrepreneursOutcomes of Moscow 2013 G20YEA SummitCommunique goal“ Position youthentrepreneurship asan important aspect ofG20 and B20 leaders’agenda as a majordrive for job creation.”Communique requirements Become the voice of youngentrepreneurs Be applicable in all G20 countries Address G20 challenges in the mosteffective way (particularly youthemployment Correlate with current G20’s agendaCommunique recommendations Improve access to digitalinfrastructure and services Provide education to enhanceknowledge, networks and innovationskills Make the business environment andlabor legislation more supportive forentrepreneurs ups and growing enterprises74 | The power of three

Make your voice heardJoin the debateTweet #G20eyey.com/G20eyThe power of threeTogether, governments, entrepreneurs andcorporations can spur growth across the G201|2|3|The EY G20 Entrepreneurship Barometer 2013 enables each G20 nationto identify the strengths in its entrepreneurial ecosystem, as well asthe main opportunities for further development, and benchmark theirprogress and performance.2013 analyzes entrepreneurs’ perceptions, quantitative indicators andgovernment leading practices across the G20 to provide more than 40 keyrecommendations across governments, entrepreneurs and corporations.of the G20 member countries, to provide a better understanding toentrepreneurs considering international expansion.ey.com/G20eyThe power of three | 75

EY | Assurance | Tax | Transactions | AdvisoryAbout EYEY is a global leader in assurance, tax, transaction and advisory services.The insights and quality services we deliver help build trust and confidencein the capital markets and in economies the world over. We developoutstanding leaders who team to deliver on our promises to all of ourstakeholders. In so doing, we play a critical role in building a better workingworld for our people, for our clients and for our communities.EY refers to the global organization, and may refer to one or more, of themember firms of Ernst & Young Global Limited, each of which is a separatelegal entity. Ernst & Young Global Limited, a UK company limited byguarantee, does not provide services to clients. For more information aboutour organization, please visit ey.com.About EY’s Strategic Growth Markets NetworkEY’s worldwide Strategic Growth Markets Network is dedicated to servingthe changing needs of high-growth companies. For more than 30 years,we’ve helped many of the world’s most dynamic and ambitious companiesgrow into market leaders. Whether working with international mid-capcompanies or early-stage venture-backed businesses, our professionalsdraw upon their extensive experience, insight and global resources to helpyour business succeed. ey.com/sgm© 2013 EYGM Limited.All Rights Reserved.EYG no. CY0559ED 0715This material has been prepared for general informational purposes only and is not intendedto be relied upon as accounting, tax, or other professional advice. Please refer to your advisorsfor specific advice.The opinions of third parties set out in this publication are not necessarily the opinions of the globalEY organization or its member firms. Moreover, they should be viewed in the context of the time theywere expressed.ey.comContactsUschi SchreiberGlobal Markets Leader and GlobalGovernment & Public Sector LeaderEYuschi.schreiber@hk.ey.comMaria PinelliGlobal Vice ChairStrategic Growth MarketsEYmaria.pinelli@ey.com