Entrepreneurship: Where failure is part of recipe for success

anuary 24, 2014 5:00 am

Entrepreneurship: Where failure is part of recipe for success

By Amie Tsang

With Silicon Valley constantly generating tales of innovation and moneymaking, it is hardly surprising that many should hope to emulate that success – especially young people who find themselves in a tough economic climate after leaving schools and universities.

Governments, too, are hoping that young enterprise will go some way towards lowering youth unemployment and spurring their economies.

In December, George Osborne, the UK chancellor, announced an expansion of the government’s Start Up Loans scheme.

However, many organisations offering funding and training have realised that their approach has to be reassessed in light of the skills gap.

Richard Branson, the Virgin Group founder, listed some of the elements that young people need to succeed: “Secondary education should place greater emphasis on critical thinking, problem-solving and emotional intelligence – key traits of successful entrepreneurs and indeed successful people.”

But skills such as these are difficult to measure and hard to teach. Some organisations have found ways to ensure young people going through their entrepreneurial programmes get experience to help develop these qualities.

Rather than allowing young people to pitch for funding early on, a scheme run by Prince Charles’s charity for young people gives participants a mentor and a small grant first to test out their plan, for example by setting up stall for a day in a market.

“Businesses that we saw weren’t necessarily being successful and it was our responsibility to help a young person understand exactly what running a young business means,” says Martina Milburn, chief executive of the Prince’s Trust.

“A lot of the young people we work with don’t understand that.”

Ashoka, the social enterprise network, also tries to enrol people at an early stage, as it means they get more opportunities to test themselves and fail.

Marina Mansilla Hermann, campaigns director for Ashoka’s global Youth Venture project, compares the approach with five-a-side football, where younger players can develop on a smaller pitch.

This ultimately makes people more prepared when they bid for funding or try to launch their project. It also breaks down the sense of social stigma that might be attached to failure in places such as Japan.

“As part of our process, we embrace failure,” she explains. “Of course, it’s not [the] ultimate goal, but if it happens we have to learn from it.”

Rob Wilson, a co-director at Youth Venture UK, adds that “the challenge is that the education system says it’s bad to fail”.

European graduates are “graduating through an education system that hasn’t challenged them in any way shape or form about the world”, he says.

“I would much rather employ someone who has tried to set up a venture and failed … They’ll have tried to recruit, sold things, manufactured, done logistics, dealt with everything.”

And this is advice many organisations that want to help budding young entrepreneurs would do well to follow themselves, according to a study conducted by the Overseas Development Institute.

Claudia Pompa, a researcher at the ODI, points out that data on the success of entrepreneurial schemes are often incomplete and not comparable, so many organisations do not know what works and what does not.

“The [development] industry itself could do so much more in terms of sharing best practice … [It] is not very good at acknowledging failure,” she says.

“There are fundamental things you have to take into account when you ask an 18-year-old to walk into a bank to ask for a loan and offer collateral.”

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Networks: Budding entrepreneurs find support and contacts in shared forums

“When you announce you’re going to start up your own business, people are either worried for you or they have over-expectations,” says Rachel Hanretty, who set upMademoiselle Macaron, a business making macaroon biscuits.

Faced with such differing attitudes, young Scottish entrepreneurs have turned to enterprise networks.

Ms Hanretty has found reassurance in meeting others at networking events run by the Prince’s Trust charity.

Mhairi MacLeod, founder of Lux, a marketing agency dedicated to building food and drink brands, has also found that entrepreneurship does not necessarily mean working alone.

She found support in a shared workspace for young businesses: “You’re all in the same boat. I can go over and ask my neighbours what they would do. More often than not they have been in that situation.”

In South Korea meanwhile, networks are opening streams of funding to budding entrepreneurs.

The Banks Foundation for Young Entrepreneurs, a non-profit group funded by banks, set up a hub for entrepreneurs in Gangnam, the Silicon Valley of Seoul. The hub, calledD.Camp, gives members access to a network of contacts, workspace and mentorship.

Hahn Ryu, manager of business planning at the Banks Foundation, says the opportunities D.Camp has given young entrepreneurs have been crucial to funding new companies.

He cites Korbit, a Bitcoin exchange, as one of the start-ups that attracted funding through contacts made at the hub.

“Lots of people come here – investors casually drop by to see if there are any companies they would like to invest in,” he says. “They have a casual conversation over coffee and this leads to investment.”

While the South Korean hub is funded by banks, back in Scotland, Vicky MacDonald credits the government for the existence of young enterprise networks.

When she set up Edinburgh Markets, which helps street traders, she was pleasantly surprised by the support for social enterprises. It made her feel “there was a revolution happening in Scotland”.

Ahead of this year’s in­dependence referendum, Angela Constance, minister for youth employment, says the young enterprise networks and her portfolio, which does not exist at UK level, are evidence that “Scotland has what it takes” to survive alone.