Investment in Youth Entrepreneurship Needed

A national Not for Profit has said there is a “startling lack of attention” given to the contribution of young Australians attempting to start and run their own ventures.

In a submission to the Productivity Commission Inquiry into Small Business Set Up, Transfer and Closure, the Foundation for Young Australians (FYA), has called for a national strategy to back Australia’s young innovators and entrepreneurs.

The FYA said the Inquiry’s Draft Report included no discussion of young entrepreneurs or the barriers to their success, despite their current and future potential as a driver of jobs growth, self-employment and innovation.

FYA CEO Jan Owen AM said at a time when the role of small business and entrepreneurship is at the forefront of economic planning and policy, far more attention needed to be paid to the nation’s future small business leaders.

“We know that Australia’s economy is changing due to an ageing population, shrinking workforce and digital disruption. International research indicates young people will have on average at least 13 different jobs across four different industries throughout their lives,” Owen said.

“To secure our economic and social prosperity, we need young Australians to be equipped and supported to drive new innovations and business opportunities for themselves and their communities.”

FYA’s submission reveals new international data from the Global Entrepreneurship Monitor which shows:

• While general entrepreneurial activity in Australia is similar to highly entrepreneurial countries such as the USA, activity among 18-24 year olds is approximately 40 per cent lower than their American peers

• Only 8.7 per cent of 18-24 year old Australians are starting new businesses – much lower than the average national rate of 13.1 percent across all age groups

“Australia is one of the only advanced economies without dedicated youth entrepreneurship initiatives supported by the government,” Owen said.

“While the US, Canada and Germany have recognised the value of youth entrepreneurship and invested in national strategies to support it, Australia is lagging behind. This is a missed opportunity.

“By investing in young people to become more entrepreneurial and innovative we can build the workforce of the 21st century, ensuring the next generation can create solutions to our national challenges and have the potential to become job creators, not just job seekers.

“We see a key role for the government in creating an enabling environment for these young entrepreneurs, with targeted initiatives, such as FYA’s Young Social Pioneers program, to unleash their potential to contribute to innovation, growth, social outcomes and prosperity.”

A survey of 65 current and former entrepreneurs engaged in FYA’s Young Social Pioneers (YSP) accelerator program found:

• 75 per cent of respondents identified access to finance as a barrier to starting and growing their ventures

• Almost half of respondents identified human resources and people management as a barrier

• 40 per cent identified complex legal structures and regulations as a barrier

• The majority are having to balance multiple jobs, study and volunteer commitments on top of leading their enterprises

• Crowdfunding was a common model used for raising external funds

“Given the growing evidence that our country’s future economic strength will rely heavily on the contribution of entrepreneurship and enterprise, we need to create an environment that supports young Australians to succeed in social and business entrepreneurship,” Owen said.

“Unless there is a strong history of self-employment in their own family, our analysis indicates young people aren’t likely to even consider starting their own business as a career option, let alone have the skills and confidence to do so.

“Enterprise education through programs like FYA’s $20 Boss is required to ensure all young people have the foundational skills to be innovative, entrepreneurial and financially literate. These kinds of programs that start early in high school to expose students to the opportunities of social and business entrepreneurship will be vital to equipping young Australians for the current and future labour market.

“There is also a need for better access to finance for young people to get their ventures off the ground. Young people don’t have assets like the family home that they can use to access commercial loans and therefore often rely on personal savings to get their ventures up and running.

“Progressing new regulations to improve access to equity crowdfunding and developing microfinance schemes like those available to apprentices will help reduce the financial barriers and boost opportunities for young entrepreneurs to turn their ideas in reality.”

FYA’s full submission is available here.