THE BLOG
10/15/2013 12:43 pm ET | Updated Jan 23, 2014

Why Entrepreneurs Need the Power of Three to Survive and Thrive

Successful entrepreneurs are the products not only of their own ability, hard work, tenacity and vision, but also of their cultural background, education and their communities. They are vital to the health of the world economy, creating more than half of all jobs in most G20 countries alone, yet their voices often go unheard by governments, regulators and even other businesses. So what can be done to give entrepreneurs the tools and create the environment they need to survive and thrive? How can we help them reach their full potential, create jobs and ultimately drive economic growth?

These are the questions that EY sought to answer in its G20 Entrepreneurship Barometer 2013 report, a survey of more than 1,500 entrepreneurs in the G20 countries. The barometer benchmarks the G20 countries in terms of the support they give to entrepreneurs across five key pillars:

· Tax and regulations

· Education and training

· Culture of entrepreneurship

· Coordinated support

· Access to funding

Countries that stood out in the survey as entrepreneurial hotbeds are Australia, Canada, South Korea, the UK and the U.S. But even in these markets, it is clear that governments, entrepreneurs and corporations need to work more closely together if they hope to accelerate economic growth and create jobs.

Given the capital constraints on banks in the wake of the financial crisis, access to funding continues to be the biggest challenge facing G20 entrepreneurs. Overall, 70 percent of entrepreneurs surveyed for the barometer said financing is difficult to obtain, with those in Italy and Argentina finding it particularly challenging. Pablo Gonzales, founder of Mexican coffee chain Café Punta del Cielo, sees a dearth of bank funding in his country. "In Mexico today, probably 80 percent of businesses start with funding from family and friends, and the remaining 20 percent will get some help from the government or risk capital. It's hard to raise money for a start-up."

Public aid and government funding are entrepreneurs' second-most important source of finance after bank credit. They also value national start-up programs as a capital resource. Nevertheless, governments need to find other ways to provide entrepreneurs the access to capital they so desperately need to grow. Options include supporting private sector venture capital funds, promoting policies that encourage banks to use lending models that rely on businesses achieving performance milestones rather than providing collateral, and promoting the use of alternative finance sources, such as internet crowdfunding platforms.

But entrepreneurs don't just need help with raising money; they also need coaching on how best to invest it. This is where the ecosystem of entrepreneurs, government and corporations can help by working together. They can serve as advisers and mentors to each other, sharing knowledge of what works and what has not worked in the past.

Tax and regulation are ever-present burdens on entrepreneurs in all G20 countries; governments are viewed as doing little to make doing business less complex. Overall, only 35 percent of entrepreneurs think it has become easier to start a business in the past three years (although that figure topped 50 percent for entrepreneurs in China, Indonesia and Russia). Meanwhile, 84 percent want the tax system in their country simplified, and a similar amount (83 percent) think that tax incentives focused on fostering innovation would benefit entrepreneurship in their country. This discontent is not surprising, and should be leveraged by nations to improve their economies. After all, successful entrepreneurs are known for their refusal to accept the status quo and their drive for constant improvement. Government bureaucracies could learn a great deal from them.

For example, U.S. entrepreneurs are especially critical of the U.S. tax and regulatory regime. They are frustrated with the uncertainty of regulation and when tax reform legislation might be passed and implemented. In my experience, one of the things that make entrepreneurs so special is their ability to adapt, to pivot and to respond to changing regulatory policy and market conditions. The uncertainty presented by government inaction, however, makes it difficult for even the best to properly invest in and navigate the market. Interestingly, when compared to other G20 countries on key metrics such as time and costs needed to start a business (or the indirect tax rate), the U.S. actually scores better than most other countries. U.S. entrepreneurs however, remain unsatisfied -- and that is exactly the point that entrepreneurs want to voice.

Achieving success is not just about being better than your closest competitor; it is ultimately about achieving your and your market's fullest potential. It is about leading, creating jobs and growing economies. EY's research also finds that entrepreneurs across the G20 are eager to have greater direct access to policymakers so they can play a more active part in shaping their country's business environment. EY also finds that governments can further support entrepreneurs through simplifying insolvency or bankruptcy rules so that they, and the market, can more easily recover from business failures. Entrepreneurs also seek reforms in labor laws to enable employers to scale up or down without paying heavy financial penalties.

Education can -- and does -- make a difference to how successful an entrepreneur becomes. While there are examples of high-profile business leaders who lack formal degrees, a 2009 study by a group of Dutch academics using U.S. labor force data found that, on average, entrepreneurs earn more for every year of formal education that they have. There is also a strong argument for teaching entrepreneurial skills as part of standard school curricula, as the vast majority (84 percent) of those surveyed for the barometer say students need access to specific training to become entrepreneurs.

Entrepreneurs also believe that schools have a role to play in fostering a positive perception of entrepreneurship. One-third say that teachers should share more success stories. "People have this image of entrepreneurs as get-rich-quick cowboys," says Anthony Podesta, the founder of Australian salary packaging company McMillan Shakespeare. "Genuine entrepreneurs want to work hard, make long-term change and bring real benefits to people. Unless you teach people the difference, they won't know."

If a country wants its entrepreneurs to thrive, it needs a set of beliefs and customs that reinforce the fact that entrepreneurship is a valid and respected career choice. It needs to applaud and reward those who succeed, while ensuring those who fail are not unduly stigmatized so that they will dust themselves off and try again. The U.S. is renowned for its culture of celebrating entrepreneurialism, while South Korea, Canada, Japan and Australia also rate highly on the barometer in this respect.

But entrepreneurs appear to be less kindly treated in some early stage and high-growth markets. There, fear of failure continues to hold back many entrepreneurs. For example, just one in four entrepreneurs around the world? saw a failed business as an opportunity to learn. This is an attitude that the ecosystem of entrepreneurs, corporations and governments can help to counter through cooperative efforts aimed at knowledge sharing. Communications campaigns and networking groups, for example, can provide platforms where entrepreneurs share their experiences and learn from one another. They can also help to improve public perceptions of entrepreneurs by highlighting their critical role as job creators.

Successful entrepreneurial countries tend to have strong funding sources, a supportive culture, a business-friendly environment and first-class education systems. They can also draw on high-quality resources within their public, private and voluntary sectors. But what tends to make the biggest difference is the way in which these assets are brought together and exploited by governments. In certain instances, this means government taking the reins and creating policies and programs, especially in emerging economies where the lack of market maturity demands government intervention. In other instances, such as a mature market like the U.S., it might mean that governments relax certain policies and programs to allow the private sector to thrive.

The International Development Community (IDC) offers examples for consideration to all G20 nations. The IDC shows how their successful efforts internationally can apply to efforts to grow economies domestically. For example, the US government's Millennium Challenge Corporation (MCC) and Overseas Private Investment Corporation (OPIC) are both terrific examples of the role government can successfully play in the development of the economies of tomorrow. Both agencies employ public-private partnership models by engaging the ecosystem of entrepreneurs, corporations and governments in the their work. This is an excellent example of the power of three resulting in the delivery of sustainable outcomes. Key to the long term success of their efforts is the role they take as leaders to bring players together, as well as their ability to exit and allow entrepreneurs to flourish without developing a dependency on government. Government is a critical tool and a key link in the chain of three, but not the long term answer by itself.

Only by collaborating with each other, and fully exploiting the power of three, will governments, large corporations and entrepreneurs unleash the full economic might of the world's entrepreneurs as drivers of job creation and economic growth.