The report, Disrupt Inc. How young people are challenging the conventions of entrepreneurship, has found that young entrepreneurs are very different from the typically middle-aged people who appear on the BBC’s Dragons’ Den. These tend to be armed with a thick business plan and are looking for tens, if not hundreds, of thousands of pounds in seed money to start up their own business after working as an employee up to that point.
In contrast young entrepreneurs tend to fall into three categories:
- The accidental entrepreneur almost stumbles into starting a business because of their interests, passions or working lives. The motivation to begin a venture is often social and emotional rather than monetary.
- The lean entrepreneur subscribes to a bootstrap business model with rapid product iterations. Although their success will to an extent be dependent on external finance and strategic planning, some are determined to avoid these at the start of their business.
- The collaborative entrepreneur seeks business partners as a source of emotional and practical support. They place a high value on personal contacts and the types of practical help they can provide – often in the form of reciprocal favours.
Recent research by the Global EntrepreneurialMonitor found that while 9.5% of 18 to 24 year olds in the UK intended to start a business, only 3.6% ended up establishing one within 12 months. This compares poorly to the 7.7% of 25 to 44 years olds intending to start a business and 6.4% actually achieving their aim.
The drop out rate is also much higher within the first year of operation for younger entrepreneurs, 35% for 18 to 29 year olds compared to 10% for those aged 30 or more.
Benedict Dellot, co-author of the report said that financial help and advice available to support young entrepreneurs did not “cater well for these unconventional entrepreneurial journeys”.
“The level of debate around the availability of start up finance, for instance, overlooks the large numbers of young people who prefer to bootstrap their way through the initial stages of their business,” he said.
The report suggests several proposals to encourage and improve the support available to young entrepreneurs. These include embedding entrepreneurial learning at all stages of education to develop the curiosity and personal competencies needed to start a venture, establishing micro-loans to enable young people to build prototypes and test the viability of their business idea with real customers in the market, and stoking demand by encouraging procurers such as local councils to buy the products and services of young entrepreneurs.
Alyssa Smith, a 26 year old jewellery designer from Hertfordshire, just north of London, started her business with £300 given to her by her grandma, using the money to buy a jewellery bench. She sold the pieces she made at a mixture of craft fairs, local shops, market stalls and in people’s houses.
She says her first years were a time when she did not earn a great deal, but was able to boost her profile and grow slowly but surely on a tight budget. “If you’ve got no option, you have to bootstrap,” she says.
Three years on, Alyssa is selling her products to a growing international market and expects a turnover in excess of £100,000 in the next financial year.
Andrew Haigh, Executive Director of Client Propositions for Coutts, said: “As the economic environment changes around us, so too does the way in which young entrepreneurs seek to engage with enterprise – both in terms of their methods when it comes to starting a business, and the way in which they seek to access the expertise and resources needed.
“The report attempts to shine a light on the experiences and preferences of modern young entrepreneurs, and how their changing needs for support requires us to be reactive and flexible in the services and advice we provide.”
Disrupt Inc, is part of RBS Inspiring Enterprise. RBS is committed to promoting economic growth and to fostering the right conditions for people to turn their ideas into business success.
By the end of 2015 RBS Group will have helped 100,000 young people to explore enterprise, develop their skills and start up in business, whatever their background. Find out more at Inspiring Enterprise.