I attended two excellent events in the UK last week that featured entrepreneurs detailing how they started up new ventures.  Their stories were inspiring not because they always had positive outcomes, in fact many had failed projects too.  They were inspiring because they took a risk and worked hard to make it success.  Entrepreneurs are the lifeblood of our global economy.  Governments need to do more to support startups. As the global economy emerges from recession, entrepreneurs and small business are often highlighted by government and industry leaders as the fuel that will get the jobs engine going again.  Indeed, most people work in small enterprises.  According to a report by the Organisation for Economic Co-operation and Development (OECD), small and medium sized enterprises account for 95% of businesses and 60-70% of jobs.

And, difficult economic times are often the best times for starting new ventures, according to a research paper published last year by the US based Kauffman Foundation.  The report details that more than half of the companies on the 2009 Fortune 500 list were launched during a recession or bear market, along with nearly half of the firms on the 2008 Inc. list of America’s fastest growing companies.  Job creation from startup companies is less sensitive to downturns compared to the overall economy.

Given the important role that startup ventures play in the economy, are governments doing enough to encourage SME formation, investment and job growth?  At the conferences last week, the Investec Entrepreneurs’ Summit and the Cranfield University Venture Day, entrepreneurs addressed this question.  It is very timely to ask, as economic growth, financial stability, and employment are top of mind for government leaders today.

Starting and growing new ventures requires many things.  First, an attitude towards risk and society’s acceptance that is is ok to try and fail are very important.  Access to resources, financing, talent and open markets are key success factors.  Light regulation and easy registration of new enterprises encourage entrepreneurs to start.  And protection of intellectual property rights are important to ensure that investments in innovation are rewarded.  Governments can help in many of these areas including providing incentives for taking on new hires and keeping capital gains taxes low so that capital appreciates.

The public sector is also one of the largest purchasers of goods and services, so allocating a fixed portion of government procurements to be sourced by SMEs is a good way to help new ventures.  The OECD reports that government procurement is 5% of total GDP in most developed countries, and the single biggest consumer of goods and services.  By making procurements transparent and simple for SMEs to take part in the process, governments can stimulate and support these businesses.  And many governments are implementing a policy setting aside fixed proportions of procurement for SMEs to bid.

Economies live and die by the health of entrepreneurs who venture to startup new businesses.  This key component of our capitalist economy creates growth and jobs.  The inspiring stories of entrepreneurs who took the risk to start up a business or invested in a turnaround of a failing enterprise reminds us we need to do more to encourage them.