Supporting Young Individuals with Ideas: a Case Study of a Swedish Entrepreneurship Programme

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1 Multi-Year Expert Meeting on Enterprise Development Policies and Capacity-building in Science, Technology and Innovation (STI) (Fourth session) Geneva, January 2012 Supporting Young Individuals with Ideas: a Case Study of a Swedish Entrepreneurship Programme by Magnus Klofsten Founder, Center of Innovation and Entrepreneurship, Linköping University Sweden This view expressed are those of the author and do not necessarily reflect the views of UNCTAD.

2 Paper for the Multi-year expert meeting on enterprise development policies and capacity building in science, technology and innovation (STI) (fourth session), Geneva January 2012 SUPPORTING YOUNG INDIVIDUALS WITH IDEAS: A CASE STUDY OF A SWEDISH ENTREPRENEURSHIP PROGRAMME Magnus Klofsten, Linköping University, Sweden (magnus.klofsten@liu.se) A huge challenge today is how to develop efficient activities to promote such entrepreneurial behaviour and minimise the barriers involved. One way to achieve that could be to arrange entrepreneurship programmes. The aim of this paper is, through a case study; find out how efficient entrepreneurship training can take place, and what the actual success factors are. The data analysed comes from the Entrepreneurship and New Business Programme (ENP), for training individuals to start new technology-based or knowledge-intensive businesses. The model was developed at the Centre for Innovation and Entrepreneurship (CIE) at Linköping University and the help of a network of enterprises, SMIL ( The programme has spread to many districts in Sweden and has, in recent years, also become internationalised. Since the beginning in 1994, over 50 programmes have been carried out, which has resulted in more than 500 new businesses as well as a dozen or more business areas within established organisations. Today, these firms and organisations employ over 2000 people. The ENP case The programme began in the spring 1994, and it was the last piece to be laid in a more comprehensive programme structure of support activities for technique- and knowledgeintensive firms with roots in the university milieu. The programme s content and execution The start-up of a new business requires knowledge in many different areas, and it was therefore considered important that the nature of the programme be holistic and the content broad, spanning everything from business development, funding, and leadership to legal matters and presentation techniques. The participants should also be progressive in their entrepreneurship with future business growth in sight. In the programme, only soft resources in the business development process such as experience, knowledge, guidance, and networks are provided. Resources of a hard nature such as money, premises, and equipment are the responsibility of the participant. Specifically, the ENP contains the following activities: Business plan. Each participant develops a simple business plan where the purpose to structure and clarify the idea. Workshops. In these, the most important components in the business development process are taken up, and emphasis is placed on the ability to present their idea. Mentoring. Each participant is given a mentor who has been or is a senior entrepreneur. Supervision. The participants meet in person with a supervisor to check progress and receive coaching. Network. Each participant is given membership in SMIL free of charge for the year in which the programme takes place. Another aspect of the programme that should be emphasised is access to a good network, for example, SMIL. SMIL comprises not only numerous of experienced entrepreneurs but also financiers and other supporting organisations. There is also a close co-operation with the local science parks, not only in the form of available premises but also in the recruitment of participants to the programmes and in the execution of certain workshops. Another aspect is the distinction between mentoring and supervision. The former has more to do with the transmission of actual experiences of business from the mentor to the participants while the role of the latter is more that of following up (making sure that the work of the business plan is carried out), auditing, and coaching. In the beginning, the programme took approximately one 1

3 year, beginning in the early spring and finishing in November or December. It soon became clear that the time was far too drawn out, mainly because most participants were able to start their firms before the programme concluded quite simply, the programme was needed for a shorter time span. It was therefore decided to shorten the programme considerably, and today it spans a four to six month period. The results were positive, and the participants are more engaged than previously for the duration of the programme. Target group and recruitment The ENP is marketed by advertisements in the university s in-house newspaper and through leaflets distributed primarily to the students in their last year of undergraduate study and graduate students. Firms and other organisations, which are members of SMIL, are invited via , fax, or regular mail. Perhaps the most important instrument for marketing is direct communication with students through the courses given in entrepreneurship or by word-ofmouth, from satisfied participants of earlier programmes. The ENP has two main target groups: Students, researchers, and teachers at Linköping University Technology-based or knowledge-intensive firms and organisations in the region The criteria used, to recruit people from these target groups, are very simple participants should have a communicable idea (which need not be particularly articulated), and they should be enthusiastic. Programme management to ensure that the applicants fulfil these two criteria and that they have understood that the aim of the programme is for the participants to start a new business; that the programme is not the usual credit-bearing university course interviews each of the applicants. The relatively simple and informal recruiting procedure was chosen based on the following: It is almost impossible to assess in the early stages of an idea whether it is economically sound, and it is not at all certain that the first idea will be the idea that shapes the future of the company (Timmons, 1994; Klofsten, 2005). The entrepreneurial process itself is distinguished by an active and achievement oriented behaviour of people in the form of being able to develop different business opportunities (McClelland, 1961; Bygrave, 1994). The programme, consequently, places the individual (the entrepreneur or the entrepreneurial team) at the centre rather than the idea. To develop an idea into a business is a process that can take a long time. It is wholly dependent on the persons behind the firm and their ability to take advantage of business opportunities in the market. Consequently, active participation in the programme is expected where the participants must be responsible for their relationship with their mentor, take advantage of the network that is offered (of the available network of firms), and exploit the relations that are created in the programme. That which is offered can be compared to an arena of activities or opportunities where the participant is responsible for taking advantage of these as effectively as possible. An important component, therefore, is the ability of the entrepreneurs in the programme to set aside enough time for both the programme s content and their own development work. Funding the programme There is no fee for participating in an ENP, a decision that was taken before the programme was initiated. The reason was that the target groups, largely expected to be students, lack the ability to pay, and it would therefore not be suitable to demand a fee that might cause certain individuals with entrepreneurial characteristics perhaps to miss this opportunity. On the other hand, a deposit of SEK 500 (approximately 45 Euro) is required of each participating idea (project) at the beginning of the programme. This fee is then returned on the condition that the participant is committed, turns in an evaluation, and presents his or her business plan at the end of the programme. It has also been discussed whether some form of ownership in the new 2

4 activities (firms?) could be a long-term source of funding for the programmes. This, however, was not realised, primarily because the University and SMIL wanted to remain neutral partners and avoid the image of an investment company. The programmes are financed through public money from the Swedish Agency for Growth and the Technology Bridge Foundation. The costs of running a normal-sized programme at the university (10 12 potential firms) are reported to be approximately 450 thousand SEK (45 thousand Euro). Feedback from the participants Continual follow-ups are made and some of the participants have responded that the programme gave them the following: Better structure in business because of a more thorough business plan. Supporting and lots of pressure. The network that we were given access to has stimulated our development. I feel more secure on what is required and have been given a good foundation to stand on.' It has meant that I have a more professional view on entrepreneurship. Analyse the business idea and business plan. Had it illustrated in different ways. A good start and probably a contributing factor to why I kept at it. Have become more secure in my role as a business leader. Those, which, without exception, were felt to be the most valuable result of participation, were three factors. First, the network with which the participants come into contact through their mentors and SMIL. Second, the forced pace that the programme has on the participants own development and third, the structure (business model) that the participants develop of the business they intend to develop. Of the number of participants who participate in a programme, an average of 75% start firms during the course of the programme and 3 years later, 75% of the newly started companies have survived. After 3 years, 20% of the surviving companies have more than five employees. Those who do not complete the programmes, state primarily causes such as the splitting up of the founder team, lack of time, family circumstances, or a business idea that did not turn out well. Lack of time is the most common reason why researchers doctoral candidates drop out of the programmes. Success factors in entrepreneurship training From the start, we have regularly evaluated the programmes, in order to continually improve their structure and process. Based on this work, the following success factors have been identified: Establish a holistic approach. The contents of the programme should be broad, so that many conceivable aspects of starting new businesses are dealt with. Use education and training as building blocks in the programme and the software to improve the self-realisation of the participants. The participants on their own acquire hard factors such as money and premises. Ensure that the supply of competence is suited to the situation. Early business development is dynamic and requires continual adjustments of the programme to the situation and needs of the participants. Define actual needs. It is not certain that the participants themselves are the ones best at defining their actual needs. The supervisor or the mentor can help, based on the experienced need, to define the actual need and then to assist with a solution. Link the programme to a network of firms. The participants seldom have an established network and are usually in great need of coming into contact with other business leaders, partly to get advice but also to form business contacts. Increase the participants self-confidence as business leaders. Many of the participants lack experience in entrepreneurship, and it is important to begin to view them as business leaders as soon as possible and get them to grow into this role. 3

5 Emphasise commitment. Before the start of the programme, it is important that the participants understand that the results are completely dependent on whether they are able to set aside enough of their own time for the programme's activities and for their own ongoing project work. Demand distinct and measurable results. The participants work in the programme must be able to be documented in some way, for example, through a business plan, a project specification, work performance, or visits made to customers. Use a tried and proven set of tools. Because the programme is largely practical, success will to a large extent depend on which tools are used, for example, in the programme s workshops. Engage people, for example, experienced entrepreneurs, who have toolboxes that, from experience, have proven to be functional and successful. Provide a neutral arena. That the supervisor is independent is important if dialogues with the entrepreneurs are to be able to be conducted in confidence and credence given to the guidance and coaching provided by the supervisor. Plan mentoring. It is our experience that taking time to carefully choose a group of mentors is worth the effort. Factors that are important to consider are, for example, personal chemistry, age, and competence profile. Include some theory alongside the practical. The programmes should be practically oriented, but it is often advantageous that certain steps are theoretical in nature, above all, to be able to structure the work in general. Focus the programmes on target groups. One important ingredient is a strong commitment from the participants and their mutual contribution to each other s activities. The ENP is designed for technology-based and knowledge-intensive activities where the majority of the participants have an academic background. Build credibility. One requirement for being able to carry out a programme effectively is that the participants are frank with each other. Business development, however, is often associated with secretiveness, and it is hardly suitable to write secrecy agreements with everyone who is involved in a programme. Therefore a working climate based on confidence must be quickly established among the participants and with programme management to create an air of frankness. Find a balance between the formal and informal. Entrepreneurship is associated with activity, drive, flexibility, and frankness. This must be reflected in the organisation of the programme at all levels. At the same time, there must also be orderliness. Brief conclusions Previous studies on entrepreneurship training have shown that individuals who are ambitious, well-motivated, and willing to take risks often run up against barriers that inhibit them from letting loose their energy (Gibb, 1990; Klofsten et al, 2010). The above success factors are all of a soft nature. It is important under the circumstances not to be blinded by how many firms have been started or how many participants have dropped out. What is important, instead, is the quality of the activities and the qualitative development that the individuals go through during the programme. For society, the number of new firms or the number of new jobs created is a natural measure of success. This way of evaluating success must, however, be used with some care. With experience from studies made at, for example, Chalmer s Innovationcentrum, we know that the increase in employment through new business development can be expressed as an exponential function (Wallmark and Sjösten, 1994). This means that the strong employment effect appears first 7 10 years or later after the start of a new business. We must therefore have a long-term perspective on initiatives such as the ENP. One of the most important aspects in all entrepreneurship training is to attempt to minimise the previously mentioned barriers by encouraging individuals to take the step to start, increasing their self-confidence, and at the same time giving them professional aid to realise their ideas. These aspects appear prominently in the evaluations that have been made of the ENP. The participants emphasise not only the mental aspects in the programme but also that they were better able to structure their business development work, that they had access to a network of experienced entrepreneurs, and that they were given professional treatment and feedback on their ideas. Programme management 4

6 has also witnessed with great satisfaction how individual participants were able to grow as entrepreneurs during the course of a programme. REFERENCES Bygrave, W.D (1994) The Portable MBA in Entrepreneurship, Toronto: John Wiley & Sons Gibb, A. A (1990) Design effective programmes for encouraging the small business start-up process, Journal of European Industrial Training, 14(1), Klofsten, M (2005) New venture ideas: An analysis of their origin and early development, Journal of Technology Analysis and Strategic Management, 17(1), Klofsten, M., Heydebreck, P., & Jones-Evans, D (2010) Transferring good practice beyond organizational borders: Lessons from transferring an entrepreneurship programme. Regional Studies, 44(6), McClelland, D.C (1961) The achieving society, Van Nostrand, Princeton, NJ Timmons, J.A (1994) Opportunity recognition: The search for higher potential ventures, in W.D. Bygrave (ed.), The portable MBA in entrepreneurship (26-54), John Wiley & Sons, Toronto Wallmark, T., Sjösten, J (1994) Stability and turbulence among spin-off companies from Chalmers University, paper presented at the 8th Nordic Congress on Small Business Research, Halmstad, Sweden, June 5