Opinion

The Great Debate

To boost entrepreneurship, France tries to change its attitude toward failure

When entrepreneur-turned-venture capitalist Mark Bivens first moved to Paris in 2001, he regularly introduced himself as someone who had started three software companies in the U.S., two of which had flopped. That’s a badge of honor in Silicon Valley, where failure is viewed as a rite of passage. Not in France. One day, a French colleague took Bivens aside and gave him some friendly advice: if you want to reassure people, stop talking about the companies that didn’t work out. “I soon realized that failure carries a stigma,” Bivens says.

The French word “échec” is indeed loaded with negative connotations. It starts at school, where pupils who get bad marks can be quickly branded “in a situation of failure” early in their education, and often drop out before graduating. In the business world, failure has long been fatal: bankruptcy in France is a lengthy and complicated process, and can scar entrepreneurs for life. And in addition to the logistical hurdles of starting a new business after bankruptcy, second-chance entrepreneurs must contend with the social stigma associated with failure, which makes raising funds or even opening a new bank account difficult.

But at a time when France, and Europe more broadly, need a burst of entrepreneurial dynamism to jump-start their economies, an intriguing shift in mentality is starting to take place. It’s partly coming from the top. The French government is now wondering aloud whether this deeply ingrained aversion to failure is actually holding back the nation’s entrepreneurs, preventing them from attaining the sort of scale and greatness that startups in Silicon Valley have been able to achieve. The private sector, led by people with firsthand experience of failure, is also playing a role, by advocating changes that would lessen or remove the stigma and help entrepreneurs get back up on their feet.

Inspiration has come, in part, from the U.S. When Fleur Pellerin, the French minister in charge of innovation and small business, was attending the CES consumer electronics show in Las Vegas earlier this month, she met entrepreneurs and consultants who impressed on her the idea that failure can be beneficial. “I want to change the French cultural software about risk-taking and the vision of failure,” she said in an interview on her return. “Valuing failure is one of the major elements of economic dynamism.”

Public opinion seems to be on her side: a December poll showed that 83 percent of the French think people who fail in business are overly stigmatized. Seventy-one percent agree that in order to succeed professionally people need to take risks, even if that means failing from time to time.

Are there still ‘millionaires next door’?

It’s time to write the elegy for The Millionaire Next Door.

When Thomas Stanley and William Danko published their best-selling book in 1996, they made much of the statistic that “80 percent of America’s millionaires are first-generation rich.” The majority, they pointed out, were entrepreneurs, many working in blue-collar professions.

Anyone could make it big, the two authors all but proclaimed; all you need is frugality and a few tax breaks. Don’t live in a pricey home. Put a cork in the Cabernet, and pop a Coors instead. But most important, open your own business. When it came to the secret sauce for scoring a million bucks, “a very big factor is self-employment,” Stanley said.

The ensuing years have not been kind to the working-class millionaire.

A little-noticed marketing report released last month by U.S. Trust contained the disturbing statistic that while almost a third of Baby Boomers worth more than $3 million claimed to have grown up in lower-middle-class homes, the number fell precipitously for younger cohorts, with 18 percent of Gen Xers and a mere 6 percent of such Millennials saying they came from working-class stock.

Gender, capital and ‘the crowd’

It’s an old, and at this point weary, tale that women entrepreneurs receive far less venture capital than men. Women currently own 46 percent of all American small businesses, generate $1.3 trillion in revenue and employ 7.7 million people. Yet Dow Jones Venture Source says that of the U.S.-based companies that received a round of venture capital financing in 2010, roughly 6 percent had a female CEO and 7 percent had a female founder.

Against this backdrop, it is interesting to look at a new crowdfunding law that was passed as a provision of the JOBS Act in April. The law, which will be effective in early 2013, is an exemption to existing securities law that for nearly a century has enabled only wealthy individuals or banks to offer entrepreneurial capital. Kevin Lawton argues against the arcane securities law in his book, The Crowdfunding Revolution, saying that it stymies the democratization of investing.

The crowdfunding law frees entrepreneurs to accept capital from “the crowd.” Under the new law, people who earn less than $100,000 in annual income may invest up to $2,000, or 5 percent of their income (whichever is greater), in businesses of their choosing via approved intermediaries. People who earn more than $100,000 can invest up to 10 percent of their income.

Stop conflating microfinance and entrepreneurship

Bogota, Colombia – Although the phone rings incessantly, Carlos Moreno is not distracted. He continues to talk, not just about his life as a slightly graying 78-year-old pastor but also about how he became what some consider to be the world’s first microfinance recipient. It wasn’t as an entrepreneur.

“My life is dedicated to the Lord,” he says. Although Carlos had launched a tea and spice business in the early 1970s, he hadn’t aspired to be an entrepreneur. That is the case with most microfinance recipients. Yet the movement that extends small, uncollateralized loans to the poor to start businesses has marketed itself as being about entrepreneurship. That is a mistake. While microfinance may have helped Carlos start a business, it did not make him an entrepreneur.

Carlos’s dream was to build a Protestant ministry. To get there, he took out a loan in 1971 from the Institute for International Development Inc (IIDI), the precursor to Opportunity International, a Chicago-based microfinance institution. That transaction appears to be the first loan in modern microfinance history, though as Center for Global Development Senior Fellow David Roodman notes, “people have been making small loans to help the poor for 500 years.”

from The Great Debate UK:

Vikas Pota on ten business icons in India

VikasAmid jitters about uncertainty in the financial markets over the past 16 months, many investors have continued to look toward the BRIC countries -- Brazil, Russia, India and China, which by 2050 are expected to be wealthier than most current major economic powers.

In all four countries, GDP has more than doubled since 1998, and in China and India it has trebled.

The Confederation of Indian Industry, a non-profit non-governmental, industry-led organisation, estimates India's GDP growth rate at 6.1 per cent in 2009-10.

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