The rise of the young entrepreneur
Faced with a particularly unfriendly job market, resourceful school-leavers and graduates are going it alone. We speak to entrepreneurs about running a business in your 20s
It’s not so much a case of “If you can’t beat ‘em, join ‘em”, as “If you can’t join ‘em, beat ‘em” for many young would-be entrepreneurs.
Surrounded by messages telling them that gaining a first-time job now verges on the impossible, it’s no surprise that the rise of the young entrepreneur has been gathering pace over the last couple of years.
Indeed, research by small business insurers Hiscox into young entrepreneurship revealed that 32% of graduates in 2010 and 2011 are considering starting-up their own company following graduation and that nearly a quarter are already running a business.
Meanwhile, a separate study by business insurers Simply Business revealed that the number of British entrepreneurs aged between 25- 34 increased by 6.5% in the three years to 2010, while the number of entrepreneurs aged 18-25 rose by 4.2% over the same period.
As Branson, who set up his first business aged 16, or Lord Sugar, who was 21 when he founded Amstrad, would no doubt agree, there are plenty of reasons why starting a business at a young age has its benefits:
- It’s less risky: young entrepreneurs often have fewer financial commitments, such as a mortgage or children, so have less to lose if a business venture doesn’t work out.
- Fresh ideas: In industries such as fashion, retailing and advertising, entrepreneurs with fresh ideas who can identify with young consumers can have a distinct advantage.
- Fewer commitments: running a business involves huge time commitments, so entrepreneurs with fewer family commitments are better placed to pour the hours into their company.
- Time to do it all again: so what if you make a few mistakes at the start of your career? You’ve got plenty of time to learn from your mistakes and even start again.
On the downside, young entrepreneurs are likely to face the following hurdles:
- A lack of experience and knowledge: potentially the biggest issue for young entrepreneurs is that they lack business acumen. Learning on the job can be costly when running a business.
- Time commitments: running a business is seriously time-consuming. Young entrepreneurs need to be prepared to work long hours.
- Failure: if a start-up doesn’t work out, it can be very costly. If you are young and have few assets to fall back on, your ability to absorb a financial blow like this may be limited.
- Raising finance: banks are nervous about lending to start-up entrepreneurs, and particularly nervous about lending to younger entrepreneurs who generally do not have assets to offer as security over a loan.
Starting a business is never an easy option but the job market could provide, for some, adequate incentive for self-starters who would far rather be doing something than nothing. Many, such as Rajeeb Dey (below), hope this will make entrepreneurship a more mainstream option, seen as a viable alternative to more traditional career paths.
Startups talked to four 20-something entrepreneurs about the challenges and benefits of ignoring the job ads in favour of self-employment.
ShopowKevin Flood and Mike Harty, 22 and 23
“I was running my own car boot sale at around six or seven years old and really got quite savvy with retail and trading”, laughs the co-founder of social shopping comparison site Shopow, Kevin Flood. With this early entrepreneurial experience under his belt, Kevin met Shopow co-founder Mike Harty at Leeds University on a business management course and the two quickly decided they wanted to start a business together.
In July 2009, the pair graduated, and got together in August with a list of ideas, of which Shopow proved the best.
The actual idea came after they realised that the online shopping arena offered “very little personalisation and very little socialisation”. The decided to set up a business that allowed users to post reviews on products and make the shopping experience more fun.
Rather than the more general approach taken by its nearest competitors (Kelkoo and PriceGrabber) Shopow’s core emphasis is on “social exchange and creating greater transparency,” says Kevin.
After putting together a business plan, the pair started pitching in April 2010 for funding and secured £380,000 from Northwestern Investment the following month.
Gaining investment has proved their greatest challenge so far, though, as Kevin explains:”As we were young we had to give away a fair amount of equity as we had used our overdrafts and needed all of the funding, however the reception to the business was fairly good”.
While Kevin and Mike received more investment options than they needed, they decided to go with the larger firm, which could provide a lump sum of funding rather than several smaller funds, in order to keep the number of decision makers in the business to a minimum.
Would their choices have been different in a more temperate economic climate? Kevin thinks not saying they had “always been entrepreneurial” and that he couldn’t imagine working for anyone else
EnternshipsRajeeb Dey, 25
“I realised that there was a gap in the market that needed to be filled”, says Rajeeb Dey, founder of internship listing website Enternships, demonstrating that university can, for a lucky few, actually provide the opportunities to start a business.
Rajeeb actually started his own career in entrepreneurship aged just 17 when he founded the English Secondary Students’ Association (ESSA), which he continues to run alongside Enternships.
Enternships began life as basic listing site while Rajeeb was a student at Oxford University running the Oxford Entrepreneurs, one of the largest student entrepreneur networks in Europe.
After being approached by advertisers and small businesses that wanted to advertise jobs to the group’s members, Rajeeb came up the idea for his business.
He says “start-ups and small businesses lack the brand or time and resources to come on campus and do the milk round themselves, so I thought it would provide a great opportunity to bridge that gap.”
Enternships launched in 2009 as a fully-fledged service for students not just from Oxford but from all over the UK, Rajeeb boot-strapped the project by entering into a shared equity arrangement with a website developer.
“In retrospect that wasn’t the best way of doing things but we managed to buy-out the first investors,” says Rajeeb. In addition, the company has recently raised £150,000 funding from individual angel investors.
Rajeeb was lucky enough to have already received a couple of job offers before he even graduated, but, he says, “I made the conscious decision to do my own thing, I couldn’t see myself being employed by anyone, so I decided to turn down the roles to focus on my own start-up”.
“I don’t think entrepreneurship is going to be suitable for everyone because it has its own challenges, but it’s definitely worth giving it a go. You just have to be comfortable with uncertainty, be willing to take risks as there are going to be ups and downs.”
“I want more people to look at entrepreneurship as a viable option, not just because there is nothing else. It should be very much about choice. We need to create that culture in the UK where more students and graduates look at it as a career path.”
The Emporium OundleRebecca Holder, 25
After struggling to find a job after graduating in the summer of 2010 with a first class honours degree in illustration, Rebecca Holder decided to use her creative skills to start up craft retail website The Emporium Oundle.
Rebecca hit upon the idea after noticing that online craft marketplace sites such as Etsy and Folksy were geared for the American market, making it hard for UK artisans to get a look in.
“I thought it was sad that UK crafters with loads of talent weren’t being seen,” says Rebecca.
While her university course didn’t help her directly to become an entrepreneur, Rebecca says that knowledge she acquired, such as learning the importance of copyright, the value of website design and marketing, was invaluable.
She says being creative has given her credibility, “especially on the internet, as if you’ve got a site that is eye-catching and looks professional, people will take you a lot more seriously”.
For guidance Rebecca turned to her local job centre which put her in touch with the Prince’s Trust, which helped provide the start-up funds she needed in the form of a £250 ‘Will it work’ grant and a £2,000 loan. In order to obtain the funding Rebecca was required to create a business plan and demonstrate it would work. Writing the plan over Christmas 2010, the Trust got in touch this year offering her the loan.
Rebecca also took courses in tax and accounting and running your own business to help her understand the basics of running your own company, “both of which were really helpful,” she says.
While enjoying working for herself, Rebecca admits that there have been times as a young entrepreneur when she feels she hasn’t been taken seriously because of her age and lack of experience, such as registering for a business banking account.
“I think that when you’re fresh out of university people think you’re just having fun and that it’s a hobby. It can be very hard to get people to take you seriously as a young entrepreneur.”
She has proved though that it is not impossible, noting that “becoming or trying to become an entrepreneur shows that you’ve tried to expand yourself and done something really productive. I think everyone should give it a go if they’ve got a good idea and the time”.