Frm Start-up t Success: Scaling a Prven Slutin t Unlck Canada s Entrepreneurial Ptential Submissin regarding 2017-2021 budget cycle request t the Standing Cmmittee n Finance Julia Deans, CEO August 5, 2016 1
A. Start-ups drive ecnmic grwth and innvatin Supprting the start-up and scaling f small and medium-sized cmpanies ( SMEs ) is critical t achieving the new Innvatin Actin Plan. SMEs are the backbne f ur ecnmy, creating jbs, supprting cmmunities, and generating new ideas that will fuel ur future. Small businesses led by yung peple are particularly imprtant. They create mre jbs than ther SMEs and recrd higher grwth rates 1. But they need help t vercme barriers greater than fr lder peple. When it cmes t readying yung entrepreneurs, Futurpreneur Canada is the nly rganizatin with a pan-canadian presence, a twenty-year track recrd, and an established mentr netwrk. We have helped ver 9,000 yung peple launch and grw new businesses. Our supprt makes a difference. Futurpreneurs have a 50-60% five-year survival rate (the Canadian average is rughly 50%), 2 and these are yung entrepreneurs withut cllateral. Even mre impressive: up t 83% f Futurpreneurs repay their lans 3. Our prven mdel is ready t scale. The Gvernment can unlck Futurpreneur s ptential by renewing supprt fr ur Start-up prgram and prviding additinal funding t supprt indigenus yuth and wmen aged 40 and ver. This is nt a request fr research and develpment. With ISED s partnership, we have established a prven slutin that delivers results and garners psitive perfrmance reviews. With cntinued partnership, we can and will help t build a mre inclusive and entrepreneurial Canada. B. Invest t leverage and scale a prven platfrm 1. Lng track recrd f building successful entrepreneurs Our impact since 1996 is clear in the figures belw. Last year alne, we reached ver 23,000 18-39 year lds. Mre than 1,000 launched new businesses thrugh ur Start-up prgram f nn-cllateral financing, industry-leading mentring, training and ther supprts. 1 Amng all new enterprises in a 2012 OECD study that survived after three years, the highest emplyment grwth was in cmpanies started by peple under 30 2 Survival rates fr Canadian SMEs (less than 250 emplyees) decline ver time. Abut 85% survive fr ne full year, 70 % fr tw years and 51% fr five years (Key Small Business Statistics, 2012). 3 Futurpreneur Canada data: 83% repayment rate in 2015/16. 2
* French versin at end f dcument We see grwing need fr ur fferings. Yuth unemplyment remains high 4, and yung peple increasingly see the pprtunity t start businesses r assume the businesses f retiring small business wners. 5 But mst yung peple lack business skills and assets, and they are ften t high-risk and time-cnsuming fr traditinal lenders. We are the nly natinal nn-prfit rganizatin that gives aspiring yung entrepreneurs acrss Canada the time, expertise and resurces they need. 2. Supprting entrepreneurs in all industries, Canada-wide Thrugh ur 353 cmmunity partners, 15 lcatins, utreach and events, we serve the innvative peple Canada needs t drive ecnmic grwth in every sectr. Frty per cent f Futurpreneur businesses are majrity female-wned (duble the natinal average) and ur prven frmula can supprt wmen entrepreneurs aged 40 and ver. Similarly, ur ThriveNrth initiative advancing yung indigenus entrepreneurs in Nrthern BC can be replicated elsewhere. We are industry agnstic. All businesses start small, and small businesses are the lifebld f Canada s ecnmy and cmmunities 6. Entrepreneurs in traditinal sectrs can be just as innvative as their technlgy industry cunterparts, as exemplified by Futurpreneur businesses like Frank & Oak, a 4 Canada s yuth unemplyment rate is 13% as f June 2016 (Statistics Canada, 2016) 5 48% f SME wners plan t retire in the next five years, 77% in the next 10 years (CFIB, 2011). The percentage f SME wners between 50 and 64 years f age has increased since 2004 and nw represents half f all business wners (Key Small Business Statistics, 2013) 6 Small businesses accunt fr 97.9% f all firms in Canada and prprtinally play a large rle in net jb creatin. (ISED, 2016) 3
Mntreal-based men s fashin retailer achieving huge nline and retail success acrss Nrth America, and Mnctn-based Prperty Guys, with ver 100 franchises in 600 Canadian cmmunities and Australia. 3. Investments t deliver Innvatin Actin Plan results 1. Renewed supprt fr ur flagship Start-up prgram f $8 millin a year fr five years ($40 millin) This investment will help 140,000 yung peple benefit frm ur launch and grwth services. We will increase the number f businesses launched by six per cent per year t a ttal f 6,455 7 businesses led by 7,700 yung entrepreneurs, creating 29,000 jbs and mre than $190M in tax revenues. We will als deliver mre value, including: Expanded pst-launch scale and grwth supprt: specialized advice and facilitated access t ther prgrams and funders t help current and alumni Futurpreneurs grw and exprt beynd their lcal markets 8. Increased utreach and supprt fr wmen 18-39, increasing the percentage f wmen served frm 40% t 45% (female-led SMEs are mre likely t innvate but nly 15.5% f SMEs are female-led 9 ). Targeted supprt fr part-time entrepreneurs wh are grwing full-time businesses. Increased utreach and supprt fr immigrant entrepreneurs and the launch f 530 new immigrant-led businesses. 2. New/incremental funding f $1.65 millin ver three years t supprt indigenus yung entrepreneurs in three cmmunities. We will engage up t 3,000 cmmunity members in entrepreneurship prmtin, 140 indigenus yuth in entrepreneurial training, and 35 indigenus yuth in ur full prgram f financing, mentrship and supprt as they launch businesses. 10 Canada s indigenus ppulatin is yunger and grwing faster than the rest f Canada. 11 Indigenus businesses are an imprtant surce f emplyment fr indigenus Canadians. 12 Cnsultatins have cnfirmed the need t expse mre indigenus yuth t entrepreneurship as a career ptin and help them launch businesses. We can replicate ur successful ThriveNrth initiative (which has helped indigenus and nrthern yung peple launch 24 businesses, create ver 60 jbs, and engage 2,000 mre peple thrugh utreach and events). Higher csts linked t extensive relatinship and partnership-building, cmprehensive awareness wrk and skills training; and additinal supprts including pre-lan grants. 7 Based n prjectins fr fiscal years 2018-2022 8 10% f enterprises accunt fr three-quarters f planned investments by Canadian SMEs t grw their businesses in 2016 (BDC, 2016). 9 15.5 percent f SMEs in Canada were majrity wned by females. In cmparisn, 66.4% were majrity wned by males in 2011 (Key Small Business Statistics, 2015) 10 Estimated impact is based n ur Thrive Nrth prgram in Terrace and Prince Rupert (ppulatins f 11,486 and 12,508) and may vary depending n the size f the cmmunities chsen. 11 Between 2001-2006, the Abriginal labur frce 15 years and ver grew by 29.7 %, cmpared t 8.0 % grwth in the Canadian labur frce (Abriginal Business Survey 2015) 12 86% f Abriginal businesses with emplyees emply at least ne Abriginal persn. On average, Abriginal peple cmprise 62% f these firms emplyees (Abriginal Business Survey 2015) 4
3. New/incremental funding f $2 millin ver three years t supprt up t 1,500 wmen aged 40 and lder acrss Canada. Cmpared t men, fewer wmen aged 40 and ver are starting new businesses 13, ften because they lack netwrks, financing, cnfidence and cmpetence 14. We will tailr ur prven mdel and Canada-wide infrastructure t help them, cmplementing existing fferings. At least 150 wmen will participate in ur full Start-up prgram, leveraging up t $2 millin in nn-federal gvernment funds. 4. Federal cntributin will leverage ther resurces, efficiencies and partnerships We leverage federal cntributins by raising nn-federal resurces, becming increasingly efficient, and develping innvative partnerships and vlunteers. Federal funding will be leveraged 3:1, in the fllwing ways: Securing lan capital thrugh ur line f credit with RBC, secured by BDC, which is cntingent n cntinued federal and ther supprt fr ur prgrams and services. Recycled lan repayments, and interest and fees. Increasingly efficient peratins, including recently updated back-end infrastructure. 85% f ur funding ges t entrepreneur fferings and ur administrative csts are belw 7%. Our average net prgram and perating csts decreased by 11% in 2016 frm 2015. Natinal Partnerships, including ur 353 cmmunity partners and ther strategic partners. Grwing referral and funding relatinships with BDC and majr bank. Vlunteers: a pan-canadian netwrk f nearly 3,000 vlunteer mentrs and business experts. The federal cntributin per business will decrease by mre than half in 2018-22 frm what it was in 2006-2008 (frm $13,459 t $6,172 per business) and deliver mre value and results. We seek five-year funding t scale ur Start-up prgram and secure nn-federal funding. Shrter-term cntributin agreements dn t give us sufficient time t build ut large-scale fferings r secure and finalize lng-term funding partnerships. 13 (Statistics Canada Survey n Financing and Grwth f SMEs, 2011) 14 56% f men feel they have the knwledge, skills, and experience t launch a business, cmpared t nly 41.6% f wmen (GEM Canada Reprt n Wmen s Entrepreneurship, 2013/14) 5
C. Futurpreneur Canada s Prven Mdel f Financing and Supprt Our Start-up prgram is cntinually imprving in respnse t ur research and cnsultatins. Yung entrepreneurs have made it clear that the three areas they mst need help with are building cnfidence and cmpetence, enhancing educatin and experience, and supprting launch and grwth. They have strngly encuraged us t cntinue ffering ur help thrugh: Increasing awareness f entrepreneurship as a viable career ptin: We prmte entrepreneurship and prfile yung entrepreneurs in ur extensive scial media, public infrmatin sessins, webinars, wrkshps, awards and ther events, ften in partnership with ther rganizatins. In-persn and nline resurces t help plan, manage and grw businesses. We spend an average f 15-20 hurs helping individuals develp business plans and ffer grwth supprts as they prgress. Up t $45,000 in cllateral-free, character-based financing ($15,000 frm Futurpreneur Canada and $30,000 frm BDC) Yung entrepreneurs request debt financing mre than lder entrepreneurs, but are less likely t secure the financing they seek 15 frm traditinal lenders due t student debt, relatively pr r n credit histry, a lack f cllateral, and their businesses being cnsidered nn-traditinal r higher risk. An expert business mentr fr up t tw years Mentring significantly imprves an entrepreneur s chances f success s we cmbine every lan with a mentr frm ur industry-leading netwrk f nearly 3,000 mentrs. 15 In additin, higher financing refusal rates and a likelihd f turning t infrmal surces f financing indicate that yunger entrepreneurs may indeed be experiencing mre difficulty in accessing sufficient levels f capital fr their businesses (Key Small Business Financing Statistics, 20016) 6
We als prvide in-persn and virtual pprtunities fr netwrking and peer-mentring and specialized caching, including ur Crprate Caching Challenge and the Spin Master Innvatin Fund. Cnnectins t Canadian and glbal peers, netwrks and markets, including thrugh: Our annual Actin Entrepreneurship: Grwing Yung Enterprise crss-cuntry rundtables and Canadian Summit; Our hsting f Glbal Entrepreneurship Week (GEW): in 2015, GEW Canada engaged ver 450 partners and reached apprximately 90 millin Canadians. Our membership in the 45-cuntry Yuth Business Internatinal netwrk; and The G20 Yung Entrepreneurs Alliance, thrugh which we engage Canadian entrepreneurs in plicy discussins, netwrking and Summits in G20 hst cuntries. D. Cnclusin Innvatin is everyne s respnsibility but cmes mst naturally t entrepreneurs. We prudly wrk with mentrs, gvernments, cmpanies and thers t help emerging entrepreneurs capitalize n their resurcefulness and becme launch- and innvatin-ready ready t spt and leverage pprtunities, t imagine pssibilities, t discver new ideas, and t learn and grw. As the nly rganizatin with a pan-canadian presence, twenty-year track recrd, and established mentr netwrk, Futurpreneur prvides an efficient and prven pathway t launch and grw emerging entrepreneurs acrss the cuntry. Our mdel can help ther grups such as indigenus peple and wmen ver 40 realize their business ptential, and we stand ready t wrk with the Gvernment f Canada t make this pssible. Futurpreneur Canada (frmerly the Canadian Yuth Business Fundatin) is the nly natinal, nnprfit rganizatin that prvides financing, mentring and supprt tls t aspiring business wners aged 18-39. French versin f image n p.3: 7