The role of entrepreneurs has received a lot of attention over the last few years due to the actions of popular entrepreneurs as well as popular TV programmes about people with great ideas without capital. The rise of crowd funding has also led to entrepreneurs with great ideas but no track record of borrowing to pitch their ideas directly to the members of the public.
In Africa and in Nigeria especially, access to funding is a long and complex process that can take months even for people with collaterals. This lack of easy access coupled with the borrowers inability to pay back the borrowed money has strangled many entrepreneurs. In my PhD thesis on the role of entrepreneurs in economic development, I conducted a survey of entrepreneurs across Nigeria, the result was that the system needs a process of picking the best ideas to support than the current process where grants can be awarded to entrepreneurs based on the decision of a panel of judges. The reasoning behind the selection process can be shrouded in secrecy. Hence, the survey concluded that a selection process was a better way to go. The research then went on to design the Entrepreneur Selection Process (ESP).
The real point of ESP is to help government and other policy makers trying to lend money or provide funding to consider some critical factors when it comes to selecting projects that they are going to support.
The ESP is based on the following criteria, that an entrepreneur and his or her proposal is likely to succeed if the following issues are considered.
That the entrepreneur has relevant education or training in the area in which he/she is planning to set up projects. The entrepreneur is comfortable and not averse to taking risks (appreciates/ considers the inherent risk associated with the project). He/she has some of his/her money invested in the project, the higher the % of the total personal money committed to the project as a % of the overall project, the better. The chances of the project being successful increases if the entrepreneur was employed in that sector prior to starting up in that business. Other factors are the extent at which the sector needs technology, the importance of innovation to the sector, the perceived opportunities in the market for the products or services as well as the expected annual growth rate of the industry or the products or services being offered.
The chances of success of the project increases where the entrepreneur has given up his / her work to pursue the venture. This type of entrepreneur is referred to as an opportunistic rather than a necessity driven one. An entrepreneur that is driven to start a business because of the gap in the market has a better chance of success than one forced by necessity such as lack of gainful employment.
The above can be put into an equation and a score can be awarded and a pass mark given. This will then help decision makers and institutions to determine whether or not a project is worthy of support or not.
In cases where there are scarcities of resources, such resources are better used to support good quality projects than a multitude of projects with very little chances of being successful.