ENTREPRENEUR SUPPORTPROGRAM

FUNDES MIF/IADB UTEC

About FUNDES

• FUNDES was founded in 1984 by Swissbusinessman Stephan Schmidheiny.

• FUNDES is a private, non-profit and internationalorganization.

• FUNDES has offices in 10 Latin Americancountries.

• … 200 direct partners.

• … and 450 external consultants.

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FUNDES NETWORK

OUR MISSION

“FUNDES promotes and drives the competitive development ofMSMEs in Latin America”

• FUNDES uses MSME competitive development to contribute to its mainobjective: Latin America’s sustainable development (economic, social andenvironmental).

• The goal is to promote and strengthen business climates in the region’scountries in order to guarantee sustainability for their main economicsectors.

• The best way to distribute the wealth that is created is through jobopportunities and paid employment.

• Employment helps decrease poverty directly, reducing social pressuresfaced in the region.

Background

• FUNDES has done several studies on entrepreneurshipin El Salvador and Latin America.

• Entrepreneurship in Emerging Markets (Argentina, Brazil,Costa Rica, Japan, Korea, Mexico, Peru, Singapore and Taiwan).

• Entrepreneurship in Chile, El Salvador, Italy and Sweden.

• Best Practices Supporting Entrepreneurship in El Salvador.

• Challenges and Opportunities for Salvadorian SMEs: Building adevelopment agenda.

Background

1. Country lacks entrepreneurs:

– 55% of the country’s SMEs are over 10 years old

– 31% are 3 to 10 years old

– And only 13% are less than 3 years old

2. Start-ups mostly belong to middle- and high-incomeprofessionals.

3. Most entrepreneurs are men.

4. Families and close friends provide most financial support for newcompanies.

5. Importance of connections to universities to train and promoteentrepreneurs.

These results led to the pilot project:

1. Foster entrepreneurship

Start-up companies

Promote entrepreneurial values and models among population

2. Expand the country’s business foundation

Entrepreneurs from low-income areas

Non-professional youth

Women

3. Maximize the success rate of start-ups in their first three years ofoperations

Create support network for start-ups less than 3 years old.

GENERAL INFORMATION

NAME Entrepreneur Support Program

PERIOD OFIMPLEMENTATION

48 MONTHS

DESCRIPTION OFTARGET GROUP

Male and female youth, ages 18 to 35, residing in Soyapango,with a minimum education of ninth grade and a business ideawith potential for growth.

GENERAL OBJECTIVE Promote the creation and development of new companies withpotential for growth.

SPECIFIC OBJECTIVES Implement a support system for new company start-ups andgrowth in Soyapango, and later transfer the process to othermunicipalities in El Salvador.

InternshipsTechnicaladvice on

business plans

Mentorshipson business

plans

Business plancompetitions

Seed money forwinningbusiness

plans

Introduction,awareness and

academicprogram

Incubatorand follow-up

BusinessConnection Rooms

and simplifyprocedures

Access tocredit

Selectentrepreneurs

Market accessand Program

transfer

Developentrepreneurial

skills

Map of Partners and Participants

PROGRAM FUNDING • Inter-American Development Bank (MIF)• FUNDES

IMPLEMENTATION • FUNDES El Salvador

STRATEGIC PARTNER • Universidad Tecnológica (UTEC)

SUPPORT DURINGIMPLEMENTATION

1. Asociación Nacional de la Empresa Privada (ANEP)2. Asociación de Microfinancieras (ASOMI)3. Muncipality of Soyapango4. Comisión Nacional para la Micro y Pequeñas Empresa5. Secretaría de la Juventud6. Banco Agrícola7. Caja de Crédito de Soyapango8. Plaza Mundo Shopping Mall9. Universidad de El Salvador

TRANSFER • Universidad de El Salvador• ITCA FEPADE

Program’s Financial Partners

Entidad % de Aportación Entidad % de Aportación

FUNDES 17%

UTEC 9%

CONAMYPE 1%

SJ 2%

SUBTOTAL 30%

FUENTES DE FINANCIAMIENTO PFE

PRINCIPAL CONTRAPARTE

BID 70%

TOTAL PROYECTO 1,119,051.00

ResultsSTAGES PROGRAM GOALS RESULTS TO

DATE

Developentrepreneurialskills

1. Youth introduced to topics2. Youth trained3. Youth participating in internships4. Teachers certified

1. 1,5002. 8003. 2004. 25

1. 10,5572. 9063. 2254. 74

Company start-ups 1. Mentors2. Business ideas in competitions3. Seed money awarded

1. 252. 2003. 60

1. 632. 2043. 39

Companies inoperation

1. New businesses2. Business connections created

1. 402. 1

1. 1052. 3

Results

Innovation

1. Program’s territorial focus.

2. Implementation through academic institution was innovative for El Salvador.

3. Program’s comprehensive support. Respond with services in 3 phases ofimplementation:

– Developing the entrepreneur’s motivation and skills,

– Starting-up the company, and

– The first months of operations.

Factores CríticosCritical Success Factors

• Introduction methodology that was used: After failing to generate demandthrough the press, FUNDES created a model to identify entrepreneurs. Youthwere contacted through academic institutions, churches and governmentaloffices.

• Training methodology simplified into two modules: Developing EntrepreneurialSkills and Creating Business Plans. Simplified logistics with facilitators and fortarget population. Reduced drop-out rate from 40% to 13%.

• Teachers with business background (rather than purely academic training) werecarefully trained in the methodology.

• Careful selection of managers from small, medium and large enterprises to createthe Mentor Network. Socially-minded businesspeople.

• Simplified paperwork process to start-up companies in the municipal office ofSoyapango

Critical Success Factors

• Providing start-up seed money through technical assistance (consulting, webpagedevelopment, design of brand and image and specialized training) institutionalizedcompanies and helped entrepreneurs appreciate the market value of the servicesprovided.

• Connections made between entrepreneurs and local financial institutions,providing information to both sides and helping entrepreneurs meet requirementsthrough specific technical assistance and technological support.

Lessons Learned

• The Program’s contractual selection of Soyapango as the target communitycreated challenges for implementation, meetings, developing the Program and thescope of the Program’s results. Local residents had little entrepreneurial culture:• Came from households where most worked in traditional jobs• Lack of knowledge about business plans• Inability to identify entrepreneurial role model

• A need to promote market research in the methodology (validate business ideas).Many business plans lacked solid market research, meaning the market analysisthat was presented was far from reality and incomplete. (Of 906 trainedentrepreneurs = only 105 business plans were implemented.)

• Not all teachers are able to invoke an entrepreneurial spirit among participants. Ifthe teacher has no experience as an entrepreneur, it is difficult for him or her toshare knowledge that adds value and motivates the entrepreneurs in theirbusiness development.

Lessons Learned

• The Program’s contractual terms stated that the entrepreneurs had to providecounterpart donations equivalent to the amount of seed money receivedwithin six months, which was not a realistic expectation. Most could providethe donation within one year.

Program’s Sustainability

SIST

EMA

TIZA

TIO

N

Documentation

Case studies:

• Program

• EntrepreneursSU

STA

INA

BIL

ITY

Program sustainabilityplan:

Implemented in 3institutions:

UTEC

UES

ITCA FEPADE

TRA

NSF

ER

Identify 2 universities.

Transfer Program:

• Stage I:

Know how to do

Stage II:

Methodology

Stage III: Follow-upon Implementationof Master Plan

•Document experience•Elaborate model for sustainability•Transfer model to 3 universities

Sustainability

• Sell degree programs and courses on business plan development

• Create seed fund (sponsors and stakeholders)

• Linking company sales to Program sustainability. Success Fee: acommission fee charged to entrepreneurs sales that is reinvested inProgram operations (20% approx.)

• Solidarity between trained and currents entrepreneurs. Pay success feeeven after having left, for the period of time that the entrepreneur was partof the Program.

• Benefits through group savings in technical assistance. Percentage ofsavings is paid as a commission fee and is reinvested in Programoperations.

• Stock participation and subsequent sale

Future Challenges

• Support universities to implement Program successfully

• Transfer model to other universities

• Identify start-ups with the most potential

• Create a Business Support Unit in FUNDES to promote dynamic start-ups

• Promote a national policy to support entrepreneurship

Oscar Ricardo Quintanilla

Executive Director

FUNDES El Salvador