Where are the young entrepreneurs?

We have been debating the curious lack of young entrepreneurs in New Brunswick for years. It’s hard to define the term ‘entrepreneur’ but if you look at self-employment as a proxy – New Brunswick has always had well below self-employment rates among those aged 35 and under.  Across all sectors of the economy there are 36% fewer persons under the age of 35 that identify themselves as self-employed on the Census.

When you look at high value sectors such as IT, engineering, accounting, consulting, etc. the young person self-employment rate across the board is well below average in New Brunswick.

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If you go a little deeper and look at urban centres, the data doesn’t get much better although you have to be even more careful because Statistics Canada reports employment by industry data in increments of five so for sectors with small levels of employment the numbers can be a bit out of whack.  For example, Statistics Canada reports there are no people self-employed in the Moncton CMA in software development in the age cohorts 15-24 and 25 and 34  Technically there could be 2 in the 15-24 age group and 2 in the 25-34 age group – 4 in total – and it would be showing up as zero in the Stats Can data.

With that as a caveat – and an issue facing all urban centres – New Brunswick’s urban centre still have low rates of self-employment among young people (under 35) particularly in strategically important sectors.  The following table compares the combined self-employment in three IT sectors – as a share of total employment in those sectors then compared to the national level.  Moncton and Saint John are at the low end of the spectrum.  Fredericton isn’t listed because it is not showing any under 35 self-employment in these three sectors (again subject to the increment of 5 caveat above).

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There could be problems with the data itself.  It’s hard to believe there are only a very few if any self-employed people in Fredericton under the age of 35 in these three sectors.  I don’t ask people their age but I have met a number in the past couple of years that must be under the age of 35.  But this wouldn’t be a problem in the province-wide data where the number are larger.

But the bottom line remains.  Using this data it would seem there are far fewer young (under 35) tech entrepreneurs in New Brunswick than average despite the fact that almost every city has beautiful facilities with colourful couches and young, smiling faces ready to help you reach your potential – not to mention earnest government officials with their chequebooks at the ready.

As I mentioned above we have been debating this for years.  There are many reasons cited: 1) Some say young NBers are encouraged by parents to ‘get a real job’ because of the historical uncertainty around the economy: 2) Others say we export our entrepreneurs (Dr. Haan’s research shows you are far more likely to own a business if you were born in NB and leave than born in NB and stay); 3)  Some say it has to do with the structure of the economy –  more rural, lower levels of professional employment overall – means less potential for entrepreneurship.; 4) Some even suggest – with some international data to back it up  – that a lack of entrepreneurship is self-perpetuating.  A person with a parent that works for themselves is far more likely to go into entrepreneurship; 5) Some blame a lack of immigration – self-employment rates among immigrants are higher – particularly in ‘tech’ sectors; and 6) Finally, some point to the lack of large industry ‘incubators’ that are traditional sources of entrepreneurs (for example there are DNA links between the former NBTel and something like 50% of the tech. firms in New Brunswick that have reached any kind of scale).

Who knows.  It could be, and likely is, a combination of all these factors and more.

But the bottom line is that we are not seeing the next generation of ambitious entrepreneurs arising in the province.

Just to be clear this is not just about ‘young’ entrepreneurs. Overall rates of self-employment (all age groups) are also lower.  For the IT sector, there are 58% fewer self-employed in Saint John, 67% fewer in Fredericton and 44% fewer overall in New Brunswick when compared to the country as a whole.

Instead of spending all our time studying the ecosystem itself – sources of funding, incubators, cluster effects, etc. I think we should spend a little more time on the front end – where do entrepreneurs come from?  And what role, if any, should governments, educational institutions, the research community, etc. have to influence this pipeline?

We need to see more high value IP-based startups coming out of our universities (Dr. Shukla is working on this in Fredericton as one example).  We should see if our large industrial players have any potential to foster high value startups in their supply chains (Dave Grebenc, et. al. working on this) and we need to see if there are high value entrepreneurial opportunities that could emerge as the result of New Brunswick being a really good place for certain growth industries (cybersecurity, smart grid, etc.).

Maybe we need to attract a lot more entrepreneurs to our shores.  I know that will sound like heresy to some but if we are exporting entrepreneurs – like Haan surmises – maybe we should start thinking about importing a few.  Then the question becomes why would they want to come here?  Now we are starting to have a real conversation about economic development.

 

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4 Responses to Where are the young entrepreneurs?

  1. Brennan Sisk says:

    Hi David,

    I wonder why you did not mention probably the most simplest reason. Debt Load. What person under 35 isn’t still paying a student loan (I’m sure they exist but I would guess a small portion). I think all the factors you listed are compounding reasons that follows debt load as to why under 35 entrepreneur are in decline(arguable entrepreneur period).

    IF you got a job, which you had no choice to seek out, right out of the education system, and kept said job, MAYBE, you find yourself clear of it. Hey, if you have the luxury, you cut costs by living with parents for 2 or 3 years.

    Whether you do or don’t live with your parents, you are not likely to marry someone that is debt free either so family debt is high. Then by the time you pay loans off or down to a reasonable amount you start having kids. Or if you don’t, you are still tickling 35 by the time you are out of student debt. Banks should not worry though because you have other debt such as a mortgage, car loan, etc (which you barely qualify for if you have student debt).

    How is a person supposed to bank role an enterprise under these conditions. It won’t be banks, I don’t care how “start up” friendly they say to be. The reality is they are not going to risk any money whatsoever on a person they can’t take collateral from (the beat up car and crappy starter home for some reason doesn’t qualify). NB does have angel investors and other investment funds but doesn’t solve the under 35 problem.(yes, yes, excuses, excuses).

    There is no lack of opportunity only the lack of ability to capitalise on it by our under 35’s. Forget starting a business, life choices are being made in the context of early and heavy debt load that seems no one else is taking into account. There are alot of other factors I think contribute but I won’t bother getting into them. Debt, though, should be factored in your list of possible reasons, shouldn’t it? Maybe we don’t won’t to acknoweledge it because we live in a society that promotes consumerism (which is another compounding problem).

    Anyway, my two cents worth.

    Brennan

  2. I started HotSpot in 2013 and the biggest issue was getting paid to live as a founder. People forget founders need to actually eat and live somewhere.

    HotSpot took time to build the software to even get the first customer approx. 12 months before we went live signing up Fredericton and building a product. During that time I had to drop out of school, use my student loan to fund myself (didn’t drop out till I got it!) and live in a friends house while they were out of town. All ill advised- border line crazy. We raised 30k but at 21 the last thing investors want to see is take 30k and spend it on yourself – which looking back may of been silly but again 21 and dumb.

    However- it’s really easy to get grants for employees so over the first year I missed many pay checks but the staff never did. We probably had 4 staff before I got my first paycheck.

    People think building a tech company is “cheap” It’s only less infrastructure intensive. The people are the expensive part and as a founder of a company you have as much a right to get paid as anyone else. I think we’re going to continue to see this until it’s fixed. If you want innovate software companies people need to be around to build them which is exactly what Dr. Shukla is doing.

  3. Also Moderation- not cool David. Let the people speak!

  4. Mark Breen says:

    Great article and an important conversation that needs to happen. I challenge anyone to go into any post-secondary class in this province (other than a select few at UNB Fredericton) and ask the students how many of them plan on opening their own businesses when they graduate. You’ll get maybe 1, possibly 2. Then ask the post-secondary institutions (again with a few notable exceptions at UNB Fredericton) what they do to encourage entrepreneurship among their students. Again you’ll get crickets.

    We’ve done some high level analysis in Saint John and found the average age of our entrepreneurs to be 37 years old. There are pros to this but we are a long way off of being a culture that encourages entrepreneurial thinking and risk taking.

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