Erasmus for Young Entrepreneurs is a European Union pilot programme that pays new entrepreneurs to learn from experienced businesspeople in other member states. The European Commission wants to make it permanent, with a lot more financial fire-power, to boost cross-border trade.

Overview

Europe is often seen as being less entrepreneurial than the United States, where studies consistently show that people are more willing to take risks.

Entrepreneurs can tap into national and EU funds to help get off the ground – but while some plead for state intervention to promote small businesses and start-ups, others would simply prefer governments to leave them to it.

99% of companies in the EU are small and medium-sized enterprises (SMEs), accounting for about two-thirds of jobs and GDP. However, less than 10% of them export goods and services within the bloc.

In February 2009, the European Commission launched Erasmus for Young Entrepreneurs (EYE), a pilot scheme allowing young businesspeople to spend between one and six months with an established entrepreneur in another EU country.

Under the project – similar to the Erasmus student programme – aspiring entrepreneurs are paid up to €1,100 a month to shadow an experienced business owner, in order to improve their skills and transfer knowledge across borders.

It is part of the EU's Small Business Act of July 2008, a framework policy to encourage entrepreneurship and help SMEs exploit the internal market.

EYE was extended for a second and third year, with a fourth scheduled for February 2012. By February 2011, 332 people had completed the training and another 200 are currently abroad – but the organisers have struggled to find willing hosts.

Moreover, with 23 million SMEs in the EU, Commission officials say EYE should be expanded tenfold if it is to have a wider and longer-lasting effect on cross-border entrepreneurship.

The Commission plans to propose permanent funding for EYE in an effort widen its scope and impact. This will require the approval of the European Parliament and member states, however.

The proposal should be adopted by the end of 2011, but with cash-strapped governments pushing for cuts to the EU's budget, it is unclear how much money will be made available.

Issues

Who & where

The scheme is open to new and would-be entrepreneurs – those who have started a company in the last three years and those who are firmly planning to. Prospective hosts have to sign up too.

Erasmus for Young Entrepreneurs (EYE) candidates apply to intermediary organisations – local chambers of commerce or business groups – who try to match them up. Travel and living costs are covered by the EU, with payments ranging from €1,100 a month in Denmark to €560 a month in Bulgaria.

Early this year, intermediaries were set up in Cyprus, Estonia and Ireland, extending the scheme to all 27 member states. Yet Italy and Spain accounted for around 47% of all applications by February this year, with all other countries lagging well behind.

The sectors attracting the most interest have been advertising, media, information technology and education. Most stays last two to three months, with the UK the most sought-after destination by far.

A marketing problem

While feedback has been broadly positive and participants have usually gone on to start their own business, critics say EYE has a "marketing problem," particularly in finding established entrepreneurs willing to give their time and resources to the scheme.

Of the 2,446 registrations received so far, 62% were new entrepreneurs and 38% prospective hosts – meaning many people currently seeking a placement will be disappointed.

It also relies heavily on intermediaries, some of whom have complained that the financial support offered is too little. Moreover, almost half of all applications come from Spain and Italy, suggesting that most member states are not doing enough to promote the project.

At a conference last April, several stakeholders asked for a name change – at least removing the word 'Young' from the title, as they fear it puts off older first-time entrepreneurs with real-world work experience.

Other concerns raised included overlap with existing EU and other mentoring schemes and the question of whether most companies founded by participants may have been launched anyway.

Towards 10,000 participants?

A survey of EYE participants has revealed broad satisfaction among new entrepreneurs and an independent review found that it is helping create sustainable new businesses but needs significantly more resources for a long-lasting impact.

By contrast, the Erasmus programme for students has 180,000 participants per year – so it is not unreasonable to aim to have tens of thousands of new entrepreneurs on the scheme, European Commission officials and advocates have argued.

And that could significantly increase competitiveness and growth, stated Jack Malan from the Centre for Strategy & Evaluation Services, which conducted a review of EYE last year.

To this end, the Commission will press the European Parliament and member states for substantially increased funding if it becomes a permanent programme. Yet with some governments wanting to freeze the EU budget, a question mark hangs over the future of the project.

Moreover, the Commission is set to publish a long-awaited review of the Small Business Act in late February. In an updated draft, seen by EurActiv, the recommendation to turn EYE into a permanent EU programme was removed.

Positions

Marko Curavić, head of unit at the European Commission's DG Enterprise and Industry, said the pilot phase had given "a good base from which to start and we want to make its impact bigger and permanent".

There is still time to improve the scheme before it moves to a new, permanent, legal basis, he said, adding that this new status would bring an increased budget.

Curavić said 180,000 students per year take part in the Erasmus student exchange scheme so it is not unreasonable to aim to enroll "tens of thousands" of entrepreneurs.

Joanna Drake, director for promoting of SME competitiveness at the European Commission's DG Enterprise and Industry, said she is committed to putting EYE on a permanent footing.

It is, she said, an integral part of the Small Business Act and sits neatly with a number of the flagship programmes set out in the 'Europe 2020' strategy – specifically 'Youth on the Move', the 'Innovation Union' and the focus on sustainable job creation.

"Looking at 'Youth on the Move', the scheme fills a gap as there is nothing for people at the early stages of their careers," she noted.

Drake said it was important to spread the word about the programme, but added that additional resources for marketing might not be the only answer. "We need entrepreneurs to be ambassadors for the programme and it is also important that MEPs and regional authorities play a key role in communicating the success stories," Drake stated.

EYE Programme Coordinator Typhaine Beaupérin from Eurochambres – which acts as a support office for the intermediary organisations – said that the number of beneficiaries is growing and awareness of the scheme is increasing.

With the structure of the programme in place, the challenge now is to ''tackle the obstacles hindering its full development before any major expansion – notably widening the geographical coverage and finding more business owners willing to be hosts,'' she stated.

With Italy and Spain dominating the applications, more promotion is needed across the EU – especially to attract more experienced entrepreneurs, she told EurActiv. Should these challenges be addressed, she believes the budget could ultimately match the €450 million allocated to its Erasmus student equivalent.

Arnaldo Abbruzzini, secretary-general of Eurochambres, said the scheme meets the need for greater mobility in Europe but warned that a number of flaws need to be ironed out.

Abbruzzini, who runs his own business, said he would not sign up as a host because there is no incentive. "We need a massive information campaign and to identify the reasons why host entrepreneurs would want to sign up. The benefit for the new entrepreneurs is clear, but it's limited for someone like me who would have to devote time and office space to the programme," he commented.

He backed the idea of changing the name to just 'Erasmus for Entrepreneurs' in order to encourage experienced businesspeople to get involved as mentors.

Fátima Mínguez, deputy director-general for SME policy at the Spanish Ministry for Industry, Tourism and Trade, said the concept behind EYE is sound but the results of the pilot phase were "very modest indeed".

Speaking in April 2010, she said there is a lot of room for improvement, adding that it was far too early to suggest that the programme has had any tangible impact.

"We need to professionalise the work done by intermediary organisations," she said, adding that member states would take ownership of the initiative if teething problems are addressed.

Luca Poli, an Italian surgeon who was a participant in the scheme, said the chance to learn from a Spanish businessperson was invaluable because local entrepreneurs are often unwilling to share sensitive commercial information.

He said he knew very little about running a company before he took part in the programme and now has his own private cosmetic clinic in Milan.

In an interview with EurActiv in February 2010, Poli said the placement allowed him to test his ideas with an experienced entrepreneur and learn how to do things better. He learned invaluable things about communications, he said.

Annie King, who participated in the programme as a host entrepreneur, said the 'Europe 2020' strategy refers to sustainable businesses and this is an area on which the Commission should place more emphasis.

She said new entrepreneurs should be left to find suitable hosts themselves rather than relying on a complex system of intermediary business organisations who act as matchmakers.

Katia Marchesin, another host entrepreneur, said it gives businesspeople an opportunity to develop new business models and can serve as "a virtual bridge to other markets". It is a chance for companies to internationalise, she said.

Jack Malan from the Centre for Strategy & Evaluation Services, which conducted a review of the pilot programme, said new entrepreneurs tended to be more positive about it than host entrepreneurs.

Speaking in April 2010, he said it was too early to accurately measure the impact of the project but the early indications suggest it improves the quality of start-ups, although it does not seem to increase the number of new businesses.

"If 10,000 new entrepreneurs took part per annum – requiring ten times the resources – it could significantly increase competitiveness and growth," he said.

However, Malan stressed the need to raise awareness to generate more applications to the programme and to fill in some "geographical gaps" that emerged during the pilot phase.

In July 2009, former European Commissioner for Industry and Enterprise Günter Verheugen said he was glad to see the EYE programme taking off.

"Its objectives to help unlock business potential, reveal new opportunities and make better use of the internal market are more relevant than ever in the context of the current economic crisis," he commented.

Timeline

  • Nov. 2006: European Parliament approves plan for an 'Erasmus for Young Entrepreneurs' (EYE) pilot scheme.
  • 25 July 2008: European Commission unveils Small Business Act, which includes preparations for EYE.
  • 19 Feb. 2009: EYE begins, with €3 million budget.
  • June 2009: First participant goes abroad under the scheme.
  • Feb. 2010: A second EYE cycle launched, budget increased to €5 million.
  • Feb. 2010: Antonio Tajani appointed European Commissioner for Industry and Entrepreneurship.
  • Feb. 2011: Third EYE cycle launched with another €5 million budget.
  • Mid-2011: Commission set to propose making EYE a permanent EU programme with a legal base.
  • By end 2011: European Parliament and member states expected to approve proposal.
  • Feb. 2012Fourth EYE cycle due.