Start me up: Creating Britain’s entrepreneurial ecosystemA Barclays report, written by The Economist Intelligence Unit
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3 Foreword
4 Executivesummary
5 Theshiftinggroundofthelabourmarket
8 Growthofinnovationhotspots
9 TheUK’semerginginnovationhotspots12 Casestudy
14 Entrepreneurialchallengesandopportunities17 Casestudy
21 Conclusion
22 Aboutthisreport
Contents
ThisreportwaswrittenbyAnnaLawlorandeditedbyZoeTabaryandMonicaWoodley.
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ForewordWith a competitive global market and rising social challenges such as youth unemployment and an ageing population, there exists an opportunity to create an environment here in the UK that values and practices lifelong enterprise learning; one that encourages direct ownership and responsibility to respond to these challenges.
Entrepreneursareahugesourceofeconomicgrowth,innovationandjobcreation.AndintheUKtheyrepresentadiverseclusterofindividuals.Newbusinesses,rangingfromtechstart-upstomanufacturersandretailers,arepioneeringnewproductsandservices.FromBristoltoLeeds,CambridgetoGlasgow,entrepreneursarethriving.Butthereismuchmorethatcanbedonetosupporttheirgrowth.
Stakeholdersoftheentrepreneurialecosystemmustshareawillingnesstothinkcriticallyandcreativelyaboutsolutions.Togetherwemustprovideaccesstofinancialcapitalandhumancapital,therighteducationandskills,acompetitivebusinessenvironmentandclear,non-onerousregulationthatdoesnotneedlesslyburdenbusinessmodels.
Theeconomicpotentialofentrepreneursistremendous.Andunlessthispotentialisproperlyharnessedandbuddingentrepreneursprovidedwiththeskillsandresourcestheyneedtobuildtheirideasintosuccessfulbusinesses,theUKeconomywillnotflourishinfuture.
AntonyJenkinsChiefExecutiveBarclays
ThisreporttakesacloserlookattheentrepreneurialpotentialacrosstheUKandpresentstheopportunitytounderstandhowitcanbebettersupported.ItisbasedonprimaryresearchundertakenbyTheEconomistIntelligenceUnitaswellasaroundtablediscussionconductedatTheEscalatorinWhitechapel,London.
Iwouldliketotakethisopportunitytothankallthoseinvolvedfortheircontributiontothisreport.
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Aninnovationecosystemreferstothecombinationoffactorsforinnovationthatfunctiontogetherinasymbioticrelationship.Thereal-wordapplicationistheenvironmentwithinwhichentrepreneursfunctionasoneintegralcomponent.Thishasaknock-oneffectonthebroadereconomy,whichthrivesoffthevitalityofinnovativeentrepreneurs.
ThisBarclaysreport,writtenbyTheEconomistIntelligenceUnit,looksathowtocreateanenvironmentwhereentrepreneurscanflourishintheUK,drawingonbestpracticesfromotherinnovationecosystemsaroundtheworld.Basedonin-depthinterviewsofentrepreneursandotherexperts,substantialdeskresearchandsocialdatamining,itskeyfindingsarelistedbelow.
Entrepreneurialcommunitiesextendbeyondthecapital,London,andSouthEastEnglandLondonaccountsforthelargestshareofonlineactivityrelatingtodiscussionsaboutinnovationandentrepreneurialism,witha48%shareof‘voice’.However,thenextlargestsharesof‘voice’comefromCambridge(9.3%)andManchester(6.9%),andthereisaclearnortherncorridorstretchingfromwesttoeast(LiverpooltoYork).MikeWright,ProfessorofEntrepreneurshipatImperialCollegeLondon,explains:“Welookedatthenotionthatthere’sa‘goldentriangle’intheSouthEastforentrepreneurshipintermsofaccesstofinance,butfoundthatsomesuccessfuluniversityspin-offswereactuallynotlocatedintheSouthEastbutwere,nevertheless,abletoattractfinancefromthere.That’soneexampleofwheretheecosystemisn’tquiteaslocation-basedaswemightadmit,andmaysuggestthatweneeddifferentmechanismstostimulateamorevirtualecosystemratherthanaphysicallocation.”
ThelabellingofinnovationhotspotsproducesacompoundeffectthatfostersentrepreneurialismThisviewrewardsaninterventionistapproachacrosstheeducationsystem,start-upincubatorsandcentresofexcellence,whichempowerandfacilitateBritishpeopleofalldemographicstofulfiltheirentrepreneurialpotential.Insodoing,itisargued,thrivingsectorhubsandthepublicity‘buzz’thataccompaniesthembroadenequalaccesstoentrepreneurialopportunity,wealthcreationandemployment.
Entrepreneurial Britain is beginning to flourish as policy changes and increased investment in the UK’s innovation ecosystem take root.
Executive summary
Entrepreneursaremade,notbornEntrepreneurialismisnotaninnatetrait,butrathersomethingthatcanbefosteredwiththerightmixoflearnedskills,accesstoopportunitiesandconfidence,accordingtoexpertsinterviewedforthisreport.Governmentandtheschoolsystemalonecannotcreateentrepreneurs,buttheycansendsignificantsignalsaboutentrepreneurship,that‘failingwell’(takingcalculatedrisksandlearningfromfailures)iskeytosuccess,andthatstartingabusinessisaviableandrespectedcareerroute.
Creatinganenvironmentwhereentrepreneurscanthriverequiresaco-ordinatedstrategycoveringarangeofareasEncouragingentrepreneurialhubsbeyondtraditionalcityboundaries,strengtheningtiesbetweeneducationsystemsandthebusinesscommunity,removingdemographic-specificbarrierstoentrepreneurialismandbettermatchingthefundingneedsofentrepreneursaresomeofthespecificprioritiesthatpolicymakers,businessesandacademianeedtoaddress.
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The shifting ground of the labour market
Thisevolutionhasincreasedregionalinequalities,andoneoftheconsequencesofthe2008financialcrisisontheUKeconomyisthatyoungpeople(aged18-24)havebornethebruntofunemploymentandhavebeenthemostaffectedbyunderemployment
Thefinancialcrisispromptedincreasingnumbersofemployerstointroduce‘zero-hourscontracts’,givingthemtheflexibilitytoemploycasuallabourasandwhenrequired,withnoneoftheresponsibilitiesassociatedwithhiringemployees.Youngpeopleareagainthemostvulnerabletosuchemploymentpractices.
ResearchfromtheUniversityofStirlingfoundthatwhilenationalunderemploymentroseto9.9%in2012,for16-24yearoldstheratewassignificantlyhigher,at30%3.
The UK has evolved from a manufacturing- and product-based economy into a service-sector- and knowledge-based economy.
1&2http://www.ons.gov.uk/ons/rel/census/2011-census-analysis/170-years-of-industry/sty-170-years-of-labour-market-change.html3http://www.stir.ac.uk/news/news-archive/13/april/meet-the-underemployed/name-44068-en.html
Employmentbysector
Source:OfficeforNationalStatistics1.
Percentageofworkforceineachindustry
Source:OfficeforNationalStatistics2.
1841 2011
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Somearguethatthishaslededucatedandtechnologicallyproficientyoungpeopletodiscovertheirentrepreneurialflair,pouringtheireffortsintostart-upbusinessventuresandturningtonon-traditionalfundingroutessuchasonlinecrowdfundingsitesKickstarterandIndiegogo.However,whilethevolumeofnewlyregisteredbusinessesisgrowingandisoftenheraldedasasignofflourishingBritishentrepreneurialism,theycouldsimplybereflectinganincreasein‘bedroombusinesses’(acolloquialismforbusinessesstartingoutofthehome,requiringlittleornostart-upfunding)andinthenumberofpeoplerepurposingthemselvesasself-employedconsultantsasaresultofredundancy.SuchchangesinlabourdynamicscanskewwhatappearstobepromisingdataaboutthetrueextentoftheUK’sentrepreneurialactivityoneconomicproductivity.
4http://www.parliament.uk/business/publications/research/key-issues-for-the-new-parliament/economic-recovery/young-people-in-the-labour-market/
Source:OfficeforNationalStatisticscitedinParliament4.
Youthunemploymentcomparedwithworking-ageunemployment
Thereisconcernthatbusinessstart-upsaretooeasilycategorisedasbeingentrepreneurialeventhoughmanycompeteonpriceandserviceratherthanbyprovidingauniqueofferinginthemarketplace.Thisincreasesthechallengesofaddressingbarrierstoinnovativeentrepreneurialismandidentifyingnewandcommerciallyviablesolutionstoproblemsbecause,whiletheyarefrequentlyregardedasthesame,entrepreneursandstart-upbusinessesoftenfaceverydifferentchallengesandoperateverydifferentbusinessmodels.
Some,suchasMarthaLaneFox,aserialentrepreneur,believethereisnotthesameriskappetiteamongBritishentrepreneursasthereisintheUSortheEU.ThiscreatesitsownprobleminthattheBritishliketothinkthereisarichseamofentrepreneurialismintheircountrywheninfact,MsLaneFoxargues,therearelimitedexamplesofBritishstart-upsthathavegoneontobecomeinternationally-renownedbrandsandhaveremainedBritishcompanies.
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BusinessbirthsbyUKregion
Source:OfficeforNationalStatistics.
2009
2010
2011
2012
WillHutton,PrincipalofHertfordCollege,OxfordUniversity,andChairoftheBigInnovationCentre,saysthatthelackofaBritishinnovationecosystemisa“principledeficiencyintheUKeconomy.Oneofthelongstandingareasofweaknesseshasbeenfinancingandcommercialisingnewideas.”However,hesayschangeisafoot;thecurrentgovernmentisatlastspeakingthelanguageofinnovationecosystems,introducingentrepreneurialprogrammesandputtingforthgovernmentfundingtosupportthem.“Isitenough?No.Isitfollowingthetrendtowardsopeninnovation,sharing,relaxingofintellectualpropertylawthatneedstotakeplace?No.Butitwouldbeunfairandwrongtosaythatnothinghashappened.”
DougRichard,FounderofSchoolforStartupsandaserialentrepreneur,saysthattheUKisaworldleaderintax-incentivisedseedandangelinvesting.TheSeedEnterpriseInvestmentScheme(SEIS)has,hesays,increasedthelikelihoodofangelinvestmentforvery-early-stageBritishbusinessesbyminimisingtheriskasmuchaspossiblefortheinvestor.“Idon’tknowofanyothercountrythathasanythingasclosetoaggressiveasthat[inusingtaxincentives].”
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Suchpubliclabellinghasacompoundeffect;thesoftpowerinherentinthe(oftengovernment-backed)promotionofareasasinnovationhotspotscreatesahoney-poteffect,whichsubsequentlyattractsventurecapitalists,bigconsultancyfirmsandotherspecialistorganisationsthatattendtotheneedsofgrowingfirmsincomplexindustries.
Suchlabellingmayalsobecomeself-fulfillingintermsofencouragingalocation-specificcultureofentrepreneurialism,withtheirownsuccesscasesandrolemodels,enticingwould-beentrepreneursfrom‘safe’salariedrolestouniversityspin-offsinordertoinstigatetheirstart-upplan.
Detractorsoflocation-specifichubscontendthatwhilepromotinghotspotsattractsresources,infrastructureandesteemforthefew,themanyothercitiesandlargetowns
Whether it is Cambridge’s ‘Silicon Fen’, London’s ‘Tech City’ or Oxford’s ‘business incubator centres’, labelling locations as ‘hotspots’ for technological innovation has become commonplace.
Growth of innovation hotspots
Top10sectorsfundedbyGrowthAcceleratorschemes
Source:http://www.growthaccelerator.com/
RegionalfundingfromGrowthAcceleratorschemes
Source:http://www.growthaccelerator.com/
NorthEast
NorthEast
EastMidlands
East
London
4%
9%
8%
9%
16%16%
11%
12%
15%
SouthEastSouthWest
NorthWest
WestMidlands
acrossthecountryareexcluded,theirsuccessstoriesandrolemodelseclipsed.Arguably,theapproachcontributestomoreacuteregionalinequalitiesanddeepensasouthernconcentrationofwealth,opportunityaccessandemployment.
CliveHoltham,ProfessorofInformationManagementandDirectorofCassLearningLaboratoryatCassBusinessSchool,says:“I’mprettyscepticalabout[theidea]thatwecangetscientificandbusinessinnovationthroughlargesumsofmoneygoingtoafewpeople.CentresofExcellence,forexample,arepartofthehugeamountofrhetoricandfashioninhigh-levelallocationsofmoney,whichgivetheimpressionthatthere’satop-downsolution.It’sanecosystem,soyouneedallthecomponents.”
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Pulsar,developedbyUK-basedcompanyFACE,isasocialdataintelligenceplatformthatisreinventingsocialmediamonitoring,customerserviceandenterprisecollaboration.Itscoured200,000postsoverthreemonthstoMarch162014,mappingtheUKlocationsthathadthehighestvolumesofonlineconversationsaboutthesearchterms‘innovate’,‘innovation’,‘entrepreneur’or‘start-up’.
While academic examination of Britain’s entrepreneurial community draws from hard, statistical and often lagging data, social data (from publicly available social media conversations) provide an alternative ‘bottom-up’ perspective, taking the pulse of entrepreneurs – what they actually talk about and how they communicate with key stakeholders and each other.
The UK’s emerging innovation hotspots
Shareofgeo-locatedinnovationcontentonlineInorderofconversationsize
Whilenotstatisticallysignificant,thefindingscautionagainstanarrowconceptionofentrepreneurialcommunitiesthrivingonlyinsouthernEngland.
City Numberofresults
London 7,705
Manchester 426
Sheffield 202
Edinburgh 189
Liverpool 166
Glasgow 153
Oxford 152
Nottingham 147
Darlington 136
Leeds 132
Brighton 130
Birmingham 130
Bristol 127
Cambridge 107
Poynton 106
Whilefewerthan5%ofsocialmediausersmaketheirlocationpubliclyavailable,thefindingsareanindicatorofwhereonlineconversationsaboutentrepreneurialismandinnovationareoccurring,whenuserschoosetosharetheirlocations.
WhileLondontopsthelistwith7,705results,northerncitiesareprevalent,withaclearcorridorstretchingfromwesttoeast(LiverpooltoYork).
Source:Pulsar.
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Locationsofhigh-volumesocialconversationsaboutinnovationInordertoextrapolatemorecomprehensivesocialdata,Pulsarapplieda‘smartfilter’toallpubliclyavailablesocialcontentontheInternet,irrespectiveofusers’setlocations.High-densityurbanareasandhigh-rankinguniversitiesarebothwidelyconsideredtobekeyfactorsinfluencingtheemergenceofaninnovationecosystem.
“Clusteringcanbringpositiveproductivitybenefitsforindividualsectors,althoughtheeffectisnearlyalwaysoutweighedbytheimportanceofbeinginalargeurbanenvironment,”theManchesterIndependentEconomicReviewstatedinits2009report,TheCaseforAgglomerationEconomies5.Thereportwentontoarguethatlargercitiesmakeiteasierfordifferenttypesofworkersandfirmstofindeachother,whichchimeswiththeviewofJaideepPrabhu,JawaharlalNehruProfessorofBusinessandEnterpriseattheJudgeBusinessSchooloftheUniversityofCambridge(England).Hesaysthatcitydwellersareatagreateradvantage,particularlythoseconnectedtouniversities,becausethereisaconstantlyreplenishingsupplyofdiversecommunitiesandyoung,educatedpeoplewithfreshideas.
MarkGlover,DirectorofBusinessPlanningattheTechnologyStrategyBoard,adds:“Innovativepeoplewithbrightideasareanimportantelementofanylocalisedcluster.High-calibreuniversitiesarelikelytoattractandtrainthesepeople,andoftenhaveadditionalinfrastructure(suchasscienceparks)tohelpcommercialiseideas.ThisisthecasewithCambridge,SiliconValleyandStanfordUniversity.”
BycombiningtheUK’stoptenuniversities6,toptenurbancities(bypopulationsize)7,pluslocationsthatTechCitynamedas‘CitiestoWatch’forinnovation8,18keylocationswereaddedtoPulsar’sdatafilter:London,Birmingham,Leeds,Edinburgh,Glasgow,Sheffield,Bradford,Liverpool,Manchester,Bristol,Newcastle,Cambridge,Oxford,Durham,Bath,Exeter,StAndrewsandWarwick.
ThePulsardatafindthatLondonstillaccountsforthelargestshareofonlineactivity(48%)relatingtodiscussionsaboutinnovationandentrepreneurialism.ThenextlargestsharecomesfromCambridge(9.3%),Manchester(6.9%)andOxford(5.9%).
ThenextlargestcitiesbypopulationafterLondon–Birmingham,Leeds,GlasgowandSheffield–donothaveacorrespondingshareof‘voice’.Rather,thesocialconversationsaboutinnovation,entrepreneursandstart-upsarehappeninginCambridge,whichisnotahigh-densityurbanareaandissituatedinaregionthathasreceivedjust9%ofthegovernment’sGrowthAcceleratorfunding.
However,itsworld-renowneduniversity(aswithOxford)hasbecomeknownforuniversity-basedtechnologyspin-offs.CambridgeUniversityhasaportfolioof68companies–includingARM,theworld’sleadingsemiconductorintellectualpropertysupplier,valuedat£12bn9(US$20bn)–whichhaveraisedover£800minfurtherinvestmentandgrantfunding,andtogethergenerateanannualturnoverof£170m10.
Manchester’sproportionoftheshareof‘voice’leapfrogsthatoflargercities,includingneighbouringLeeds.Again,academiaappearssignificantasManchesterBusinessSchoolisthesecondmosthighly-rankedforpostgraduateentrepreneurshipcoursesintheUK11,behindUniversityofCambridge’sJudgeBusinessSchool.ThecitywasalsolistedbyTechCityasa‘CitytoWatch’12–alongwithBirmingham,BristolandNewcastle–andatthetimeofthedatacollectionhadjustannouncedthatithadbeenawarded£1.5mingovernmentfundingforaSocialEnterpriseAcceleratorscheme.
5http://www.manchester-review.org.uk/projects/view/?id=7186http://www.thecompleteuniversityguide.co.uk/league-tables/rankings7http://www.ukcities.co.uk/populations/8http://techcitynews.com/2014/02/27/the-battle-for-britains-next-tech-city/
Source:Pulsar.Theremainingeightlocationsaccountedforlessthan2%ofshareofvoice.
London48%
Shareofvoiceofthe18selectedcitiesintopic-specificconversations
Cambridge9.3%
Manchester6.9%
Birmingham4.9%
Leeds3.1%
Bath3%
Bristol3.2%
Edinburgh2.8%Liverpool2.7%
Oxford5.9%
11
9http://www.digitallook.com/companyresearch/10111/ARM_Holdings/company_research.html10http://www.enterprise.cam.ac.uk/industry/portfolio-companies/11http://www.best-masters.com/ranking-master-entrepreneurship.html12http://techcitynews.com/2014/02/27/the-battle-for-britains-next-tech-city/
andrelatedtopicssuchas‘collegeadmissioncourses’,‘studies’,‘degree’and‘prestigiousuniversity’areallveryprevalentintheseonlineconversations,butparticularlyconspicuousistheabsenceofsocialdiscussionsaboutfunding,crowdfunding,businessloans,grants,investors,oreventaxbreaksandgovernmentschemesforentrepreneurs.
Thisfunding-relatedconversationvacuumcouldeitherbeconsideredcauseforconcern–asignthatgovernmentinitiativesarenottrulytricklingdowntotheentrepreneurialcommunitiesthattheyaredesignedtosupport–orcauseforcelebration,ifsocialsilenceindicatesthatfurtherdebateaboutfundingoptionsisunnecessarybecauseentrepreneursareconfidentintheiraccesstoresourcesandsimplydonotwishpubliclytodiscusstheirfinancingneeds.
Thesocialconversationswithineachlocationalsorevealthenuancesoftheirspecificecosystems.WhilesocialconversationsmentioningLondonhavealargeshareof‘voice’,thedatashowthatthenoiseiscrowdingoutanynuances,highlightingeachofthekeytopicsasequallyconnectedtoeachother(seechartbelow).Bycontrast,theManchesterdatasetidentifiesaninfrastructureforsupportingyoungentrepreneursinfast-growingcreativefieldssuchasgamedevelopment.
City-to-cityconnectionsIntermsofevidenceoflocationsparticipatinginabroader,nationalecosystem,onemightexpectahighlevelofreferencingofotherlocationswhendiscussinginnovation.ThisistrueforLondon,whichmentionsCambridge,andforCambridgeandBirmingham,whichmentionLondon,duringonlineconversationsaboutinnovationandentrepreneurialism.Thehighestvolumeoflocation-referencingpostscomesfromManchesterdiscussingLeedsinthiscontext(itistheninthmostmentionedkeyword),whichcouldreinforcetheconceptofthenortherncorridor.
However,inter-connectednessbetweenlocationsislowerthanexpectedandsocialconversationsregardingOxforddonotmentionanyotherlocation.Oxfordalsoproducesuniversity-basedspin-offcompanies,withasimilarnumbertoCambridgeat65,andcurrentlyvaluedat£40m,soitissurprisingnottoseethedatarepresentamoresimilarsocialconversationpattern.
ContentclustersfromonlineconversationsAcrossall18locations,socialnetworksaredominatedbyconversationsabouttechnology,newtechniques,socialinnovationand,interestingly,Cambridge.TwitterasachanneltendstobemoreLondon-centric,withahighprevalenceofstart-up,business-centredconversationsinvolvinginnovationandentrepreneurialism.Universities
Source:Pulsar.
London Cambridge Oxford Manchester Birmingham
1 new new new new new
2 time university world business business
3 years time university time time
4 world world years people 2014
5 year year time world firms
6 help years work 2014 years
7 good technology people years people
8 technology home best united year
9 business good business Leeds free
10 university group research start work
Top10keywordsmentionedbyeachlocation
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Ascanbeseenintheassociatedchart,largenodesinthenetworkuniverseindicateveryactiveonlineparticipants,withtheCentreforEntrepreneurialLearning(CfEL)Cambridgethemostactiveduringthedataperiod.
CfELCambridgeisanot-for-profitorganisationbasedinJudgeBusinessSchool,whichprovidescoursesforundergraduate,postgraduateandnon-academicaspiringentrepreneursdesignedtosharebestpractice,unlockentrepreneurialpotentialand‘plug-in’attendeestoanetworkofCfELCambridgealumni,mentorsandfacilitators13.
VirginStartUp,anot-for-profitorganisationthatpromotesbusinessfinancingthroughitspartners(includingVirginMoney)andthenconnectsstart-upswithbusinessmentors14,isthesecond-largestinfluencerinthedataset.
Interestingly, the Pulsar data finds that accelerator programmes and those providing funding guidance and introductions to funding resources are key ‘influencers’ across the social web.
Case study – Accelerator programmes dominate online conversation in the UK
13http://www.cfel.jbs.cam.ac.uk/aboutus/index.html14http://www.virginstartup.org/about/what-we-do/15http://www.entrepreneurial-spark.com/the-accelerator.aspx
Influencers’network
Source:Pulsar.Includes‘smartfiltered’data.
ThethirdisEntrepreneurialSpark(ESparkUK),abusinessacceleratorinGlasgow,EdinburghandAyrshirethatoffersfreeofficespace,ITandstructuredsupportfor18monthstohigh-growth,early-stagebusinesseswithanannualturnoveroflessthan£1m15.
Thisdataindicatesthatsourcesofpracticalsupportandfundingprovisionsareintegraltotheonlineconversationabouthigh-growthbusinessesandstart-upsintheUKandavaluablesocialsignalguidingentrepreneurstoresourcesandrolemodels.
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Inthebundlechartbelow,theprominenceofthis‘virtualecosystem’linkingthekeycategoriesof‘gamedesign’,‘development’,‘youngentrepreneurs’and‘training’isvisible.ThistopicwassparkedbyTwitterengagementrelatedtotheannouncementofaManchester-basedgamedesignstudioprovidingtrainingingamedesignanddevelopmentforyoungentrepreneurs.
Today,theUKisthefifth-largestvideo-gamedeveloperintheworld,withthesectorcontributing£947mtoGDPin2012,employingmorethan9,000peopleingamedevelopmentandindirectlysupportingalmost17,000furtherjobs,accordingtotradeassociation,TIGA16.Whatthesocialdatadoesnotshowisthattheyoungentrepreneurstowhomthegamedevelopersareappealingarethemselvespromotinginnovationinthisspace.Engagementinsocialmediaincludesrelativelypassiveactionssuchasforwardingand‘liking’contentpostedbyothers–inthiscase,agamedesignstudio–notnecessarilycommentingonthepost,althoughthecontentisbeingdigestedbyitsintendedaudience.
AsimilarinnovationecosystemisevidentintheCambridgedataset,withthekeytopic‘co-foundinggroup’mentionedinthesamepostsas‘pharmacology’and‘prestigiousuniversity’.Toptweetsduringtheperiodfeature‘hotCambridgeshares’andcontentabouttheCambridgeSatchelCompanyexpandingintoChina.ThePulsardatafindsthattechnologyisnotasstronglylinkedtoacademia-relatedtopicsasmightbeexpected;instead‘technology’ismentionedinconjunctionwith‘socialinnovation’,‘newtechnique’and‘world’.
IntheManchester-relatedsocialconversations,thegovernment’sannouncementinJanuaryofa£300mtaxbreakforretailbusinessesaroundtheUKappearstohavegainedsignificanttractioninonlineconversations,asitisfeaturedinthedataasakeytopic.Whilethislookspositiveonthesurface,whenthedataisanalyseditshowsthatthistopicoftaxbreaksistheresultofdigitalpublishing,ratherthansocialconversation;traditionalnewspublicationsreportingonlineandsharingnewsofthetaxbreakacrosstheirsocialmediaaccounts.
16http://www.cbi.org.uk/about-the-cbi/business-voice/february-march-2014/creative-industries-gaming/
Londondataset:inter-relatedkeytopics
Source:Pulsar
college-admissioncourses
collegeofficials
co-foundinggroup
costlylab
pharmacology
studies
potentialsocialinnovation
cambridge
degree
startup
technology
time
london
Connectioninsocialconversationsbetween‘GameDesign’andotherkeytopics–‘development’,‘training’and‘youngentrepreneurs’
Source:Pulsar
techentrepreneurs
gamedesign
leeds
dev
training
youngentrepreneurs
bizitalk
liverpool
startup
business
manchester
entrepreneurs
300mtaxbreak
retailfirms
innovation
Manchesterdataset:relationshipbetween‘£300mtaxbreak’topiconline
Source:Pulsar
techentrepreneurs
gamedesign
leeds
dev
training
youngentrepreneurs bizitalkliverpool
startup
business
manchester
entrepreneurs
300mtaxbreak
uk
nhstechnology
nhsbossretailfirmscbeinnovation
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Fosteringtomorrow’sGenerationCreativeTooofteninnovationisconsideredfromatop-downperspectiveandtoorarelyfromabottom-up,child-centricsolutionforcreatingtheUK’sfuturegenerationsofentrepreneurs,sayexperts.Prof.HolthamclaimsthatBritain’sschoolsystemlimitscreativethinkingbecauseitdoesnotrewardadiversityofapproaches,whichmeansthattheUKproducesyoungpeopleill-equippedtobecometomorrow’sentrepreneurs.
“Unlessyouaddresstheeducationsystem,eitherwithinschoolsanduniversitiesorsubsequentlyinadultlife,you’renevergoingtoachieveasatisfactorylevelofinnovationinsociety,”heexplains.
To address the question of how best to power the UK’s economy by empowering its entrepreneurs, a host of eminent thinkers and doers in the field of entrepreneurialism were consulted. Here, they share what they perceive to be the biggest barriers prohibiting innovative businesses from thriving in the UK, and set out proposed solutions.
Entrepreneurial challenges and opportunities
17http://www.gazellecolleges.com/about-us18http://www.pjea.org.uk/about-us
Source:RosanBosch.
TelefonplanschoolinStockholm,Sweden
TheroleoffurthereducationisequallyimportantashighereducationincreatingaUKentrepreneurialecosystem.GazelleCollegesGroup,whichlaunchedinJanuary2012,operatesentrepreneurialprogrammeswithin22collegesaroundtheUK,providingappliedlearningmodelsandworkingstrategicallywithlocalenterprisepartnerships,studentsandemployerstodevelopentrepreneurialcapacityinthoselocalcommunities17.Inhighereducation,thePeterJonesEnterpriseAcademy18workswith31regionalcollegestoprovideone-yearpractical‘learningbydoing’coursesdesignedtoprovideyoungpeoplewiththeskillsandconfidencetothinklikeanentrepreneurandpotentiallystartabusiness.
15
BorrowingfromtheLatinrootof‘education’,Prof.HolthamsaysthateducationatalllevelsintheUKneedsto‘drawout’theintrinsiccreativityofpeople,bethatcreativityinconceivinganideapreviouslyunimaginedoringeneratinganalternativeapproachtosystemsandoperations.Toflourish,hesays,“theinnovationprocessneedsalltypesofpeople,generallyworkingtogetherinteams”.
JaneChen,Co-FounderofEmbrace,believesthatthetypesofworkshopsundertakeningraduateandpostgraduatedesignandentrepreneurialismcoursescaneasilybeadaptedtoandintroducedatanearlierstageintheeducationsystem,aswellaswithinexistingcompanies,tohelpcultivateacreativeapproach.Suchworkshopsarebasedonanunderstandingthatallbrainstormingandapproachesarevalid,withnojudgementfromanyparticipantsmadeifanideaisoutlandishordoesnotwork.
OrganisationssuchasGooglehavelongadvocatedandprovidedcreativeworkenvironmentsfortheirstaffinordertoassistwork-basedcreativity.IntheUK,companiessuchasMindCandyinLondon,MelbourneServerHostinginManchesterandVirginMoneyinEdinburghhavefollowedthistrend19.ThispromptsthequestionofwhetherBritain’sschoolsshouldconsiderintroducingsimilarliberalanddesign-ledideas,suchasthoseembeddedinSweden’sTelefonplanschool,whichemphasisesbothindependentandcollaborativeworking.Itisarguedthattraditionalworkspaces–fromformaleducationthroughtotheworkplace–quashcreativityandcollaborativeworking,whichisnowaprerequisiteforatechnology-enabledworkforceandaservice-driveneconomy.
Prof.HolthamreliesontheacademicmodelofinnovationforcoursesattheCassBusinessSchool,anecological‘CreativeProblem-Solving’(CPS)modelinwhichthefourcomponents–Product,Process,PeopleandPlace–allpositivelyinteractwitheachother.Hearguesthatpolicymakers’andbusinessleaders’attentionistoonarrowlyfocusedonproduct-basedinnovationorplace-specificentrepreneurs.
EzeVidra,HeadofCampusLondonandGoogleforEntrepreneursEurope,saysthereneedstobean‘alternativeeducation’outsidetheformaleducationsystem,where‘theneedisbiggest’astherearenoprofessorsontapandnoaccesstoclassroomfacilitiesorresources.HepointstoschemessuchasGoogle’sCampusforMoms20,whichisababy-friendlyeight-weekstart-upschool,attheendofwhichtheparticipantspitchtheirbusinessideatocourseleaders,guestentrepreneurspeakersandventurecapitalinvestors.
Demographic-specificbarriersAccordingtotheWomen’sBusinessCouncil21,theentrepreneurialgenderdivideisrobbingBritainofmorethan1mmoreentrepreneurs;totalentrepreneurialactivityin2012(calculatedastheproportionoftheworking-agepopulationeitherintheprocessofstartingabusinessorrunninganewbusiness)was11.6%formencomparedwith6.3%forwomen.
AsMsLaneFoxsays:“Womendon’tneedspecialtreatment,theyarenotdisadvantagedbyanythingotherthanlong-rootedculturalreasons”,illustratedbyclaimsthatmenareneurologically‘hard-wired’differentlytowomen,makingtheminnatelymoreentrepreneurial.Examplesofmisogynyfacingwomenincertainsectors,includingscience,technology,engineeringandmathematics(STEM)areprolific.Insuchacultureitisunsurprisingthat,statisticallyspeaking,womendonotfulfilthe‘typical’profileofanentrepreneur;thisisaconsequenceratherthananexplanation.
KathrynParsons,FounderofDecoded,atechnologyeducationbusiness,saysresearchonDecodedpupilsfoundthatwomenaregenerally30%lessconfidentthantheirmalecounterpartsinbelievingtheycanmastercoding.Childcareissuesalsoprovideachallengetoprofessionalwomen,whocontinuetobeprimarycaregiversdespiteincreasesinflexibleparentalleave.Thepaceoftechnologicalchangemagnifiesanyperiodawayfromwork,yetthebenchmarkforbasicdigitalliteracyintheUKisfrighteninglylow,andtheeconomycannotaffordtoexcludewomenfromfuturedigitalbusiness,MsParsonsadds.
Itisnotjustwomenwhofacehaving“entrepreneurshipinstitutionalisedoutofthem”,asJillHuntley,ManagingDirectorforCorporateCitizenshipatAccentureputsit,butolderpeopletoo.Whilethepotentialforengagingthisdemographicinentrepreneurialactivityishuge(thereare3.6mpeopleintheUKaged50-64whoarenoteconomicallyactive),toooftenthefocusisonfosteringyoungentrepreneurs.
“Unlessyouaddresstheeducationsystem,eitherwithinschoolsanduniversitiesorsubsequentlyinadultlife,you’renevergoingtoachieveasatisfactorylevelofinnovationinsociety.”CliveHoltham,ProfessorofInformationManagementandDirectorofCassLearningLaboratory,CassBusinessSchool
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AlastairCleggisChiefExecutiveofThePrince’sInitiativeforMatureEnterprise(PRIME),whichistheonlynationalorganisationdedicatedtoprovidingover-50swiththesupporttosetuptheirownbusiness.Heexplainsthatwhilemanypeopledreamofstartingabusinessintheir30sor40s,theycanbehinderedbyfamilyandfinancialcommitmentsinawaythatover-50sarenot.
“Thereisenormousentrepreneurialzealinthisagegroup,”hesays.“Whatwedoisgivethemconfidenceandpointthemintherightdirectionofwhatstepstheyneedtotaketostartasuccessfulbusiness,suchasgettingabusinessplaninplaceorseekingadvicefrommentors.Theover50stendtohavetheskillssoit’smoreaboutdemystifyingtheprocessandgivingthemtherighttoolssotheycangetupandrunning.”Fearandasenseofrisk-takingcomesfromnotunderstandinghowsomethingworksorwhattoexpect–areasthatcanbedemystifiedthroughcoachingandsupport.
Programmesthataimtodismantlethebarriersaffectingspecificdemographicsshouldbeapplauded,butMsHuntleyurgescorporationstofacilitatechangewithintheirorganisation.“Giventhefutureofworkandthestructuralchangestotheeconomy,inordertogrowestablishedbusinessesthereneedstobeabetterculturalpipelineofinnovationandentrepreneurshipandsomeofthatneedstocomefrominsidethecompany,”shesays.
“Werunanumberofprogrammesinternallytotryandopentheinnovationmindsetandencourageemployeestobringideas,and[forusto]providemechanismsoffundingthoseandspinningthemoutifnecessary,”sheadds.
TheroleofuniversitiesinseamlesslymovingentrepreneursintothebusinessenvironmentUniversityspin-offcompaniesarenotnew,butMrHuttonarguesthatBritishuniversitiesshouldshiftawayfromtheir“extremelyconservativeviewaboutintellectualpropertyrights”andabouthowtodivideanycommercialgainsemanatingfromuniversityspin-offs,toadoptwhathedescribedasthe“MITorStanfordmodel”.
HesaysthattheUSbenefitsfromuniversitiesattractingcompanies,whichsupportemergingentrepreneurialventuresbyactingasabridgefromacademiatobusiness.Bylinkingtheentrepreneurswithinfluentialalumniinamentoringandnetworkingcapacity(aswasthecaseforEmbraceInnovations),universitiesareabletofast-trackthecommercialisationofearly-stageideas.
MrHuttonfurthersuggeststhatpromisinguniversityprojectscouldbefundedbyembeddinggrantsintotheparticipants’PhDormastersdegreetofundtheirdevelopmentforafurtheroneortwoyears,effectivelybuyingtimetoenableaninnovativeconcepttobedevelopedtoacommercialleveloncompletion.“It’sveryhardinacademiclifesimultaneouslytobeanentrepreneurandhaveanacademiccareer;thesystemisnotstructuredtohelpyoudothat.Universitiesarenotassignificantastheyshouldbe.”
AccordingtoProf.Wright,UKuniversitiesarealreadymovingawayfromthetraditionalapproachofcommercialisingentrepreneurialactivitythroughlicensingagreementsandequitystakesinspin-offs,andmovingtowardsgainingfrom‘indirectreturns’.Heidentifiestheseasbeingthevirtuouscycleofsuccessfulalumniprovidingpracticalbusinesssupporttoentrepreneurialstudents,whichmakesalumnimoreinvestedintheuniversityandlikelytodonatefinancially.
“IthinktheUShasbeenbetteratthatthantheUKbutwe’restartingtoseeaconnectionbetweentwoareasinuniversitiesthatarequiteseparate:thedevelopmentoffice,whichistryingtoconvincealumnitodonate,andtheofficesthataretryingtopromotecommercialisation,”Prof.Wrightsays.Forexample,theNationalCentreforEntrepreneurshipEducation,basedatCoventryUniversity,launchedaprogrammecalled‘MakeItHappen’,whichhashelpedwiththelaunchof1,900newbusinessessince2009byprovidingresources,toolsandonlinementoringforgraduatesstartingupacompany.
DavidGill,ManagingDirectorofStJohn’sInnovationCentre(ownedbyStJohn’sCollege,Cambridge),saysthatdespitesome20yearsofpoliciestoencourageuniversitiestoprovidealinkwiththebusinesscommunitysothatuniversity-associatedenterprisescanflourishcommercially,thisremainsa“missingpiece…inthemajorityof[UK]universities”.
MrGilladvocatescollaborationbetweenuniversitiesandhubsofentrepreneurialactivity,suchasinnovationparkswherepioneeringstart-upswiththepotentialforhighgrowthareprovidedwithflexibleandsubsidisedworkspaceandsupportedbyancillaryservicesbasedinthesameplace.Heexplainsthat“gatekeeperswhounderstandtheneedsofbothsides”arevital,andencouragesuniversitystudentstoundertakeworkplacementswithinstart-upbusinesses,sothattheycanshareandapplytheirknowledgeinabusinesssetting,whilethestart-upbenefitsfromastudent’sexpertiseatnocost.
19http://www.telegraph.co.uk/finance/jobs/9640237/Top-10-coolest-offices-in-UK.html?frame=238363420http://googleblog.blogspot.co.uk/2013/07/campus-for-moms-helping-women.html21http://womensbusinesscouncil.dcms.gov.uk/appendices/
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Case study – Turning a crisis into an opportunity: EmbraceWhileimprovementshavebeenmadetotheUKinnovationecosystem,itisstillconsideredtobesomewaybehindinmanyareascomparedwiththeUS.Bycontemplatingthejourneyofasuccessful,innovativeenterprisethatfollowswhatwilllaterbediscussedas‘theStanfordmodel’,Britishpolicymakersandbusinessleaderscantakeheedof,andevenenhance,similarfactorsandpracticesinordertostrengthentheUKinnovationecosystem.
DuringherMBAatStanfordUniversity,JaneChenandherpeersonamulti-disciplinary‘entrepreneurialdesignforextremeaffordability’classcreatedtheworld’sfirstlow-costbabyincubator,whichcostsabout1%oftheusualUS$20,000.Whatstartedasanacademicchallengeevolvedintotheaward-winningsocialbusiness,EmbraceInnovations,whichhasdistributedEmbraceWarmersthathavereachedover60,000hypothermicinfantsin11developingcountriesaroundtheworld23.
Process:design-ledinnovationMsChenassertsthatthedesignprocesscanbetaughtandfosteredacrossacademicandbusinessfields,drawingonthecreativityinherentineachindividual.Thatprocessistounderstandtheproblem;listthecriteriarequiredtoaddresstheproblem;userapid‘low-resolution’prototypinganditerationbasedontrialanderror;andtoco-createwiththeenduser,notjustintermsofreceivingfeedbackbutinorderto“understandtheecosystemaroundsomethingthat’sgoingtomakeyourproductsuccessfulornot”.
TheEmbraceWarmerusesaninnovativewaxincorporatedinasleepingbagtoregulateababy’stemperature.Itstayswarmwithoutelectricity,issafeandintuitivetouse–acrucialfactorgiventhehighnumbersofbabiesborninremoteruralareas,withoutaccesstohospitalfacilities,meaningthatfamilymembersneedtobeabletooperatetheproductthemselves.
TheentrepreneurialstructurePullingtogethermulti-disciplinaryteamsisalsoimportant,MsChensays.TheEmbraceprojectteamoriginallycomprisedanelectricalengineer,anaerospaceengineer,acomputerscientistand(inMsChen’scase)apublichealthprofessional,whichallowedthemtoconsiderthechallengeofregulatinganeonate’sbodytemperatureunburdenedbymedicalpreconceptions.
Shebelievescorporationswouldbenefitfrom“bringingthatdiversityofbackgroundsandviewpointsintotheirwork”andencouraginginnovation-basedcorporatespin-offsinthesamewayasuniversitiesdo.
MsChenalsoadvocates“verticalintegration”ofthesupplychain,suchasmanufacturingandsales,areasthattheteamfirstassumedcouldbeoutsourcedtothirdparties.“You’resellingabrandnewconcept,whichdoesn’tplugintoanyexistingsalesinfrastructure.Wetriedtopartnerwiththird-partydistributorsandevenmultinationalsandthatsimplydidnotwork.So,forground-breakingideas,Ithinkyouneedverticallytointegratetosomeextent,”sheexplains.
Consequently,Embracehasdevelopedasmall-scalemanufacturing,trainingandsalesteam,whichMsChensaysnotonlygivesEmbraceend-to-endcontrolofitsproduct,butalsoprovidesinsightsintothepricepoint,effectivesalespitches,controloverhowitsproductandbrandispositionedinitsmarket,aswellasproduct-specificfeedback.
EcosystemsupportforentrepreneursStanfordUniversityplayedacriticalroleinassistingEmbrace,notleastbyfacilitatingaccesstootherinfluentialstakeholdersandfundingopportunities.EmbracewonUS$125,000inseedfundingfromtheStanfordBusinessPlanCompetition,andEchoingGreenFellowshipawards.
Asanon-profitorganisation,Embracereceivescontributionsfromfoundationsandindividualdonors,aswellasasmallpercentageoffundingfromroyaltiesoncommercialsalesoftheinfantwarmertogovernmentsandprivateentitiesthatcanaffordalow-costsolutiontoneonatalhypothermia.BothStanfordandEchoingGreenFellowshipadditionallyprovideaccesstotheirrespectivealumniandpartners,whichMsChenconsiderstobecrucialinEmbrace’ssuccess.
“Corporationswouldbenefitfrombringingadiversityofbackgroundsandviewpointsintotheirworkandencouraginginnovation-basedcorporatespin-offsinthesamewayasuniversitiesdo.”JaneChen,Co-Founder,Embrace
23http://embraceglobal.org/who-we-are/mission-impact/
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Couldvaluingintellectualpropertyunlockmainstreamstart-uplending?Prof.Wrightconsidersfundinglessofabarrierforentrepreneurialstart-upsbecausetheinitialcostsformanyknowledge-basedbusinessesarenowlow.However,MrHuttonadvocatesBritaincreatingitsownmarketforintellectualproperty,whichhebelieveswillcreatemoremainstreamlendingopportunitiestostart-upsthatwouldotherwisenotqualifyforsuchfunding.
Britishbusinessesnowinvestmoreinintangibleassets,suchasintellectualproperty,brandinganddesign–investing£138bnon‘knowledgeassets’in2011–thantheydoinbuildings,enginesandmachinery(£90bnin2011)24.Thatsuchassetsarecurrently‘unbankable’,accordingtotheIntellectualPropertyOffice25,providesahugeopportunityfornewfinancialinstrumentstounlockthislatentvalue.Initsrecentreport,BankingonIP:Theroleofintellectualpropertyandintangibleassetsinfacilitatingbusinessfinance26,theIntellectualPropertyOfficestated:“Balancesheetsdonotrepresenttheirvalue,andcurrentregulationsactivelyworkagainstconsiderationofIP(intellectualproperty)asanassetclassbuttheresultisarealandimportantdisconnectbetweenbankingregulationandpracticeandtheUK’sambitionforgrowth.”
MrHuttonexplains:“OneoftheinterestingdevelopmentsintheUShasbeenM-CAM,acompanythatunderwritesthevalueofintellectualproperty,againstwhichbankscanlend.Thisgivesinventorsandentrepreneurssomeprofitbutalsogivesbankerssomecomfortthateventhoughnothinghasbeencommercialised,thereisanideabehindthepotentialcommercialventurethathassomeintrinsicvalue.”
AsChairoftheBigInnovationCentreatTheWorkFoundation,MrHuttonsupportsthecreationofagovernment-backednationalInnovationBank,whichwoulddrawtogethersomeoftheUK’sbiggestcompanies,suchasGlaxoSmithKlineandBAESystems,withauniversityconsortiumincludingOxford,CambridgeandUniversityCollegeLondon.ThevisionisthatsuchanInnovationBankwoulddevelopinsuranceschemestounderwritethevalueofintangibleassets,aswellasmentoringUKbusinessesandplayersinthefinancialsector,includingbanksandventurecapitalists.
However,MrRichardiscriticalofanymovetofosteramarketforintellectualproperty,encouragingfinancialinstitutionseffectivelytovalueconceptsbeforeanycommerciallyviableproductorservicehasbeenproduced.“They’retakinganotionatonestageofabusinesswiththetypeofactivitythathappensatadifferentstageandsaying:ifwerealisetheintellectualpropertyandgiveitanassetvalue,then[start-upbusinesses]couldborrowagainsttheasset.It’snotthelackofassetbackingthatstopsthemfromgettingaloanatthatstageofthebusiness,it’sthelackofserviceabilityontheloan,”hesays.
Thefutureofseed-stagefundingissocialWhileadvocatesofanIPvaluationmarketbelievethiscouldhelpstart-upsgainfundingatseedstage,MrRichardthinksthisisunlikelybecausetraditionalbankloanshingeontwoquestions:canyoupaybacktheloan;and,ifyoucan’tpaytheloanback,whatassetcanbeclaimedinitsstead?
“Ifthebusinessisfailingthentheintellectualpropertymayhavebeenprovedinthemarketplacetobeofnovalue,”hesays.Atseedstage,thebusinessissimply“aconcept,adream,adesire”.SimplyvaluingIPdoesnothingtofreestart-upsfromrelianceoninvestmentsfromthe“threeF’s”–family,friendsandfools–becausetheconceptisnotasset-backed.
Instead,heoffers,socialloanscanprovideasolution.Theyareunsecuredloansprovidedunderverydifferentlendingcriteriatotraditionalloans(designedforstart-ups)bycommercialfinancialinstitutionsandunderwrittenbythegovernment,withalownominalinterestrateof6%.
“Sociallendingisinterestingbecauseitpreservestheentrepreneur’sequity.Peoplethinkthataloanisworsesomehowthanthesaleofequity,butintruththesaleofequityisthemostexpensivemoneyyou’lleverspend,ifyousucceed.”DougRichard,Founder,SchoolforStartups
24http://www.theguardian.com/business/2014/may/04/innovators-mcam-knowledge-underwriter-value-intangible-assets-intellectual-property25http://www.ipo.gov.uk/ipresearch-bankingip-sum-281013.pdf26http://www.ipo.gov.uk/ipresearch-bankingip-sum-281013.pdf
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Loanrecipientsarematchedwithabusinessmentortoguidethedeploymentoftheloanfundingwiselyandtopassonreal-lifeexperiencethatthementorhasgainedbybeingasuccessfulentrepreneur.Theaverageloansizeis£6,000andSchoolforStartupsisthelargestdeliverypartneroftheStartUpLoansschemeintheUK,throughitslauncherprogramme,saysMrRichard.“Sociallendingisinterestingbecauseitpreservestheentrepreneur’sequity.Peoplethinkthataloanisworsesomehowthanthesaleofequity,butintruththesaleofequityisthemostexpensivemoneyyou’lleverspend,ifyousucceed,”headds.
However,MrRichardbelievesthattheUKgovernmentcouldbemoreinnovativeitselfinitsfundingstrategyforentrepreneurs.Traditionalloans,hesays,donotfitstart-upsbecausetheytypicallyhaveavolatilecashflowyetloansrequireregularrepayments.Instead,countriessuchasColombiaarecreatingcustomfinancialinstrumentstosuitthestart-up,bethatasteppedaccelerationininterestratetowardstheendoftheloantoencouragequickerrepaymentsooneroracertainpercentageoftheloantoberepaiddependingonvaryingrevenuelevels.
Start-upLoans:Keystatsanddemographics
Source:www.startuploans.co.uk
MrRichardsayssuchapproachesdefytraditionallending,butlendingtostart-upbusinesshasneverbeenpartofthetraditionalbankingremitbecauseitisdeemedtoorisky.Thatriskyelementofthemarketindevelopedeconomiescanbeaddressed,heexplains,byborrowingandadaptinginnovativeapproachesthatworkwellindevelopingcountrieswheretheyseektoassistthe‘unbanked’(peopleexcludedfromthebankingsector).
Combatingsell-out‘gazelle’companiesThefactthatUKtechnologystart-upsbeingsnappedupbyfarlargerUScompetitorsonanacquisitionbentissocelebratedintheUKhighlights“ambitionandscalebarriers”thatcouldbepartiallygeographic,suggestsMsLaneFox.“Ifyou’rebornintheUSthenyourhomemarketisimmediately300mpeople,whichgivesyouadifferentideaofscaleandambitioncomparedwiththeUK,wherethehomemarketis60mpeople.Togetaccesstorealscale,youhavetogointoEuropeandthat’sharder,”shesays.
MrHuttonagrees:“TheAmericanshaveasinglemarket.ThemarketinEuropeisformarketingmanufacturedgoods,notinknowledgeservices,wherealltheactionis.ThatmakesitverydifficultforBritishentrepreneurstopitchtheirstart-upcapitalwithanychanceofbuildingabilliondollarcorporation,becausethesinglemarketinwhichitmightdothatdoesn’texist.”
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At the heart of the Eurozone project is the concept of borderless free-trade movement (of people and goods) but, unlike in a domestic single market the size of the US, UK companies face different legal and administrative environments, different languages and cultural nuances on the Continent, as well as the need to select a suitable corporate structure for expansion – whether to franchise, partner or otherwise enter a less familiar marketplace.
Nicholas Davis, Director and Head of Europe at the World Economic Forum, says: “At the EU level there’s a huge amount of work still to be done to reduce fragmentation and create a digital single market. This would allow companies that start here in Britain to seamlessly access 500 million people rather than just 8 million in London, for example.”
Ms Lane Fox also says that European businesses tend to have “longevity and levity”, which UK businesses lack, suggesting “there’s a cultural point about that kind of ambition and really not trying to get out of your business before you’ve achieved scale”.
Mr Hutton adds: “Too many companies have to exit or sell all their equity at the crucial juncture of £2m turnover. [As entrepreneurs] they have no scope to grow unless they sell out completely and that indicates a dysfunction in the system.”
Prof. Wright believes this dysfunction is compounded by government policy, which is too narrowly focused on measuring start-up volumes and using that as an indicator of entrepreneurship in the UK, without also focusing on whether the start-ups actually grow or create wealth. “I think there’s probably not enough done after the incentives to start up a business to help it to grow,” he says. “There are a lot of problems there with policy; the growth side [of businesses] is where the impact from innovative entrepreneurship is really going to be.”
There is also a case for greater promotion of alternative funding and growth options, making it less attractive for successful UK businesses to sell out to acquisitive (typically foreign) competitors, which then benefit from the UK’s cultivation of a business during its riskiest phase and draw the future profit potential of the business away from the UK economy.
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AstheUK’seconomyisweightedtowardsknowledge-basedenterprises,encouragingentrepreneurialismthatadvancesnewapproaches,processesandproductsthatcanbebothcommercialiseddomesticallyandscaleduptorivalinternationalpeersiscrucialtothefutureoftheUKeconomy.Withoutawell-functioningandoptimallysupportedentrepreneurialecosystem,theUKrisksactingasanationalstart-upincubatorsupplyingforeignmultinationals.
ExpertsinterviewedinthisreportofferadviceonhowtosucceedinbuildingaUKentrepreneurialecosystem.
• Whilesoletraders,theself-employedandsmallandmedium-sizedbusinessesmakeaconsiderablecontributiontotheUKeconomy,greatercaremustbetakentoaddressthespecificneedsofeachofthesegroupsandcautionexercisedsoasnottoallowterminologytobeusedinterchangeablytodescribebusinessesthataresodiverseintermsoftheirbusinessmodel,riskappetite,scalabilityandcapacityforemploymentgrowth
• Location-basedhubsofentrepreneurialactivityshouldnotbeconsideredsimplywithincityboundaries.ThesocialdataincludedinthisreportmakeacaseforfosteringentrepreneurialactivityalongtheLiverpool-to-Yorkcorridorratherthanprovidingcity-specificsupportandignoringtheagglomeration.Supportforentrepreneursinsuchagglomerationsmayneedtobeindirect,suchasprovidingenhancedtransportinfrastructureandfosteringsupportandbusinessnetworksthatspanthemultiplecitiesandareasconnectingthem
• Thesocialdataindicatethatsourcesofpracticalsupport(suchasacceleratorprogrammes)andfundingprovisionsareintegraltotheonlineconversationabouthigh-growthbusinessesandstart-upsintheUK.Consequently,these‘influencers’canbeusedtoamplifythesuccessesofBritishentrepreneursandprovideawarenessofrolemodelstohelpcultivateamoreambitiouscultureofentrepreneurialismtorivalthoseoftheUSandEurope
While improvements to foster an innovation ecosystem in the UK have begun, much more can and should be done.
Conclusion
• Theseinfluencersshouldbeusednotonlytosignpostentrepreneurstoresources,butshouldbeconsideredaslong-termpartnersforentrepreneurswhiletheygrowtheirbusinessesfromstart-upphasethroughtohigher-scalematurity,completewithoptionsforexpandingabovethe£2mturnoverthreshold
• Thetiesbetweenacademiaandthebusinesscommunitymustcontinuetobestrengthenedandpublicisedsothatawiderrangeofbusinessescanbenefit,andlessbusiness-mindeduniversitiescanbeencouragedtofollowsuit.Partnershipsbetweenalumnianduniversityenterprises,withtheformermentoringthelatteronhowtocommercialisetheirprojectsisoneelement,butbroaderintegrationintothelocalbusinesscommunitieswillensurewiderparticipationinaknowledgeeconomy.Giventhatuniversitiesarepubliclyfunded,asharperpushtowardsawidernon-academiccontributiontoenterpriseactivityisneeded
• Aninnovativeapproachtofinancialinstrumentsthatarebetterabletomatchthefundingneedsandpracticalconstraintsofentrepreneursatthedifferentstagesoftheirbusinesses’lifecyclesisrequired.Traditionalfinancialinstitutionswillbepivotalinprovidingthis.Thegovernment,whichcanwieldtaxandotherfinancialincentives,alsohasacrucialroleinreducingthebarriersthatentrepreneurscomeupagainstingettingfundingtocommercialisetheirideas,andthebarriersthatthemarketfacesinpricingriskaroundentrepreneurialventures.Forstart-ups,matchingfundingwithmentorshipappearstobeagoodfirststep,butmorecanbedonetomatchtheriskandliabilityprofileofbusinessesatdifferentstages.ThisshouldbeapproachedcollaborativelyfrombothagovernmentandfinancialservicesstandpointtoensureacohesivefundingstrategyisadoptedfortheUK.
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Inadditiontowide-rangingdeskresearchanddatafromPulsar,asocialdataintelligenceplatform,thisreportisbasedonqualitativeinterviewsandaroundtablediscussionwithexperts.Ourthanksgotothefollowingfortheirspecificcontribution.
MarkAnderson,ManagingDirector,PearsonEducationUK
JaneChen,Co-Founder,Embrace
AlastairClegg,ChiefExecutive,ThePrince’sInitiativeforMatureEnterprise(PRIME)
NicholasDavis,DirectorandHeadofEurope,WorldEconomicForum
GraemeFisher,HeadofPolicy&ExternalAffairs,FederationofSmallBusinesses(FSB)
RossFobian,CEOandCo-founderofResponseTapLimited
DavidGill,ManagingDirector,StJohn’sInnovationCentre,StJohn’sCollege,UniversityofCambridge
MarkGlover,DirectorofBusinessPlanning,TechnologyStrategyBoard
CliveHoltham,ProfessorofInformationManagementandDirectorofCassLearningLaboratory,CassBusinessSchool
TomHulme,DesignDirector,IDEO
JillHuntley,ManagingDirector,CorporateCitizenship,Accenture
WillHutton,PrincipalofHertfordCollege,UniversityofOxford,andChairoftheBigInnovationCentre
Barclays approached The Economist Intelligence Unit in February 2014 to investigate how entrepreneurs in the UK are supported and the barriers that hinder them, as well as wider trends that are shaping the UK’s innovation ecosystem.
About this report
MarthaLaneFox,Co-Founder,lastminute.com
JamesLayfield,SerialEntrepreneurandCEO,CentralWorking
KathrynParsons,Founder,Decoded
JaideepPrabhu,JawaharlalNehruProfessorofBusinessandEnterprise,JudgeBusinessSchool,UniversityofCambridge
DougRichard,Founder,SchoolforStartups
SumonSadhu,Founder,Quid
PhilipSalter,Director,TheEntrepreneursNetwork(TEN)
PeterTufano,PeterMooresDean,SaidBusinessSchool,UniversityofOxford
EzeVidra,HeadofCampusLondonandGoogleforEntrepreneursEurope
MikeWright,ProfessorofEntrepreneurship,ImperialCollegeLondon
ThisreportwaswrittenbyAnnaLawlorandeditedbyZoeTabaryandMonicaWoodley.
BarclaysisatradingnameofBarclaysBankPLCanditssubsidiaries.BarclaysBankPLCisauthorisedbythePrudentialRegulationAuthorityandregulatedbytheFinancialConductAuthorityandthePrudentialRegulationAuthority(FinancialServicesRegisterNo.122702).RegisteredinEngland.Registerednumberis1026167withregisteredofficeat1ChurchillPlace,LondonE145HP.
June2014.
barclays.com/entrepreneurs