As regular readers will know, I’m what you might call an "Estonia stan". I’ve visited the country many times to meet their politicians and entrepreneurs, to better understand how they built their self-styled "digital society" out of the horror of communist occupation.
But even I couldn’t object to Aria Babu’s swipe at the Baltic state in the Telegraph this week:
"[Estonia] boasts the highest number of billion-dollar start-ups founded per capita. But while Estonia clearly has enviable levels of entrepreneurship its population is too small and too remote from other tech centres to provide the ecosystem necessary to sustain its start-ups. As a result, many of them move to scale. Looking at the ten Estonian start-ups valued at over a billion dollars, only two of them, Bolt and Veriff, are still based in the country. Skype is now based in Luxembourg, Gelato has moved to Norway, and Playtech to the Isle of Man. Zego and Wise (formerly TransferWise) are now based in London and ID.me, Pipedrive and Glia are in the USA."
Over the years, the UK has benefited from being able to poach capital and talent hungry startups from Europe – including Estonia. After all, when we last looked, half of the fastest growing companies had at least one foreign-born founder. But we’re also on the receiving end of this process – particularly with the lure of Silicon Valley’s cash, talent and ethos (or even New York’s). And we’re not just losing out to America. Since Brexit, European funding bodies are still giving money to UK companies, but asking that they move operations to an EU country to continue their growth. As Aria’s article makes clear, we need to make greater efforts to hold onto our startups:
"Of particular concern to some of our nation’s most innovative entrepreneurs are planned cuts to the generosity of R&D tax credits. These incentivise investment in developing new goods and services, and have been integral to fostering cutting-edge innovation. Scheduled to take effect this April, research from Coadec suggests the reform will cost the average start-up £100,000. Combine this with rising corporation tax, general Government hostility to tech companies, and the poor outlook for domestic investment, and it isn’t surprising that companies are leaving."
Along these lines, Ayming’s UK Innovation Barometer 2023 recently found that 69% of businesses moved R&D activity abroad in 2022 and 70% are planning to move activity abroad in 2023. At least 63% of businesses have moved activity to EU countries, primarily due to our exclusion from Horizon Europe, the EU’s key funding programme for research and innovation, and HMRC’s R&D tax delays. We estimated that the delays to processing claims were costing UK startups and small businesses at least £132m.
All is not lost. The UK is undoubtedly the best place in Europe to scale your business. But there could come a point when it’s not. As the Silicon Valley exodus shows, resting on our laurels is not an option.
Visa Vacillation
It’s sad to see Tech Nation close. The formidable founding CEO Gerard Grech has shared his views on Twitter and LinkedIn.
But as Elli Graves from Kingsley Napley writes, it’s not clear what Tech Nation’s closure means for the Global Talent visa: "the removal of Tech Nation’s funding has been planned for some time now, it feels extremely short sighted that the Home Office have allowed us to reach this stage without even the vaguest of plans for the continuity of the visa programme or a successor to Tech Nation being announced."
I wasn’t joking when I wrote last year that we should consider abolishing the Home Office.
Pay Up
In response to the recently announced Prompt Payment and Cash Flow Review, our friends at Enterprise Nation are running a series of roundtables.
In the extreme case, late payments can cause businesses to fail, but they also have a negative impact on employment, exports, international expansion, investment, profitability, access to finance, borrowing costs, and much else besides.
Sign up below to feed into the response, and have your say on what needs to change to ensure smaller companies are paid faster.
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