Million-Pound Questions

In the House of Lords on Tuesday, we launched One In A Million: our sixth major report of the Female Founders Forum, which we run with Barclays. The title comes from the fact that there aren’t as many female founders of high-growth firms as there could, and should, be: just 32%. We don’t need to look far to find countries where there is a higher percentage of female founders. Switzerland, the US, Canada, and the Netherlands are all doing better. 

One In A Million shares the success stories of many of the most successful of that 32%. Over the last year, Aria Babu, our Head of Policy, has interviewed 59 female founders who have raised over ​​£1 million. As the report reveals, just 16% of equity finance goes to companies with a female founder or co-founder. 

Entrepreneurs buck the trend – even their own stereotypes. As the report shows, there is no such thing as a typical female entrepreneur. But there are important questions to ask in the dividing lines, lessons to be learned even from outliers, and, ultimately, concerning trends across the experience of many female founders that require action from government, the finance industry, our education system and society at large.

First, 59% of our sample feel that they have been discriminated against because they are a female founder, and 72% believe that it would have been easier to raise finance if they were a man. If you have any doubts that this is still a problem read the case study of Kim Nilsson, founder and CEO of PeripherAI: “Very few founders ever get concrete proof that they have been discriminated against, although many have stories of when they suspect they had been. Kim is the exception. She said that once, after an Angel investing pitch, one of the investors reached out to her and said that he had made a mistake. ‘He emailed me afterwards and said that he had given money to the other team because they were men and they seemed so much more confident. He told me he regretted that decision.’”

Nevertheless, 76% of the female founders we polled said that they thought there were advantages to being a female founder. As Raissa de Haas, co-founder of Double Dutch says in her case study: “It helps you to stand out. If you’re in a group of ten colleagues, the rest of whom are men, people are more likely to remember who you were.” And Hannah Philp, co-founder and CEO of ARC Club said: “There is an advantage. I feel like there’s less of a prototype for what I have to do. I don’t have a dress code, for example. I don’t have to fit a mould.”

Just over half, 54%, of the founders Aria spoke with think that the media positively portrays them. As Saascha Celestial-One, co-founder of OLIO says: “You get more PR. That’s usually helpful.” But as Elsie Rutterford, co-founder of Bybi says: “The fact that we are both women often poses itself as a PR opportunity. But the story that gets penned could do with work. The stereotype of a female founder is quite cliched. There are only so many stories that get told about women in positions of power. There are only so many things you get to be.” Yet the majority, 79%, still think that the framing of “female founders” is helpful. 

Every time I write about our Female Founders Forum reports, I get a couple of emails from men asking why we focus on female founders. Here’s one compelling reason: of those living with a partner, only 18% say that their partner does more housework, while 38% do more housework; the gap is wider for those with children: 12% versus 48%. This points to why childcare is such a big issue for the female founders in our community – as well as for women and households more broadly.

I suggest you read the report (or at least skim it), read a write-up in The Times (paywall), read Aria on how the ‘chore gap’ is still holding female founders back, or read the speech Aria delivered at the launch.

Happy Mondays
Getting the right funding for your business is such an ever-present challenge that there is always the risk we overlook it. That’s why we picked it as the topic for Monday’s event with The Office Group, who we work with (and out of). 

You’ll hear from Julia Elliott Brown, founder and CEO of Enter the Arena, member of the Female Founders Forum and author of RAISE: The Female Founder's Guide To Securing Investment; Henry Whorwood, head of research and consultancy at Beauhurst, who we’ve worked with on a number of reports; and Patrick Newton, ​founding partner at Form Ventures, who back companies in UK startups with public policy exposure, and who we regularly chat to about what the regulations their portfolio companies are struggling with.

We’re a lean operation, so wouldn’t stretch to anything as profligate as a public Christmas party. However, most of the team will be there if you want to pop along and say hello before and after the event, and raise (if not some funds) at least a festive glass.

Inclusive Innovation Forum: Access to Funding

Welcome to the third newsletter of the Inclusive Innovation Forum. The first and second roundtables and newsletters considered how founders of colour can access funding, the different paths they can follow, the barriers they face, and what can be done to unlock their potential.

In the third roundtable we focused on understanding the role of public policy and how it can support founders of colour. At The Entrepreneurs Network we will use these insights of this project to inform its policy work and lobbying efforts, including:
- Ongoing discussions with government departments;
- Engagement with policy makers outside government, e.g. the Labour Start Up Review
- Upcoming conversations with the British Business Bank;
- Scoping out a briefing paper to impact policy.

Roundtable Insights

The roundtable opened by summarising the findings from the Report of the Commission on Race and Ethnic Disparities, which analysed different areas, including employment and enterprise. As Tony Sewell, Chair of the Commission on Race and Ethnic Disparities, said in his opening remarks: “There are disparities in terms of who gets money from venture capitalists for their startups, and these disparities are also rooted in peer groups and families."

There was agreement that a barrier for underrepresented communities to start an entrepreneurial journey is the lack of access to capital. Marquis Caines, partner at Diversity-X, explained this problem: “Typically, in the black community, we can not do family and friends rounds. When we try to leave the ideation stage, most of us do not even have the capital to develop the idea of a product, which is a necessary first step before approaching venture capitalists.”

It was suggested that this situation should be addressed by the government:

"Public policy, especially within the pre-seed investment space, should include more vehicles to promote more equitable access to capital." – Dama Sathianathan, Partner at Bethnal Green Ventures.

“I don’t think that mentoring and outreach is good enough, because the question is not how do we discuss ideas, but how do we turn the idea into a business.” – Ahana Banerjee, Founder & CEO of Clear.

Mark Neild of the University of Bristol said: “People from underrepresented communities often can’t access Start Up Loans because credit decisions are based on whether the applicants have money and if they can pay it back.” He believes that credit decisions should shift to be more about the prospects of the business rather than the founder's already existing wealth.

The discussion, additionally, revolved around whether entrepreneurship can be promoted by shifting mindsets and encouraging people to convert their day jobs into a business. Mark Neild thinks this may be particularly important for excluded groups that may not be able to access employment and may be better suited to selling directly to the public rather than selling their skills to an employer.

Another major topic of conversation was around if entrepreneurs should focus on selling to their own communities or look to expanding their market beyond them. Many of the attendees said that an advantage of selling to their own communities is that they understand what their specific needs are that have not been solved by others.

Moving on, the discussion covered the importance of promoting minority-lead accelerators and other organisations that provide startup support. More diverse organisations that support startups could be game-changing.

Eni Timi-Biu, Founder & Director, Create Your Table, said: “The opportunity to design and deliver programmes can be monopolised by quite a few organisations who often mirror some of the biases that exist in the entrepreneurship ecosystem.”

Ahana Banerjee, Founder & CEO of Clear stated some of the key institutional blocks for underrepresented founders:
- There are too few ethnic minority investors in senior positions (with decision-making power) at VC funds;
- Companies tackling problems faced by underrepresented founders are often built by those minorities. These areas may be less familiar or less well understood by most investors, resulting in even more unknowns and an increased perceived risk;
- Many investors will not respond to cold communication, thus, the ability to fundraise is often tied to one’s network. Most people in VC come from a finance, tech, or a startup background; these are also white male-dominated fields.

It was agreed that something has to be done to overcome those institutional barriers and this is something that the private sector can help with. “Corporate-led programmes such as the Morgan Stanley Multicultural Innovation Lab, which focuses on actively investing in improving access and opportunities for diverse founders, are critical. We find that there is a strong business imperative to invest in diverse founders, given the resilience and innovation they bring to the table” said Sanghamitra Karra, EMEA head of multicultural client strategy at Morgan Stanley.

Finally, it was agreed that it would be valuable to have a better evidence base to, as Tony Sewell put it “gain a better understanding of what works and use this as a model to move forward.”

One in a Million

This week we released our sixth annual Female Founders Forum report One In A Million with Barclays. Unlike in previous years, where we have repackaged and drawn out themes in other people's data, this year we have created our own new data set. We talked to members female entrepreneurs, who have raised at least £1m in equity finance, and asked them about what it is like to be a female founder in Britain in 2022. Here is what we found:

• 72% of our founders believe that it would have been easier for them to raise equity finance if they were a man;

• 59% of our founders report having been discriminated against because of their gender;

• Female founders are much better educated than the general population. They are twice as likely to have have a degree and ten times more likely to have a postgraduate qualification;

• The chore gap for female founders is the same as it is for other working women. Half the founders who are mothers say they take on the majority of housework.

I hope that has whet your appetite because there is much more in the report. If you'd like a condensed version you can read our Twitter thread or the coverage in the Times. And if you're interested in the chore gap for female founders, and ways we can make childcare cheaper, I have written about that here, here, and here.

We launched the report in the House of Lords. Thanks to everyone who made it there. There was so much energy and passion in the room and it made such an excellent event.  We had the support of Baroness Jenkin, who is a great champion of women in politics and who, before entering politics, founded a business and Maria Caulfield, the Minister for Women and a great advocate for women's empowerment. Below is a version of the speech I gave.

First of all, I need to say thank you to all the founders who helped put the report together. There are only about 2000 women who have raised at least £1m in equity finance, and about 5% of them have been a part of this project in some way. We have been running the Female Founders Forum for several years, but until now we’ve been reliant on general data from the business literature. The vast majority of people who start businesses are not high-growth founders and I think people face very different interests when they run very different businesses. The policy issues for women who run kitchen-table businesses because they are trying to work less and spend more time with their children are very different to those who are trying to revolutionise banking or green energy. As a result I feel honoured that such a small and thinly stretched group has been so generous with their time and attention.

But let's go back to basics. Why should we care about female entrepreneurs? I think to some it may feel like this is a luxury issue – when we’re talking about founders we are talking about a. tiny portion of the population and often (but not always) quite a privileged portion of the population.

But I think they're of critical importance. First, barriers that thwart female entrepreneurs are barriers to our own economic growth. In the UK we have significantly fewer female founders than similar countries like Switzerland, the Netherlands, Australia, the US and Canada. Young companies are engines of growth and we’re losing out on about £200bn of economic output because we are behind our peer countries.

Second, founders have influence. By starting a company and creating new products you have a disproportionate influence over the world. You can determine what gets sold and how it works, and you set the cultures in your companies and industries. The systematic underrepresentation of women in decision making roles has created a world that is not built for women.

Here’s a small example. I had a meeting the other day in a VC firm’s offices and I had to sign in on a screen and then it took a picture of me for my pass. I’m 5ft3 – which is the average height of a British woman, and I think my arms are a pretty normal length. But I couldn’t reach the screen and stand in range for the picture at the same time.

This is obviously just a minor inconvenience but it is illustrative of a broader issue. How many of us take aspirin or paracetamol? How many of us are a woman of 'childbearing age?'. Well, until 1993 the US FDA banned clinical trials on women of childbearing age, meaning that many of us regularly take medicines that were approved before they were properly tested on people with our biology.

It’s damaging to women to exclude us from the decision making processes. This is why it is so important to increase the number of women in politics, and in business, and in STEM fields. And, as we have seen an increase in the number of women in senior roles, we have seen more and more products made for women by women.

Just look at the very first case study in the report. Irene McAleese makes bike lights that gather data on people’s cycling habits. She’s passionate about the health and lifestyle benefits of cycling and wants to help close the gender cycling gap. With the bike lights she’s found some really interesting differences between how men and women cycle and she’s using this data to help policy makers make more women-friendly urban design choices.

And third, female founders face the same issues that all women face. How do we navigate careers with the ingrained expectations about household labour? I was shocked to learn that despite being incredibly successful, 46% of the female founders who are mothers say that they do the majority of the housework. Only 12% say that their partners do more. These are similar numbers to the rest of British mothers who work full time.

And discrimination is something we all deal with. Founders talked to me about how they were ignored in meetings, about how male investors don’t take them seriously, and about how they are generally believed to be less competent and worthy than their male counterparts. Still only 16% of equity finance goes to companies with a female founder. 72% of our founders believe they would have found it easier to raise equity if they were men.

The interests of high-growth female founders should be all of our interests too. Discrimination and poorly built systems are making all of our lives worse and it’s time we addressed these issues head-on.

We have a series of recommendations in the report. I have a whole list of ways that we can make childcare more affordable. We need to address the fact that girls, despite being as talented in maths and science, do not feel as though they can continue onto careers in these fields. We need to change the culture in the media and how the press discusses female founders. And we need investors to stop investing in people who are like them and already in their networks.

Even if they don’t care about inequality, it’s bad for business. 

Best wishes,
Aria

P.S If you would like to keep up to date with what we're doing with the Female Founders Forum, make sure you subscribe to our newsletters and follow The Entrepreneurs Network on Twitter. We're trying to raise the salience of these issues and raise the profile of female founders (on their own terms) so that they are viable role models for all the women who have a business in them but haven't made the leap yet. To that end, please to share the report and the Twitter thread on any platform that you have.

Rhyme or Reason

Hot off the press! As part of our Access All Areas project, this week we released our third report with Enterprise Nation on Access to People.

The report focuses on small businesses, but many of the ideas would help businesses of all sizes. I’ll focus in detail on two recommendations, but I think all eight deserve serious consideration.

First, we should allow the self-employed to get tax breaks for learning new skill sets, even if they aren’t relevant to their immediate work. Currently, if someone wants to access training courses that help them start a new business, or expand into new areas of business, including anything related to their current business, they aren’t allowed.

Of course, there are limits to this policy. We probably shouldn’t be giving tax breaks to learn calligraphy – although it didn't do Steve Jobs any harm. Either way though, it is easy enough for the Government to decide what’s permissible, as is the case in the majority of other OECD countries.

Second, we should allow employers that pay the Apprenticeship Levy – which is 0.5% of an employer’s wage-bill if they pay more than £3m of wages in a year – to transfer even more of their funds to smaller companies down their supply chain, and consider replacing the Apprenticeship Levy with a Skills Levy.

I’m not going to pretend that lots of companies will make use of transferring more of their funds to smaller companies, but it’s nevertheless worth doing for the small percentage that do.

Replacing the Apprenticeship Levy with a Skills Levy would be more transformative. Despite the initial success of apprenticeships, they have fallen sharply across all age groups even with the Apprenticeship Levy. To increase uptake, the government could widen the scope to include other forms of accredited training. It’s an argument that has already been made by the likes of the British Retail Consortium, CIPD, and the Learning and Work Institute – particularly in trying to refocus training on young people.

The report also looks at changes to visas and immigration. In a week where record levels of migration have been announced, it might seem politically naive to call for more of it. But someone needs to to fight the good fight, if only to help shift the Overton window. 

The main cause of the spike is humanitarian. As Oxford’s Migration Observatory notes: “the largest single factor is the introduction of visa routes for Ukrainian refugees and Hong Kong British Nationals (Overseas) status holders. Together these two routes contributed 45% of the 467,000 increase in visa grants between 2019 and the year ending June 2022." The rest is the result of students (39%) and work visas (23%). "Skilled workers, particularly in the health and care sectors, were the main factor behind the increase in work visa grants."

So most of this immigration is both temporary and necessary. Not necessary, of course, in an absolute sense, but certainly in a moral sense. The public agrees, overwhelmingly backing asylum for those fleeing the likes of Putin, and they are massively in favour of letting in doctors, nurses and care workers to tend to our sick and elderly.

The British public also likes international students, but that isn’t stopping the Prime Minister from exploring plans to only allow ‘top universities’ to accept immigrants. Gone is the previous target of boosting the value of Britain’s education exports to £35 billion per year by ensuring we have 600,000 foreign students by 2030 – a rarity in government targets in being met early.

Time to reread Made in the UK, our 2014 report with the NUS, which was prompted by Theresa May's crackdown on international students. History never repeats itself, but it does often rhyme.

Whether Forecasts

Our chickens are coming home to roost. There is no getting away from the incredibly weak economic forecasts in the Autumn Statement. In five years' time, the average household will be poorer than they were before the pandemic.

Many readers won’t be the average household, and entrepreneurs can be successful in the midst of a recession. Even during the Great Depression, and in Communist states for that matter, entrepreneurs found a way. But it’s harder – not least because their consumers are poorer.

But forecasts aren’t destiny. This is no comment on the smarts and credibility of the Office for Budget Responsibility, but an acknowledgement of the limitations of forecasting and known (and unknown) unknowns. Of course, these predictions may just as likely be optimistic, but I think there are things we can do to turn things around: things that we know would work.

But first, the Autumn Statement. As Eamonn Ives, our Head of Research, summarised, it’s a familiar mix of the good, the bad, and the let’s wait and see. We have a thread outlining the main announcements relevant for entrepreneurs.

I won’t go over everything, but focus on a few things that are important to entrepreneurs.

It was pleasing to see the online sales tax being ruled out (again), which we most recently argued should happen in our Access All Areas: Finance report with Enterprise Nation.

Perhaps it’s only ever raised as a possibility in each Budget so organisations like ours can pat the government on the back for not doing it (like taxing pensions). I think the threat is real, with powerful voices, including successive Tesco bosses, calling for an online sales tax. And while the Treasury will push back because the economics don’t add up – a bad tax only takes one bad decision to implement. They then have a tendency to prove hard to ditch – Stamp Duty being a case in point."

We were delighted to see the planned changes to EIS, SEIS and VCTs will be retained. It’s impossible to have a roundtable without our entrepreneurs proselytising about the value of these schemes to any politicians who will listen. That’s why we’ve long-supported them to fix a clear market failure.

In fact, we’re in the process of working on a report with the All-Party Parliamentary Group for Entrepreneurship on the value of these tax breaks. While the Call for Evidence is now closed, please feel free to reach out to Aria Babu, our Head of Policy, if you’ve got something you think we might miss.

The Chancellor also pledged to bring forward a bill to provide new powers to the ‘Digital Markets Unit’. In its previously planned iteration, we identified significant risks to competition, innovation and entrepreneurship. The wording we have in the Autumn Statement is unclear – focusing on laudable things like introducing measures to prevent subscription traps and fake reviews – but devil, or not, will be in the detail.

Jeremy Hunt also promised to ensure regulations are fit for purpose. While there are limits to divergence from the EU and other markets, I think there are some emerging technologies where we can carve out a niche as a testbed nation.

There are many other announcements that you’ll find on our thread, covering NICs, VAT, R&D, Catapults and business rates that I’ll pick over in the coming weeks.

Snap back to reality. So what next?

Yesterday I was at a talk on ‘Why do liberal democracies feel stuck?’ at King’s College, London, chaired by Munira Mirza (see below for our event with her) and featuring the economist Tyler Cowen. In short, Cowen argued for optimism, asking the audience to weigh up all the problems we see in the world against the immense talent we now have. With new technologies like vaccines and nuclear fusion, for Cowen, the latter always outweighs the former. And that’s where entrepreneurs come in. With or without government, entrepreneurs will find a way.

Even outside of the Autumn Statement, the UK Government can speed up this process – whether that’s immigration (in fact, OBR analysis accompanying the Autumn Statement revealed that Jeremy Hunt is relying on a surge in net migration to more than 200,000 people per year to help deliver economic growth – don't tell Suella Braverman), planning policy and procurement (which is already happening) or childcare reforms (which we will cover in our forthcoming Female Founders Forum report).

Another area the government should push ahead with is infrastructure. Sam Dumitriu (formerly of this house), is getting stuck into fixing our slowdown of building stuff with Britain Remade. As it says on their website: “We built the world's first railway, the world's first coal-fired power station, and the world's first commercial nuclear power station.”

Their first finding is that we aren’t necessarily a nation of NIMBYs, with polling revealing that wind farms and solar fields do have popular support – especially if they bring a discount on fuel bills – even if built near people's homes.

In his speech, the Chancellor reminded us of his entrepreneurial roots, stating his ambition to “turn Britain into the world’s next Silicon Valley.” What is the Government waiting for?

Back to the Civic Future

There are lots of first-rate Members of Parliament – including, of course, the many MPs reading this to keep abreast of what entrepreneurs need to succeed. But as I’ve argued for a long time, we could do better. In fact, there are strong arguments to suggest that things have been getting worse. But beyond diagnosing the problem and suggesting we pay them more, I haven’t heard of any practical solutions. Until now.

This week, Munira Mirza, the former director of Boris Johnson’s No 10 policy unit (until she resigned), launched Civic Future. She thinks that too few of our most capable citizens aspire to enter public life, and Civic Future is her non-partisan answer to that problem.

Munira set out her stall in The Times and on the Today Programme (50 minutes in). Civic Future will be launching a fellowship next year: a one-year programme to provide participants with the knowledge, skills, and support needed to become great public leaders – regardless of their politics. (People from Labour and the Liberal Democrats are also involved.) Through evening seminars, weekend residential events, and overseas trips, fellows will discuss the most important moral, technological and governance issues of our time and meet senior figures in government, industry, and society. The programme is designed to be conducted alongside a full-time job.

This isn’t just about becoming a politician – public life is much broader than that, including those chairing and sitting on the board of public bodies. I know many of you reading this are incredibly civic-minded. Despite the mischaracterisation in too much of our media, entrepreneurship isn’t red in tooth and claw, but a collaborative endeavour.

Entrepreneurs aren’t the only group who Munira is targeting, but I think they should be a key one. She agrees, so we will be hosting a dinner with her soon. I have a long list of Advisers and wider entrepreneurs in my head who will want to attend this, but do let me know if you’re interested. You should also take a look at their website for more public events and sign up to be kept updated.

Getting good policies is more than just good ideas. We also need leaders in public life who can put them into practice. Both through Civic Future and other mechanisms, we want to ensure that some of the UK’s latent entrepreneurial talent is applied to the public sector.

Crisis of Care
The cost of childcare in the UK is prohibitively expensive. As Aria Babu explains in an article today, this is due to a number of factors:

“We force children into excessively regulated, formalised care; childminders and nursery teachers face a heavy-handed and bureaucratic curriculum that requires taking several weeks out of paid employment to learn; and we have the strictest adult to child ratios in Europe. Considering these factors, it is unsurprising that we face childcare shortages and spiralling costs.”

This is a problem that disproportionately impacts women, which is why we hear about it so often from the many of the female founders in our network. It’s a tough nut to crack. Childcare suffers from Baumol's cost disease (the rise of wages in jobs that have experienced little or no increase in labour productivity), but that shouldn’t leave us hopeless. Instead, we need to redouble our efforts to find sensible policy changes – such as those Aria maps out.

Western Front
We got a shoutout in Parliament! In a debate on the contribution of international students, Matt Western MP cited our research which found that half of the UK’s fastest growing companies have an immigrant founder. This report was kindly sponsored by a successful immigrant founder: Sukhpal Singh Ahluwalia. I think it's time we updated the statistic, so if there are other similarly civic-minded entrepreneurs or companies who want to support an update, do let me know.

In related news, a new paper provided yet more evidence of the benefits of immigration to an economy – the authors found that immigrant-founded startups in the US are 35% more likely to hold a patent than those founded by US natives.

Like & Subscribe

Given this Government’s poor polling, it’s hardly a surprise that entrepreneurs are suddenly interested in engaging with His Majesty's Most Loyal Opposition. This week we held a couple of roundtables as part of Labour’s Startup Review and to be frank, everyone in attendance assumed Labour is now the government in waiting.

Of course, Labour supporters (or those that just want a change) shouldn’t be adding up their poultry any time soon, but more importantly, we shouldn’t be unambitious for the next two years.

There are limits on what can be achieved – particularly in a polycrisis. The Tories can’t even keep Matt Hancock from 'the jungle' to “deliver important messages to the masses” and/or bag £400,000 and/or gamble on rebuilding his public reputation. As James Forsyth writes in The Times (paywall): “​​he has taken the view that if he is not at the top table, he may as well do his own thing, even if he loses the whip. This shows how unbiddable former ministers can be and there are now dozens of them on the Tory benches.”

Forsyth is a Tory insider who knows which way the wind is blowing. It’s telling that in the same article he thinks education is an area where the party can make a difference. He’s particularly optimistic about ​​Gillian Keegan, the new Secretary of State for Education and first degree-level apprentice to enter parliament. Beyond school, college and university, Forsyth thinks Sunak will also focus on in-work training: ”He has long bemoaned the fact that British employers spend barely half the European average on training their workers.”

It’s ironic that such a potentially short premiership may focus on a policy area that even if executed impeccably would take years to pay off. It’s also one that has suffered from so much chopping and changing that if you were to ask anyone in the education sector their top priority it would likely be for stability.

Nevertheless, as The Times Education Commission findings show (only partially paywalled), we can, and must, do better. For our part, we think there are tweaks to support the entrepreneurial instincts and ambitions of young people. As we argued in our latest All-Party Parliamentary Group report, entrepreneurship education in schools is not currently integrated into the curriculum and England, unlike many other European economies, lacks a specific entrepreneurship education strategy.

On adult skills, one simple shift would be allowing the self-employed to benefit from the same tax breaks for training as employees. While all employer-funded work-related training is tax-deductible, the self-employed can only benefit from tax breaks for training directly related to their current work. This is something we explore further in a forthcoming report with Enterprise Nation, who, relatedly, are looking for volunteer mentors to support the Government’s Help to Grow: Management scheme.

In the book Thatcher and Sons, Simon Jenkins's convincing thesis is that there was a lot more continuity between Thatcher, Major, Blair and Brown than many of the party faithful would care to admit. However long Sunak remains in power (well, perhaps not if it’s just 38 days), he has the opportunity to leave a lasting legacy. He’ll need to be a lot more ambitious than just focusing on education, but our six reports on the topic – and another two on the way – prove there are policy ideas ready and waiting for him.

The Time is Now
We’re an open network. If you’re an entrepreneur or passionate about supporting entrepreneurs you can get involved in our work.

To keep the network open we don’t push people too hard to give us money. This is both because we don't like asking for money, but it would also backfire as without our dynamic network of over 10,000 entrepreneurs we would lose out on key insights and our authority would be diminished. When we advise politicians and special advisers of a policy change they are much more receptive when we're being backed by entrepreneurs saying the same thing.

Having done this for around eight years, I think it’s fair to say that we are the UK’s leading think tank for entrepreneurs. Time and again, our research has led to policy changes that at the margin have made the UK better for entrepreneurs. I’ll still be doing this in eight years.

All this is a preamble to ask for one of four things:

1. If you’re an individual who appreciates our work and comes to our events, consider signing up as a Supporter or Adviser.

2. If you or your company has the capacity to sponsor research or host our events, then get in touch with me so we can see if there is any crossover.

3. If you know of anyone else who you think I should chat to about either of the above, then feel free to make an introduction.

4. If you are already a Supporter, Adviser or sponsor, please ignore this (and thank you)!

Not Rocket Science

New week; new Prime Minister. This time it’s Rishi Sunak’s turn.

Back in February I wrote here about Sunak’s Mais Lecture: Capital. People. Ideas. I was cautiously optimistic about his priorities then, and as Eamonn Ives, our head of research argues in an article this week, perhaps we can afford a note of optimism that he wants to “make Britain a science and technology superpower”. To achieve this he vowed, among other things, to increase the amount of lab space available, ensure we have access to the best talent, and improve and speed up the research grant process.

We have solutions for all three.

Becoming a science superpower will be impossible without adequate lab space. As reported in FT Sifted, a lack of lab space is holding back Britain’s biotech founders. “We are at risk of losing some of these companies to the states or to Europe, if there’s nowhere to actually put them,” explains Jacob Nathan, founder of Epoch Biodesign which recently raised an $11m seed round.

We identified this problem a while ago, with Aria Babu, our head of policy, writing in Strong Foundations on the impact of planning policy on entrepreneurship (which politicians should be read and heed as a clarion call):

“We seriously lack lab space, and analysis of planning data shows there are few plans to build more. To put this scarcity into perspective, according to Savills, London has only 90,000 sq ft of available lab space, while Manchester has 360,000 sq ft available. By contrast, New York has 1.36 million sq ft available. The current trend is for research teams to custom install their own lab space into generic office buildings. But labs often need bespoke design, e.g. higher ceilings to allow for fume hoods, ventilation systems, or an unusual layout of corridors. For example, ‘dirty corridors’ between labs mean that researchers do not need to ‘gown-up’ and ‘gown-down’ as they do when they’re working out of a traditional office building.”

When it comes to ensuring we have the talent to be a science superpower, we have an idea that is as close as you get to a silver bullet: expand the High Potential Individual (HPI) visa. With Immigration hawk Suella Braverman back in the Home Office, any calls for reforms to immigration are going to have to be carefully crafted. As such, now is the time to push through this hyper-targeted liberalisation to ensure entrepreneurs can access the talent they’re crying out for and the best scientists in the world can move here with ease. I’m quietly optimistic. After all, Sunak’s a fan of quoting our finding that half of our fast growing companies have an immigrant founder.

Yesterday we hosted a roundtable with Lord Clement-Jones CBE and some of the UK’s leading AI entrepreneurs. It covered a lot of ground, including the challenges of grant funding. One thing was clear – bureaucracy and delays are hindering our best entrepreneurs. The same goes for R&D Tax Credits.

As set out in the Way of the Future, we need novel funding mechanisms and a bigger appetite for risk and experimentation. Speeding up the delivery of funds is about putting more resources into fighting fraud. The relative cost is minuscule compared to the at least £132m burden being foisted on businesses by delays.

Sunak won’t have a lot of time before the election, but if he gets his priorities right, win or lose, he could leave a lasting legacy.

Import of Exporting
I’ve never been convinced by many of the policy ideas put forward over the years on how to support exporting. In part, this is because they're usually framed in mercantilist terms, despite Adam Smith teaching us otherwise, and in part because they’re weak on academic or real-world evidence.

But there may be room for high-quality interventions. After all, companies that export are typically more productive than those that don’t – around 20% more – and the academic evidence suggests this isn’t just because more productive firms are more likely to be exporters. Exporting makes firms more productive.

So where should the government focus its limited resources? Our friends at the Enterprise Research Centre shed a bit more light on this, recently putting out a report showing that the benefits of innovation support measures to stimulate exporting are greatest for firms that already have a technological advantage in the UK: “This suggests that identifying companies which are domestic market leaders but not exporting and targeting these firms for export support may create the greatest productivity improvements through greater and faster returns on their innovations.”

This may not matter as much when looking at exporting into less developed markets, where less radical innovations can still be novel. Something that’s particularly relevant given Conservative governments’ post-Brexit trade strategy and a Brexit-voting Prime Minister.

The report also finds that smaller firms may be in a better position to translate lessons from export markets into innovations, or at least benefit more from those lessons, and that export promotion policies would be most cost-effective if they encourage sustained engagements with export markets.

We’re looking to inject some economically sound ideas into this policy area, working with Enterprise Nation as part of our Access All Areas project. To that end, on Wednesday lunchtime we will host a virtual roundtable on this topic. If you have views about exporting, it would be great if you could join us (we may even use you as a case study in the report).

How will Labour's Fair Pay Agreements affect Entrepreneurs?

In all the excitement of Liz Truss resigning and the starting pistol being fired for yet another race to become Prime Minister, many people have overlooked a speech by Keir Starmer in which he set out some substantive policies. Speaking to the Trades Union Congress on 20th October, Starmer committed to a series of labour market reforms. These include banning zero-hour contracts, extending parental leave, strengthening entitlements for flexible working, creating stronger protections for pregnant women, creating a single “worker” status for all but the most obviously self-employed, getting rid of one-sided flexibility, creating statutory sick pay for all, repealing 2016 restrictions on unions, and enforcing mandatory reporting on ethnicity pay gaps.

It’s a long list, and many of the ideas will be unsurprising. They’re the sort of things that Labour leaders often promise. But Starmer also committed to a new and radical idea, to create sector-specific “Fair Pay Agreements” (FPAs). As Starmer explains, FPAs would entail unions and industry representatives getting round the table to negotiate industry-specific minimum wages and minimum worker entitlements, which would then be applied to the rest of the sector – regardless of whether the sector’s other workers were represented by those unions at the negotiating table, and regardless of whether the sector’s other employers were represented by the industry bodies that took part.

The implications of such a policy, as you can imagine, are profound. If applied across all industries, they would empower both unions and industry bodies to set the terms for all workers and firms in an industry. If it passes, we might expect the membership of industry bodies to grow, in order for businesses to get any say in the matter. But unions may well dwindle because workers would gain regardless of whether they are actually members. This may or may not be what Labour intends, but many on the left have long dreamed of the UK becoming more like other European countries, where such agreements are common. Labour is also following New Zealand’s Labour party, which is currently shepherding the same reforms through Parliament.

We don’t yet have all the details from Labour, but New Zealand’s plans for FPAs give us some indication of what to expect. FPA agreements, when made, would become secondary legislation, so that breaches of the agreement would mean breaking the law rather than just a contract. The FPAs would also last for 3-5 years, after which they can be renegotiated. Unions are able to initiate FPA negotiations when they gain the support of either 1,000 employees or 10% of the workforce in a given sector – whichever is lower. And when an agreement cannot be reached, the government can step in to command one. Interestingly, unions would not be allowed to strike to achieve an FPA, but could take industrial action if employers fail to keep to the agreements.

Just as in New Zealand, Labour’s first target for FPAs is the social care sector, in which half a million workers are paid less than £10 an hour. But where it may get more troublesome is in how it gets applied beyond that. The plan for New Zealand is for FPAs to cover either occupations or industries, with overlaps defaulting to whichever provides the best coverage. But if the proposals are taken beyond social care, we can probably expect a lot of legal disputes down the line as to how industries or sectors are defined. 

And Labour should take into account how larger firms may use the process to hurt their smaller, newer competitors. It is not uncommon for small start ups, without much money now, to offer their employees equity or a particularly flexible or dynamic work culture to offset lower wages today. It’s already challenging enough for entrepreneurs to come up against large incumbent firms, but if those large firms have a seat at the table and their competitors (or potential competitors) do not, there’s a very big risk that larger firms able to swallow much higher labour costs may use FPAs to bury the firms that are less able to do so. This anticompetitive process – of big businesses pushing for higher and more costly regulations to benefit themselves – may ultimately benefit big businesses and hurt workers’ bargaining position in the long run. So Labour should pay close attention to how it designs FPAs in order to prevent it, or find ways to offset it. Otherwise, an economy dominated by big business will not lead to the dynamism, growth, and rising opportunities for employment that Labour envisions.

Every Cloud

It would be easy to stick the boot in. After all, even her strongest backers have turned against her. But while Liz Truss’s mistakes and shortcomings are clear and present, there are two things from her briefest of times leading the country (well, sort of) that her successor should keep.

First, Truss was right to focus on growth. We live incredibly privileged lives compared to previous generations, with entrepreneurial endeavours taking humanity from subsistence to relative affluence. I want to stay on this ride, raising the long-term living standards of the current, next, and future generations. And I think you should too.

Obviously all past and future Prime Ministers will say they want growth. But most have and will fail to prioritise it. Who knows if Truss would have been true to her ‘three words’, and while the concoction of unfunded tax breaks, spending commitments and unconvincing promised cuts clearly weren’t the right choice to get there, this doesn’t mean we should give up on growth.

I’m optimistic about the future though. With the advent of Progress Studies – which is investigating “the combination of economic, technological, scientific, cultural, and organisational advancement that has transformed our lives and raised standards of living over the past couple of centuries” – we have a growing intellectual base on which to build the right policies. Whoever comes next may want to pick a synonym for growth, given the short-term damage done to it, but the underlying intention is correct.

Second, the disastrous Mini Budget did nevertheless contain some good ideas. I’m not talking about the headline announcements that spooked the markets and have already been rolled back on, but the micro changes that a broad coalition of organisations, including ourselves, campaigned for. I’m talking about the increase in Seed Enterprise Investment Scheme, reforms to employee options and reforming the pensions regulatory charge cap. These are uncontroversial ideas that any pro-entrepreneurship government should back.

Fair Pay to You
You may have missed it, but Keir Starmer gave a big speech to the Trades Union Congress this week. In it he committed to a series of labour market reforms entrepreneurs should be aware of, including banning zero-hour contracts, extending parental leave, strengthening entitlements for flexible working, creating stronger protections for pregnant women, creating a single “worker” status for all but the most obviously self-employed, getting rid of one-sided flexibility, creating statutory sick pay for all, repealing 2016 restrictions on unions, and enforcing mandatory reporting on ethnicity pay gaps.

Starmer has also promised to create sector-specific “Fair Pay Agreements” (FPAs). As Anton Howes, our Head of Innovation, writes: “FPAs would entail unions and industry representatives getting round the table to negotiate industry-specific minimum wages and minimum worker entitlements, which would then be applied to the rest of the sector – regardless of whether the sector’s other workers were represented by those unions at the negotiating table, and regardless of whether the sector’s other employers were represented by the industry bodies that took part.”

The devil will be in the detail, but as Anton argues: “there’s a very big risk that larger firms able to swallow much higher labour costs may use FPAs to bury the firms that are less able to do so. This anticompetitive process – of big businesses pushing for higher and more costly regulations to benefit themselves – may ultimately benefit big businesses and hurt workers’ bargaining position in the long run.”

£132m+ Problem
Anton has also written about the shocking state of R&D tax credits. It’s an issue we’re increasingly hearing from entrepreneurs. Approval windows have increased from 28 up to 40 days, and tax credit payments are painfully slow, creating major cashflow problems for startups.

Many businesses are having to take out loans using the expected credit as security. Based on the interest rates, Anton has done the sums:

“For 2020-21, HMRC paid out £6.6bn in R&D tax relief support, so we are looking at a total market for R&D tax credit loans of about £5.28bn (80% of that figure). The loans themselves often vary in duration, but typically charge a loan facility fee of about 2.5-3% followed by an interest rate of 1.25% per month. Given this monthly interest rate, and generously assuming that total delays have averaged only an extra two months, the total cost to UK startups and small businesses is in the order of £132m – and probably higher, especially if they have been forced by delays to take out new loans to tide them over, incurring more rounds of loan facility fees.”

This is a very conservative (with a small ‘c’) estimate. It’s time for a Conservative (with a big ‘C’) to sort this out.

The Cost of R&D Tax Credit Delays

All is not well in the world of business. Forget the headlines about a new Chancellor, or even the U-turns on Corporation Tax. One of the biggest problems for many of the most innovative UK startups has been a dramatic increase in delays receiving their R&D tax credit payments.

Since July 2020, HMRC has been looking a lot more closely into the merits of R&D spending claims. Although their aims are laudable – to fight fraud and save taxpayer money – civil servants have been spending a lot more time checking the applications of all businesses, both bad and good. The approval windows have increased from 28 up to 40 days, which is already a major problem. But it’s actually even worse than that, as even when approvals are given, HMRC has been painfully slow at actually issuing the tax credit payments.

This has created major cashflow problems for startups, sometimes even forcing layoffs. After a company’s financial year has been completed, it can submit an application to HMRC for a R&D tax credits. These then typically took 28 days to process, with the payment made within just a few weeks. From spending on R&D to receiving the tax credit payments can thus take over a year.

But even the smallest delays can be critical for startups, because many of them take out loans using the expected credit as their security, in order to help their cash flow. As such, both HMRC’s own processing delays, along with post-processing delays in receiving payments from HMRC – some reportedly delayed for up to five months – create a very real cost to businesses in terms of the interest payments they must continue to pay for their loans. And in cases where HMRC decides not to pay out the full amount being claimed – often with minimal warning or communication – it can be game over for a startup.

What is the cost of these delays to startups? We can estimate this with a quick back-of-the-envelope calculation by taking the typical interest rate offered on R&D tax credit loans, and treating this as a proportion of about 80% of the total amount awarded in R&D tax credit payments each year – roughly the amount that most R&D tax credit loan providers seem to be willing to give. Not all startups will actually take out the loans of course, but the market interest rate tells us the opportunity cost faced by all startups who partake in the scheme. Just because they don’t always actually take out the loan, doesn’t mean they don’t also suffer costs from the same lack of cash flow.

For 2020-21, HMRC paid out £6.6bn in R&D tax relief support, so we are looking at a total market for R&D tax credit loans of about £5.28bn (80% of that figure). The loans themselves often vary in duration, but typically charge a loan facility fee of about 2.5-3% followed by an interest rate of 1.25% per month. Given this monthly interest rate, and generously assuming that total delays have averaged only an extra two months, the total cost to UK startups and small businesses is in the order of £132m – and probably higher, especially if they have been forced by delays to take out new loans to tide them over, incurring more rounds of loan facility fees.

Tomorrow the World

I won’t be writing on today’s events. Between hitting send and it landing in your inboxes there’s every chance the Government will have u-turned yet again. But as luck would have it, I can distract you from it all with a new report we released this week in the House of Lords: Tomorrow’s Entrepreneurs.

It’s in partnership with Youth Business International (YBI), a global network of expert organisations in over 40 countries supporting young people to turn their ideas into successful businesses, creating jobs and strengthening communities.

The report is built around polling of young entrepreneurs (under 35) and not-so-young entrepreneurs (35+). We find that young entrepreneurs are twice as likely to say their business’s primary aim is to solve a social or environmental problem (39% to 18%), as well as caring more about things like the ethics of the ​​suppliers, diversity, and ​​helping employees live fulfilling lives outside of work.

Crucially, we found that trying to solve environmental or social problems was not incompatible with pursuing growth. In fact, according to our polling, the more a business turns over the more likely they are to agree that their business’s primary aim was to tackle a social or environmental problem, with close to half (47%) of entrepreneurs turning over £1m+ each year agreeing.

Unfortunately our report shows that access to entrepreneurship isn’t universal. Young entrepreneurs are more likely than older entrepreneurs to come from a privileged background. They are more than three times as likely to have attended a private school compared to the general public (20% vs 6.5%), more likely to say they had help through personal connections to get their business running than older entrepreneurs (45% vs 38%), more likely to have successfully raised finance than older entrepreneurs (43% vs 31%), and less likely to have attended a comprehensive school than older entrepreneurs (49% vs 63%).

There are a lot of policy levers that need pulling to fix this, but we focus on three. First, we want to bring back the Enterprise Allowance. Not the half-baked New Enterprise Allowance that was recently scrapped, but the full-throttled policy devised by Lord Young under Margaret Thatcher, which properly helped unemployed people who set up their own business.

Second, we want better support systems for young entrepreneurs to help them make connections: providing them with information about how to set up and run a business, linking them up with mentors, and ensuring they have opportunities to network with people who could support their businesses, especially potential investors. This may sound trite, but it’s no less important.

In practice, this means working with the grain of successful interventions that are taking place in the private and charitable sectors. Too often the Government intervenes, disrupting and crowding out established support, before pulling out with a new Minister or Government joins who wants a headline or two – or some spending cuts.

Third, we want the broader use of Challenge Prizes and Advanced Market Commitments to give young people, who are trying to innovate solutions to big problems, more certainty that their work will become profitable and attract more investors to pro-social companies. This is something we were calling for to fight Covid, with great success, but it could and should be applied to more of the world’s biggest problems.

It would be great to chat with anyone who wants to help us take any of these (or other) ideas forward. You’ll see that this report sits nicely into our large and growing body of work on supporting young people. We’re also keen to look at how we can support older entrepreneurs, of course.

(For those of you who are not just sick of politics, but policy too, the report also uncovers six entrepreneurial tribes: Mission-Driven Founders, Industrious Entrepreneurs, Modern Artisans, Established Founders, Independent Entrepreneurs, and Socially-Conscious Solopreneurs – take a look to see which sounds most like you.)

Give Growth a Chance
Whatever happens over the next few years, month, days or minutes – let’s not give up on growth. To this end, check out the latest edition of Works in Progress for thoughts on getting energy that is so abundant that it’s almost free, the risks of not taking risks, finding out from J. Storrs Hall where your flying car is, and much else besides.

Sign up to me Friday newsletter here.

Do You Even LIFTS?

“I love people who take responsibility, start their own businesses and invest.” So claimed the Prime Minister in her speech at Conservative Party Conference.

Over the next two years (assuming she makes it), we will see whether she makes good on this and other claims. Although the opinion polls suggest that people already have pretty strong opinions on her and the Conservatives, now is the time to engage – even for those who want a change of government. Since I started working in think tanks, I can’t remember a better opportunity to make an impact on policy.

Any new government wants to get things done. But one with such a short potential ‘use by’ date will inevitably be in a big rush – particularly with a possible recession looming. I also think there is something unique in Truss’s openness to new ideas. This is partly the result of her not having had years in opposition to plan her agenda in detail, but also because from what little I have gleaned from the times I’ve met her, she doesn’t seem the sort to pass up the opportunity to make radical changes.

Of course, being radical isn’t inherently good. From my perspective, the Home Secretary Suella Braverman sounds pretty radical in a bad way by objecting to increasing visas for Indians as part of the trade deal. I wouldn’t worry too much though. Downing Street will likely rebuke her, as they did with her call for the UK to leave the European Convention on Human Rights: “As Suella acknowledged, her personal views are contrary to government policy and if she wishes to make those views known within government she should do so in a more appropriate setting.” And pleasingly, the FT carried reports this week on Truss's plans to make it easier and cheaper for businesses to make intra-company transfers.

But being radical isn’t inherently bad either. Sometimes things need to change, and talking to ministers, MPs and special advisers, they’re genuinely on the hunt for more ideas. Obviously Truss will be most receptive to ideas that are within her ideological worldview, but I don’t think this is as narrow as many assume. For example, the Government’s decision to widen the Seed Enterprise Investment Scheme (SEIS) and Startup Loans, and introduce the Long-term Investment in Technology and Science (LIFTS), suggest they are open to more than just tax cuts and deregulation.

Remember, it was Margaret Thatcher who created the Enterprise Allowance Scheme – a guaranteed income for unemployed people to set up their own business, without which the world would be bereft of Creation Records, Superdry, Tracey Emin and Viz magazine. Sometimes only Nixon can go to China.

A decent chunk of our policy papers are inspired by entrepreneurs and those that support them. We’re still promoting our ideas that haven’t yet to be adopted, but we’re always on the lookout for more areas to investigate. And if this Government doesn't want them, then they’ll be ready and waiting for the next one.

So what are your big ideas? What are your small ideas? What are the good ideas you’ve read? What is holding you back as an entrepreneur, that you don’t know how to solve? Let me know.

Big LIFTS?
The mini-Budget announced the Long-term Investment in Technology and Science (LIFTS) initiative, providing up to £500 million to support new funds designed to catalyse investment from pensions schemes and other investors into the UK’s pioneering science and technology businesses.

To update you on this, the British Business Bank and the Office for Investment are now leading some market engagement on the scheme. If you have developed thoughts on this please get in touch. After the engagement, the Government will then launch a call for proposals. And then, once selected, the new LIFTS vehicle(s) will receive the relevant government support and raise funds before beginning to invest.

Labour the Point

After last week’s not-so-mini-Budget Aria Babu has written for City AM on what was welcome but crucially what the Government needs to do next, while Eamonn Ives has a piece in CapX on why a revamped immigration system is vital to Truss’s growth plan. However, this week it would be remiss of me if I didn’t turn attention to His Majesty's Most Loyal Opposition.

After all, Labour had its Party Conference this week in Liverpool with Keir Starmer and the rest of the Labour front bench keen to position the Party as pro-business, making the case for why his is the party to “unleash” Britain’s “entrepreneurial spirit”. According to Starmer:

“Business leaders aren’t knocking on my door saying they want to rip up employee rights. They don’t tell me the problems they face will be solved by corporation tax cuts. They want fair taxes, high skills and the long-term confidence to invest.

“I want to be crystal clear about this: I’m not just pro-business, I want to partner with business. So we will scrap business rates, level the playing-field for start-ups and the high street, give employers new flexibility to invest in the world class training they need.

“And, as Jonny Reynolds said yesterday, invite them to drive forward our modern industrial strategy: a true partnership between government, business and trade unions.

“This isn’t about the size of government – it’s about what government can do. Government can support businesses to innovate and grow. Can bring in the creative genius of our scientists and universities. Can unite us to tackle the country’s challenges on behalf of working people.”

As is normal, the Jonny Reynolds speech Starmer is referring to doesn’t add a lot of meat to the bones, while Lucy Powell’s speech as Shadow Secretary of State for Digital, Culture, Media and Sport mostly serves to show how incongruous it is that digital policy sits alongside culture, media and sport in the same department. Obviously this isn’t Powell’s fault, but whoever wins the next election should really bring digital into the business department.

There is a little more policy detail in their Industrial Strategy, which is quite high-level and mostly unobjectionable. It mentions advance market commitments, which is something we've been making the case for. However, calls to level the playing field for the high street should also be treated with caution. Support for high streets is laudable, but punishing online services is not. We shouldn’t be penalising businesses for investing in the latest technologies, or for being able to scale.

Last week I argued that Truss will need to push through major reforms to have any hope of returning the country to 2.5% growth. For its part, Labour will need some bolder policies to get the ‘entrepreneurs vote’. At least in his speech Starmer mentions the triumvirate of areas requiring reforms I pointed to last week – house-building (I would add office and lab space as well), childcare costs, and immigration reform.

We’ve fed into Labour’s Startup Review and we’ll be hosting roundtable discussions in the next few months to build on this. With Tulip Siddiq we’ll explore ‘how to encourage more growing UK firms to reach the highest growth stage’, and, on the back of our Female Founders Forum work, we’ll discuss ‘how to ensure more women can successfully start and grow businesses’ with Anneliese Dodds, Shadow Secretary of State for Women and Equalities.

We’ll be inviting our Advisers and others who have informed our thinking in these areas, but let me know if you’re particularly keen on influencing Labour.

All Change
As reported in Politico, Eamonn Ives has joined The Entrepreneurs Network as our new Head of Research: “It’s a return to wonk-land for the COP26 aide, who previously headed up energy and environment work at the Centre for Policy Studies.” In 2020, Eamonn wrote our influential Green Entrepreneurship report, many of the policies of which were later adopted by the Government.

In addition, Aria Babu has been promoted from Senior Researcher to a new role: Head of Policy. As discussed here last week, now feels like a real crunch time in terms of getting good ideas into government and the opposition. It’s pleasing that we’ve got such a strong team to make the case for the policies we’ve been designing and championing – as well as coming up with some more.

"Mini" Budget

Today’s not-so-mini-Budget is a bet on economic growth. The scrapping of the planned increase in Corporation Tax and cutting of National Insurance and Income Tax will of course be broadly welcomed by businesses, but there’s quite a lot behind the headlines that should please entrepreneurs.

For example, from April 2023, companies will be able to raise up to £250,000 of Seed Enterprise Investment Scheme (SEIS) investment, the gross asset limit will be increased to £350,000, the age limit from 2 to 3 years, and the annual investor limit will be doubled to £200,000. This is something that we’ve been campaigning on for years – most recently in our Tech Startup Manifesto with Coadec. The government also hinted that they will extend the Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCT).

The government is also doubling the current limit to allow qualifying companies to issue up to £60,000 of CSOP options to employees, making the Annual Investment Allowance permanent and reforming the pensions regulatory charge cap. It’s a bit cringe when think tanks claim all the credit for policy changes, but at the very least I think it’s fair to say we’ve been in the vanguard of organisations pushing for these reforms.

The repeal of IR35 was huge news for those caught up in its web, and enterprise zones could be a big deal if they can offer something more than displacing economic activity. The Long-term Investment for Technology & Science (LIFTS) competition, which aims to “provide up to £500 million to support new funds designed by institutional investors and world-class fund managers” sounds intriguing (incidentally, we’ll be chatting to the British Business Bank about this policy, so let me know if you have any thoughts on how it can identify promising fund structures and vehicles).

While there’s a lot more to digest, these reforms alone aren’t enough to deliver the much-vaunted 2.5% growth. The Chancellor recognises this, but I’ll take this opportunity to remind him of three that we’ve identified as structurally critical.

First, as detailed in Strong Foundations, beyond the intergenerational scandal of only the wealthiest being able to get on the property ladder (nay, gilded escalator), the cost of housing and offices is holding back innovation by setting a limit on agglomeration. The Plan for Growth acknowledges that “further reform is needed”, but it’s impossible to understate how important this policy area is. It’s why we keep banging on about it.

Second, as we’ve said in multiple reports for the Female Founders Forum (FFF), the cost of childcare is locking mothers out of the workforce. Aria Babu has been a big campaigner on this – as were her predecessors Sophie Jarvis and Annabel Denham. Have a read of what Aria said to the Work and Pensions Committee for the most concise arguments we’ve been making. When she was Children’s Minister, Truss pushed for some of the policies we back, but she was blocked by people more senior than her in the coalition government. Today the Government says it “will bring forward reforms to improve access to affordable, flexible childcare.” Watch this space.

Third, we need to make the visa system work. While I could write for Britain (or any country) about all the necessary reforms, I’ll focus on the one that will make the biggest impact on growth. In True Potential we set out how to reform the newish High Potential Individual (HPI) visa so that we don’t miss out on the world’s smartest graduates. The Government should copy our formula, allowing graduates from approximately 100 universities spanning 13 different countries to access this innovative visa. Again, the Chancellor claims that “the government is committed to ensuring the immigration system works for business and encourages highly skilled people and high growth businesses to choose to locate and invest in the UK.” But is it committed enough?

We’ve heard this from too many previous governments – for 12 years it’s been from Conservatives. Talk is cheap, but any more of it without some action will come at a huge cost to the UK.

Hot Iron
This Government is actively looking for supply-side reforms and additional pro-growth measures like regulatory reforms and cuts – and they want them quickly. We will be feeding in our ideas that haven’t already been taken up (and those of others we wish we had come up with), but we’re always willing to hear more.

I can’t promise we’ll run with it, but we will take any suggestions you make seriously. Even if you think it’s too minor or niche to your industry to be worth suggesting, now is the time to share your thoughts. I look forward to hearing from you.

Why Not Both?

We’ll have a new Prime Minister next week. It’s looking like Liz Truss has it sewn up. She’s been very supportive of The Entrepreneurs Network over the years, speaking at lots of events, inviting us in to discuss ideas, and writing the foreword for our Resilience & Recovery and Here & Now reports.

On the face of it, it’s an unenviable time to become Prime Minister, with biting inflation, the cost of living crisis, a looming recession, and only two years until an election. But all political reigns come with mammoth tests. It just happens that this time – unlike with Covid or the financial crisis – we already know what’s on the horizon.

The new Prime Minister will be necessarily focused on the short term, but I think some commentators are overplaying the need to have every idea show fruition before the election. In the words of the Old El Paso advert turned meme: why not both?

Consider an issue like the visa system, which my colleague Aria Babu co-wrote on for City AM this week with Coadec's Frances Lasok, drawing on a section of our recent Tech Startup Manifesto. There is low-hanging fruit which, if implemented, could deliver results before the next election.

Currently the Home Office makes an 800% profit on some applications, which is absurd. Some have argued that it’s good to see the government making money on them. But this would only make sense if these people were an economic burden to the UK (they are not), or if there was no competition from other countries for talent (there is).

The article also recommends opening up the High Potential Individual visa beyond the current “top university” rankings, which aren’t getting at what we want. As Aria and Frances write: “A better ranking would look at the human capital of graduates, which you can calculate using graduate earnings. If the visa was reformed in this way it would include more specialist STEM institutions, small but elite American Liberal Arts Colleges, and top business schools.” Perhaps most importantly, it would open up the UK to India’s IIT’s, many of whose alumni have built and increasingly run Silicon Valley.

Luckily for the government, we have done the hard work of producing the criteria for a better ranking that would allow graduates from approximately 100 universities spanning 13 different countries to access the visa. This would have a slower effect than reducing the fees, but would still have an impact before the next election.

In an earlier paper, we called for the UK government to proactively identify and persuade leading scientists and innovators to settle in the UK. This idea may sound kind of wacky, but it’s something we do on a small scale through the Global Entrepreneur Programme (GEP), and something we did on a larger scale historically. This policy isn’t going to pay off in anything like two years, but we should still do it.

Many future crises could have been mitigated with proper planning. Whether that’s pandemic risk, which we’re still being incredibly blasé about, or the energy crisis – watch and weep as Nick Clegg ​opposes nuclear power in 2010 because it would only come on-stream by 2021 or 2022.

And even if some long-term policies aren’t yet bearing fruit, the act of genuinely tackling long-term challenges won’t be lost on people. After all, we humans literally (and metaphorically) plant trees knowing we’ll never sit in their shade. A government doing the same would be recognised as such.

Investment Culture
The Tech Sector team in the Department for Digital, Culture and Media and Sport (DCMS) has asked us to ask you to share the challenges you face – particularly when raising investment. If you would like to help inform their policy and communications strategy, please fill out this short Google form.

The survey aims to gather Insights into what further support founders need to scale their businesses, how the regional equity financing gap could be decreased, and insights about diversity within the sector.

Please provide responses by the 14th of September. If you would like a discussion, DCMS will be setting up feedback calls. You can get in touch with them about this by dropping them an email.

SME Productivity Call for Evidence
We’ve extended the deadline for the SME Productivity Call for Evidence briefing paper until next week. We’ve had some great responses, but a few people have asked for a few more days, so it’s only fair to open this up more widely. You can read the questions here. There is no expectation that you answer all the questions – short responses focused on specific issues are often the most useful.

Fermenting Female Ambition
We are hosting a Female Founders Forum roundtable on Wednesday. We will be talking about the barriers that the UK’s most ambitious female founders face and what can be done to help them out. If you’re a female entrepreneur, trying to build a billion-dollar company, get in touch with Aria.

Tech Startup Manifesto 2022

Yesterday we released a new report: Tech Startup Manifesto 2022.

To save the incoming Prime Minister the trouble of rereading all our reports, we’ve put together a pithy paper with our friends at Coadec to explain what tech startups will need in order to flourish.

Many of the policies will be familiar to regular readers. It covers access to capital, access to talent, start-up friendly regulation, and fostering innovation. You can read the detailed list here, which includes policies like reforming the pension charge cap, opening up the public sector to startups, and experimenting with funding mechanisms.

The key ambition for this report is to explain what the next Prime Minister should prioritise specifically for tech startups. To be clear, it isn’t a manifesto for every business type, size and stage. Nor is it exhaustive. But we think that these policies will be critical for supporting tech startups.

Dom Hallas and I have written about the report in CapX, to cover some of the key policies. And I want to draw attention to one area of the article and report where we are calling for more of the same: the UK must continue its consistent and stout defence of the value of digital free trade, as reflected in the recent Singapore Digital Economy Agreement:

“This matters when across the world we’re seeing a wave of digital protectionism, often couched in the language of ‘digital sovereignty’. Whether it’s in Europe via the French Cloud Doctrine, or new digital localisation requirements in emerging economies such as Nigeria and Vietnam, a leading global tech market leader such as the UK has much to lose in exports from a swing towards more closed digital markets.”

Crossing the Floor
Following our submission to Labour’s Startup Review, we’re in discussions about hosting a few roundtables with the panel. These may cover lots of different areas, including supporting scaling of private businesses to the highest level (including listing), and issues around diversity.

Please let us know if these interest you. We’re particularly keen to hear from entrepreneurs and experts who have insights on what the government can do to help scale businesses to the utmost.

Was Nice Dumitriu
Our Research Director, Sam Dumitriu, is leaving The Entrepreneurs Network. The quality of the research under his leadership is testament to his talent. Just check out his reports on elite immigrant founders with Amelia Stewart, drones with Anton Howes, and most recently on reforming the High Potential Individual visa with Jason Sockin. Read more of his greatest hits here.

Everyone who has worked for us has gone on to achieve more incredible things. Watch this space for announcements on what he’s up to next, and keep in touch with Sam by following him on Twitter, subscribing to his Substack and connecting with him on LinkedIn.

We all wish him the very best.

An Urgent Call for Entrepreneurship Education

A society that fails to harness the energy and creativity of the next generation risks being left behind. If we want to unlock entrepreneurial potential and cultivate an entrepreneurial mindset amongst young people we have to start in the classroom.  

It’s time we reshaped the education system to connect young people with the world of work. Integrating entrepreneurship education into the curriculum will equip people with digital literacy and general business acumen, and give them valuable life skills such as confidence, communication and problem-solving. 

Entrepreneurship should be open and accessible to everyone. Young people are held back by little or no access to mentors, networks and funding.  According to The Entrepreneurs Network, over half of young people in the UK have thought about starting (or already have started) a business, yet 70% cite ‘not knowing where to start’ as why they don’t follow through. 

Exposure to entrepreneurship is a key driver of entrepreneurial intention. Young people who have thought about starting or started a company are more likely to have a family member or friend who is a business owner, and seven in ten say that having a family member or friend who is an entrepreneur has made them more likely to consider starting a business.

We need to map out a pathway today for a fairer, more equitable tomorrow for young entrepreneurs of all backgrounds – and an inclusive economy that advances growth and prosperity for all. This is critical to driving positive change and meeting the UK’s social mobility challenge. 

I’m proud to have joined forces with the All Party-Parliamentary Group (APPG) for Entrepreneurship to call on the Government to integrate enterprise education into the school curriculum. In our recent Entrepreneurship Education report, we highlight the urgent need for greater clarity from the Government. We want to know under whose portfolio responsibility for enterprise education falls. And we want resources and funding for pupils to engage with entrepreneurial activity in schools and incentives for businesses and local enterprise partnerships to support and engage with this entrepreneurship education. 

This report is the culmination of many months speaking to academics, education experts, youth enterprise organisations and business leaders. The concept of entrepreneurship education is extremely important to me, and I’m hugely encouraged by the worlds of business and education coming together to help drive greater opportunities for young people. 

Our education system is responsible for preparing young people to build successful lives. If ever there was a time to empower the younger generation of entrepreneurs, it is today.  We, as a society, need to ensure that this latent potential is fully realised.  Given the potential that new businesses and start-ups have to boost our economy, it’s critical – as outlined in our report – that “young people are equipped with the toolset to achieve what they increasingly desire: independence and meaningful work.”

Tearing down the barriers that prevent more young people from becoming successful entrepreneurs and creating a pathway for all young people, irrespective of their background, can generate positive outcomes for everyone. I strongly believe early intervention and expanding access to entrepreneurship education to young people in schools is a fundamental part of this. 

It’s no surprise that an entrepreneurial mindset and enterprise skills are also highly valued by employers. Inspiring these skills in the next generation of workers clearly has benefits in terms of dealing with ever-evolving market conditions and the future world of work which looks very different from now. 

But what’s really driving me is the profound impact that entrepreneurship education can have on young people’s lives.  Enterprise skills are ultimately life skills – the ability to think creatively and ambitiously. It’s about engaging with the world around you, to identify challenges and seize opportunities.

I’ve seen first-hand how access to entrepreneurship education has helped young people from different backgrounds thrive. I would urge other business leaders to join me as we look to create a more equitable and inspiring future for the UK’s young people. 

Sam Smith is the CEO of finnCap Group

Chief Entrepreneur

Scotland now has a Chief Entrepreneur. As former COO of Skyscanner, you can’t deny that Mark Logan has the entrepreneurial credentials. The question is: can he make a meaningful difference?

To some extent, he’s already had an impact. His appointment came following his 2020 review of the Scottish technology ecosystem. In it, among other things, he called for the creation of a network of “tech scalers”, which claim to be “best practice in incubation, intensive founder education in Internet Economy best practice, ecosystem social infrastructure, and integrated funding.”

As this illuminating interview in the New Statesman shows, Logan is ambitious for Scotland (in a way that only someone who has built a billion dollar company and not worked in the public sector can be). But he is already struggling with plans to get computing science taught from the 1st year of secondary school with the same emphasis that is put on maths and physics: “We’re getting some stuff done in education, but it’s way too slow. It shouldn’t be this hard. I’m not seeing enough people throwing themselves onto the barbed wire of that task alongside me.”

From the same interview: “I have spent the last two years in this space, and it’s very hard to get things done because there’s no one owner. Let’s say I want to do something on the front line with teachers – there’s Education Scotland, there’s the SQA, there’s local authorities, the unions, the headteachers, and all of those groups together have to basically agree on doing something. Now that has frankly become the big excuse – ‘we’d love to do that, but we have to get those other people convinced’. Education has been, relatively speaking, a more difficult area in which to make progress.”

In The Times, Alex Massie picks up on his challenges and isn’t optimistic about his chances: “I fear that he is in the business of pushing water uphill on behalf of bosses who do not much care if he makes it to the top.” For Massie: “The problem is large because it is, at heart, one of culture. In general, this is not a dynamic country; it is certainly not one in which business success is esteemed.”

So can Logan, or anyone, impact culture, making Scotland more entrepreneurial?

Culture obviously changes. Even the language of “startups”, “scaleups” and “ecosystems” is relatively new. Ultimately, the success of Silicon Valley has allowed it to export its culture to the rest of the world, with each place giving it their own local twist.

Things have moved on, but I wonder if there’s a new way we could impact culture. For example, Ned Donavan and Anton Howes made the case for establishing a new order of chivalry, specifically designed to encourage invention and raise the status of being an innovator in the eyes of the public. Separately, Anton has also called for the creation of a new Great Exhibition. Any other ideas (genuine question)?

Another way of looking at the problem is through the institutions of government. Logan mentions Estonia as a “tiny country that’s producing a lot of unicorns”, who “have done exactly what I’m prescribing.” I’ve written before about what Whitehall can learn from Estonia, but the most fundamental lesson from Estonia is that a flourishing entrepreneurial ecosystem can be built from scratch.

In a way, starting from scratch, after the wreckage of Soviet occupation, was to Estonia’s advantage. As Logan’s diagnosis of Scotland’s sclerotic education system shows, a long-standing bureaucracy makes reform hard-going (to put it mildly). The same is true for England, which our numerous reports are testament to.

As an aside, one reason ARIA has such potential is because it’s specifically designed to be at a distance from bureaucracy. It’s also why we think (like Dominic Cummings, but don’t let that put you off) that it should fund Focused Research Organisations (FROs), which are low on bureaucracy because they are fully funded with a time-limited mandate.

Into Focus

When I started The Entrepreneurs Network back in 2013, I thought I had a pretty good sense about the scope of our work. We would focus on the nuts and bolts of policies to support entrepreneurs, advising on things like how the tax system can best incentive people to start and grow businesses, and identifying regulations that are holding back businesses. And yes, there is plenty of that, but our scope has widened much more than I could have imagined.

Take our latest report, which we produced with the Tony Blair Institute and Convergent Research. A New Model for Science makes the case for Focused Research Organisations (FROs) to tackle some of the world’s biggest challenges.

I first came across FROs in an excellent Nature article in January. FROs are designed to fill a gap in the market, solving problems too big for a single academic lab to take on, too complex for a loose, multi-lab collaboration to solve, and not directly profitable enough for a venture-backed startup or industrial R&D project to fund.

Though nonprofits, FROs are entrepreneurial, being run by full-time technical founders who oversee 10-30 employees. They pursue specific, quantifiable technical milestones for a finite-duration (5-7 years). And as they near completion, they translate what they have built into longer-lived nonprofits or venture-backed startup spinouts.

Because these are bigger undertakings than most academic labs handle, and are focused on a very tangible, focused goal, entrepreneurs are as critical a part of FRO founding teams as scientists. As Tom Chivers put it in his first-rate article on our report: “If it’s not profitable, the private sector won’t fund it; if it’s too big and complicated, universities can’t do it.”

Three FROs have been launched so far, all in the United States. E11 Bio is building the key tools needed to map the connections between neurons in a mammalian brain. If successful, it could make new treatments for brain disorders possible. While Boston-based Cultivarium is building an end-to-end toolkit for cultivating currently unculturable microbes. This will accelerate the study and engineering of microorganisms for purposes such as medicine and carbon removal, which will be vital if the world is to keep global temperatures stable.

Milan Cvitkovic of Convergent Research has identified the NHS as offering scope for FROs: “The potential of the NHS for biomedical research is extraordinary and unique to the UK. Its size, centralised approval processes, and consistency in data and standard of care make it possible to run biomedical projects in the UK that could not be run elsewhere.”

The report has the backing of pioneering geneticist George Church, who described FROs as “a timely and much-needed approach with momentum behind it.” And ​​Stian Westlake, CEO of the Royal Statistical Society and former innovation policy adviser to the UK government said: “Organisational innovations like FROs represent a very promising opportunity to refresh our research institutions and accelerate human progress. This report is a very welcome contribution to a rapidly emerging field, and will be valuable to anyone who cares about science and technology policy.”

FROs are a bold new idea. A lot of you, I know, are equally bold. So please reach out to Milan Cvitkovic at Convergent Research if you're interested in founding, funding, or joining an FRO. Or you just want to learn more. (Also, please give our thread a retweet if you're on Twitter.)

People Power
Don’t worry! We’re still doing the nuts and bolts too.

What can we do to ensure small businesses can access the talent they need to scale? Are there cost-effective ways that the government can help businesses get access to better advice from experts? What role can government play in ensuring marginalised groups have access to fellow entrepreneurs, experts and investors to inspire and support them? What are the easiest ways for the government to ensure that the next generation has the right skills to work in start-ups? And what about the role of training courses?

If you have answers to any of these questions, you should join us for our latest Access All Areas virtual roundtable on Tuesday from 11am to 12pm. Just drop our events team an email to register your interest. Your insights will help guide the report and we may want to use you as a case study for the report.

What Reliefs!
The APPG for Entrepreneurship is undertaking a report on tax reliefs for equity investments: specifically SEIS, EIS and VCTs. At rather short notice we’ll be hosting a virtual roundtable on this topic next Friday at 11am to 12pm. If you have expertise on this topic and want to register your interest in attending, get in touch.