Risk is inherent in entrepreneurship. After all, something like 20% of new businesses fail during the first two years, 45% during the first five years, and 65% during the first 10 years. Only 25% of new businesses make it to 15 years or more.
But while the businesses might no longer exist, many will have created significant value (in every sense of the word) while they were running, many will be acquired and merged giving the founder an exit, and many of the entrepreneurs go onto bigger and better things. And while we often hear about the risk of starting a business, there is also the risk of never trying: never taking a swing.
Contrary to popular belief, research suggests that entrepreneurs are only moderate risk takers – higher than the general population, but no higher than leaders in other fields. They are, however, more tolerant of ambiguity, where outcomes are hard to estimate. Ultimately, entrepreneurs take a personal risk for the same reason investors back them. Both are looking for opportunities where others have mispriced the risk and opportunity, or where only they have the right vision, skills, knowledge and connections to succeed.
We’re working with the law firm Mishcon de Reya on a report on the role of risk in entrepreneurs’ decision-making. We want to know how entrepreneurs think about risk. From this survey we will better understand how starting a business changes founders’ attitude to risks; whether it’s tax uncertainty, cyber-attacks or supply chain disruption which are keeping founders awake at night; the way entrepreneurs access the risk versus reward for AI technology; and even which political party is seen as the riskier choice in the upcoming election.
I know how much everyone hates filling out surveys, but this is a genuine chance to feed into our reports and policymaking. If you’re a startup founder, please support us by filling in our short survey.
Exhibiting Greatness
The Business Department on Victoria Street – whether BEIS, BIS, BERR, or even DTI – used to be pretty good at showcasing the best of British innovation. At some point that stopped, and it started to look like any other office.
It’s pleasing to hear that the mantel will be picked up by the Department for Science, Innovation and Technology (DSIT), with plans to showcase innovations as part of the department’s work to champion UK industry and academia. Based in the Admiralty Buildings, each exhibit will be in place for around one month. It’s not quite as ambitious as our plan for a modern day Great Exhibition, but it’s a start.
If you are interested in exhibiting, contact exhibit@dsit.gov.uk for more information.
Taxing Times
After last week’s critique of HMRC, I was planning to take a break from critiquing it. But needs must, as more entrepreneurs and the Chartered Institute of Taxation (CIOT) have been getting in touch about its crackdown on R&D claims.
The CIOT made the case back in July that HMRC is rejecting legitimate claims and stone-walling other genuine claimants with a bureaucratic system driving them to give up on their claims. If you want to get a flavour of what’s going wrong, read their 12-page letter to HMRC’s Director of Wealthy & Mid-sized Business Compliance. For further reading, Lord Leigh and others have raised concerns in Parliament.
It goes without saying that HMRC needs to crack down on genuine cases of fraud, but there are legitimate doubts about the widely reported estimate that the overall level of error and fraud was higher than previously reported. As the ICAEW state: “It has been widely reported that some claimants have decided that the time and costs involved with defending a claim outweigh the benefits. Although these may be entirely justified claims, they will be recorded by HMRC as an error.” For further reading, MSC R&D has some legitimate questions for HMRC. It’s a huge shame that this attempt to get better data has led to more questions than answers. Get in touch if this is impacting you or businesses you work with.
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