The Trial

This week I needed to speak with someone at HMRC about a pretty straightforward business tax issue – or so I thought. Hours passed on the phone. I was transferred more than Trevor Benjamin. It all ended with a kindly voice apologising for their error but ultimately telling me they couldn’t help. It was Kafkaesque in as much as the processes and decisions were utterly inscrutable. But it would be unfair to describe it as impersonal. On the other end of the line were people doing their best.

This wasn’t a ‘people problem’. It was a ‘process problem’. My query couldn’t have been unique – yet, every year, thousands of business owners are forced to tie themselves in knots trying to navigate the system.

The UK isn’t alone in this. I’ve never lived in the US, but by all accounts their tax code is labyrinthine and bureaucracy can be a nightmare. But there are definitely countries where it’s much easier to deal with the state. Before it was paused, the World Bank’s Ease of Doing Business Index tried to rank countries on all sorts of metrics, including ‘paying taxes’; but it took too big a picture to uncover best practice.

Desk research only gets us so far. Get in touch if you have experienced or know of other jurisdictions that do this better.

Ultimately, AI has the potential to solve many of these problems, but in the meantime, here are three things that could be done easily to improve HMRC.

First and foremost, everytime I call HMRC they are “higher-than-normal call volumes.” They are clearly chronically understaffed and need more people. It goes without saying that this would pay for itself in saving countless hours of time for business owners.

Second, when being transferred, you shouldn’t ever be sent back to the voice-assisted main menu to start the whole process again. While it’s reasonable to have to be put on hold to whichever department you’ve been transferred to – after all, we don’t want people using shortcuts to skip the queue – it’s mad and maddening to make people start the whole process from scratch.

Third, and this would make the second solution redundant, there should be the option to simply have someone from HMRC call you back so you don’t have to wait on the line. This could be done automatically at intervals throughout the day, so that if you miss one call you don’t have to call again.

When complaining about all this to a tax adviser, they describe HMRC as a “lost cause.” I’m not quite so pessimistic. It’s not beyond the wit of government to fix this.

As Y Combinator’s Paul Graham said about the UK in a recent podcast with Tyler Cowen: “I am optimistic because they still have a gear that they haven’t shifted into...They’re not lazy, and they’re not stupid, and that’s the most important thing. Eventually, non-lazy, non-stupid people will prevail.”

Cowen thinks the UK is undercapitalised: “You keep on borrowing against the future. You don’t plough resources back in, and then at some point you don’t have anymore.” He mentioned the water utilities and the NHS, but you could tell the same story about our bureaucracies.

Graham has the last (optimistic) word: “Actually, when things get bad enough, they fix things. This place is not run by the kind of yahoos that America is. It may be a small country, but people running things – they’re not just boneheaded political appointees. When things are wrong, they notice they’re wrong, and they fix them. This is a very old country. That’s another reason it’s not going to tank. They’ve been through some bad stuff before. There have been ups and downs.”

Nation of Immigrants

We’ll soon be releasing two papers on visas and immigration. As part of this we’ll be looking for endorsements from entrepreneurs and experts. If you’re supportive of our campaigning on this topic, we think you’ll like our new papers. Let us know that you would like to receive an early copy of the reports with a view to writing an endorsement.

Along similar lines, we’re planning to undertake a roundtable on “pinch points” for foreign-born founders. This is more than just the visa system. For example, one common issue I’ve heard over the years is the difficulty in setting up a business bank account, but there are no doubt many more. If you have any views on what we should discuss, let me know.

Animal Spirits

Our Research supremo Eamonn Ives spoke at a Civic Future event on the impact animal agriculture is having on our environment, health system, and national resilience. Before joining us, Eamonn was a Special Adviser to the COP26 President, so he knows a thing or two about this. We’ve published his opening words and will share the video from the event shortly.

“I believe the answer lies in the innovative zeal of our country’s entrepreneurs and startups. In the last few years, we’ve seen an explosion in the number of companies trying to produce alternatives to meat and dairy.

I’m not just talking about plant-based alternatives such as Quorn – good as they may be. Here I’m thinking more of exciting startups like Ivy Farm, who cultivate lab-grown meat to make authentic pork sausages without the pig; or Better Dairy, who use precision fermentation techniques to make real milk without the cow.

Many of these firms are still in their developmental stages – often held back by completely irrational regulations… But they will be critical to fixing what I see as the biggest problem with our current food system, and as such we should be focusing relentlessly on doing what we can to help them succeed.”

On Nutshells

While 496-page tomes are sometimes needed to properly interrogate a complex policy issue, we also know that brevity can be a blessing. That’s why we produce shorter briefing papers, and why we’re going to start doing even shorter ‘Explainers’.

Explainers will succinctly engage with policymakers on key entrepreneurial issues. Rooted in our mission to make Britain the best place in the world to start and grow a business, these papers will be crafted to bridge the knowledge gaps between entrepreneurs, experts and policymakers.

As with all our reports, some will be in partnership with sponsors while others we will do off our own bat. If you have succinct policy ideas that you think we should pursue, get in touch.

Feeding Britain: Our Food Problems and How to Fix Them

On Monday (7th August, 2023) I was delighted to speak at a panel event organised by Civic Future. Entitled Feeding Britain: Our Food Problems and How to Fix Them, it focused on a range of issues relating to Britain’s food system. The debate was chaired by Inaya Folarin Iman, and Professor Tim Lang was my co-panellist.

The overarching thesis I wanted to advance was that entrepreneurs working in the food and drinks sector will be crucial to delivering food which is more nutritious, affordable, environmentally friendly and – perhaps most importantly of all – tasty. For my opening remarks, however, I paid particular attention to a specific subset of entrepreneurs – those who are running startups working on the protein transition.

Below is a rough script I prepared in advance of the discussion, slightly edited for fluency. When the recording is uploaded, I’ll make sure to link to it here.

Let me know what you think!

The biggest problem facing Britain’s food system right now is our collective addiction to animal agriculture.

Quite simply, if we’re to strengthen our food system – and indeed our country – we need to begin talking far more candidly about this, and start making a lot more meaningful progress.

In my remarks tonight, I’ll touch on the consequences animal agriculture has for our environment, our health system, and our national resilience.

And because that’ll all be quite bleak, I’ll conclude on a more positive note – looking at some of the ways we can address these challenges.

So, beginning with the environment.

I think most of us are increasingly familiar with the impact animal agriculture has on the world around us.

Over recent years, awareness of the emissions from animals – in particular cattle and other ruminants – has risen markedly.

In numerical terms, agriculture as a whole is responsible for 11 per cent of Britain’s greenhouse gas emissions – around 50 million tonnes of carbon dioxide equivalent.

More tangibly, that’s roughly the same as a year’s emissions from all the cars on Britain’s roads, or from all of the power stations which generate our electricity.

But that doesn’t tell the whole story.

Animal agriculture on the scale we currently practise requires space – and a lot of it.

It’s hard to arrive at a precise figure, but somewhere in the region of 11-14 million acres of land in the UK is given over just to rearing animals.

In contrast, approximately 170,000 acres is devoted to housing. (As a renter, this makes me very unhappy indeed.)

When we think about all of this space that animal agriculture takes up, we have to consider the counterfactual – what would be there if the farms weren’t?

In a lot of instances, it’d be ancient woodlands, or other natural features, like wildflower meadows, which we’ve actively chosen to eradicate from our landscapes.

So not only does animal agriculture contribute a lot of emissions, it also denies us the ability to sequester emissions too.

The wholesale clearance of natural habitats has also devastated our country’s biodiversity, with populations of numerous key indicator species in freefall over the past few decades – be that insects, amphibians or birdlife.

Finally, let’s not forget animal agriculture’s detrimental impact on air and water quality – issues which have shot to prominence of late.

So that’s the environment. Now, onto health.

I actually don’t care too much about personal health ailments that occur from what people eat.

With respect to food and health, I’m actually quite relaxed about this on a personal level. Frankly, if you want to gorge yourself to death on fatty burgers, I don’t think I should have the right to tell you not to.

What does scare me a bit more – quite a lot more in fact – is antimicrobial resistance.

According to the latest data I could find, 73 per cent of antimicrobials sold globally were for use in animal agriculture.

Animals are often given them prophylactically too – so, as a matter of course, rather than in response to any disease being identified.

What this means is that, to a large extent, we’re deliberately and willingly getting ourselves into an antibiotic arms race.

And given that no new classes of antibiotics have been discovered since the 1980s, it’s something I think we should be considerably more worried about.

Thanks to the mass medication of farmed animals, we could render some of our most powerful antibiotics completely redundant. In turn, this could make even relatively acute injuries or illnesses far more dangerous than they currently are.

It’s true that the UK has managed to somewhat reduce the amount of antibiotics in its farming sector – but use still remains widespread, and as the recent pandemic teaches us, in our globalised world, the distinction between what happens abroad and what happens at home is increasingly irrelevant.

And finally we turn to national security.

I guess by this we mean: “does the state have the means to secure a certain baseline objective in a time of crisis?”

And in the case of food, I guess that means a sufficient amount of calories per person, plus a good balance of nutrition too.

Here is where things just get really mind-boggling.

Eighty-five per cent of the land used to feed Britain is dedicated to rearing animals. Yet that area produces just 32 per cent of our calories. The other 15 per cent of land produces the remaining 68 per cent of our calories.

As a way of converting resources into food to eat, putting an animal in between us and the field really is quite dumb – to put it bluntly.

I’ll concede by saying that food shouldn’t just be seen as fuel. But we’re talking about national security here, not Michelin Stars.

So they’re the problems – what are the solutions?

As you might expect someone who works for a think tank called The Entrepreneurs Network to say, I believe the answer lies in the innovative zeal of our country’s entrepreneurs and startups.

In the last few years, we’ve seen an explosion in the number of companies trying to produce alternatives to meat and dairy.

I’m not just talking about plant-based alternatives such as Quorn – good as they may be.

Here I’m thinking more of exciting startups like Ivy Farm, who cultivate lab-grown meat to make authentic pork sausages without the pig; or Better Dairy, who use precision fermentation techniques to make real milk without the cow.

Many of these firms are still in their developmental stages – often held back by completely irrational regulations, and I would be happy to expand on these in the Q&A.

But they will be critical to fixing what I see as the biggest problem with our current food system, and as such we should be focusing relentlessly on doing what we can to help them succeed.

Thank you.

Universities: Challenged

“Should universities have a monopoly on spinouts?” This was the question posed in the headline of an article covering Academic to Entrepreneur, a paper we released this week, in which we call for university researchers to be given control over their own inventions.

This system, known as “Professor’s Privilege” gives academics ownership of the intellectual property they create, rather than assigning it to universities. This grants them the freedom to decide how best to use it – whether to release it to the world free of charge, attempt to commercialise it independently, commercialise it using pre-existing business contacts, or commercialise it through a university Tech Transfer Office (TTO). Not just their own university’s TTO, but potentially that of another university, which may be better suited to their specialisation, or have more resources at its disposal.

It’s a punchy proposal, but it doesn’t come from the ether. We’ve been following the academic literature for years.

Sadly the evidence comes from many countries having scrapped Professor’s Privilege in the past. As the paper details, in Finland the abolition of Professor’s Privilege led to a 46% drop in patenting by academics, despite an increase in government funding for university R&D. While in Germany, there was a 29% decrease in the quantity (and a decrease in quality) of academics’ research that is commercialised. In Norway, its abolition resulted in a 50% decline in both academic startup creation and patenting, and a decline in the number of citations per patent, the number of patents with an international scope, and the success of university spinouts. 

Only Sweden has maintained Professor’s Privilege, and in the process has managed to maintain a higher rate of academic entrepreneurship than even the US. Evidence suggests that Swedish academic entrepreneurs also have lower rates of commercial failure.

If you have two minutes to spare, read Eamonn Ives’ Twitter thread on it. Another two minutes? Air Street Capital’s Nathan Benaich supports it. Another five minutes? Anton Howes has an article detailing the failings of the current system, while UKTN also covered it, as did Times Higher Education.

In the short-term, this paper has been fed into the Government’s spinout review. As Anton writes for CapX: “There are many ways these problems might be solved, from increasing funding for TTOs to forcing them to take less onerous equity stakes. But at root, many of the problems stem from a monolithic, one-size-fits-all approach to spreading the innovations of university researchers – one that those researchers generally have no option but to use, because it is the universities that own their intellectual property.”

To their credit, recent governments have been open to rethinking this sort of thing. ARIA has the freedom to make big bold bets on the scientific trajectories, while Focused Research Organisations (FROs) – which we called for, and the Government was receptive to – will bring entrepreneurial processes and thinking to bear on solving the world’s biggest problems.

We think there’s strong evidence for a similar shakeup in the way universities support spinouts. We should not assume our current system, though functional, is optimal. And in the case of university spinouts, the current evidence points in only one direction.

Credit Where it's Due
We’ve been recently contacted by entrepreneurs and advisers sharing their experience that HMRC is turning down perfectly reasonable R&D tax credit claims, and investigating previously approved R&D claims from genuine tech startups. 

I’m not qualified to judge individual claims, but the number of people who have contacted us suggests that it’s something worth looking into.

If this is something impacting your business or your clients, we would be keen to know. It’s something we’ve raised with our Advisers of the All-Party Parliamentary Group for Entrepreneurship, and may take forward.

Silicon Fen

A week is a long time. It was only seven days ago that I was lamenting the ways the planning system stymies entrepreneurs. Soon after – I can claim no credit, sadly – Michael Gove announced an ambitious plan to build more homes in Cambridge, including a major new quarter for the city.

The need for this is obvious to most people (if it’s not, read The Housing Theory of Everything). On both the left and the right of British politics – and everything in between – it is generally agreed that successive governments’ failure to allow building has held back growth. The politicians know this, though have been shy to say so publicly.

Less recognised, however, is the need to build out Cambidge’s lab space for innovators. As we argued in Strong Foundations, labs often need bespoke design, like higher ceilings to allow for fume hoods, ventilation systems, and ‘dirty corridors’ between labs so that researchers do not need to ‘gown-up’ and ‘gown-down’ as they would in a traditional office building. 

Gove’s speech was spot on: “While Cambridge’s growth has been held back, its rivals abroad have benefited. In 2021, Boston had 6 million square feet of lab space under development; in an average year, Cambridge and Oxford together managed just 300,000 square feet. In Cambridge today, you have to wait almost a year for the next available lab space: that is no way to incubate the dynamic technological innovators that we sorely need.”

If you live in Cambridge – or even if you don’t – you may be thinking: well, that’s all well and good, but we don’t want ‘Barratt Boxes’ ruining one of the world’s most beautiful cities. But this isn’t what is being proposed – we don’t need to compromise between beauty and density.

Samuel Hughes has written the must-read article on this – an important read given his research helped make this happen. As he writes: “There is no economic or technical reason that the Government could not allow something that resembles the urbanism of Clifton or the Edinburgh New Town. It just needs to allow building on sites where people really want to live, namely sites that are contiguous with the existing settlement.”

The solution wasn’t rocket science, but, if it happens, science and entrepreneurship will certainly rocket.

Punt on the Future
Beyond agglomeration, Cambridge, and the country at large, would benefit from more university spinouts. On Monday we’ll be releasing a punchy paper on this topic. If you want to get it in your inbox as soon as we unleash it to the world, sign up here.

May I take your order?
At a number of recent roundtables, entrepreneurs have discussed their desire to exit their business. While successful exits are the sign of a healthy ecosystem, many of these decisions are being undertaken for the wrong reasons: the political landscape, access and costs of capital, and rising costs of doing business. Of equal concern, many have discussed their plans to move their business overseas, which could be avoided if the UK had a more favourable business environment.

These anecdotes were recently confirmed by recent polling by Evelyn Partners, which found that the majority of UK businesses with a turnover of £5 million upwards are pursuing an exit strategy: 65% of owners are looking to sell off their enterprises, with 40% planning to exit within the next year.

This is why we’re joining up with Evelyn Partners for a private roundtable to better understand entrepreneurs’ concerns. With an election around the corner, we will take your anonymised views to the Government and opposition.

You can read the whole newsletter here, and sign up for the newsletter here.

Fighting Talk

“Young people have been forced to live in sub-standard houses on the periphery of cities and forced to accept low wages for decades as their elders have got fat and happy on the proceeds of asset-price inflation and triple-locked pensions. There are admirable signs that they are fighting back by organising pro-growth organisations (e.g., The Entrepreneurs Network, Collective Intelligence, Britain Remade) and writing pro-growth publications (e.g. Works in Progress). The YIMBYs are on the march.”

So wrote Bloomberg’s Adrian Wooldridge following Civic Future’s Great Stagnation Summit. The former author of The Economist’s Lexington, Schumpeter and Bagehot columns is spot on. Not just about us being involved in the fightback, but more about the state we’re in. (On the issue of housing costs, our paper Strong Foundations explained how the planning system stymies entrepreneurs.) 

The sub-optimal state we’re in was most starkly articulated by our Adviser Sam Bowman, who set the tone for the conference with the deliberately provocative claim that Britain is a developing country, and that there is virtually no recognition of how bad things are among British elites. 

Sam’s full list deserves your attention, but here are some devastating facts:

• By GDP per capita, adjusted for purchasing power, the US ($76,399) is 39% richer than the UK ($54,603). GDP growth since 2010 has been 47% faster – nine percentage points – in the United States (28% growth) than the UK (19% growth), despite being from a much higher level.

• By productivity, or how much we produce per hour worked, the US was 38% more productive than the UK (UK $54.3/hour, USA $73.7/hour) in 2019. France and Germany were much closer to the US than to the UK at $69/hour.

• Americans could stop working each year on September 22nd and they’d still be richer than Britons working for the whole year.

• A median square foot of housing in the US is about half the price of the median square foot of housing in the UK (about $225 or £173 in the US, versus £331 in Britain).

• The median industrial price of energy, even before the Ukraine war, was 7 cents per kWh in the US and 19 cents per kWh in the UK.

The good news at the conference came from Tyler Cowen, who, having diagnosed it back in 2011, now thinks the Great Stagnation is over. Tyler was also bullish on UK innovation, citing the development of the Oxford-AstraZeneca COVID‑19 vaccine and the fact that DeepMind started in the UK. As those of us who work with entrepreneurs all know, this is just the tip of a sizable iceberg of incredible innovation.

While Sam’s and Tyler’s stories aren’t mutually exclusive – they vehemently agreed on everything – we can’t keep getting the fundamentals wrong. Luckily, the fundamental problems are a lot easier to solve than those being tackled at the frontier of science and technology. At least, they should be.

When I’m 64
As Debbie Wosskow OBE, member of our Female Founders Forum, reminded us all on LinkedIn, the average age of a successful startup founder is 45. That’s one reason we’re working with Enterprise Nation on barriers for older people (re)entering the economy – whether that’s working for an entrepreneurial company or starting a business. If you want to feed into it, Enterprise Nation has added some questions to their latest barometer. 

On the Horizon
Our friends at the Regulatory Horizon Council (RHC), an independent expert committee set up by the government, have asked us to share an opportunity to input into the unique regulatory experiences and challenges you face. You can do this openly or anonymously. While I can’t promise that the Government will act on your response, we’ve found the RHC proactive in trying to push a pro-innovation agenda. Let them know your thoughts.

You can read the whole newsletter here, and sign up for the newsletter here.

Fees-High-Ho-Hum

While the week started well enough, with the Chancellor’s Mansion House announcement on unlocking pension funds (something we have long campaigned for), it hasn’t taken long for things to sour. Yesterday we found out that the Government will fund public sector pay rises by increasing visa fees. Whatever you think about public sector pay, this is not the way to pay for it. 

Visa fees were already cripplingly high for many businesses, and much higher than our competitors, having already gone up nearly 500% over the past 10 years.

Soon UKVI visa application fees and visitor visas will rise by 15%. Fees for certificates of sponsorship will rise by £20%. But more outrageously, the Immigration Health Surcharge, which is a payment towards the NHS, will go up by an eye watering 66% – from £624 per year to £1,035 per year. The cumulative costs are staggering. 

If the Government was really committed to making the UK the next Silicon Valley (as both Gove and Hunt claimed this week), it wouldn’t be doing this.

If you tax something more you get less of it. The Government is imposing a whacking burden on high-skilled workers and the businesses that need that talent to scale. We will all be poorer as a result.

Mastering Basics
This week Mastercard released Powering Small Businesses, the second report in its ‘Get Britain Growing’ series. There are seventeen recommendations, but I want to focus on one that I think is particularly important: “Don’t try to develop new programs from scratch, particularly if similar programmes or interventions are already available. Instead, actively seek out partnerships with relevant organisations that have been successful in supporting small businesses and help them scale their work.”

This is spot on. We really don’t need any more government-led interventions that crowd out the charitable and private sector. But that doesn’t mean the government can’t do good. Instead of trying to reinvent the wheel, the government can support existing interventions by supporting their evaluations.

It’s not a new idea. The Business Basic Fund supported projects that tested methods of encouraging small and medium-sized enterprises to boost their productivity through ways of working and technology. Money was made available to be shared between the successful proof of concept ideas and trials.

Doing so will build an evidence base for what works, and, just as importantly, what doesn’t. This is vital for the organisations delivering the interventions, as well as others considering future interventions.

Check out Strive UK to find out about their projects and support.

Looking Ahead
It’s worked well in the past, so I'm just sharing a few projects we’re considering, which you might want to input into. Get in touch if you have any thoughts on the following questions:

• What can the government do better to help business owners realise their growth potential? For example, are there policy levers that would help business owners who would like to scale their business, but feel compelled to exit?

• Is there anything to learn from the Corporate Venturing Scheme (CVS), which existed from 2000-2010?

• How should we think about ecosystem building in Birmingham/the Midlands? What local knowledge should we be aware of?

• What needs to change so the government collects better business data?

Read the full newsletter here, and sign up for my Friday newsletter here.

New Needs Friends

To misquote Anton Ego, voiced by the late, great ​​Peter O’Toole in Ratatouille: “Not everyone can become a great entrepreneur; but a great entrepreneur can come from anywhere.”

It’s one of the driving forces behind the work we do. Well, not so much the 2007 Pixar movie, but more like the brilliant research of John Van Reenen. His work on Lost Einsteins teaches us that there are large disparities in innovation rates by socioeconomic class, race and gender – children at the top of their third grade (ages 8-9) mathematics class are much more likely to become inventors if they come from high income families than if they come from poorer backgrounds, for instance.

Similarly, Georgetown University’s 2019 report, Born To Win, Schooled To Lose, argues that due to striking disparities “it’s better to be born rich than smart” in the US now and that “the most talented disadvantaged children have a lower chance of academic and early career success than the least talented affluent children.”

This is why we have been running the Female Founders Forum with Barclays for several years now, and more recently the Inclusive Innovation Forum with Morgan Stanley. We’ve built our research and campaigning on the expertise of those in the entrepreneurial ecosystem and over the coming weeks will be finalising our next steps. If you have any thoughts on what you think we should be doing, now is the time to get in touch.

For its part, this week the British Business Bank released its report Finding What Works on how to improve diversity in venture capital investment. The research suggests three pathways for enhancing diversity in venture capital firms.

First, by increasing diversity among key decision makers – particularly Investment Committees. Second, by increasing the pipeline of investment opportunities from underserved founders. Successful firms are already actively seeking out diverse founding teams by engaging scouts with their own diverse networks to source investment opportunities, and using incubators and accelerators for earlier stage firms. And third, by measuring and delivering on progress.

It’s a solid report. Of particular note is a ranking of the perceived effectiveness of 14 actions VCs could take. It could be interesting to ask founders, or smaller funds to rank the same actions, as well as considering if any 'actions' are missing from the list.

Young Turk
With support from the Association of Business Executives, we’re undertaking an ambitious project to sketch out what the world’s most pro-innovation visa system would look like. 

Luckily, the ambition of the project is matched by that of its author. Derin Kocer was previously a journalist and remains the youngest-ever byline holder of Independent Turkish. He has a Substack on international politics you can subscribe to. 

Get in touch with Derin with any insights on what would go into building a pro-innovation visa system – not just for the UK, but the whole world. We will be launching the report at 3.30pm in the House of Lords on 6th September. Patrons, Advisers and Supporters may want to save the date in their diaries before the invites hit your inboxes.

Like & Subscribe
The Department for Science, Innovation and Technology has just launched a newsletter and it’s better than most of these sorts of things. Most impressively, it includes the names, job titles and email addresses of people you can reach out to, which addresses a common complaint from entrepreneurs. Next step, office hours?

On the topic of newsletters, if you’re not subscribed to Dr Eamonn Butler’s sardonic takes on the latest political machinations you’re missing out. To celebrate Adam Smith’s 300th birthday, the ASI has opened up an essay prize asking: what Adam Smith would write about today? They are looking for 1,500 words, and are offering prizes up to £3,000. You can find more on their website (scroll down).

Read the full newsletter here, and sign up here.

Right Round, Baby

Much to the surprise of many, the Government is putting its weight behind reforming university spinouts. More than anyone else, Air Street Capital’s Nathan Benaich can be credited – or blamed, for those lobbying against change – with putting this on the political agenda.

As Benaich explains on Spinout.fyi, this kicked off in May 2021, when he wrote an op ed in the Financial Times (Paywall). Off the back of this, he’s built a database of founders’ experiences spinning out. According to this data, most founders are dissatisfied – principally because of how long it takes: “The negotiation process is too long and cumbersome: 66% of spinout deals take longer than 6 months to complete, and 27% more than a year. In comparison, startup seed rounds typically take 3 months.” In addition, Benaich finds that UK universities take 19.8% of equity on average, compared to 7.3% taken by European universities and 5.9% taken by US universities.

This wasn’t a new issue, but it’s only recently gained political attention, with the Government keen to hear from the founders of spinouts. We’ve engaged with the team working on this consultation and are impressed. Entrepreneurs shouldn’t just respond if they have a negative account of working with their tech transfer office – a positive or neutral experience is just as valuable. After all, one of the big takeaways from Benaich’s data is that there is significant divergence between universities on everything from golden shares, royalties, upfront payments, exit fees, and much else besides.

You can access the consultation here. Please share it with anyone you know who has spun out a company from university.

For our part, we are ready to roll on a report on spinouts. Anyone interested in getting a briefing before it hits your inboxes should drop Eamonn Ives an email. 

Raking Progress
With news that OpenAI will open its first foreign office in the UK, and following on from the much-needed upgrade of both people (bringing in the super-smart entrepreneur Ian Hogarth) and bodies (scrapping the AI council) advising the Government, there are reasons to be optimistic about the role that the UK’s entrepreneurial ecosystem can continue to play in building this foundational technology. 

A lot has been written about the transformative power of AI – but much of the time people are arguing past each other. For a considered, good faith debate, I recommend reading what started as a Google Doc conversation between Tamay Besiroglu and Matt Clancy (a previous author of our report on the future of work), with the former arguing that we will likely see a rate of growth that far surpasses anything we’ve previously witnessed, while the latter isn’t quite so optimistic.

Our Man in Alba
Dr Anton Howes, our Head of Innovation Research, has relocated to Edinburgh. As such, you could argue – and I’m going to do so – that we now have a Scotland office. If you’re based in Scotland then do reach out to him, as he’ll be embedding himself in the local ecosystem.

Anton is a noted historian of the industrial revolution (sign up to his award-winning Substack here). While he’s up there, he’ll be tasked with spearheading a rerun of the Scottish Enlightenment, which boasted the genius of Adam Smith (the founder of economics born 300 years ago), David Hume (the great empiricist) and James Watt (a pioneer of intangibles assets). No pressure, Anton!

Sign up to my Friday Newsletter here.

Watch This Space

Building on our joint reports on access to finance, government, people and markets, today we released our fifth report with Enterprise Nation on access to space. Not the final frontier this time (we've already done did that through with the APPG for Entrepreneurship); but closer to earth, whether that’s an office, coworking, shop, cafe, or other space.

A fair amount of the report is devoted to the grossly exaggerated predictions of the death of the high street. As we write in the opening of Access All Areas: Space, disruption isn’t new: “Ever since the Industrial Revolution, commercial space has changed as dramatically as the economy has. When it comes to retail and hospitality, new products and services and resulting new consumer demands have been a constant challenge, as well as opportunity. Shop numbers have been steadily declining since at least the 1920s, while mass car ownership transformed the way we live, with the country’s first out-of-town shopping centre, Brent Cross in Hendon, built in 1976. In fact, since the 1960s, we’ve gone from high streets and town centres dominated by essential retail, to one where discretionary social and experience are taking centre stage.”

In the face of this creative – and not-so-creative – destruction of the high street, successive governments have tried to help. Business Improvement Districts were introduced in 2003, whereby local businesses vote to invest together in their area; the Portas Review of 2011 saw retail expert Mary Portas conduct an independent review on the future of high streets; we’ve seen a growing number of reliefs and increasing amounts of cash, including the £675 million Future High Streets Fund, the £3.6 billion Towns Fund – which, following accusations of “pork barrel” politics has been rolled into the Levelling Up Fund, a pot of £4.8 billion given to local authorities in England for infrastructure projects that promote economic growth and regeneration.

While successful regenerations require public money, they're by no means the only policy lever though. 

The paper argues for local authorities to be empowered by giving them more responsibility over Business Rates reliefs and exemptions for small businesses and charities. This would empower those with a better understanding of what’s needed, such as creating locally administered Community Ownership Funds to save businesses, or funding charities and social enterprises that work in the community directly.

Also, while charity shops are a positive and integral part of many high streets, because they are tax advantaged small businesses can’t always compete. Depending on their nature and number, too many charity shops can hollow out a high street, even in economically vibrant areas, making them less diverse and reducing its overall value and attraction for visitors.

Ultimately, we should trust those who are embedded in our communities with the discretion to know what’s needed to incentivise and protect spaces for local businesses.

The paper also calls for the Localism Act 2011 to be enhanced, granting greater authority to community organisations that have proven their long-term sustainability and presented a strong business case for assuming ownership of dilapidated buildings within their vicinity. This is especially relevant when these structures pose a detriment to the overall appeal of the local high street. 

Following in the footsteps of Andrew Dixon and others, the paper also calls for the business rates system to be scrapped and replaced with a tax on the underlying land values, not productive investment. For example, the proposed Commercial Landowner Levy would cut business taxes in the vast majority (92%) of local authorities – particularly outside the South East – helping to rebalance Britain’s divided economy. After decades of consultations and dithering, one way or another, whoever forms the next government really needs to fix business rates.

The report also sees potential for central and local government, as well as its arm's-length bodies to work with established coworking partners to set up places within their property portfolio. For example, Network Rail and The Office Group have opened drop-in workspaces in King’s Cross, Liverpool Street and Leeds stations as part of The Station Office Network, an initiative intended to provide mobile offices in train stations throughout the UK’s major cities.

Sage Advice
This week Sage released A Blueprint for Digital-led Growth. Two ideas piqued our interest. First, it calls for the Government to ensure that as part of Open Finance, credit agencies should make Commercial Credit Data Sharing available to businesses so they can understand and improve their own creditworthiness and help facilitate lending needed to grow.

Second – and this is familiar territory for regular readers – we agree that the Government should create a government-backed API-driven digital ID that businesses can use to verify their identity with banks and accounting providers, among others. While the Government is progressing things like the Digital ID Trust Framework, Digital Service’s One Login, and a new ID verification process for Companies House, the history of digital identity in the UK and abroad teaches us that this needs much more coordination.

And the Award...
There is still time to get your nominations in for the Barclays Entrepreneur Awards. Nominate your own business or others – there’s a category for most stages and types of business. The awards have been running for eight years – about as long as our partnership with Barclays on the Female Founders Forum – and we’ve seen first-hand the value of getting the deserved recognition and profile that winning an award like this can give you and your business.

This is the opening of our Friday Newsletter – sign up here.

Capital Projects

“There is an extraordinary stat. Something like half of all our fastest-growing innovation businesses have a foreign-born founder, so that tells you you need a visa system that attracts the best and brightest to the UK.”

This is a quote from Prime Minister Rishi Sunak at the opening of London Tech Week, which took place this week. We revealed this “extraordinary stat” – that nearly half the fastest-growing businesses in the UK have a foreign-born founder – in our Job Creators report. Such facts have helped make the case for the High Potential Individual (HPI) visa and are helping us make the case for its extension and further reforms.

That statistic came from Beauhurst’s data via a Syndicate Room report, while the writing of the report was sponsored by Sukhpal Singh Ahluwalia, a successful immigrant founder who came to the UK as a refugee having fled the regime of Idi Amin in Uganda. This data needs updating as it’s from 2019. If you’re an individual or company and believe in the importance of keeping the door open to foreign-born talent, drop me a message to see how we could work together on this project.

Both Rishi Sunak and Keir Starmer spoke this week about how London is a centre for tech. Their positivity was confirmed a few days later in Startup Genome’s GSER 2023 report – a comprehensive analysis of the current state of startup ecosystems worldwide – which ranks London joint-second with New York City, with only Silicon Valley ahead.

The numbers speak for themselves. While the likes of Berlin, Amsterdam, Paris and Stockholm are impressive, the economic value of London’s ecosystem is more than Paris (second), Berlin (third) and Stockholm’s (fourth) combined: £364 billion versus £326 billion. It’s also worth more than their combined early stage funding: £18 billion versus £16.7 billion, and exits in London are valued more than all four combined too: £100 billion versus £95 billion. In other words, it’s not even close. 

As the report states: “London remains Europe’s leading tech startup ecosystem. The region has seen an upswing in exits over $50 million, with several high-value exits over $1 billion, including fintech Wise ($12.2 billion), Deliveroo ($10.5 billion), and Oxford Nanopore Technologies ($4.6 billion). In addition, Europe’s largest Fintech unicorn, Revolut, is based in London, boasting a valuation of $33 billion, while SumUp and Rapyd are valued at $9 billion and $8.7 billion respectively.”

We all know there’s room for improvement, but we do this from a position of strength: as the UK’s unequivocal leading entrepreneurial ecosystem. It’s why a16z (perhaps still better known as Andreessen Horowitz) has just chosen to base its first office outside of the United States in the capital.

London isn’t an island though. For example, a16z is adamant that the value it sees in its bet on blockchain will involve it working with universities up and down the UK. And the Startup Genome report ranks the Manchester-Liverpool region sixth as an emerging ecosystem, with Bristol, Edinburgh-Glasgow, Birmingham, Durham, and Belfast also getting very honourable mentions.

The government has a role to play in supporting these other ecosystems, most critically through infrastructure. As Marc Andreessen (the “a” in a16z) persuasively argued back in 2020: It’s time to build. There remains much to do though. As our Adviser Sam Dumitriu recently showed, it’s too hard to build new homes, factories, labs, roads, railways, airports, and energy infrastructure like wind farms, grid connections, and nuclear power stations. While Mustafa Latif-Aramesh and Angus Walker detail in The Telegraph (paywall) the ways in which large infrastructure projects are increasingly being held up in the UK. Just read the Wikipedia article on Northern Powerhouse Rail for a textbook case of political mismanagement and Cheems Mindset.

It’s time to celebrate our successes and build on them – literally.

Group Think
The All Party Parliamentary Group (APPG) for Entrepreneurship – for which we’re the Secretariat – published its latest newsletter this week. Among other things it included an update on our new Officers: Anna Firth MP, Virendra Sharma MP, Paul Howell MP, Brendan Clarke-Smith MP and Ben Bradley MP.

Sign up to the APPG monthly newsletter here, and feel free to drop me an email if you’re keen to see how you can get involved in the APPG.

Norton Anti-Vibes

In 99.9% of circumstances, a Hollywood celebrity should be the last person you turn to for policy advice, which is why I wasn’t expecting much going into an event with Uber and Edward Norton. I was planning to gloss over the policy with the hope of getting a slither of insight about his films. Luckily it turns out Norton is in the 0.01%.

Norton didn’t rely on emotive arguments, but on sound economics to argue for a better world. He wants to ensure the environmental costs of doing business are internalised by companies, and defends the creation of markets to protect environmental assets. Unlike too many environmentalists, he understood how to think at the margin and cautioned against making perfection the enemy of the good. As he has stated back in 2019 when probed about Uber:

“Does any form of car-based transportation within urban environments need to grapple with the challenges of congestion and pollution and the nature of employment? Of course. But the New York City medallion system should be cancelled tomorrow. It is not egalitarian. It is terrible economically for the drivers. It drives empty cars around polluting and congesting the city. This notion that Uber is not an improvement off of where we were is absurd. Does it need to get better? Absolutely. But there is no way you can tell me that the experience of riding in a New York taxi is anything other than debased compared to ride-sharing services.”

The critical point for Norton is that the creation of ride-hailing services put us on a path to a better world. It didn’t come overnight, but without this technological shift there was no escaping the inherent inefficiency of customers and  cabbies being unable to coordinate. There is no putting the genie back in the bottle. And while there are individual losers and new policy challenges thrown up, ultimately we are much better off for this technology existing.

There are many areas of the economy that could be equally transformed. We’ve written about drones, copyright, and most recently in our Operation Innovation collection Meri Beckwith wrote an essay on clinical trials. The co-founder of Lindus Health – who has just raised money from the likes of Peter Thiel to accelerate their use of machine learning and data science to revolutionise clinical trials – paints a bleak picture of ethics committees in the UK. For example, when discussing whether to allow a clinical trial for a new drug for Stage 3 cancer to proceed, the committee, which only meets every eight weeks, spent the session complaining about the font used in various documents giving no time to discuss the drug. Beckwith suggests paying ethics committee members and making it easier to use private ethics committees like in the US.

During next week’s London Tech Week I’ll raise these and other cases at a roundtable with George Freeman, the Minister of State for Science, Technology and Innovation (who has himself identified a fair few obstacles in his TIGRR report) organised by the excellent Regulatory Horizon Council.

When it comes to regulatory hurdles like this, we rely on you – our network of thousands of founders – to let us know what conditions are like on the frontier of innovation. In turn, government relies on us, and organisations like us, to frame these individual experiences as part of a bigger picture and suggest solutions. So whether you’re a business owner, investor or anyone with knowledge of something holding business back, now is the time to get in touch.

Norton said it best upon his decision to devote more time to entrepreneurship, investing and environmentalism than acting: “I don’t want to look back on my life and see the large majority of it coloured with me playing pretend instead of actually doing things.”

Mighty Oaks
Mid-sized businesses should be Goldilocks for governments – big enough to boost productivity and create jobs, but small enough to be nimble and innovative. 

However, without the resources of very large businesses to lobby government, or the weight in numbers (and therefore voters) of small businesses, they are often overlooked by policy. Compared to equity backed tech businesses, much less attention is paid to businesses that are already profitable, but aren’t (yet) large companies.

That’s why we’re hosting a roundtable for profitable businesses turning over £1 million with Shadow Minister for Small Business, Consumers and Labour Markets Seema Malhotra, and Shadow Minister for Business and Industry Bill Esterson. 

Watch This Space

I’ve written before about space and entrepreneurship. However, last year I was focused on the final frontier – or, more precisely, the incredible applications of space technology – now we’re looking at an equally interesting ‘space challenge’ for entrepreneurs a little closer to home. We’ll soon release a new report with Enterprise Nation covering everything from shops and offices, to markets and coworking spaces.

I won’t break the embargo, but it won’t surprise you that the report covers the challenges to bricks and mortar businesses, many of whom have struggled in recent years.

But while the future of retail and leisure has changed dramatically, I remain a bricks and mortar optimist for one simple reason: people think local shops and services are important for their communities. It’s why recent governments have poured money into things like the Future High Streets Fund, Towns Fund, and Levelling Up Fund. They’re responding to voters, and while some might argue that revealed preferences show that people would prefer to shop online, both can exist alongside each other. 

Just consider Westfield, whose Stratford and White City locations offer the whole shebang: retail, dining, leisure, offices, hotels and residential. The future of bricks and mortar is about this sort of diversity. The two centres generate significant additional expenditure for the benefit of local businesses, including an estimated £18m-£25m annual spend by centre employees.

Westfield is also keen to open up their space to more entrepreneurs, which is why we’re partnering with them on their Grand Prix competition, which offers creative and eco-conscious food, fashion, beauty, home, leisure, and services brands the chance to win a free retail space.

The winner will get a pop-up shop or kiosk for one year, £50,000 contribution to design and fit it out, £200,000 worth of media promotion, and a chance to compete for the European prize in Paris to kickstart European expansion. Your company should have been incorporated less than seven years ago; operate fewer than five UK stores; be able to operate a physical point of sale; and sell goods or services to individual consumers. Entries are open until 30th June.

Point of Order

The Government didn’t need to wait for the ONS to release the migration figures to begin taking action to reduce the number of people able to come into the UK. Two days prior to those statistics coming out – which showed a record 606,000 people came to the UK on net in 2022 – the Home Secretary Suella Braverman was informing the House of Commons of her 6-point plan to drive the numbers down.

At the top of her list was the intention to remove “the right for international students to bring dependents unless they are on postgraduate courses currently designated as research programmes.” Enforcement will also be beefed up, with “unscrupulous” education agents clamped down on. 

The exact impact this will all have is uncertain, but needless to say, the UK will now be viewed less favourably among prospective students looking to study abroad. And while these reforms were all related to foreign students, in the coming weeks and months, be sure to expect further agitation from migration hawks clamouring for measures to reduce the numbers of other types of immigrants as well. 

Debates on immigration are all too often typified by feelings rather than facts. And as someone who comes down on the more liberal side of the argument, I think it’s worth pointing out what research we have published in this space, to give a little in the way of concrete evidence. 

A statistic of our own which we’re particularly proud of sheds light on the share of fastest-growing companies set up by people who have moved to the UK. In 2019, we found that this stood at 49% – in other words, half of the country’s fastest-growing companies had a foreign-born founder or co-founder, despite immigrants making up only about one seventh of the total population. It’s a figure that’s been used by the Prime Minister no less, and underscores the importance of foreign talent when it comes to the forefront of success in business.

Beyond company founders, immigrants have been indispensable to the growth of many businesses – especially where they can provide scarce skill sets. To best enable this, we need a visa system which is fit for purpose. Some readers might be surprised to hear that there are instances where the UK has moved in a more positive direction on this lately. One example is the creation of the High Potential Individual (HPI) Visa, which allows graduates from leading universities to move to the UK for two years without a job offer. Yet even here, there’s room for improvement – and in True Potential, we explained how to do exactly that. At present, the HPI Visa’s methodology for which universities it covers gives more weight to student-teacher ratios than how students do in the world of work upon graduating, which is surely what we should be interested in. As a case in point, India’s prestigious Institutes of Technology are currently excluded, despite the fact they count the CEOs of IBM and Google among their alumni. Do we really want to be throwing up barriers to these sorts of people?

As well as – and perhaps because of – visa complexity, something else we’ve been highlighting recently is the seeming inability of the Home Office in simply fulfilling its end of the bargain when it comes to approving applications. In Operation Innovation, our handbook for building a more innovative Britain, Coadec’s Bella Rhodes notes: “too often we speak to startups where the decisions have been delayed by three months or more. The problem is not policy intent – it is red tape and delays within the Home Office.”

Having spent a decade as the voice for Britain’s entrepreneur community, we don’t need to be persuaded of the value of immigrants to individual companies, and the economy at large. Perhaps the fact that so many politicians have comprehensively failed to get numbers down suggests, in a weird way, that they don’t either. And thank goodness for that.

Investors Calling
For a while now, we’ve been researching university spinouts, and how best to support them. The Government have started looking at this too, and we’ll be inputting our findings to them. With so much of the focus on founders and technology transfer offices, we’d like to find out more from investors. If you’ve invested in spinouts and would like to share – in confidence – your experience of dealing with them and TTOs, you can get in touch with us here. 

Also, in case you missed it, we’ve recently joined forces with FieldHouse Associates to provide a free forum for investors who want to make a positive impact on UK policy. Learn more here. 

Great Schemes of Things

Sometimes we need to turn to the past as a guide to the future. That’s why this week we published Blueprint for a New Great Exhibition, a report by our Head of Innovation Research, Dr Anton Howes.

As I wrote in Forbes, exhibitions of industry have a long and successful history of being used by policymakers to showcase and inspire innovation. Recent attempts to replicate such exhibitions, however, have not always lived up to their goals – and have been far removed from the momentous success of events such as the Great Exhibition of 1851. 

This isn’t jingoistic yearning for a long-gone ideal. It’s about applying what has worked in the past to the modern world. As Anton writes, visitors would “see drone deliveries in action, take rides in driverless cars, actually use the latest in virtual reality technology, play with prototype augmented reality devices, and see organ tissue and metals and electronics being 3D-printed in front of them. They would see industrial manufacturing robots in action, have a taste of lab-grown meat at the food stalls, meet cloned animals brought back from extinction, and themselves perform feats of extraordinary strength wearing the exoskeletons that are already in use in factories and warehouses. Visitors would naturally get to meet the inventors and scientists and engineers who developed it all, too. They would browse the latest in fashion, art, and architecture, seeing them alongside historical examples. And the whole thing would be powered using only the cutting edge of clean energy technology, much like how the great new Corliss Engine drove the 1876 Centennial Exhibition in Philadelphia, or how Westinghouse’s alternating current powered the 1893 Chicago World’s Fair. Visitors might also be able to view air CO2 removal machines in action.”

While focused on the future, the paper makes the case that it shouldn’t be online. Perhaps one day such an event is best hosted in the metaverse – but that day isn’t imminent. Showcasing innovations of driverless cars, lab-grown meat and drone delivery online would be an abstraction that subtracts significantly from the goal of inspiring innovation.

We think it should be privately funded – and not just because of the state of public finances. The recent UNBOXED festival – dubbed the ‘Festival of Brexit’ – could be a Harvard Business School case study in failure: bureaucratic, politicised, and lacking in clarity of vision and oversight. The Great Exhibition of 1851, for example, albeit organised under the direction of a Royal Commission to give it official credibility while maintaining some arms-length distance from the government, was privately financed. 

The Great Exhibition was centred around the prefabricated majesty of Sir Joseph Paxton’s Crystal Palace, which was moved from Hyde Park to an area of London now (unsurprisingly) known as Crystal Palace, but was sadly destroyed in a fire in 1936. Previous World’s Fair structures with an enduring legacy include the Eiffel Tower in Paris (1889), the Space Needle in Seattle (1962), and the Atomium in Brussels (1958). We would need an equally majestic building today and played around with Midjourney to come up with some AI-generated designs to poll the public on Twitter (I’m still annoyed the glass building didn’t win, proving these things aren’t best decided by committee).

Our next reports will cover things like reforming visas and spinout policies, and unlocking commercial space for startups and institutional funding for deeptech policy. But the culture of innovation also matters. If you don’t stop and look around once in a while, you could miss it.

Job Creators II 
We're busy crunching the numbers, updating our incredibly influential Job Creators report, in which we looked at the fastest-growing companies by valuation, finding that half the fastest growing companies have at least one foreign-born founder. It got significant press coverage, including the second page of the Financial Times, and the headline statistic has been used by the Prime Minister on a number of occasions. We're open to partnering with a sponsor on this. Get in touch if you're keen to help.

Free Forum
As previously mentioned, we’re building an Investor Forum to provide a free forum for investors who want to make a positive impact on UK policy. It’s for UK investors at any stage, sector focus, or location. We will support you on an ad hoc basis through events, surveys, research, and other ways as the community develops. Join us.

First Draft

LabourList, the party’s grassroots website, has revealed Labour’s draft policy platform. It gives a long summary of the 86-page policy handbook, which is split into six sections: a green and digital future, better jobs and better work, safe and secure communities, public services that work from the start, a future where families come first, and Britain in the world. I’ve read it, so you don’t have to (though you might want to).

These policies still need to be agreed by the National Policy Forum, with amendments subject to approval at Labour’s party conference. Finally there will be a Clause V meeting, where the party's National Executive Committee and Parliamentary Labour Party agree on the final policy platform.

First and foremost, when it comes to policies supporting entrepreneurship, there is little in this document that would be out of place in a Conservative manifesto. This is good to the extent that continuity of good things is good for business; this is bad to the extent that there’s a lot that needs fixing. The art of good governance is identifying and successfully reforming the latter.

For example, Labour will promise to tackle late payments and scrap and replace the current system of business rates. Of course, these are things which the current and past Government has promised too. On business rates, I’ll be pushing Labour towards the most thought through proposal, which was led by our Adviser Andrew Dixon: Introducing the Commercial Landowner Levy.

As per the current Government, Labour wants to “unlock the supply of patient capital for fast-growing digital businesses”. I would replace “digital businesses”, which is too broad, with “deep tech”, which is what the new LIFTS programme will aim to do. We will also be pushing for Labour, if elected, to conserve the Conservative Party’s support for Focused research organisations (FROs), which would give entrepreneurs, scientists, and engineers a new pathway for developing the sorts of transformative technologies which will be required to tackle pressing public problems.

Labour wants to “ensure the UK capitalises on its world-leading universities and research base to grow the number of spinouts”. This is something that the current Government is suddenly – and somewhat surprisingly – animated about – as mentioned last week, there is a consultation on the topic. This is a technocratic enough issue that hopefully we will see continuity if Labour come to power.

There are nods to traditional Labour policies. The unions, who contribute over half the party’s donations and loans, feature heavily. As such, some of the language feels very 1970s, but it’s not inherently bad, and could be positive if they can, as the document suggests, carefully fix the awkward fudge on worker and employee status (without damaging flexibility for those that want it).

As the Labour Party needs to keep the unions onside, the Conservative Party is held hostage by its Nimby voters on one of the biggest issues of the day: planning reform (see here). Labour is promising to build. We can but hope.

One area that piques our interest is around data and IP reforms. Labour wants to: “ensure our world-class researchers and businesses have the data and computing infrastructure they need to compete internationally”, “ensure our intellectual property system is fit for the digital age”, “make it easier for public services to adopt innovative technologies by removing barriers to data-sharing and smart procurement”, “use new capabilities in data analysis and AI to deliver better public services”, and “introduce robust regulation that opens up data while enshrining consumer rights.”

This is potentially along the lines of what we’ve been calling for across numerous reports. If expanded out it could be genuinely transformative. We could make the UK the best place in the world for AI research while aping digital states like Singapore, South Korea, the Scandinavian and Baltic States, but with larger populations and an already more advanced entrepreneurial, financial and research ecosystem.

That said, according to the draft platform, Labour would “bring about the biggest wave of insourcing of public services in a generation.” While the UK has undertaken many failed procurement projects, it’s also failed on as many internal projects. The problem isn’t outsourcing, but the way procurement is undertaken. And while this document states it wants to “cut red tape and streamlining the bidding process to level the playing field for small businesses” it would also burden businesses with social, environmental and labour clauses. These are all worthy goals, but they are better pursued in ways that won't hold back the innovation and economic growth that will let us pay to achieve these same goals.

I could go on. But I’ll wait until future weeks. On Wednesday we’ll be speaking with Stephen Kinnock MP, the Shadow Minister for Immigration, so will hopefully be able to understand its business offer better then. Get in touch if this is a topic you care about – we might be able to squeeze you in.

Battle Royal

Whether you’re a flag-waving Monarchist or a dyed-in-the-wool Republican, we can (hopefully) all agree that those in a position of power should use it to promote the benefits of an entrepreneurial society.

That's why Dr Anton Howes and Ned Donovan made the case in our paper a few years ago to establish a new order of chivalry to encourage invention and raise the status of being an innovator in the eyes of the public; and that's why I sometimes recommend people from our network for the Order of the British Empire; and that's why I'm letting you know that the King’s Awards for Enterprise opens for applications tomorrow.

The King’s Awards was instituted by Royal Warrant in 1965 with the first Awards made in 1966 under the scheme’s original title: The Queen’s Award to Industry. They are for outstanding achievement by UK businesses in the categories of innovation, international trade, sustainable development, and promoting opportunity through social mobility.

Winners are invited to a Royal reception; presented with the award at their company by one of The King’s representatives, a Lord-Lieutenant; able to fly The King’s Awards flag at their main office and use the emblem on marketing materials; and given a Grant of Appointment and a commemorative crystal trophy.

I’m sure some of you reading this are thinking that Royal recognition is the last thing you want. But that’s not really the point. It’s clearly a big deal for lots of other people and because of this it sets the tone for what society as a whole values. We can (and do) have other incentives for those that don't like the Monarchy.

We think culture matters for building an entrepreneurial society, and as set out in the opening essay of our recent Operation Innovation collection, the second order effects of this have been incredible:
 
“The effect of accumulated innovations has transformed the world at a pace that would have been unimaginable to our not-so-distant ancestors. Even a rate of 2% growth per year – what is now considered slow – if sustained year after year, results in a doubling of measured living standards in just 35 years. The gap in living standards between 1423 and 1723 may have been noticeable to a typical fifteenth-century person, but the gap between 1723 and 2023 would have been beyond even an eighteenth-century person’s wildest imaginings. 

In 1723, the typical Brit would have spent a substantial portion of their wage on lighting and heating their home with sputtering candles and smoky coal. They would almost certainly have had no access to running water, been unable to afford to travel abroad, and only just about been able to fund some pastimes – some limited reading, if literate, and perhaps the occasional and expensive sip of a newly-imported luxury like coffee. Their work would have involved back-breakingly long hours, with little recourse for that broken back. They faced the constant threat of an early death from disease.

Thanks to the incremental and accumulated work of just a few thousand innovators in the intervening three centuries, we now enjoy the widespread availability of electricity, central heating, running water, toilets, cars, rail travel, literacy, television, restaurants, office jobs, and instantly effective treatments for many previously debilitating or life-threatening diseases – not to mention commonly available inventions that to the 1723 Brit would seem tantamount to magic, like human flight, impressively accurate weather forecasting, instantaneous communication with anyone in the world, and now machines that can reason and talk.”

Anton’s next report for us will elaborate on his plan to create a modern-day Great Exhibition. If you want to take a look at an early copy with a view to endorsing it (assuming you like it, of course), drop me an email. 

Right 'Round
We’re responding to the review of university spin-outs. Based on the evidence gathered, the review will provide recommendations for government policy and for institutions aimed at ensuring the incentives are in place to maximise the gains from university spin-outs, and increasing the economic contribution of spin-out companies to local areas and the UK as a whole. Get in touch with Eamonn Ives if you’re as passionate about this policy area as we are.

What a Corker
Over the years we’ve undertaken significant work on policies to support female founders. While we’re busy planning our next activity, check out the first ever National Women’s Enterprise Week from 19 to 23 June, and the Women’s Launch Lab, which is offering 12 free places on a boot camp from 20 to 22 June. Both are the work of our Adviser and entrepreneur Alison Cork MBE. Deadline for applications is 15 May 2023.

Inclusive Innovation Forum: Start-Up, Scale-Up

Welcome to the fourth newsletter of the Inclusive Innovation Forum. Following the roundtable led by the Government’s Chair of the Commission on Race and Ethnic Disparities, we crossed the House of Commons for our fourth roundtable to discuss the findings of the Labour Party’s recent Start-Up, Scale-Up review, which provides crucial insights on how the Party would aim to achieve one of the guiding ambitions of a potential future government: to make Britain the best place to start, and to grow, a business.

Roundtable Insights
The Start-Up, Scale-Up review includes data that reinforces the notion that investing in founders of colour has a substantial and positive economic impact. One respondent to their call for evidence calculated that if entrepreneurship among ethnic minority founders was increased to the average level, this could add a further £15-20 billion to UK GDP.

The discussion was opened by Tom Adeyoola, Co-founder of Extend Ventures, who sat on the panel of the Labour Startup Review. A central theme of the review and Tom’s talk was how to encourage growth. “There are only three ways to generate growth: more people, more productivity, and mining untapped resources. Untapped resources refer to communities and regions that have not been given fair access to funding opportunities. If it is possible to remove structural biases and systemic issues, then there could be improvements on the capability, capacity, and outcomes of UK PLC.”

But, how can we facilitate greater access to capital for entrepreneurs in the UK and ensure that this access is distributed more equitably? Adeyoola thinks we need to follow the money. One of those routes is pension funds: “Pension fund capital is probably the most diverse asset class of capital in the UK, yet Canadian pension funds invest more in UK start-ups than UK-based funds. This means that people in the UK do not receive stakes in the success. It reinforces the importance of connecting capital to broad and diverse sources of capital through the system, to get more alignment around where the money is going”. But convincing pension funds to invest in the venture asset class is challenging, says Amina Ahmad, head of community and content at Diversity VC. Pension funds are known to be more risk averse in the UK – they need a change of culture that enables them to take more risks into startups as an asset. 

According to Adeyoola, we also need to address the issue of equitable access to capital for entrepreneurs. He proposes government develop an Investing in Ethnic Diversity Code – similar to the Investing in Women Code – to bring to light the lack of equity in capital distribution and provide recommendations. It’s also important that the government commits to ongoing engagement with the topic and establishes working groups under each recommendation area to implement them quickly and create real tangible outcomes.

Another way to promote more investment into ethnically diverse founders is to diversify who deploys capital. We should be looking at global tech hubs – like Tallinn, Estonia, for example – that have a founder culture of reinvesting into the ecosystem. As entrepreneurs and senior operators experience a liquidation event, they should be encouraged and incentivised to invest in UK startups. “We need the UK to recycle wealth from the older generation into turbocharging the younger generation — we need to create that virtuous cycle,” says Adeyoola. 

Alongside recycling cash, the roundtable discussed needing more visibility of diverse role models. Investing through a mirrortocracy lens – not on merit but in people who “mirror” other successful people – hinders investment into people of colour. Roundtable participants argued that, alongside increased data and awareness that illustrates the benefits and increased returns of investing in ethnic minority founders, investors need to see more success stories to further convince them. Role models also encourage future entrepreneurs to believe they can also build: “The importance of role models is crucial to show young people how and why they might want to consider, even in a recession, or because of a recession, the opportunities of entrepreneurship,” says Richelle Schuster, Head of Innovation Programme at Leeds City Council. 

Another suggestion raised was putting pressure on entities providing funding to ensure that they invest more equitably across the board. This could look like quotas, a code of conduct or key goals.

In addition, participants largely agreed that there needs to be improved guidance and support for founders to help them navigate more open and diverse funding sources. This isn’t to enable venture capital investors to ignore ethnic minority founders but to provide founders with greater options to increase chances of success.

Sanghamitra Karra, EMEA Head of the Inclusive Ventures Lab, welcomed the thoughtfulness and the research undertaken to provide a snapshot of the start-up ecosystem in the UK for the purpose of the report and the roundtable discussed ways to make the findings actionable irrespective of the party.

Operation Innovation

This week we launched Operation Innovation. The essay collection’s subtitle tells you what it’s all about (and what we’re all about): “How to Make Society Richer, Healthier and Happier.”

As we write in our opening, each essay addresses a key way in which the UK can improve its growth prospects, and all of them focus on how to do this by supporting and harnessing innovation. Some discuss the barriers that prevent people from innovating in the UK, looking at housing, transport, and childcare costs, as well as immigration and taxation policy. Others examine the way we support and fund science and innovation, how we regulate emerging markets, how we build a culture that supports innovators, and how we integrate the things they develop into both private and public services. A few essays deep-dive into specific sectors, such as artificial intelligence, food production, and energy systems. But in all cases we asked authors to push the envelope and point readers towards important ideas that have been overlooked.

This isn’t an impenetrable tome. Each essay is the length of a comment article, which is why others are republishing them, including our opening essay, Tom Westgarth’s essay on why we need to make AI a higher political priority, Dr Lawrence Newport’s essay on how to inspire a culture of innovation, Bella Rhodes’s essay on reforming the visa system, and Matt Clancy’s essay on how to think about science funding. Keep your eyes peeled for more in the coming days.

Taken together, the collection adds up to a serious agenda for innovation, but I’ll restrict myself to two recommendations for today.

First, Meri Beckwith, the founder of Lindus Health, which is an innovator in clinical trials, shares his company’s Kafkaesque experiences dealing with ethics committees, suggesting some changes to make the UK the best place in the world to run clinical research. 

Second, check out Harry Rushworth’s essay on how transport networks can support entrepreneurship through greater agglomeration. It’s one of a number of topics I expect we’ll delve into in more detail in a fuller paper – not least because it’s one of the more concrete ways to realise the ephemeral (in both meanings of the word) goal of levelling up the country.

You can read all the essays on our website here; read, reply, like and retweet our Twitter thread here; read, like and share my LinkedIn post here (also, feel free to connect with me); forward this email onto anyone who you think might be interested in the topic; and become a Supporter or Adviser – if you’re not so already – so we can continue to produce more unsponsored reports like this one.

Real Talk
The big news in business this week was undoubtedly the CMA’s decision to block Microsoft’s acquisition of Activision. Like most people, whenever a story of this nature drops I turn to Ben Thompson’s Stratechery to see what he thinks. It’s not great: “Microsoft is going to appeal this decision; if they fail, and pull out of console gaming entirely, the CMA will have … ensured Sony is dominant in consoles for a very long time to come.” Check out his article from last year on the history of consoles if you really want to understand why a lot of industry experts think this is a bad decision.

While the Government and regulators should be brave enough to stand up to big tech companies, it just as obviously matters if the regulators are making mistakes and if Microsoft and Activision are vehemently talking down the UK as a result. And as Ryan Bourne warns in The Times, with the creation of the Digital Markets Unit we can expect greater interventions. It goes without saying that competent competition regulators should protect consumers – but, as we have argued previously, overreach will be costly for both them and startups.

This is part of a bigger picture of decline though. In recent weeks I’ve had a table full of high-growth founders tell me that they’re planning to move their business abroad and heard anecdotes of the UK’s economic growth prospects being the butt of the jokes at international conferences. This was understandable after Brexit – in the same way that the US suffered reduced standing in the world following the election of Trump – but the US is having the last laugh with the gulf between our countries wealth per capita huge and widening. Eir Nolsøe points out in The Telegraph that back in 2008 forecasters were (reasonably) predicting the UK’s GDP per head would surpass that of the US. Jeremy Driver tells it straight: “The typical British family is now £6,800 worse off than a German family, £13,500 worse off than an American family, and, if we continue our current trajectory, is set to be poorer than a Polish family by the early 2030s.”

I don’t want to get accused of talking Britain down. We shouldn’t mock the ‘Unicorn Kingdom’ campaign as it is celebrating our genuinely incredible tech companies. This isn’t the 1960s and 70s, we aren’t the “sick man of Europe.” Just use Startup Genome’s great new tool for comparing startup ecosystems across the world for proof that we have incredible potential in our nation. It’s just there’s a great deal of ruin too. Too much.

Investors Ready

This week we launched Funding to Flourish in the House of Lords, with well over 100 entrepreneurs and investors listening to speeches delivered by Lord Leigh, the Shadow Business Minister Bill Esterson, and Will Fraser-Allen from the Venture Capital Trust Association (VCTA). As many of you will know – particularly if you signed our letter in The Telegraph backing it – the report was released last month, but this was an opportunity to take stock of what has been achieved in the interim, and what more needs to be done.

Most importantly, following our report the Chancellor committed to maintaining the Enterprise Investment Scheme and Venture Capital Trust relief past 2025, although we need the Government to set out a timeline and details of how it plans to implement the extension of the scheme.

Also, as the report recommends, the financial health requirements are still not fit for purpose. HMRC are increasingly rejecting exactly the sorts of companies these schemes are designed to target: loss-making companies with growth prospects. This needs addressing as a matter of urgency.

There is also an ongoing issue with SAFE Notes not benefiting from these tax breaks. SAFE Notes are commonly used by early-stage startups to raise capital from investors. A SAFE is a contract between an investor and a company that provides the investor with the right to receive equity in the company at a future point in time, usually when the company raises its next round of financing. Y Combinator invented them back a decade ago, but the regulators haven’t caught up.

While this report was driven by the views of entrepreneurs, it was also informed by conversations with investors, as well as the VCTA, EISA and others. That’s why alongside our friends at Fieldhouse Associates we’re launching an Investor Forum to ensure that the views of investors feed into policy in a more systematic way.

Fieldhouse is a public relations and communications agency working with many angel and venture capital investors, as well as with many fast-growth tech startups and scaleups. Many of you will know its founder Cordelia Meacher, who is one of our Advisers. 

We’re joining forces to provide a free forum for investors to have an impact on UK policy, ensuring investors are able to input into government through both The Entrepreneurs Network and APPG for Entrepreneurship, as well as established groups like the VCTA, EISA, BVCA, BAA and anyone else in this space.

It’s for investors in the broadest sense – both individual and institutional. The way this forum develops will be driven by you. So sign up today to let us know how we can work together – and please forward the opportunity on to any investors who you think might want to be involved.

The 25% 
While some policy areas are oversaturated with ideas, others remain remarkably unexplored. The intersection of disability and entrepreneurship is very much underexplored.

That’s why it’s pleasing to see a new report from Small Business Britain.

This isn’t a niche issue. The FSB estimates that 25% of entrepreneurs are disabled or neurodiverse. For its report, Small Business Britain surveyed 500 disabled entrepreneurs from across the UK, specifically those with a physical or mental impairment that has a ‘substantial’ and ‘long-term’ negative effect on your ability to do normal daily activities, as defined by the Equality Act. 

Key findings include that: 37% report they have been discriminated against because of their disability; 33% of disabled entrepreneurs followed the entrepreneurship route out of necessity; 60% did not get any support when starting their business; 59% are worried to take on debt, whilst 48% don’t know the right type of funding; 70% lack appropriate role models; 84% feel that they do not have equal access to the same opportunities and resources as non-disabled founders; and 35% say their disability has positively impacted them as an entrepreneur.

I recommend reading it in full – or, at least, dropping it into Chatpdf (other software is available) and interrogating the paper through chat.

This should be a catalyst for more policy work in this area – including, I hope, through the APPG for Entrepreneurship. It’s something we touched upon in this webinar with Lisa Cameron MP during Covid, but it remains a hugely neglected area of research. 

Operation Innovation
Next week we'll launch a new essay collection that will make the case for the power of innovation to make us all richer, healthier and happier. It something of a manifesto on topics we plan to undertake more research. Eamonn Ives, our Head of Research, has an article out today to give you a taste for what to expect:

“The effect of accumulated innovations has transformed the world at a pace that would have been unimaginable to our not-so-distant ancestors. Even a rate of 2% growth per year – what is now considered slow – if sustained year after year, results in a doubling of measured living standards in just 35 years. The gap in living standards between 1423 and 1723 may have been noticeable to a typical fifteenth-century person, but the gap between 1723 and 2023 would have been beyond even an eighteenth-century person’s wildest imaginings.”

Join us to get a copy in your inbox on Tuesday.

Remote Possibilities

Mods Are Asleep. Well, the political equivalent: Parliament is in recess. To fill the void, here’s something I’ve been turning over in my mind for a while.

During the pandemic, we published a report by Matt Clancy making the case for remote work. Crucially, it didn’t suggest government should overtly incentivise working from home – but it did explain (and correctly predict) the economics of what factors might mean the forced changes would become permanent.

This was published at a time when many business leaders and their representative organisations were making the case – vehemently behind closed doors – that government should force businesses to open up their offices, despite Covid cases being on the rise.

Post-pandemic, many business leaders and politicians can’t seem to make up their minds about what the future of work should look like, with some now wanting to make ‘working from home’ an inalienable right, and others seeming to think returning to the office should be mandatory. They should get more comfortable living with the uncertainty most of us have about the pros and cons.

On an individual basis, everyone reading this will be familiar with the advantages of working from home. Equally, everyone will be familiar with the disadvantages. How we weigh them will depend on a multitude of factors, which is why it’s best that employers and employees continue to work this out for themselves.

As reported in The Times this week, the amount of vacant office space across the UK has increased by 65% over the past three years. It’s not hard to understand why – ONS data reveals we have gone from a country where working from home was a rarity, to one where 16% of working adults reported working only from home in the last seven days, and 28% reported they were hybrid working.

The insights of Friedrich Hayek are important here. Knowledge about what’s best for individuals and companies is so widely dispersed that it cannot be planned for centrally. We should let the employers and employees coordinate this, which means letting entrepreneurs decide what’s best for their business, and employees decide the offer that’s best for them. 

It’s not to say there is no role for government. But that should be in ensuring that infrastructure and regulation in areas like internet, transport, energy, domestic and commercial property, education and so on isn’t leaving people with no choice.

There is no better alternative.

Talking of Work 
Today is the last day to apply to join The Entrepreneurs Network as a Researcher. We’ve had plenty of applications, but if our growing pipeline of projects is anything to go by it won’t be too long before we will be going out to the job market again.

Find out more about the role here. (We won’t be checking the email until Monday so you won’t be marked down if you send it through a little late.)

Talking of Tight Deadlines
The Clinton Global Initiative (CGI) and Equal Innovation have got in touch to invite us to nominate startups that may qualify for CGI Greenhouse, "a unique showcase for path-breaking entrepreneurs at CGI in the areas of inclusive economy, climate resilience and global health."

The company/NGO should fall within CGI pillars of inclusive economic growth, climate resilience, health equity or refugee/humanitarian support. Secondly, the company/NGO should have raised some capital – Seed/Series A, major government grant or major philanthropic partnership.

The deadline is Sunday, so if this is of interest, drop us an email with the name of your startup/NGO, contact information, and a brief sentence about what you do, and we’ll pass on this information over the weekend.