I held off sending out last week’s newsletter to coincide with today’s launch of our latest report. Unlocking Growth: How to Expand Access to Capital evaluates the funding options open for SMEs and identifies key reforms to boost SME’s access to capital.
It has been undertaken in partnership with the Enterprise Trust – a brilliant charity that aims to help individuals of all ages and from all backgrounds realise their potential as independent wealth generators.
You can read Richard Harpin, the founder Homeserve (and the Enterprise Trust), in City AM today with his thoughts on the report.
The report makes seven policy recommendations:
Experiment with lottery-style funding to channel more grant-funding to startups.
Simplify and modernise the R&D Tax Credit by providing better feedback for applications and expanding the score of activities that qualify as R&D.
Make data sharing obligatory for incubators and accelerators receiving public funding.
Provide more long-term patient capital through the British Business Bank.
Improve the mentoring offer for Start Up Loans by providing additional mentoring when businesses finish paying their loans.
Streamline the advanced assurance process for EIS and SEIS to unlock more investment in high-growth startups.
Unlock additional investment into venture capital from defined-contribution pensions by reforming the fee cap and clarifying rules on the valuation of illiquid assets.
If you like the look of these ideas – we would appreciate a retweet.
Unlocking Growth also doubles up as an introductory guide for anyone looking to raise finance, and is packed with some great advice from some of our Members, Supporters and Advisers. Here’s a flavour of some it:
Tammy Kolowski, Co-Founder of NAF! STUFF on securing the Scottish Edge grant:
“I’d urge anyone out there looking for funding to look into your options and shop around. I used to use instant loans as a quick and easy option, and I was always scared of “answering to someone” or getting feedback about my business plans. Those loans worked for me at the time but the interest was high and I didn’t quite understand the value of taking the time to assess how the funding (and possible repayments) would impact my business in the future.”
Jacob Thundil, Founder of Cocofina on raising Peer-to-peer Finance:
“When we recently asked for a small bank guarantee to provide to HMRC our relationship manager discouraged us by saying that they needed to run credit checks etc. when they have the whole history of trading over the last 15 years right in front of them. [With peer-to-peer lending] there was a more open conversation and feedback compared to a mainstream bank, which might not want to have a transparent dialogue on the qualification criteria.”
Richard Mabey Co-Founder of Juro on Venture Capital
“Given our product ambition, we knew we would need a heavy R&D spend to ensure we really executed in the right way on the product before commercialising it. Now that the market we are in is seeing significant growth, the funding also allows us to grow headcount far faster than we could if we were bootstrapping from revenue.”
Coronavirus response
Thousands have already died from the Coronavirus and the global loss to real GDP is predicted to be around $US2.3 trillion. In facing the crisis, the work of entrepreneurs will be vital.
Self-isolation is going to hit some sectors particularly hard. It would be a mistake to let otherwise viable companies go to the wall. As Paul Johnson from the IFS suggests: “This could mean giving more generous payment terms to businesses for some taxes such as business rates and employer NICs.” He also thinks that the government, with the Bank of England, could work with the financial sector to avoid banks foreclosing on businesses in temporary difficulties.
Keeping otherwise viable businesses afloat should be a key priority for the government. Failing to do so may cause long-term damage to productivity. The following options should be on the table for the government:
Business rate rebates aimed at specifically affected sectors (e.g. venues, restaurants, hotels).
Expanded access to HMRC Time to Pay Agreements for affected businesses (e.g. allow people to postpone tax payments).
Cooperation with banks to avoid unnecessary failures for indebted businesses.
Using Universal Credit (assuming the systems are up to it) to support gig workers, who are at the biggest risk of losing income.
Future proofing
Taking a step back from the immediate challenge, Azeem Azhar thinks this should be a wakeup call for governments. To better cope with the next Coronavirus (or worse) he thinks we need to: invest in early warning systems, make supply chains more robust, increase investments into scientific and medical research, and engineer cities to be more self-sufficient.
While public health is a ‘government-sized problem’, entrepreneurs will integral to delivering this.
Azhar also calls for more open data, which can increase trust and confidence for a population dealing with a pandemic. Just look at the data available to the citizens of Singapore.
We have a long way to go, but a recent trip to Estonia renewed my hope in the future. I met with Taavi Kotka, former CIO of Estonia, who has a 115-step blueprint for how Estonia went from a post-Soviet state with limited internet access and population with no digital skills to being one of the most advanced digital states in the world.
I’ve written about Estonia here, here, and here, but my latest thoughts on what we can learn from Estonia are for another day.
Now is the time for the Government to act swiftly.
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