Though mostly stuck at home, the world is in flux.
Countries the world over are putting forward ambitious schemes to support their businesses. As we argued very early on, this extraordinary situation calls for an equally extraordinary response from the government: “We should be aiming to keep our economy in stasis, so that it is in as good a position as possible to bounce back.”
The UK Government gets this, but there are still some glaring gaps – particularly for equity-backed startups. Although they represent a small proportion of all businesses, they will have a disproportionate impact on job and wealth creation. They build the products and services that enrich our lives.
We think we should be backing pre-revenue innovative businesses, specifically with convertible notes for early-stage startups, which would convert to equity at a later date. The leaders of Britain’s most ambitious businesses need this government injection because these businesses don't suit the risk appetite or lending criteria of traditional banks.
Cédric O, France’s impressive Minister of State for Digital Affairs, is ahead of the curve here. He has spearheaded a $4.3B plan to support France’s startups, of which $86.7 million will be used to support equity-backed businesses: “Startups that were in the process of raising a new funding round will be able to raise a bridge round through Bpifrance’s PIA (Programme d’Investissements d’Avenir). Some VC firms might retract term sheets, others might slow down their investment pace. Bpifrance is putting $86.7 million (€80 million) on the table. Private investors will co-invest as much as $86.7 million (€80 million) as well.”
Startups in co-working spaces and accelerators need support too. As we argued in our submission to the Treasury Committee: “Many startups will not benefit from the small business grant funding available for small businesses that already pay little or no business rates because of small business rate relief (SBRR), rural rate relief (RRR) and tapered relief, as they work out of co-working spaces or incubators, and accelerators. Grants aimed at small businesses that don’t pay rates should be extended to startups in these circumstances, if they don’t they risk stifling a vital source of future job growth. In lieu of accurate valuations, the government could use employment and tax data as a proxy.”
The Government also needs to ensure that co-working spaces and accelerators are around to support the recovery. The UK’s entrepreneurial success has grown out of a favourable ecosystem. We need to protect it. The Government will also need to look at whether tax breaks can be tweaked or regulations reformed or delayed – even if temporarily – to support entrepreneurs at this most challenging time.
And finally, we need to hear more about what you need on the ground. No one person or organisation has all the answers. Knowledge is dispersed – help us gather the best of it by sharing yours with us.
It pours
Every other day we’re greeted with an announcement of gargantuan proportions. But rather than run through it all for the umpteenth time, I want to make sure everyone knows where to turn for the right details. While we’ll continue to keep you informed with our Policy Updates which you can sign up for here, the best place to go for the latest information is GOV.UK. Specifically, the Guidance for Employees, Employers and Businesses and the Business Support.
Scotland, Wales, and Northern Ireland have additional guidance, while the British Business Bank hosts useful information for anyone interested in finding out about the Coronavirus Business Interruption Loan Scheme (CBILS). We know there are issues around how the loans are being rolled out. Please keep us updated on how this is working on the ground and we will pass on your concerns to the right people.
Beyond government, you can find a list of the business organisations that have useful coronavirus hubs on their website in the latest APPG Digest, while for those on Twitter I’ve made a Twitter List of government and business organisations you can follow, which might prove useful for cutting through the noise.
We need you
Zenia Chopra, an Adviser to the Network, has put together a short policy update on how visas will be impacted by coronavirus. We're looking to do more of these sorts of articles from outside experts. Just get in touch if you want to help us keep the thousands of entrepreneurs updated on your area of expertise in this challenging time.
Eyes on the prize
Anton Howes, the newest member of our team, has been taking a longer view than many. While coronavirus started with a bat (or pangolin), innovation will finish it off. But this won’t be the last challenge of this sort, and Anton has been looking at how the government can best promote innovation, whether directly with cool hard cash, incentivised by prizes or an Advanced Market Commitment, protected with patents, or fast-tracked with government patent buyouts. It’s a must read for anyone who cares about how we can help mitigate future pandemics.
Anton concludes: “As we look to fight coronavirus and any future pandemics, we should perhaps consider which patents — for antivirals, vaccines, ventilators, and other hygienic equipment — might be bought out in order to remove similar innovation bottlenecks. Whether we decide to use prizes, Advance Market Commitments, or patent buyouts, now is the time to experiment with any new ways to encourage innovation. As the coronavirus has shown us, increasing innovation is a matter of life and death.”
For further reading, check out this new paper on how grand innovation prizes could help address the coronavirus pandemic.
A good note
Along these lines, our friends at Nesta are looking at a number of approaches to the pandemic, considering how best to use innovation methods, such as Challenge Prizes, to support public wellbeing during the crisis, and are exploring how Edtech AI could best support home-schooling. They’re also coordinating community groups, and direct grant funding of some external organisations, and have also supported apps such as GoodSAM, which is playing an important role in coordinating NHS volunteers. Watch this space!
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