This time next week we will know the result of the election.
We're not going to tell you who to vote for. After all, you can take a look at the main party's manifesto promises for businesses and decide for yourself. And, more importantly, you will no doubt vote, spoil or abstain for reasons beyond the impact the result will have on entrepreneurship.
Of course, we think policies impacting entrepreneurs should be an important consideration. As our Policy Priorities page states: "Entrepreneurial endeavours have taken humanity from subsistence to relative affluence and it is entrepreneurs who will raise long-term living standards of future generations." But this doesn't capture everything that matters to us in politics, and I doubt it does for you.
One thing I've heard a lot from entrepreneurs over the last few years is that many feel politically homeless. I've always felt like this, so can sympathise.
For some, the solution is to disengage completely from politics. For others, now is the time to get stuck in at the party level – whether locally as a councillor or engaging in groups directly attached to political parties. I admire the grit it must take to work within the system.
But for anyone wanting to make a difference but put off by the idea of committing to a particular party, think tanks offer a neat compromise. Whatever your ideological leanings, burning passion or change you want to see in the world, there's a think tank – or a combination of think tanks – for you.
Unlike political parties, the best think tanks offer a forum to engage with ideas without the burden of worrying about getting the party reelected. And, for better or worse, think tanks wield real power in the battle of ideas so your involvement can really make a difference. The big political movements of modern politics – from the Fabian Society's socialist vision, to the IEA, CPS and ASI's Thatcherite revolution, through to the IPPR's Blairite Third Way – were started and flourished in think tanks.
Voting is one expression of your political voice, but it doesn't have to be the only one.
Can tab
Cambridge Central Library is looking for someone skilled and willing to share their pitching skills with startup founders. Email BIPC@cambridgeshire.gov.uk to find out more.
Human Intelligence, Faked Experiments and the Right Frustrations
Stanford professor who changed America with just one study was also a liar, by Susannah Cahalan
Suggested by Philip Salter, Founder, The Entrepreneurs Network
Most lectures are dull – not David Rosenhan's. The Stanford psychology and law professor opened one of his lectures sitting on a student’s lap as a way to test the class’ reaction to abnormal behaviour.
The 70s were wild. Rosenhan is famous for convincing his students to go undercover as psychiatric patients. The story goes that eight healthy volunteers went into 12 psychiatric hospitals across the country, each telling doctors that they heard voices that said, “thud, empty, hollow”, after which they were diagnosed with a mental illness, hospitalised and only able to leave “against medical advice.”
Rosenhan's 1973 paper 'On Being Sane in Insane Places' was hugely influential, expediting the widespread closure of psychiatric institutions across America. It should shock us that a paper with such a small sample size had any impact at all; it should appal us that it seems to be based on lies. In 'The Great Pretender', Susannah Cahalan finds that Rosenhan "paints the picture of a brilliant but flawed psychologist who was likely also a fabulist."
It is said that the worst lies are the ones we tell ourselves. I disagree. It's the lies told by Stanford University Professors in the 1970s.
Principles for the Application of Human Intelligence, by Jason Collins
Suggested by Sam Dumitriu, Research Director, The Entrepreneurs Network
We tend to be biased in favour of the status quo. As a result, we tend to overweight risks and underweight benefits when deciding whether to adopt new technologies. In this article, Jason Collins flips our concerns about algorithmic decision making on their head, asking us to imagine what if human intelligence was the new technology. Collins writes “Humans may be a powerful technology with great potential. But until we have developed human decision-making systems that comply with some basic principles, we risk substantial harm.”
We need to start a more nuanced debate about the use of algorithms in decision making, Collins intuition pump is a good attempt at that. You can read my own attempt, with a special focus on fintech, here.
Small Projects, Big Companies, by Daniel Gross
Suggested by Sam Dumitriu, Research Director, The Entrepreneurs Network
When we think about entrepreneurship, we often picture people like Mark Zuckerberg or Bill Gates, college dropouts who founded companies in their twenties. Yet some evidence suggests the average entrepreneur is older and that older entrepreneurs are on average more successful. One reason for the success of older entrepreneurs might be the benefit of having the right frustrations. As Daniel Gross notes:
“Pizza delivery. Event planning. Bill splitting. We see many of these at Pioneer. I call them “incombustible ideas”. Founders relentlessly try to ignite them, but they just don’t light up. I don’t blame the firebrands. Solving anecdotal problems is a good instinct in most situations. But it can also lead founding teams down a stray path, spending years working on a company in a dog market.”
Entrepreneurs in their early 20s don’t tend to have the kind of gripes that can lead to creating massive B2B businesses. To help them out Daniel Gross has listed 7 business problems worth solving. Perhaps, they might inspire you to build the next Salesforce.
Don’t miss another Big Idea – sign up here!
Our Manifesto in the Media
Our #StartupManifesto, which outlines 21 policies the next government should implement to boost British business, was covered widely in national, local and trade media.
The Telegraph trailed the report in an article outlining the ways we could put Britain in the digital driving seat. “A new manifesto by policy campaigners Coadec and think tank the Entrepreneurs Network [suggests] regulations and bureaucracy have contrived to help keep the information age’s biggest pots of gold beyond reach. Backed by dozens of entrepreneurs from Britain’s start-up and scale-up ecosystem, their manifesto outlines a simple, three-pronged plan of action. The aim is to cement and greatly extend Britain’s position as Europe’s most innovative nation.”
An op-ed penned by Seedrs founder Jeff Lynn – one of the 250 entrepreneurs who endorsed the Manifesto – for The Times focused on how Britain must continue to attract the best and brightest globally after (if) we leave the European Union. He writes: “In the shadow of Brexit it is vital that the UK remains open to attracting and retaining great entrepreneurial talent. The manifesto rightly calls for proper implementation of the Startup and Innovator Visas, to enable more entrepreneurs to come to the UK to start and grow businesses, just as I did.”
The Manifesto was covered in the News section of both City AM and FT-backed Sifted, while our Research Director Sam Dumitriu wrote an opinion piece for CapX. “Startups and young businesses are the engines of job creation… Supporting them is key,” he writes. Joel Gladwin of Coadec – our partners in the project – wrote in the New Statesman that the next government “must reform the R&D tax credit if UK tech is to thrive”. And Annabel Denham wrote for Conservative Home outlining why the Tories cannot take the business vote for granted.
It also featured in the FinTech Times, FE News, FinTech Alliance, Small Business, and Essentials.news.
Zuckerberg, Teacher Impact and Grant Lotteries
A Conversation with Mark Zuckerberg, Patrick Collison and Tyler Cowen
Suggested by Philip Salter, founder of The Entrepreneurs Network
If pushed to come up with a shortlist of interesting dinner party guests, Mark Zuckerberg, Patrick Collison and Tyler Cowen would all have a decent shot of getting an invite. Luckily the've had the conversation without me needing to cook.
For those familiar with Collison and Cowen's shared thesis and their wider views, this interview might not offer much that's new (besides the not insignificant pleasure of seeing their intellectual world collide with Zuck's). But for everyone else, it's a worthy use of an hour (or perhaps less if you skim the transcript).
So what's the big idea? There are quite a few, but Tyler expresses one that too many people fail to grasp: that there is connection between the need to build more homes in cities and the prospects for young people in rural areas:
"Let's say you want to improve the lot of people in West Virginia. One growth enhancing way of doing that is to make it easier to build, say, in Washington D.C. and the Bay Area. Right now, to move from West Virginia, say, to Menlo Park, it's extraordinarily expensive. You can't just pick up and show up here and hope to get a job washing dishes the way one might have done in America 50 years ago. So by having more building, more economic growth, also more GDP, it would increase more opportunity. So economic growth and opportunity – they do tend to be correlated, and sometimes the problem is we don't have enough growth, not that we have too much."
Teacher effects on student achievement and height – a Cautionary Tale
Suggested by Sam Dumitriu, research director of The Entrepreneurs Network
How do you distinguish between good and bad teachers and schools? You might look at student achievement, which school or class has the best exam results. There’s an obvious pitfall: private schools, for instance, might get better grades, but you can’t attribute them solely to the teaching. Students from wealthier households may be more likely to be privately tutored, to have more attentive parents, and face fewer environmental hazards (e.g. air pollution). To use a footballing analogy, winning the league with Manchester City isn’t the same as winning the league with Leicester City. (Coincidentally, the Economist have a fun piece on football management along similar lines.)
Looking at value-added, the difference between a student’s predicted grades and their actual achievement might be a better approach. However, a new study offers a cautionary tale. Using administrative student data from New York City, they use commonly estimated value-added models to an outcome teachers cannot plausibly affect: student height and find the standard deviation of teacher effects on height is nearly as large as that for math and reading achievement.
Science funders gamble on grant lotteries
Suggested by Philip Salter, founder of The Entrepreneurs Network
For many, the idea of a lottery for science funding will seem instinctively unfair. After all, shouldn't the best ideas win? But as reported in Nature, a growing number of research agencies are assigning money randomly.
The argument is that above a threshold, it's wasteful trying to rank (nearly) equally good grant applicants. As economist Margit Osterloh explains: “Referees and all kinds of evaluation bodies do not have really good working criteria,”... while "random chance will create more openness to ideas that are not in the mainstream."
Randomness has also been shown to reduce biases and Osterloh thinks it might be good for scientists' egos: “If you know you have got a grant or a publication which is selected partly randomly then you will know very well you are not the king of the Universe, which makes you more humble,” she says. “This is exactly what we need in science.”
Don’t miss another Big Idea – sign up here!
250 British entrepreneurs back Startup Manifesto in open letter
250 British entrepreneurs, including the founders of Transferwise, Mumsnet, YO! Sushi, Bloom and Wild, Zopa and LendInvest have signed an open letter endorsing the policies in The Startup Manifesto, which we co-wrote with The Coalition for a Digital Economy (Coadec).
“As founders of some of the UK’s most successful businesses, we call on the parties seeking to form our next government to prioritise the needs of Britain’s startups and scale-ups.
Despite Brexit uncertainty, the nation’s entrepreneurial spirit is undimmed. Since 2010, the number of people engaged in early-stage entrepreneurial activity has increased by a third. Total venture capital investment in UK tech topped £6bn in 2018, more than any other European country. And all this growth has meant hundreds of thousands of new jobs.
Entrepreneurship is essential to the British economy. That’s why we support the Startup Manifesto by The Coalition for a Digital Economy (Coadec) & The Entrepreneurs Network.
What startups need from government to build world-beating companies is simple. Access to top talent from both here in the UK and abroad; the right tax incentives to foster and grow early-stage businesses then access to the capital needed to scale them; and a clear, simple set of rules and regulations flexible enough to encourage new and innovative startup business models.
This means reforming the visa system so startups can attract the best and brightest without needless bureaucracy, streamlining tax reliefs so we can get timely investments in ambitious businesses, and reforming pension regulations to attract more funding into early-stage businesses.
These policies would be good for startups, but more importantly, they would be good for the UK. When you support Britain’s entrepreneurs you support the whole economy. We urge all the political parties in this election to bear that in mind and develop a startup and scale-up friendly approach for the years to come.”
List of signatories:
Carlos Silva – Co-founder, Seedrs
Aron Gelbard – Co-founder & CEO, Bloom & Wild
Christian Nentwich – CEO, Duco
Emma Jones – Founder, Enterprise Nation
Sarah Wood – Co-founder, Unruly
James Lohan – Founder, Mr & Mrs Smith
Mats Stigzelius – Founder and Chairman, Takumi
Mike Lawton – Founder, Oxford Space Systems
Shaun Azam – CFO, Sweatcoin
Stephen Rapoport – Founder, Pact Coffee
Simon Rogerson – CEO, Octopus Group
Edwina Dunn – CEO, Starcount (Founder, dunnhumby)
Virginie Charles-Dear – Founder & CEO, toucanBox
Giles Andrews – Co-founder, Zopa
Tom Carrell – CEO, Cydar Medical
Jonathan Sattin – Founder, triyoga
Simon Woodroffe – Founder of YO! Sushi & YOTEL
Dom Hallas – Executive Director, The Coalition for a Digital Economy
Daniel Korski – CEO and Co-founder, PUBLIC
Kris Naudts – Founder, Culture Trip
Doug Monro – Co-Founder & CEO, Adzuna
Celia Francis – CEO, Rated People
Christian Faes – CEO & Co-Founder, LendInvest
Merlie Calvert – Founder and CEO, Farillio Limited
Tugce Bulut – CEO and Co-founder, Streetbees
Alex Stephany – Founder & CEO, Beam
Cecile Reinaud – Founder and President of Seraphine ltd
John Spindler – CEO, Capital Enterprise
Jeff Lynn – Executive Chairman & Co-Founder, Seedrs
Rajeeb Dey MBE – Founder & CEO, Learnerbly
Andrew Webster – Co-Founder, DesignMyNight
Husayn Kassai – CEO & CoFounder, Onfido
Justine Roberts – Founder, Mumsnet & Gransnet
Vincent Fraux – Co-Founder, Oxford Space Systems
John Fingleton – Founder and CEO, Fingleton
David Dunn – CEO, Sunderland Software City, Chairperson, UK Tech Cluster Group
Philip Salter – Founder, The Entrepreneurs Network
Thish Nadesan – COO, Cleo
Tania Boler – Founder and CEO, Elvie
Taavet Hinrikus – Co-Founder and Chairman, Transferwise
Anna Lane – CEO, The Wisdom Council
Adrian Gregory – CEO, DataIQ
Ana Andres – Co-founder, TidyChoice
Bryony Simpson – Founder, Engineers for Pioneers
Iglika Ghouse – Founder & CEO, USPAAH
Guy Tolhurst – Group CEO, Indagate Group
Ian Drew – Chairman, Foundries.io
James Dean – CEO, Sensat
Iona Smith – Founder, New Life Classes Ltd
David Murray-Hundley – Chairman, E-Fundamentals
Elizabetta Camilleri – CEO, indiluup
Hannah Cox – Founder, betternotstop
James Clews – CEO, Venture
Ana Andres – Director, TidyChoice
Irina Pafomova – Co-Founder, Engelworks
Janice Gordon – Founding Director, Problem Solving Company
Andrew Dixon – Founder, ARC InterCapital Ltd
Anne-Laure Le Cunff – Founder, Ness Labs
Dana Denis-Smith – Obelisk Support, CEO
Geeta Sidhu-Robb – CEO, Nosh Detox Delivery Ltd
David Regler – Founder, Maine Associates Ltd
Cordelia Meacher – Managing Director & Founder, FieldHouse Associates
Emma Joy Obanye – CEO, Mindful
James Lemon – CEO, The Growth Works
Ben Fletcher – Founder, Lead Bullets
Adrian Wong – Founder & CEO at Fuse Foundry
Maria Tanjala – Co-Founder, FilmChain
Mark Twigg – Executive Director, Cicero Group
Merita Memisi – CEO, Carter Labs
Christina Richardson – Founder, weare3Sixty
Miguel Martinez – Co-Founder and Chief Data Scientists, Signal AI
Daniel George – Founder, StepEx
Michael Piddock – Founder, Glisser
Maria Inmaculada Martinez-Rubio – Venture Partner, Deep Science Ventures
Rachael Twumasi-Corson – Co-Founding Director, Afrocenchix
Mike Battle – Co-Founder & CEO, LaplandUK
Simon Hall – CEO, eCommerce Performance Model
Charlie Stein-Cohen – Founder & CEO, Net2Work
Manya Klempner – Founder, Rathbone Boxing Club
Robert Hollamby – Professor of Enterprise, Leeds University
Sven Al Hamad – Co-Founder & CEO, Webiny
Gemma Taylor – Director, Rocket Bridging Limited
Simon La Fosse – Founder & Chairman, La Fosse Associates
Ashok Suppiah – Co-Founder & CEO, Mitra Innovation
Dinara Asadulina – CEO, Plombir
Kate Grussing – Founder, Sapphire Partners
Matt Kuppers – Founder & CEO, Startup Manufactory Ltd
Shane Smith – CEO, Intelligent Crowd TV
Karina Robinson – CEO, Robinson Hambro Ltd
Randa Bennett – Founder & CEO, VeeLoop
Vincent Boon – Founder, Standing on Giants
Rick Lowe – Managing Director, Brands In Ltd
Neeta Patel – CEO, Centre for Entrepreneurs
Russ Shaw – Founder, Tech London Advocates & Global Tech Advocates
Alpesh Patel – CEO, Pipspredator.com
Julie Walters – Founder, Raremark
Joe Seddon – Founder & CEO, Zero Gravity
Ross Fobian – Co-founder & CEO, ResponseTap
Diane Banks – Founder & CEO, Northbank Talent Management Ltd
Elizabeth Drew – Founder, Osmology (Acre Supply Co. Limited)
Actar Arya – CEO, D A Languages Ltd
Mark Lightowler – Founder & CEO, Phorix Limited
Sheelpa Patel – Founder & Managing Director, Mavens & Mavericks Ltd
John Attridge – CEO, BBXUK
Reina D’costa – Founder, Bizlaw UK
James Boyd-Wallis – Director, Fourteen Forty
David Holloway – CEO, Marlin Hawk Group
David Benigson – CEO, Signal AI
Joe Charlesworth – Director, Highway Data Systems Ltd
Tim Chater – Director, Zero to Sixty
Krisztina Tardos – Founder, The Merit Club
Toby Schulz – Founding Director, Vantage Power
Will Young – CEO, rais.io
Agata Boczkowska – COO, rais.io
Jude Ower – Founder/CEO, Playmob
Robert Lingard – CEO, Power Brand Communications
Hanadi Jabado – Director of Enterprise, University of Cambridge Judge Business School
Hela Wozniak-Kay – Co-Founder, Sister Snog
Sam Gordon – Founder, Gordon & Eden
Halima Hamid – Founder, The Rustic Roots Company
Lisa Thorne – Managing Director & Founder, Together Group Ltd.
Chi-chi Ekweozor – Founder & CEO, Assenty
Veera Johnson – Managing Partner, Johnson Capital Advisory Ltd
Raphael Chow – CEO & Co-Founder, Wevat
Jack Pearson – Director, EngX
Una Cottrell – Founder & MD, Authentic Marketing
Allison Alexander – Founder, Branue
Lucy Sharp – Co-Founder, Dot Residential
Frankie Fox – Co-Founder, The Foraging Fox
Sean Ramsden – Founder and Chief Executive, Ramsden International
Fiona Castela – Director, Castela Consulting
Tilly McAuliffe – Owner, Think Publishing & Wanderlust Magazine
Natalia Bojanic – Co-Founder, Form Nutrition
Richard Carter – CEO, CCww
Touria Roqaa – Founder & CEO, Roccabox
Will Dracup – CEO, Biosignatures Ltd
Simon Cherry – Director, Phantom Ltd
Nick Sturge – Director, Engine Shed
Yannick Brunner – Co-founder, WealthKernel
Stuart Clarke – Director, Paceline
Ben Brabyn – Head, Level39
Iris Anson – Co-founder, Etiq
Pratik Sampat – CEO, ihorizon
Dr Nicholas Field-Johnson – Senior Partner, Fraser Finance LLP
Madhuban Kumar – Co-Founder & CEO, Metafused
Al Gerrie – Founder & CEO, ZigZag Global
Rick Benfield – CEO, thirdbridge
Andrew Tibbitts – COO, TechHub
Kully Singh – CEO & Founder, Player Up
Aneesh Varma – Founder & CEO, Aire
Stephen Oldroyd – Head of Strategy, Adzuna
Luke Robinson – Partner, Post Urban Ventures
Alastair Paterson – CEO, Digital Shadows
Sophie Sandor – Founder, Uncouth Chic Films
Kristian Papadakis – Founding Director, Presso Network
Davide Machado – Founder, Splitcab Ltd
Jonathan Holtby – CCO, Dataswift
Nilema Bhakta-Jones – Chief Operating Officer, Farillio
Alex Gurr – Head of Sales, Farillio
Manita Rai – Operations Manager, HireHand
James Garner – Founder, Sticky
David Hulmes – Founder, Jackhumble
Darin Brockman – CEO & Founder, Firsty Group
Alma Ramirez Acosta – Co-Founder, Vibio
Rosemary forsythh – Founder, Forsyth Group
Yogesh Gupta – Founder, GET-NILA LIMITED
Peter White – CTO, W Cubed Tech Ltd
Kuvera Sivalingam – Co-Founder, Learn How Now
Niall Jones – Founder, Innevent
Phoebe Yiin – Head of Operations, Dataswift
George Biddle – Founder & CEO, The Grad Soc
Theodosis Georgiou – CSO, Wild AI
Jack Dow – Founder & CEO, Grapevine
Sakunthala Panditharatne – Founder, Asteroid Technologies, Inc
Geoff Anderson – CEO, PixelPin
Natasha Guerra – CEO, Runway East
Simon Francis – CEO, Flock Associates
Jack Gaskin – Co-Founder, GoKart
Steve Day – Co-Founder, Football Matcher LTD
Phil Day – Co-Founder, Football Matcher LTD
Carl Stephen Patrick Hunter OBE – Chairman, Coltraco Ultrasonics
Oliver May – COO and Co-founder, Streetbees
Seb Barker – Co-Founder & COO, Beam
Dan Walker – Founder, Lnet Digital Ltd
Sophie Newbould – CEO, Newbould & Co Solicitors | COO, Athensys
Ian Merricks – Chair, The Accelerator Network
Fabrizio Nicolosi – Founder, Leaders First
Emma Little – Founder & CEO, ExecSpace
Yuliana Topazly – Director, My OutSpace
Evgeny Shadchnev – CEO, Makers
Kevin Flanagan – Founder, Dialoguers
Edmond Ibrahimi – CEO, Propertalis
James Butler – CEO, Tollo Ltd
Laurence Nicholas John – CEO, Ctrlio ltd
Lee Strafford – CEO, ADV
Chris Barley – Founder & CEO, Converso
Ellie Webb – Founder, Caleño Drinks
Vivi Friedgut – Founder, Blackbullion Ltd
Louise Doherty – CEO, Yoller
Meera Panchal – CEO, Synadd
Elizabeth Ellis – Founder, Blue Marble Private
Dr. Maria Aretoulaki – Founder & Director, DialogCONNECTION Ltd
Chang Liu – CEO, Extend Robotics
Jerry Young – CEO, ieDigital
Simon Thethi – Founder, Tech City News / Indicium Ventures
Ajay C Thomas – CEO, Sweans Technologies
Vicky Ngari-Wilson – Founder, The Rural Retail
Sara Ahmadi – CEO & Founder, shopest
Christopher Lier – Co-Founder & CMO, LeadGen App
Sharmadean Reid – CEO & Founder, Beautystack
Pawel Bojarski – CEO, Sceenic
Paul Bellamy – CTO, truenova
Paul Andrews – Founder, School Lettings Solutions
Ross Williams – Founder, Venntro Media Group
Dalila Duffy – Finance Director, Mercanto Limited
Anna B. Sexton – Founder, Open To Create… Ltd
Becca Courtenay – Co-Founder, The Plantifull Food Co.
Michele Trusolino – Co-Founder & CEO, Debut
Shelley Stuart – Director, Stuart Consulting
Lizzy Hodcroft – Co-Founder, Myndr Ltd
Charlie Mowat – Founder & CEO, The Clean Space
Nicolas Colin – Co-Founder & Director, The Family
Chris Butcher – Co-Founder & CTO, Portify
Jonathan Wiggin – Founder and CEO, Pionr
Sho Sugihara – Co-Founder & CEO, Portify
Michael Nabarro – CEO & Co-founder, Spektrix
Anne Sutton-Scales – Start-up Founder, Designihastings.com
Daniele Baroncelli – CEO, Trenìt! / GoBright Media Ltd
Rafael dos Santos – CEO, High Profile Club
Dharmin Polra – Partner, London Investable
Michael O’Sullivan – CEO, Bywire News
Sorcha Lorimer – Founder & CEO, Trace
Carlo Alberto Seneci – CEO and Co-Founder, Future Forge Ltd
Shaan Ahmed – Founder, Uown
Kirsty Macdonald – Investment Manager, JamJar Investments
Fotini Markopoulou – CEO, doppel
Freddie Blackett – CEO, Patch
Sarah J. Wadham – Founder & CEO, SJW Corporate Services Ltd.
Peter Bance – CEO, Origami Energy
Keyu Sumaria – Co-Founder, The Oblique Life
Adrian Palmer – Former CEO, Proven Legal Technologies
Dmitry Ivanov – Co-Founder, Wevat
Sophie Eden – Co-Founder, Gordon & Eden
Elizabeth Varley – Founder & CEO, TechHub
Alexander Fitzgerald – Founder and CEO, Cuckoo Internet
Silvia Ferrero – CEO, MediaLoc Ltd
Simon Hulme – Programme Director, MSc Entrepreneurship, UCL School of Management
Diane Young – Co-Founder & CEO, The Drum
Dr Christopher Haley – Head of Startup Research, Nesta
Jessica Mendoza – Founder and CEO, Monadd
John Stapleton – Founder, Entrepreneur & Business Advisor
Giles Palmer – Brandwatch
Letitia Seglah – CEO and Founder, Build Scale Grow
Jonathan Cohen – Founder, Canvus
Ufuk Polat – Founder & Engineer, Deplike
Kim Palmer – Founder, Clementine
Annabel Denham – Founder, Female Founders Forum
Emma Sinclair MBE – Co-Founder, EnterpriseAlumni
Karen Kerrigan – Chief Operating Officer, Seedrs
William Page – Co-Founder, FilmDoo
Jillian Kowalchuk – Founder & CEO, Safe & the City
Jinn Koriech – Managing Director, Ixydo
Have a Cow
Hei from Slush!
I'm briefly in Finland at Helsinki's founder-focused event to speak at three events on our recent reports: Job Creators, Future Founders, and Here and Now. As a general rule, I don't attend conferences – not least, because we put on so many events of our own – but with great speakers like Sequoia Capital's Michael Moritz, Stripe's John Collison and Clearbanc's Michele Romanow, this one is making me think I should attend more. If you have any that you think are particularly worthwhile for busy entrepreneurs, let me know so I can share them in advance with our 10,000+ members.
The State of European Tech Report 2019 was launched at the event. The headline finding is positive, the number of industries receiving significant capital is increasing, but there is certainly room for improvement. One fun fact stuck out: based on Meetup data, Milton Keynes is one of the fastest growing tech hubs across the continent. From concrete cows to concrete businesses.
Labour the point
Political parties are busy making their policy positions more concrete. Labour and the Lib Dems have released their manifestos.
Labour's is radical. By its own calculations, it would push up day-to-day spending by £80 billion in 2023–24. To pay for this, the tax burden would be well above levels sustained in the UK since the Second World War. As usual, the IFS has produced the leading economic analysis.
The independent IFS has a robust take on Corbyn's plan to increase corporation tax from 19% to 26% (this would take corporate taxes in the UK to the highest in the G7 and almost the highest in the whole OECD):
"The truth is of course that in the end corporation tax is paid by workers, customers or shareholders so would affect many in the population. In the end, it is unlikely that one could raise the sums suggested by Labour from the tax policies they set out. If you want to transform the scale and scope of the state then you need to be clear that the tax increases required to do that will need to be widely shared rather than pretending that everything can be paid for by companies and the rich.”
Entrepreneurs would also be impacted by the end of Entrepreneurs' Relief; the new treatment of dividend and capital gains income, which would be treated as other income (ie. 40%, 45% or 50%); and the minimum wage increase from £8.21 to £10. While for larger companies, 10% of shares in all UK companies with more than 250 employees would be owned by employees through inclusive ownership funds.
I should point out, John McDonnell disagrees with the IFS analysis, insisting that 95% of people would pay no more tax than they do now. And Labour would give EU nationals the right to remain, which while logistically challenging would be welcomed by many entrepreneurs and their staff. They also have some good stuff around the apprenticeship levy – making it easier for employers to spend the levy by allowing it to be used for a wider range of accredited training. This is something we suggested in our Management Matters report that we produced as part our Business Stay-Up campaign with ABE.
Land liberalisation
You can read what the IFS thinks about the Liberal Democrat's manifesto here. It's not as dramatic as Labour's manifesto, but it still gets quite a lot of criticism. But ultimately, their promise to remain in the EU is probably the marmite policy that will trump all others for entrepreneurs (though don't forget that Labour is promising a second referendum on Brexit).
I want to pick on a policy recommendation in the Lib Dem manifesto that mimics something recommended in our APPG for Entrepreneurship Tax Report (and elsewhere). On page 11 of our report, we suggest the Government transforms business rates into a business land tax levied on landowners. We called for the Government to reform Business Rates to reduce administrative burdens and cash-flow issues by levying the tax on commercial property owners and not occupying businesses. And in order to incentivise investment, we suggested it should be assessed on rateable values upon the underlying land value of a commercial site rather than on the value of the property itself.
This might sound like niche stuff, but it's important. It's the smart way to fix business rates and is pretty much what the Lib Dems have in their manifesto. Labour and the Conservatives are also reviewing the plan. This is pleasing and why think tanks matter.
The Conservative Party hadn't released its manifesto yet at the time this was written. To read the full e-bulletin click here, and don’t ever miss one in the future by signing up here.
Uber loses London license: reaction
In response to the news that Uber has lost its license to operate in London", Research Director Sam Dumitriu comments:
“TfL’s decision to strip Uber of its license to operate in London is disproportionate. It sends a signal across the world that London isn’t open to innovation and competition.
“The violations uncovered by TfL, while troubling, have been addressed through stricter checks on drivers using AI and facial recognition. There’s no reason to expect that this specific problem will continue. Furthermore, if you take into account Uber’s other safety features, it’s likely they compare favourably to other modes of transport in London and definitely favourably compared to transport in London ten years ago before Uber.
“Unlike the initial ban, there is now intense competition in London’s private hire market. However, there is a serious risk that a similarly aggressive regulatory approach will be applied to Uber’s competitors, such as Kapten and Bolt.
“Disruption, innovation, and competition in the private hire market has been overwhelmingly beneficial to Londoners. Cutting fares and wait times, while providing flexible work for thousands of drivers in London.“
Sleep, Scientific Progress and Child Labour
What's wrong with "why we Sleep?"
Suggested by Annabel Denham, Associate Director at The Entrepreneurs Network
Alexey Guzey’s analysis of Professor Matthew Walker’s critically acclaimed book Why We Sleep is worth reading. Contrary to Walker’s claims that the shorter you sleep, the shorter your life span, Guzey reveals that most studies on the relationship between life span and sleep duration find a U-shaped relationship between length of sleep and longevity: both short- and long-duration sleep are associated with higher mortality.
Neither will sleeping less than six hours a night double your risk of cancer: “Walker does not cite any studies that support this assertion anywhere in the book.” Nor has the World Health Organisation ever declared a sleep loss epidemic throughout industrialised nations (though if you now Google “WHO” and “sleep loss epidemic” you’ll find results citing, you guessed it, Matthew Walker.
That two-thirds of adults in developed nations fail to obtain the recommended amount of sleep is a conclusion Guzey suggests Walker reached through a series of non-sequiturs. Further, “the quote is empty because the WHO does not stipulate how much an adult should sleep anywhere”.
We should worry less about sleep. Sleep is like a cat, it only comes if you ignore it. Instead, let's heed Guzey’s advice: “as long as you feel good, sleeping anywhere between five and eight hours a night seems basically fine for your health, regardless of whatever Big Sleep wants you to believe”.
Is the rate of scientific progress slowing down?
Suggested by Sam Dumitriu, research director of The Entrepreneurs Network
A new paper by my former colleague Ben Southwood and economist Tyler Cowen suggest it is. Defining and measuring scientific progress is a tricky task, so Southwood and Cowen look at a range of metrics including "productivity growth, total factor productivity, GDP growth, patent measures, researcher productivity, crop yields, life expectancy, and Moore’s Law"
However, their findings aren't so straightforwardly negative. While "a wide variety of “per capita” measures do indeed suggest that various metrics for growth, progress and productivity are slowing down. On the other side of that coin, a no less strong variety of metrics show that measures of total, aggregate progress are usually doing quite well. So the final answer to the progress question likely depends on how we weight per capita rates of progress vs. measures of total progress in the aggregate."
Why child labour beats school
Suggested by Philip Salter, founder of The Entrepreneurs Network
As part of Unherd's radical policies series, Ed West has an article on why child labour beats school.
"Sure, when you put it like that, it sounds a bit… regressive. Perhaps I also think women should be denied the franchise or that MPs should be elected by rotten boroughs? Maybe the return of serfdom?", writes West.
West believes most - perhaps all - children would benefit from working a bit. And he thinks some children could benefit from ditching most of school and working after fourteen.
Referencing economist Bryan Caplan, West suggests schooling is often a costly arms race for credentials and is an overrated part of economic development. Would many teenagers not be better off in a "working environment [that] allows them to interact with adults, adopt adult social norms and learn skills when their brain is rapidly absorbing information?"
West's idea is as big as it will be unpalatable to some. But having sat in classes where some students got precisely nothing out of it - except the daily humiliation of being reminded that they aren't up to scratch (to say nothing about the impact on other children they disrupt), those shocked by West's solution still need to find one or two of their own to solve this policy failure.
Unpicking the Conservative & Labour CBI Announcements
The leaders of the main parties have today attempted to woo businesses with a raft of pledges. Boris Johnson has promised to put Corporation Tax cuts on hold to “help fund the NHS,” while Opposition leader Jeremy Corbyn has turned his attention towards the Apprenticeship Levy. Our Research Director, Sam Dumitriu, comments below.
On Business Rates
“The Conservatives have committed to “launch a fundamental review” of Business Rates at their first budget. If elected, they should replace business rated with a tax on commercial landowners. In their current form, Business Rates discourage investment in commercial property, they impose a large administrative burden upon smaller businesses, and can create cashflow constraints for smaller firms. Moving to a commercial land tax solves all three problems. It might be tempting to simply reduce the burden by cutting business rates, but landlords will be able to raise rents in the long-run, leaving businesses no better off.”
On R&D Tax Credits
“There is a strong case for modernising the R&D tax credit. For example. Data sets are essential to the R&D projects of many tech startups in AI and machine learning, but don’t qualify as an R&D expense. Boris’s commitment to review the scope to consider whether the credit should apply to “areas of investment such as cloud computing and data” could have a significant impact on innovation.”
On Scrapping Cuts to Corporation Tax
“Further cuts to the headline rate of Corporation Tax aren’t the best way to stimulate growth. Osborne’s rate reductions weren’t “self-funding,” as some have suggested. Revenues increased as a result of base-broadening measures, i.e. cutting capital allowances. The actual incentive to invest for businesses barely shifted. This improved following Budget 2018, when Philip Hammond created the Structures and Buildings Allowance, increased the write-down rate for certain types of investment and expanded the Annual Investment Allowance.
“To boost investment, the next government should use the additional revenue to expand capital allowances. Removing anti-investment distortions in the tax system would help manufacturers in left-behind regions, too. The UK’s historically ungenerous capital allowances may explain the UK’s rapid deindustrialisation. The 1 percentage point increase in the Structures and Buildings allowance is a welcome move.”
On Reforming the Apprenticeship Levy
“Labour’s pitch to business involves reforming the Apprenticeship Levy to give employers more flexibility. In our Management Matters report we called for the Levy to be rebranded as a general Training Levy. The status quo is too bureaucratic and inflexible, and is leading spending on training to fall. Under a more flexible levy funds could still be restricted to ensure they’re only spent on developing in-demand skills. The reform should also be paired with measures to allow the self-employed to benefit from tax breaks when they fund their own training.”
Milking It
What do you want to ask Britain's leaders? If Lord Ashcroft's focus groups are anything to go by, perhaps why Boris he puts the milk in before taking the teabag out? Or who's going to pay you for a four-day week? (Or something even more amusing, if unprintable)
On 25 November you'll have the chance to ask some of the UK's political heavyweights your burning questions, when we join forces with Enterprise Nation, IPSE, Coadec and ICAEW for a hustings in Moorgate.
The 2019 General Election Small Business Debate will be chaired by the FT's Dan Thomas, and will feature: Liz Truss (Conservative), Ed Davey (Lib Dems), Bill Esterson (Labour), Amelia Womack (Greens), and Benyamin Habib (Brexit).
Find out more here, and sign up here. You'll need the code 'TENHUSTING' to get your ticket. I hope to see you there!
(NB. I'll update you next week with details of the live stream, as well as IPSE's Scottish hustings.)
Members' Manifesto
I'm not sure why it's taking the major parties so long to produce their manifestos. We managed to write ours with Coadec in a week. It's a blueprint for any new government that wants to unleash the dynamism of Britain's ambitious startups.
We will launch it in about a week, but before this we're asking entrepreneurs to sign a letter to back the policies. If you want to take a sneak peek at the Manifesto with a view to signing the open letter, please sign up here for FREE to become a Member of The Entrepreneurs Network.
By backing us, you are backing Britain's entrepreneurs.
Queen of the castle
New research from Octopus Ventures ranks universities on the number of high quality spinouts they produce. Queen’s University Belfast tops the list.
The size of the opportunity for the UK to capitalise on more academic spinouts is massive. In the US, MIT alone has been the genesis for 26,000 companies with a combined turnover of $2tn (65% of UK GDP).
Trevor Clawson has written about it for Forbes, and you can read the full report here.
Wise Words
James Wise of Balderton has created an open sourced list for those interested in the tech policies being debated and proposed by the parties in the run-up to the election. Feel free to add policies, discuss and vote for favourites here.
Read the whole newsletter here, and sign up here so you never miss it.
Competing with China, AI regulation, and declining sound quality
Beating China at its own game
Suggested by Marc Sidwell, deputy editor of a new magazine, launching in the new year
Can unleashing global entrepreneurship reset the strategic balance with China? In a provocative essay, the ever-interesting Francis Pedraza makes the case.
Pedraza is the entrepreneur behind Invisible, an online ops platform that coordinates remote knowledge workers. He points out that China leveraged its manpower advantage in low-cost labour to end up dominating high-tech manufacturing through the Shenzhen cluster, gaining a global strategic advantage. Pedraza argues that the West can now play a similar game of its own by turning to the world outside China to coordinate low cost knowledge work online.
There are 5 billion people outside China earning less than $10 a day. Tapping that workforce, he argues, could open an advantage that China, with its total population of 1 billion, cannot replicate.
Pedraza identifies an opportunity that trades on the ever-expanding dominance of English as a lingua franca, the ever-deeper penetration of the internet around the world and the growing sophistication of online platforms that lower the transaction costs of coordinating and rewarding entrepreneurial individuals everywhere.
With increasing concerns about China’s aggressive tactics at home and abroad, perhaps it’s time for entrepreneurs to think big in response.
AI regulation in the EU: The risks of a human-rights based approach
Suggested by Sam Dumitriu, research director of The Entrepreneurs Network
The new European Commission President Ursula Von der Leyen has promised to release proposals for a new AI law within her first 100 days in office. She’s advancing a human rights-based approach to this regulatory effort – focusing on impacts on individuals, and framing potential harms by reference to human rights concepts such as individual dignity and autonomy. What does this mean in practical terms? Ben Hooper and Ying Wu of regulatory consultancy Fingleton Associates argue “the EU’s hope that trust will drive AI growth looks like a risky bet.”
There’s a danger that the EU will fall behind in AI, as other more permissive regimes attract talent. Not only would this be a bad result for businesses and consumers in Europe, but it’d also mean that the EU would find it increasingly hard for the EU to enforce its more restrictive regime.
As the authors write: “AI looks set to be the most important technology of the next few decades. Given these stakes, losing the global AI race would have immense implications for the EU’s future competitiveness.”
Music as cultural cloud storage
Suggested by Philip Salter, founder of The Entrepreneurs Network
"I would say that music is the only form of entertainment in which the technology has gotten worse during my lifetime." Ted Gioia's provocative idea comes from his excellent Conversation with Tyler.
Gioia isn't a luddite. For example, the music historian isn't concerned that streaming platforms have changed how people sing and perform (ie. needing to hold listeners' attention for a few seconds to get a royalty). But he is really concerned about the technology lessening the whole listening experience due to lower sound quality.
It wasn't always thus. Innovation in sound quality used to be the norm, with RCA the Apple of its day, inventing new sound technologies like microphones and the 45 RPM single. Columbia invented the long-playing album and Sony invented the Walkman.
Gioia thinks it was a mistake for record labels to hand over innovation to Silicon Valley. Personally, I think having the world's music in my pocket is probably a price worth paying for lower quality listening, but Gioia makes a strong case that it's not (he also has a brilliantly eclectic music taste).
Sign up for Three Big Ideas here.
A Little Help From Our Friends
This week we've been busy writing a start-up manifesto with our friends at Coadec. It will cover a lot, including access to talent, regulations and tax reform. The aim is for this to influence whoever comes to power on 12 December. It includes some awesome ideas – many of which were sparked by speaking with our 10,000 strong network of entrepreneurs.
We're also busy planning a hustings with our allies at Enterprise Nation and IPSE, which will be hosted in Morgate by the ICAEW. Speakers and timings will be announced next week.
Regarding the election itself, a friendly entrepreneur got in touch to suggest that business owners "allow staff to arrive late or leave early so that they have time to vote." Polling Stations will be open from 7am to 10pm, but I think his point of offering clarity to employees on whether or not they can turn up a bit late makes a lot of sense (unless you suspect your employees will vote the wrong way!)
Micro management
Our pals – yes, we are a friendly bunch here – at the Small Business Charter have just launched a new programme to help micro businesses use tech to grow.
The Leading to Grow programme is part of a broader £9m package of measures to support small businesses through the Business Basics Programme (run by BEIS and Innovate UK).
Businesses can apply online or directly via one of the 15 business schools across Yorkshire, the Midlands, Manchester, Newcastle and London. Spread the word!
Nudge, nudge
The Behavioural Insights Team – informally called the Nudge Unit – has a report out on applying behavioural insights to business policy. In behavioural economics, Nudge is a theory that proposes positive reinforcement and indirect suggestions as ways to influence behaviour and decision making.
It's a useful report, but I've got reservations about some of the findings of behavioural economics. For example, even something as seemingly uncontroversial as the sunk cost fallacy – e.g. that we too readily throw good money after bad – may have its uses. (If you want to read more about this, check out this article from Jason Collins).
At the extreme, there are no doubt ways that government can help businesses make better decisions. Behavioural economists sometimes call this "choice architecture", framing information and choices to nudge business owners into making the 'right' decisions. However, the primary focus should be simply making any decision easier for business owners. Until entrepreneurs' interactions with government are at least half as slick as Estonia's (read my thoughts on Estonia here), simplification should be our number one priority.
Tech pondering, Estonia, and people vs. machines
What is a tech company?
Suggested by Dom Hallas, executive director of Coadec.
At Coadec, we help represent tech startups to Government. But what even is a tech company anyway? It’s something we wrestle with a lot. From the young entrepreneur I met ‘selling dreams’ (he was actually selling skiing holidays) to the story that a lot of Europe's AI startups weren’t using any AI, there’s now a vibrant debate about how to define the boundaries of the tech sector (sparked by the recent WeWork IPO debacle).
This is something that our friend Nicolas Colin, co-founder and director of The Family has tried to answer. He suggests:
Its business model is marked by increasing returns to scale, sustained thanks to supply-side economies of scale, strategic positioning, built-in network effects, and supply-side platform effects.
Its main strategic goal is to provide its users with an exceptional experience, as it’s the only way to inspire trust and retain those users that are so critical for sustaining increasing returns.
It collects user-generated data on a regular and systematic basis — which enables it to constantly improve the experience and, again, sustain increasing returns.
Benedict Evans of A16z, Ben Thompson and Christopher Mims in the WSJ are also trying to answer this elusive question.
The inside story of building a digital nation
Suggested by Philip Salter, founder of The Entrepreneurs Network
Estonia’s innovations in governing have been a big idea for over two decades – one that has undergone multiple iterations.
Starting with a blank slate in a country with limited internet, just collecting the data was ambitious enough. Upon this they built e-tax, X-Road (the open source distributed data system that Finland, Iceland and the Faroe Islands now also use), their ID card, i-voting, e-health and e-residency, which provides anyone anywhere in the world with the opportunity to establish a business remotely.
Earlier in the year, Taavi Kotka, former CIO of Estonia and Toomas Hendrik Ilves, Estonia’s president from 2006 to 2016, shared their views on what made Estonia so successful. When asked about the incredibly low budget, Kolta quips: “If you don’t use Accenture or McKinsey, you’d be amazed at what you can get done.”
All interactions are logged on X-Road, but the X-Road system is designed to allay privacy concerns by being totally transparent. “We had one famous case where a systems administrator with the police abused her authority. She checked up on her boyfriend. The police are not allowed to do this. She was fired and convicted of a felony,” says Ilves.
Many countries claim that copying Estonia is too hard due to legacy issues. But surely not as hard as successive Estonian governments building these systems from scratch.
People versus machines in the UK
Suggested by Sam Dumitriu, research director of The Entrepreneurs Network
Just over a month ago, Chancellor Sajid Javid announced bold plans to raise the UK’s minimum wage to £10.50, the highest in the developed world. It’s part of a dramatic change in the UK labour market. As Tim Harford writes: “When the minimum wage was first introduced in the UK in the late 1990s, only a few hundred thousand workers were paid it. Last year, 2m workers received the minimum wage.”
One under-discussed aspect is the impact of minimum wages on automation. As minimum wages become higher, firms may be tempted to automate jobs typically performed by low-skilled workers. There’s a risk point to moving too fast, as Harford again states: “Once a minimum wage rises too far, and the new machine is installed or the factory is moved offshore, reversing the policy will not easily bring the old jobs back.”
A new study by the LSE’s Grace Lordan looks at the impact of recent minimum wage rises in the UK on automation. She finds that “a 10% increase in the minimum wage leads to a 0.11 percentage point decrease in the share of automatable jobs done by low-skilled workers.” Relatively modest, you might say, but as ever it’s more complicated.
There’s been “a stronger effect over the last decade and a half which is roughly double in size, implying that the importance of the interaction between the minimum wage and automation has been accelerating.” She concludes: “while the effects found in this study are modest, they should not be used to predict the future. Rather, monitoring of these trends, and ensuring that low skilled low wage individuals are not unduly hurt by the advent of the 4th industrial revolution is a key role for government and social science researchers.”
Sign up for Three Big Ideas here.
Not another one?
It’s November 1st and somehow Britain is still in the EU. Boris was unable to keep his “do or die” pledge and Brexit has been delayed, again, until January 31st. With the risk of a No Deal Brexit subsiding, at least in the short term, the Prime Minister was finally able to get the opposition to agree to the General Election he’s wanted since the start of September. Coincidently, Brenda from Bristol has stopped answering the door.
The Brexit Party stand out as an unknown quantity. While they won the European elections, the First Past the Post (FPTP) system tends to close the door on insurgent parties. Counter to popular wisdom, Stephen Bush argues the Brexit party may be an asset to Boris, noting that “the Conservatives actually did slightly better overall in seats where Ukip stood than where they stood down, because disgruntled Labour voters, flirting with Ukip, reverted back to Labour rather than backing the hated Tories.”
The other unknown is whether the Liberal Democrats can maintain their jump in the polls. FPTP has a habit of squeezing out smaller parties.
The polls are hinting at a Conservative majority as Labour struggles to hang on to the Remain votes they won in 2017. But as we learned back then, a lot can change over the course of an election campaign.
So what does this mean for entrepreneurs? Every party will be making a pitch to business and we’ll be interrogating their plans on tax, immigration, and regulation closely.
Why talent matters?
This week I blogged about a new US study on the impact of immigration on startups. It found that startups who won the H-1B visa lottery (and therefore were able to hire skilled migrants) were more likely to receive additional rounds of VC funding, to patent, and to successfully exit through IPO. It’s a stark reminder of the rewards of being open to international talent.
You can read the post here.
Read the whole e-bulletin here, and sign up to the e-bulletin here.
Rock climbing, skilled migrants, and trains
Rock climbing and the economics of innovation
Suggested by Anton Howes, economic historian and author of Age of Invention, a newsletter about the causes of Britain's industrial revolution.
Richard Jones provides a fascinating explanation for how modern rock climbers, often without any ropes or gear to support them, have managed to surpass even the wildest feats of their predecessors.
Contrary to what some might think, the key has been new technology. From cheap air travel, to better rubber soles, to superior ropes and ways to secure them to the cliff face, today's astounding free climbs are made possible by the ability to practice, practice, and practice before doing them without the ropes.
It's time to reverse the Beeching Axe
Suggested by Sam Bowman, principal at Fingleton Associates and author of Reviving Economic Thinking on the Right
The last fatal rail accident took place when Tony Blair was still Prime Minister, with one fatality. Since then, 23,000 people have died on our roads.
Niall Gooch makes the case that the Beeching Cuts, which closed hundreds of miles of suburban and cross-country railways during the 1960s, were the turning point when we gave up on public transit and surrendered to the motorcar. That’s led to huge expenditure on roads, including highways straight through once-booming metropolises like Birmingham.
Today we’re rebuilding some of the most valuable lines killed by Beeching – HS2 recreates the Grand Central Main Line, and the old Varsity Line between Oxford and Cambridge is being brought back too. Many more may be worth reviving if we’re serious about plugging in ‘left behind’ towns to booming cities near them so that they can grow as well.
There may be one thing to add to Gooch’s piece. Apart from a few toll roads and London’s congestion charge, roads are effectively free at the point of use. That creates a lot of traffic congestion, which makes buses unreliable. If we’re serious about moving people onto trains and buses, and out of their cars, we’ll need to get serious about road pricing, too.
Give Me Your Tired, Your Poor, Your High-Skilled Labor: H-1B Lottery Outcomes and Entrepreneurial Success
Suggested by Sam Dumitriu, research director at The Entrepreneurs Network
A new study allows us to quantify the value to startups of being able to hire high-skilled workers. In Give Me Your Tired, Your Poor, Your High-Skilled Labor: H-1B Lottery Outcomes and Entrepreneurial Success, researchers exploited the lotteries used to allocate H-1B skilled worker visas to businesses in the US. While economists typically can’t conduct randomised controlled trials on immigration policy, the H-1B lottery, while arguably a bad way to allocate visas, created a natural experiment that allows us to see just how important access to talent.
They find that a one standard deviation increase in the H-1B visa lottery win rate for a company is associated with a:
1.5pp (23%) increase in the probability of IPO.
4.5pp (10%) increase in the probability of receiving additional external funding.
2.9pp (20%) increase in the probability of a successful exit over the next five years.
4.8% increase in the number of patents filed and a 4% increase in quality adjusted of patent citations.
The value of talent
It is hard to overstate the importance of international talent for the success of an/our entrepreneurial ecosystem. Our recent report, Job Creators: The immigrant founders of Britain’s fastest growing companies, is strong evidence. We found that 49% of Britain’s fastest growing startups – companies like Deliveroo, Monzo, and Gousto – have at least one immigrant co-founder. Our data fits with past research from AnnaLee Saxenian, which found that over half of all Silicon Valley engineering and technology companies had at least one immigrant founder.
But that’s not the whole story. Job creators deserve credit, but so do the talented managers, engineers, and product designers who actually do those jobs. When I speak to founders at fast-growing tech startups, they will typically tell me that the biggest barrier to more growth isn’t access to finance or consumer demand, but a lack of access to talent.
A new US study, Give Me Your Tired, Your Poor, Your High-Skilled Labor: H-1B Lottery Outcomes and Entrepreneurial Success, highlights how access to skilled talent is crucial to a startup’s success. The study exploits the lotteries used to allocate H-1B skilled worker visas to businesses. In economics, we typically can’t conduct randomised controlled trials on immigration policy, but the H-1B lottery, while arguably a bad way to allocate visas, creates a natural experiment that allows us to see just how important access to talent.
The researchers found:
Relative to other firms that also applied for H-1B visas, firms with higher lottery win rates are more likely to receive additional venture capital funding and to have a successful exit via an IPO or acquisition. H-1B visa lottery winners also subsequently receive more patents and patent citations. Overall, our results show that access to high-skill labor is a critical determinant of success for start-up firms.
The results are stark. A 1 standard deviation increase in the H-1B visa lottery win rate for a company is associated with a:
1.5pp (23%) increase in the probability of IPO.
4.5pp (10%) increase in the probability of receiving additional external funding.
2.9pp (20%) increase in the probability of a successful exit over the next five years.
4.8% increase in the number of patents filed and a 4% increase in quality adjusted of patent citations.
If policymakers want British startups to succeed they need to recognise the importance of accessing skilled workers. Recent moves such as the reinstatement of the post-study work visa and adding roles such as software developer to the shortage occupation list will help, but we need to go further.
Plans to end free movement and impose a £30,000 minimum salary on all new arrivals will damage the UK’s entrepreneurial ecosystem. At the very least, the plans should be amended to take into account the preference of early-stage startups to pay workers in equity.
If Britain is to be truly ‘open for business’ then we must be open to talent.
If you’re an entrepreneur and want to discuss the impact of Brexit on the immigration system, then why not come to our upcoming breakfast roundtable at Kingsley Napley - “Britain Needs Talent: What Next For Entrepreneurs”.
Turkeys Don't Vote for Christmas
Philip has departed for warmer climes – all founders need a break from time to time. It has been left to me to make sense of the week's events (thank you, Philip).
Super Saturday began auspiciously and with unexpected victory – for the England rugby team. Politically, however, we witnessed an anticlimax to rival season eight of Game of Thrones. The Letwin Amendment, an "insurance policy" to ensure Britain would not crash out of the EU without a deal, passed by 322 to 306. On Titanic Tuesday the bill seeking to put into law Johnson's deal was passed by MPs, but just 20 minutes later they voted against the government's programme motion. The compressed timetable – essential fo the Prime Minister to stay true to his "do or die" rhetoric – was rejected.
We are now told that Johnson will launch a fresh bid to hold a general election on 12th December to "get Brexit done". His fate is partly in the hands of EU leaders, who today agreed to a delay of unspecified duration. Of course, passing the Withdrawal Agreement will be just the beginning. Some fear that, having taken 40 years of membership to get to this point, it will take another four decades for us to untangle ourselves from the world's largest economy.
Unlike the focus group who were stunned into silence on Monday when informed that the wrangling, double-dealing and persistent threat of crashing out without a deal after the transition period are set to go on and on, entrepreneurs know all too well that we're staring down the barrel of medium to long-term uncertainty.
Looking Up
That's the bad news. But as Jimmy McLoughlin, former special adviser to Theresa May, wrote in The Times this week, it has never been easier to start a business – regardless of demographic or geographical location. Some entrepreneurs thrive in uncertain economic conditions while large companies decrease investment: see Microsoft or Apple, both started during recessions.
Fifteen years ago, McLoughlin explains, entrepreneurs needed relevant experience and the support of a local chamber of commerce to turn an idea into reality. "It was likely you quit your job on the Friday and started your business on the Monday." Today, two-thirds of founders start up while in full-time employment.
Citing our Future Founders research, McLoughlin draws attention to the fact that just 15% of young people say they've never thought about starting a business (and never will). Over half of 14-25 year olds, meanwhile, have thought about starting (or have already started) a business. Call it the end of the job for life. Call it progress. McLoughlin calls it a revolution.
Read the whole e-bulletin here, and sign up to the e-bulletin here.
Fintech, AI, and discrimination
Boomer Memes, The Backfire Effect, and Anything-as-a-Service
How the Liberals beat Labor at its own game
Suggested by Sam Dumitriu, research director at The Entrepreneurs Network
It’s only a matter of time before Parliament is dissolved and Britain faces another general election. Today, the Conservatives tweeted their slogan “Get Brexit Done” in Comic Sans. Predictably it led to a fair deal of mockery and within 20 minutes “Comic Sans” was the top trend on UK Twitter.
There may be a method to their madness. I found this analysis of how Australia’s Liberal party used social media to pull off a shock election win informative. One part stood out:
“CCHQ deliberately turned out tacky content it dubbed Boomer Memes. These would often riff off a well-known movie or television show but always contain a serious message about Shorten being an economic risk.
"We'd make them really basic and deliberately lame because they'd get shares and lift our reach - that made our reach for the harder political messages higher," one campaign staffer says.”
Coincidentally, two weeks ago the Conservatives hired the Kiwi behind the tacky memes, Sean Topham.
Truth can only take you so far in politics
Suggested by Annabel Denham, associate director of The Entrepreneurs Network
US academics Ethan Porter and Thomas J Wood set out to show that the backfire effect exists. The more you told conservatives in the US that Iraq did not have WMDs, the more they believed it did – or so the theory went. But instead they discovered that Americans are not immune to facts. People will accept correction even when the original view is one they like and is held by people they approve of. Further, though we may prefer being corrected by a “fellow partisan,” we’d take being put right by someone we dislike.
Framed in the context of one of the most contentious claims since 2003, that we “send the EU £350m a week”, Finkelstein exposes an uncomfortable truth. The reason factual correction is possible is that facts simply aren’t that important to people in forming their political views. As the authors put it: “People do not care enough about facts to engage in motivated reasoning against them.” It is unlikely, Finkelstein concludes, that persuading the public that “£130m a week might have been a fairer figure would have altered the referendum result in any way”.
A new deal for big tech
Suggested by Kirsty Innes, Head of Tech And Economy at the Tony Blair Institute for Global Change.
Starting a business has never been easier. Thanks to cloud-based services, your company can store data, manage its accounts, or build an app cheaply and efficiently, without needing to run its own servers, procure accounting software, or design its own web development platform.
“Anything-as-a-Service” utilities have become part of the essential infrastructure of the economy. Just like roads, telecoms or the National Grid, they underpin millions of businesses who depend on them in order to function. Unlike traditional infrastructure, these services are almost entirely unregulated.
Does this matter? What would be the economic fall-out if, say, Amazon Web Services were to go bust, get hacked or suffer a serious technical failure? What would be the benefit if all companies made the best use of these services? If cloud services are infrastructure, do governments need to get involved, or get out of the way? Chris Yiu’s paper A New Deal for Big Tech sets the context for this debate. Over the new few months, TBI’s Tech and Public Policy team will be answering these questions and more – watch this space!
Sign up to Three Big Ideas here.
#bobptd?
Entrepreneurs are used to working weekends, while Members of Parliament haven't had to officially work on a Saturday since the Falklands War. Tomorrow they vote on the Prime Minister's Brexit deal. It's too close to call.
While the Democratic Unionist Party (DUP) will vote against the deal, a few of the Tories in exile, some self-styled ‘Spartans’ from the European Research Group (ERG) and quite a few Labour MPs will vote with the Government.
However, whatever happens tomorrow, Sir Oliver Letwin MP and others could force Boris to ask the EU for an extension. Their stated concern is that a vote in favour on Saturday would cancel the Benn Act, leaving the door open for a no-deal if Boris pulled back from the deal.
But perhaps the biggest shift in recent days is the split among anti-no dealers. While many have their heart set on remaining come what May (or Johnson), there's a growing #bobptd movement – #bobptd stands for 'Bored Of Brexit, Pass The Deal'. (Of course, while passing the deal would eventually take Brexit off our front pages, the new deadline of December 2020 isn't far off. Whatever happens, this is just the beginning – or the end of the beginning.)
The think tank Open Europe has a useful explainer on the new deal. In essence, the backstop has been replaced with a ‘frontstop’ special arrangement for Northern Ireland which will come into force immediately after the end of the transition period. The UK will have to enforce EU Customs procedures at points of entry into Northern Ireland, which will impact exporters into and importers in Northern Ireland. Businesses will continue to enjoy unfettered access to the market in Great Britain, but the region will also follow the EU’s regulatory framework in certain respects.
More Erg
Whatever happens tomorrow, a hard Brexit remains possible. Some RRG types are supporting it precisely because of the possibility of a no deal come December 2020. Giles Wilkes, former adviser to Theresa May and Vince Cable has written a paper for the Institute for Government on the potential for a bailout for business in a no-deal Brexit. Wilkes sensibly calls for the Government to develop clear principles now to reflect the purpose and constraints of business support.
Sham Pain
A think tank's work is never done. As you'll see below, we're putting on a couple of events on immigration and visas. It's not just for the champagne and slap-up breakfast, we're busy scoping out a new paper on fixing the failing Start-Up and Innovator visas. If you're an entrepreneur or expert with experience or knowledge of these visas, drop me an email so I can ensure you're consulted.
Read the whole e-bulletin here, and sign up to the e-bulletin here.