Do You Even LIFTS?

“I love people who take responsibility, start their own businesses and invest.” So claimed the Prime Minister in her speech at Conservative Party Conference.

Over the next two years (assuming she makes it), we will see whether she makes good on this and other claims. Although the opinion polls suggest that people already have pretty strong opinions on her and the Conservatives, now is the time to engage – even for those who want a change of government. Since I started working in think tanks, I can’t remember a better opportunity to make an impact on policy.

Any new government wants to get things done. But one with such a short potential ‘use by’ date will inevitably be in a big rush – particularly with a possible recession looming. I also think there is something unique in Truss’s openness to new ideas. This is partly the result of her not having had years in opposition to plan her agenda in detail, but also because from what little I have gleaned from the times I’ve met her, she doesn’t seem the sort to pass up the opportunity to make radical changes.

Of course, being radical isn’t inherently good. From my perspective, the Home Secretary Suella Braverman sounds pretty radical in a bad way by objecting to increasing visas for Indians as part of the trade deal. I wouldn’t worry too much though. Downing Street will likely rebuke her, as they did with her call for the UK to leave the European Convention on Human Rights: “As Suella acknowledged, her personal views are contrary to government policy and if she wishes to make those views known within government she should do so in a more appropriate setting.” And pleasingly, the FT carried reports this week on Truss's plans to make it easier and cheaper for businesses to make intra-company transfers.

But being radical isn’t inherently bad either. Sometimes things need to change, and talking to ministers, MPs and special advisers, they’re genuinely on the hunt for more ideas. Obviously Truss will be most receptive to ideas that are within her ideological worldview, but I don’t think this is as narrow as many assume. For example, the Government’s decision to widen the Seed Enterprise Investment Scheme (SEIS) and Startup Loans, and introduce the Long-term Investment in Technology and Science (LIFTS), suggest they are open to more than just tax cuts and deregulation.

Remember, it was Margaret Thatcher who created the Enterprise Allowance Scheme – a guaranteed income for unemployed people to set up their own business, without which the world would be bereft of Creation Records, Superdry, Tracey Emin and Viz magazine. Sometimes only Nixon can go to China.

A decent chunk of our policy papers are inspired by entrepreneurs and those that support them. We’re still promoting our ideas that haven’t yet to be adopted, but we’re always on the lookout for more areas to investigate. And if this Government doesn't want them, then they’ll be ready and waiting for the next one.

So what are your big ideas? What are your small ideas? What are the good ideas you’ve read? What is holding you back as an entrepreneur, that you don’t know how to solve? Let me know.

Big LIFTS?
The mini-Budget announced the Long-term Investment in Technology and Science (LIFTS) initiative, providing up to £500 million to support new funds designed to catalyse investment from pensions schemes and other investors into the UK’s pioneering science and technology businesses.

To update you on this, the British Business Bank and the Office for Investment are now leading some market engagement on the scheme. If you have developed thoughts on this please get in touch. After the engagement, the Government will then launch a call for proposals. And then, once selected, the new LIFTS vehicle(s) will receive the relevant government support and raise funds before beginning to invest.

Labour the Point

After last week’s not-so-mini-Budget Aria Babu has written for City AM on what was welcome but crucially what the Government needs to do next, while Eamonn Ives has a piece in CapX on why a revamped immigration system is vital to Truss’s growth plan. However, this week it would be remiss of me if I didn’t turn attention to His Majesty's Most Loyal Opposition.

After all, Labour had its Party Conference this week in Liverpool with Keir Starmer and the rest of the Labour front bench keen to position the Party as pro-business, making the case for why his is the party to “unleash” Britain’s “entrepreneurial spirit”. According to Starmer:

“Business leaders aren’t knocking on my door saying they want to rip up employee rights. They don’t tell me the problems they face will be solved by corporation tax cuts. They want fair taxes, high skills and the long-term confidence to invest.

“I want to be crystal clear about this: I’m not just pro-business, I want to partner with business. So we will scrap business rates, level the playing-field for start-ups and the high street, give employers new flexibility to invest in the world class training they need.

“And, as Jonny Reynolds said yesterday, invite them to drive forward our modern industrial strategy: a true partnership between government, business and trade unions.

“This isn’t about the size of government – it’s about what government can do. Government can support businesses to innovate and grow. Can bring in the creative genius of our scientists and universities. Can unite us to tackle the country’s challenges on behalf of working people.”

As is normal, the Jonny Reynolds speech Starmer is referring to doesn’t add a lot of meat to the bones, while Lucy Powell’s speech as Shadow Secretary of State for Digital, Culture, Media and Sport mostly serves to show how incongruous it is that digital policy sits alongside culture, media and sport in the same department. Obviously this isn’t Powell’s fault, but whoever wins the next election should really bring digital into the business department.

There is a little more policy detail in their Industrial Strategy, which is quite high-level and mostly unobjectionable. It mentions advance market commitments, which is something we've been making the case for. However, calls to level the playing field for the high street should also be treated with caution. Support for high streets is laudable, but punishing online services is not. We shouldn’t be penalising businesses for investing in the latest technologies, or for being able to scale.

Last week I argued that Truss will need to push through major reforms to have any hope of returning the country to 2.5% growth. For its part, Labour will need some bolder policies to get the ‘entrepreneurs vote’. At least in his speech Starmer mentions the triumvirate of areas requiring reforms I pointed to last week – house-building (I would add office and lab space as well), childcare costs, and immigration reform.

We’ve fed into Labour’s Startup Review and we’ll be hosting roundtable discussions in the next few months to build on this. With Tulip Siddiq we’ll explore ‘how to encourage more growing UK firms to reach the highest growth stage’, and, on the back of our Female Founders Forum work, we’ll discuss ‘how to ensure more women can successfully start and grow businesses’ with Anneliese Dodds, Shadow Secretary of State for Women and Equalities.

We’ll be inviting our Advisers and others who have informed our thinking in these areas, but let me know if you’re particularly keen on influencing Labour.

All Change
As reported in Politico, Eamonn Ives has joined The Entrepreneurs Network as our new Head of Research: “It’s a return to wonk-land for the COP26 aide, who previously headed up energy and environment work at the Centre for Policy Studies.” In 2020, Eamonn wrote our influential Green Entrepreneurship report, many of the policies of which were later adopted by the Government.

In addition, Aria Babu has been promoted from Senior Researcher to a new role: Head of Policy. As discussed here last week, now feels like a real crunch time in terms of getting good ideas into government and the opposition. It’s pleasing that we’ve got such a strong team to make the case for the policies we’ve been designing and championing – as well as coming up with some more.

"Mini" Budget

Today’s not-so-mini-Budget is a bet on economic growth. The scrapping of the planned increase in Corporation Tax and cutting of National Insurance and Income Tax will of course be broadly welcomed by businesses, but there’s quite a lot behind the headlines that should please entrepreneurs.

For example, from April 2023, companies will be able to raise up to £250,000 of Seed Enterprise Investment Scheme (SEIS) investment, the gross asset limit will be increased to £350,000, the age limit from 2 to 3 years, and the annual investor limit will be doubled to £200,000. This is something that we’ve been campaigning on for years – most recently in our Tech Startup Manifesto with Coadec. The government also hinted that they will extend the Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCT).

The government is also doubling the current limit to allow qualifying companies to issue up to £60,000 of CSOP options to employees, making the Annual Investment Allowance permanent and reforming the pensions regulatory charge cap. It’s a bit cringe when think tanks claim all the credit for policy changes, but at the very least I think it’s fair to say we’ve been in the vanguard of organisations pushing for these reforms.

The repeal of IR35 was huge news for those caught up in its web, and enterprise zones could be a big deal if they can offer something more than displacing economic activity. The Long-term Investment for Technology & Science (LIFTS) competition, which aims to “provide up to £500 million to support new funds designed by institutional investors and world-class fund managers” sounds intriguing (incidentally, we’ll be chatting to the British Business Bank about this policy, so let me know if you have any thoughts on how it can identify promising fund structures and vehicles).

While there’s a lot more to digest, these reforms alone aren’t enough to deliver the much-vaunted 2.5% growth. The Chancellor recognises this, but I’ll take this opportunity to remind him of three that we’ve identified as structurally critical.

First, as detailed in Strong Foundations, beyond the intergenerational scandal of only the wealthiest being able to get on the property ladder (nay, gilded escalator), the cost of housing and offices is holding back innovation by setting a limit on agglomeration. The Plan for Growth acknowledges that “further reform is needed”, but it’s impossible to understate how important this policy area is. It’s why we keep banging on about it.

Second, as we’ve said in multiple reports for the Female Founders Forum (FFF), the cost of childcare is locking mothers out of the workforce. Aria Babu has been a big campaigner on this – as were her predecessors Sophie Jarvis and Annabel Denham. Have a read of what Aria said to the Work and Pensions Committee for the most concise arguments we’ve been making. When she was Children’s Minister, Truss pushed for some of the policies we back, but she was blocked by people more senior than her in the coalition government. Today the Government says it “will bring forward reforms to improve access to affordable, flexible childcare.” Watch this space.

Third, we need to make the visa system work. While I could write for Britain (or any country) about all the necessary reforms, I’ll focus on the one that will make the biggest impact on growth. In True Potential we set out how to reform the newish High Potential Individual (HPI) visa so that we don’t miss out on the world’s smartest graduates. The Government should copy our formula, allowing graduates from approximately 100 universities spanning 13 different countries to access this innovative visa. Again, the Chancellor claims that “the government is committed to ensuring the immigration system works for business and encourages highly skilled people and high growth businesses to choose to locate and invest in the UK.” But is it committed enough?

We’ve heard this from too many previous governments – for 12 years it’s been from Conservatives. Talk is cheap, but any more of it without some action will come at a huge cost to the UK.

Hot Iron
This Government is actively looking for supply-side reforms and additional pro-growth measures like regulatory reforms and cuts – and they want them quickly. We will be feeding in our ideas that haven’t already been taken up (and those of others we wish we had come up with), but we’re always willing to hear more.

I can’t promise we’ll run with it, but we will take any suggestions you make seriously. Even if you think it’s too minor or niche to your industry to be worth suggesting, now is the time to share your thoughts. I look forward to hearing from you.

Why Not Both?

We’ll have a new Prime Minister next week. It’s looking like Liz Truss has it sewn up. She’s been very supportive of The Entrepreneurs Network over the years, speaking at lots of events, inviting us in to discuss ideas, and writing the foreword for our Resilience & Recovery and Here & Now reports.

On the face of it, it’s an unenviable time to become Prime Minister, with biting inflation, the cost of living crisis, a looming recession, and only two years until an election. But all political reigns come with mammoth tests. It just happens that this time – unlike with Covid or the financial crisis – we already know what’s on the horizon.

The new Prime Minister will be necessarily focused on the short term, but I think some commentators are overplaying the need to have every idea show fruition before the election. In the words of the Old El Paso advert turned meme: why not both?

Consider an issue like the visa system, which my colleague Aria Babu co-wrote on for City AM this week with Coadec's Frances Lasok, drawing on a section of our recent Tech Startup Manifesto. There is low-hanging fruit which, if implemented, could deliver results before the next election.

Currently the Home Office makes an 800% profit on some applications, which is absurd. Some have argued that it’s good to see the government making money on them. But this would only make sense if these people were an economic burden to the UK (they are not), or if there was no competition from other countries for talent (there is).

The article also recommends opening up the High Potential Individual visa beyond the current “top university” rankings, which aren’t getting at what we want. As Aria and Frances write: “A better ranking would look at the human capital of graduates, which you can calculate using graduate earnings. If the visa was reformed in this way it would include more specialist STEM institutions, small but elite American Liberal Arts Colleges, and top business schools.” Perhaps most importantly, it would open up the UK to India’s IIT’s, many of whose alumni have built and increasingly run Silicon Valley.

Luckily for the government, we have done the hard work of producing the criteria for a better ranking that would allow graduates from approximately 100 universities spanning 13 different countries to access the visa. This would have a slower effect than reducing the fees, but would still have an impact before the next election.

In an earlier paper, we called for the UK government to proactively identify and persuade leading scientists and innovators to settle in the UK. This idea may sound kind of wacky, but it’s something we do on a small scale through the Global Entrepreneur Programme (GEP), and something we did on a larger scale historically. This policy isn’t going to pay off in anything like two years, but we should still do it.

Many future crises could have been mitigated with proper planning. Whether that’s pandemic risk, which we’re still being incredibly blasé about, or the energy crisis – watch and weep as Nick Clegg ​opposes nuclear power in 2010 because it would only come on-stream by 2021 or 2022.

And even if some long-term policies aren’t yet bearing fruit, the act of genuinely tackling long-term challenges won’t be lost on people. After all, we humans literally (and metaphorically) plant trees knowing we’ll never sit in their shade. A government doing the same would be recognised as such.

Investment Culture
The Tech Sector team in the Department for Digital, Culture and Media and Sport (DCMS) has asked us to ask you to share the challenges you face – particularly when raising investment. If you would like to help inform their policy and communications strategy, please fill out this short Google form.

The survey aims to gather Insights into what further support founders need to scale their businesses, how the regional equity financing gap could be decreased, and insights about diversity within the sector.

Please provide responses by the 14th of September. If you would like a discussion, DCMS will be setting up feedback calls. You can get in touch with them about this by dropping them an email.

SME Productivity Call for Evidence
We’ve extended the deadline for the SME Productivity Call for Evidence briefing paper until next week. We’ve had some great responses, but a few people have asked for a few more days, so it’s only fair to open this up more widely. You can read the questions here. There is no expectation that you answer all the questions – short responses focused on specific issues are often the most useful.

Fermenting Female Ambition
We are hosting a Female Founders Forum roundtable on Wednesday. We will be talking about the barriers that the UK’s most ambitious female founders face and what can be done to help them out. If you’re a female entrepreneur, trying to build a billion-dollar company, get in touch with Aria.

Tech Startup Manifesto 2022

Yesterday we released a new report: Tech Startup Manifesto 2022.

To save the incoming Prime Minister the trouble of rereading all our reports, we’ve put together a pithy paper with our friends at Coadec to explain what tech startups will need in order to flourish.

Many of the policies will be familiar to regular readers. It covers access to capital, access to talent, start-up friendly regulation, and fostering innovation. You can read the detailed list here, which includes policies like reforming the pension charge cap, opening up the public sector to startups, and experimenting with funding mechanisms.

The key ambition for this report is to explain what the next Prime Minister should prioritise specifically for tech startups. To be clear, it isn’t a manifesto for every business type, size and stage. Nor is it exhaustive. But we think that these policies will be critical for supporting tech startups.

Dom Hallas and I have written about the report in CapX, to cover some of the key policies. And I want to draw attention to one area of the article and report where we are calling for more of the same: the UK must continue its consistent and stout defence of the value of digital free trade, as reflected in the recent Singapore Digital Economy Agreement:

“This matters when across the world we’re seeing a wave of digital protectionism, often couched in the language of ‘digital sovereignty’. Whether it’s in Europe via the French Cloud Doctrine, or new digital localisation requirements in emerging economies such as Nigeria and Vietnam, a leading global tech market leader such as the UK has much to lose in exports from a swing towards more closed digital markets.”

Crossing the Floor
Following our submission to Labour’s Startup Review, we’re in discussions about hosting a few roundtables with the panel. These may cover lots of different areas, including supporting scaling of private businesses to the highest level (including listing), and issues around diversity.

Please let us know if these interest you. We’re particularly keen to hear from entrepreneurs and experts who have insights on what the government can do to help scale businesses to the utmost.

Was Nice Dumitriu
Our Research Director, Sam Dumitriu, is leaving The Entrepreneurs Network. The quality of the research under his leadership is testament to his talent. Just check out his reports on elite immigrant founders with Amelia Stewart, drones with Anton Howes, and most recently on reforming the High Potential Individual visa with Jason Sockin. Read more of his greatest hits here.

Everyone who has worked for us has gone on to achieve more incredible things. Watch this space for announcements on what he’s up to next, and keep in touch with Sam by following him on Twitter, subscribing to his Substack and connecting with him on LinkedIn.

We all wish him the very best.

An Urgent Call for Entrepreneurship Education

A society that fails to harness the energy and creativity of the next generation risks being left behind. If we want to unlock entrepreneurial potential and cultivate an entrepreneurial mindset amongst young people we have to start in the classroom.  

It’s time we reshaped the education system to connect young people with the world of work. Integrating entrepreneurship education into the curriculum will equip people with digital literacy and general business acumen, and give them valuable life skills such as confidence, communication and problem-solving. 

Entrepreneurship should be open and accessible to everyone. Young people are held back by little or no access to mentors, networks and funding.  According to The Entrepreneurs Network, over half of young people in the UK have thought about starting (or already have started) a business, yet 70% cite ‘not knowing where to start’ as why they don’t follow through. 

Exposure to entrepreneurship is a key driver of entrepreneurial intention. Young people who have thought about starting or started a company are more likely to have a family member or friend who is a business owner, and seven in ten say that having a family member or friend who is an entrepreneur has made them more likely to consider starting a business.

We need to map out a pathway today for a fairer, more equitable tomorrow for young entrepreneurs of all backgrounds – and an inclusive economy that advances growth and prosperity for all. This is critical to driving positive change and meeting the UK’s social mobility challenge. 

I’m proud to have joined forces with the All Party-Parliamentary Group (APPG) for Entrepreneurship to call on the Government to integrate enterprise education into the school curriculum. In our recent Entrepreneurship Education report, we highlight the urgent need for greater clarity from the Government. We want to know under whose portfolio responsibility for enterprise education falls. And we want resources and funding for pupils to engage with entrepreneurial activity in schools and incentives for businesses and local enterprise partnerships to support and engage with this entrepreneurship education. 

This report is the culmination of many months speaking to academics, education experts, youth enterprise organisations and business leaders. The concept of entrepreneurship education is extremely important to me, and I’m hugely encouraged by the worlds of business and education coming together to help drive greater opportunities for young people. 

Our education system is responsible for preparing young people to build successful lives. If ever there was a time to empower the younger generation of entrepreneurs, it is today.  We, as a society, need to ensure that this latent potential is fully realised.  Given the potential that new businesses and start-ups have to boost our economy, it’s critical – as outlined in our report – that “young people are equipped with the toolset to achieve what they increasingly desire: independence and meaningful work.”

Tearing down the barriers that prevent more young people from becoming successful entrepreneurs and creating a pathway for all young people, irrespective of their background, can generate positive outcomes for everyone. I strongly believe early intervention and expanding access to entrepreneurship education to young people in schools is a fundamental part of this. 

It’s no surprise that an entrepreneurial mindset and enterprise skills are also highly valued by employers. Inspiring these skills in the next generation of workers clearly has benefits in terms of dealing with ever-evolving market conditions and the future world of work which looks very different from now. 

But what’s really driving me is the profound impact that entrepreneurship education can have on young people’s lives.  Enterprise skills are ultimately life skills – the ability to think creatively and ambitiously. It’s about engaging with the world around you, to identify challenges and seize opportunities.

I’ve seen first-hand how access to entrepreneurship education has helped young people from different backgrounds thrive. I would urge other business leaders to join me as we look to create a more equitable and inspiring future for the UK’s young people. 

Sam Smith is the CEO of finnCap Group

Chief Entrepreneur

Scotland now has a Chief Entrepreneur. As former COO of Skyscanner, you can’t deny that Mark Logan has the entrepreneurial credentials. The question is: can he make a meaningful difference?

To some extent, he’s already had an impact. His appointment came following his 2020 review of the Scottish technology ecosystem. In it, among other things, he called for the creation of a network of “tech scalers”, which claim to be “best practice in incubation, intensive founder education in Internet Economy best practice, ecosystem social infrastructure, and integrated funding.”

As this illuminating interview in the New Statesman shows, Logan is ambitious for Scotland (in a way that only someone who has built a billion dollar company and not worked in the public sector can be). But he is already struggling with plans to get computing science taught from the 1st year of secondary school with the same emphasis that is put on maths and physics: “We’re getting some stuff done in education, but it’s way too slow. It shouldn’t be this hard. I’m not seeing enough people throwing themselves onto the barbed wire of that task alongside me.”

From the same interview: “I have spent the last two years in this space, and it’s very hard to get things done because there’s no one owner. Let’s say I want to do something on the front line with teachers – there’s Education Scotland, there’s the SQA, there’s local authorities, the unions, the headteachers, and all of those groups together have to basically agree on doing something. Now that has frankly become the big excuse – ‘we’d love to do that, but we have to get those other people convinced’. Education has been, relatively speaking, a more difficult area in which to make progress.”

In The Times, Alex Massie picks up on his challenges and isn’t optimistic about his chances: “I fear that he is in the business of pushing water uphill on behalf of bosses who do not much care if he makes it to the top.” For Massie: “The problem is large because it is, at heart, one of culture. In general, this is not a dynamic country; it is certainly not one in which business success is esteemed.”

So can Logan, or anyone, impact culture, making Scotland more entrepreneurial?

Culture obviously changes. Even the language of “startups”, “scaleups” and “ecosystems” is relatively new. Ultimately, the success of Silicon Valley has allowed it to export its culture to the rest of the world, with each place giving it their own local twist.

Things have moved on, but I wonder if there’s a new way we could impact culture. For example, Ned Donavan and Anton Howes made the case for establishing a new order of chivalry, specifically designed to encourage invention and raise the status of being an innovator in the eyes of the public. Separately, Anton has also called for the creation of a new Great Exhibition. Any other ideas (genuine question)?

Another way of looking at the problem is through the institutions of government. Logan mentions Estonia as a “tiny country that’s producing a lot of unicorns”, who “have done exactly what I’m prescribing.” I’ve written before about what Whitehall can learn from Estonia, but the most fundamental lesson from Estonia is that a flourishing entrepreneurial ecosystem can be built from scratch.

In a way, starting from scratch, after the wreckage of Soviet occupation, was to Estonia’s advantage. As Logan’s diagnosis of Scotland’s sclerotic education system shows, a long-standing bureaucracy makes reform hard-going (to put it mildly). The same is true for England, which our numerous reports are testament to.

As an aside, one reason ARIA has such potential is because it’s specifically designed to be at a distance from bureaucracy. It’s also why we think (like Dominic Cummings, but don’t let that put you off) that it should fund Focused Research Organisations (FROs), which are low on bureaucracy because they are fully funded with a time-limited mandate.

Into Focus

When I started The Entrepreneurs Network back in 2013, I thought I had a pretty good sense about the scope of our work. We would focus on the nuts and bolts of policies to support entrepreneurs, advising on things like how the tax system can best incentive people to start and grow businesses, and identifying regulations that are holding back businesses. And yes, there is plenty of that, but our scope has widened much more than I could have imagined.

Take our latest report, which we produced with the Tony Blair Institute and Convergent Research. A New Model for Science makes the case for Focused Research Organisations (FROs) to tackle some of the world’s biggest challenges.

I first came across FROs in an excellent Nature article in January. FROs are designed to fill a gap in the market, solving problems too big for a single academic lab to take on, too complex for a loose, multi-lab collaboration to solve, and not directly profitable enough for a venture-backed startup or industrial R&D project to fund.

Though nonprofits, FROs are entrepreneurial, being run by full-time technical founders who oversee 10-30 employees. They pursue specific, quantifiable technical milestones for a finite-duration (5-7 years). And as they near completion, they translate what they have built into longer-lived nonprofits or venture-backed startup spinouts.

Because these are bigger undertakings than most academic labs handle, and are focused on a very tangible, focused goal, entrepreneurs are as critical a part of FRO founding teams as scientists. As Tom Chivers put it in his first-rate article on our report: “If it’s not profitable, the private sector won’t fund it; if it’s too big and complicated, universities can’t do it.”

Three FROs have been launched so far, all in the United States. E11 Bio is building the key tools needed to map the connections between neurons in a mammalian brain. If successful, it could make new treatments for brain disorders possible. While Boston-based Cultivarium is building an end-to-end toolkit for cultivating currently unculturable microbes. This will accelerate the study and engineering of microorganisms for purposes such as medicine and carbon removal, which will be vital if the world is to keep global temperatures stable.

Milan Cvitkovic of Convergent Research has identified the NHS as offering scope for FROs: “The potential of the NHS for biomedical research is extraordinary and unique to the UK. Its size, centralised approval processes, and consistency in data and standard of care make it possible to run biomedical projects in the UK that could not be run elsewhere.”

The report has the backing of pioneering geneticist George Church, who described FROs as “a timely and much-needed approach with momentum behind it.” And ​​Stian Westlake, CEO of the Royal Statistical Society and former innovation policy adviser to the UK government said: “Organisational innovations like FROs represent a very promising opportunity to refresh our research institutions and accelerate human progress. This report is a very welcome contribution to a rapidly emerging field, and will be valuable to anyone who cares about science and technology policy.”

FROs are a bold new idea. A lot of you, I know, are equally bold. So please reach out to Milan Cvitkovic at Convergent Research if you're interested in founding, funding, or joining an FRO. Or you just want to learn more. (Also, please give our thread a retweet if you're on Twitter.)

People Power
Don’t worry! We’re still doing the nuts and bolts too.

What can we do to ensure small businesses can access the talent they need to scale? Are there cost-effective ways that the government can help businesses get access to better advice from experts? What role can government play in ensuring marginalised groups have access to fellow entrepreneurs, experts and investors to inspire and support them? What are the easiest ways for the government to ensure that the next generation has the right skills to work in start-ups? And what about the role of training courses?

If you have answers to any of these questions, you should join us for our latest Access All Areas virtual roundtable on Tuesday from 11am to 12pm. Just drop our events team an email to register your interest. Your insights will help guide the report and we may want to use you as a case study for the report.

What Reliefs!
The APPG for Entrepreneurship is undertaking a report on tax reliefs for equity investments: specifically SEIS, EIS and VCTs. At rather short notice we’ll be hosting a virtual roundtable on this topic next Friday at 11am to 12pm. If you have expertise on this topic and want to register your interest in attending, get in touch.

Inclusive Innovation Forum: The Diverse Path to Success

Welcome to the second newsletter of the Inclusive Innovation Forum.  The first roundtable of the Inclusive Innovation Forum focused on the discussion of a well-known problem: the funding gap for founders of colour. The conversation gave insights into whether venture capital firms should have quotas to reduce the underinvestment in entrepreneurs of colour.

Check out Morgan Stanley's write-up of the first roundtable here.

The second roundtable looked at operations in companies founded by people of colour. The conversation delved into whether they set companies up differently: what are the pathways to success and what factors determine the route they decide to follow? The Entrepreneurs Network will use the insights of this project to inform its policy work.

Insights from the Roundtable 
Kalkidan Legese, founder of resale marketplace Owni, explained that she lacked exposure to companies designed to scale. When she started her first company, it was with the simplest and most cost-effective model — the basic money in, money out apprach. After spending time in the industry, she decided to approach things differently with her current business. Owni is VC backed and aiming for fast and large scale growth. 

“I see a lot of people, especially in the Black community, running social enterprises and CICs. Sometimes the lack of knowledge pushes you into directions that you do not know, and later you learn what you need to do. At that time, it is not too late, but it takes a lot of work to untangle all of that.” – Alecia Esson, founder of sports wearable startup Nxsteps.

It raised the question of whether the Black community chooses to build social enterprises and community interest companies because they do not know other routes or do not have access to them, or because that is the choice they wanted to make. For Alecia, it is a result of both factors. She believes that many people do not know enough, but also when a person of colour tries to launch a company, the advice they receive is based on underestimation of their skills, ambition, and potential. Others mentioned that the reason a traditional VC funding route is often not considered is lack of networks and the industry’s need for warm introductions.

Although there is a wealth of knowledge and information out there, access to the right information at the right time isn’t always easy:

“There is a huge disparity when it comes to access to knowledge, where to find it, or where to be signposted when it comes to first time entrepreneurs versus people who have done a business before.” – Dama Sathianathan, Partner at Bethnal Green Ventures. 

Some suggested that knowledge should be more practical and critical, particularly for people who do not have an established network. According to Upasna Bhadhal, founder of recruitment firm Career Collective, there should be easy, standard answers to key questions like ‘How do you raise money?’ and ‘What are the different pathways you can take when running a business?’ that everyone can find. When you have no network and are starting your first business, googling these concepts brings up a whole host of resources — many from consultants who want you to pay them to help — and that needs simplifying.

“Networking has an important significance for the ecosystem. Getting insider information is key and having it early in a founder’s journey is important because it is the initial capital raising that makes a huge difference.” – LaToya Wilson, ​​Executive Director at Morgan Stanley. 

Another major topic of conversation was around why VC is considered the pinnacle of success. We discussed whether there are other options that could be better for founders of colour: 

“VC is one route. It is just one option of many. There are huge stories of success from companies that have followed this route because VCs have the loudest voices, and they push that narrative. The other funding routes have smaller voices.” – Esme Verity, founder of Considered Capital.

Additionally, VC is beneficial because it helps to gain credibility for the founder:

“If you have raised any kind of money, you are taken more seriously; if you raise VC money, you are taken even more seriously. It is a repetitive cycle.” – Upasna Bhadhal, founder of Career Collective.

More founders of colour are considering alternative routes because “they don’t have access to VC or they realise that this route is not right for them due to their business models, growth projections, aspirations and lifestyle choices”, says Esme.

But what are the alternative routes? Alongside grants and loans, there are also options such as revenue-based financing, profit-based financing, shared earning agreements and a mixture of a bunch of them.

Sheeza Shah worries that raising venture funding leads founders into a repetitive cycle of pursuing funding, instead of building their company for profit:

“Any financing firm exists to make a profit from a founder continuously needing financing. While financing organisations continue to lean on encouraging founders to be constantly in a fundraising mode, they will not have the time or resources to make those enterprises sustainable.” – Sheeza Shah, cofounder of social impact crowdfunding platform UpEffect.

Dama explained that, in her experience, raising constant rounds of VC is not always necessary when you have the right investors and advisors onboard — Bethnal Green Ventures’ has portfolio companies that haven’t raised again, or raise many years later, as they focus on becoming a profitable and revenue driven business. 

The flipside of this discussion was that founders of colour stay away from being a limited company by shares or from raising venture funding because they don’t believe they can create impact under those models:

“A lot of enterprises are realising that they can be any structure they want if it serves their community. So being a profit limited by shares company does not keep them from doing something good. This is progress because, in the early years, many companies chose CICs or tried to incorporate articles for a third-social mission. This has limited them because it builds barriers to accessing the right kind of financing. Generally, financing options are fairly limited for social enterprises. Over the last five years, a lot of enterprises that are now approaching our organisation are limited by shares because they have realised that this gives them more options.” – Sheeza Shah, cofounder of UpEffect.

Finally, we discussed diversity in teams. It was insightful to hear how differently attendees have approached the topic of hiring: Some have considered diversity a conscious priority — they’ve experienced being overlooked or underestimated and are purposefully ensuring they do not do the same. For others, it hasn’t been a conscious thought. There was a widely accepted belief that coming from underrepresented communities means you are more likely to hire diversely, anyway. However, some of the women founders shared that they have been advised to hire senior white men be more credible to VCs, their market and future hires. 

Thank you to everyone who attended. I’m looking forward to having further conversations on the topic and using these insights to drive policy change. 

Attendees
– Anisah Osman Britton, Reporter at Sifted, Founder at 23 Code Street
– Sanghamitra Karra, Managing Director at Morgan Stanley
– La Toya Wilson, Executive Director at Morgan Stanley
– Eni Timi-Biu, Founder of Create your Table 
– Karan Jain, Chief Executive Officer at NayaOne
– Dama Sathianathan, Partner at Bethnal Green Ventures 
– Kalkidan Legesse, Founder of OWNI

– Esme Verity, Founder of Considered Capital
– Saffron-Lucia Gilbert-Kaluba, Co-Founder of the Corporate Law Journal Limited
– Alecia Esson, Founder of Nxsteps
–Kelly Kalaitzaki, Vice President Lead of the Multicultural Innovation Lab in Europe, the Middle East, and Africa at Morgan Stanley
– James Usmar, Head of Tech Strategy at Department for Digital, Culture, Media and Sport
– Upasna Bhadhal, Founder of Career Collective
– Ruphina Ochanda, Department for Digital, Culture, Media and Sport
– Sheeza Shah, Co-Founder of UpEffect

Labouring the Point

Penny’s dropped. So no new ‘theme tune’ for the UK. But after weeks of writing about the blue team, this week I’ll cross the floor.

Labour has published the Call for Evidence for its Start-Up Review. There are seven areas of enquiry, covering access to capital, incentives, skills, procurement, levelling up (though they call it ‘geographical distribution’), listing and diversity.

The Review Panel is chaired by Rachel Reeves, the Shadow Chancellor, and includes Tom Adeyoola (Extend Ventures), Alex Depledge (Resi), Julie Devonshire (King’s College London) and Lord Jim O’Neill (Northern Gritstone).

The panel will review the evidence submitted, and this will inform part of its final report. Labour wants to hear from individuals and institutions before the 12th August.

I can’t find the details anywhere online, so I’ve shared it below. We’ll be responding. You may want to share your thoughts with us – if so, drop me an email. Although I would also recommend responding to it yourself. You just need to send them through to cormac.savage@parliament.uk.

1. What more can we do to ensure new and growing businesses have access to capital, and in particular patient capital?
– Where are the gaps in the current funding landscape? (e.g. by stage of funding, by type of firm, by sector).
– Are the current set of institutions (e.g. British Business Bank and British Patient Capital) right, and do they have the right mandates?
– What regulatory and policy changes could be made to encourage deeper provision of patient capital in the UK?

2. Do we have the right incentives for growing businesses in the UK, and how do they compare to other countries?
– How does the tax system incentivise growing businesses – in particular are there complexities or contradictions that limit this?
– Outside of the tax system, how could policy or institutional features be changed to provide greater incentives?

3. Do universities have the right skills, structures and incentives to allow them to successfully spin out and grow businesses?
– How well are universities set up to encourage spin-outs and the commercialisation of research?
– How can government help ensure universities have the right ecosystem of investor networks, firms, and leaders, and the right structures to spin out businesses?
– How should universities build enterprise into their institutions and recruitment processes?

4. How do we improve access to public procurement for start-ups?
– What are the barriers to start-ups accessing public procurement?
– How could policy reduce these barriers and/or actively prioritise high-growth British businesses in procurement decisions?

5. How do we ensure we have a better geographical distribution of start-up high-growth businesses across the UK?
– What are the key barriers to wider geographical distribution?
– Can better distribution be achieved through central policy, or should it focus on (setting up) empowering local institutions?

6. Should we be encouraging more firms to list in London? If so, how?
– What are the economic benefits, and how great are they, from firms listing in London rather than elsewhere?
– How does the complexity and flexibility of the listings regime compare with other key financial centres?

7. How do we ensure that women and people from ethnic minorities can access the finance, support, and networks necessary to successfully start businesses?
– What are the key barriers to women and people from ethnic minorities starting and growing businesses?

ARIA
It’s only natural that an incoming Prime Minister scraps (or starves) some of the ideas and institutions that the previous administration came up with. However, one that they should run with is the Advanced Research and Invention Agency (ARIA), which this week finally announced its new CEO and chair: Ilan Gur and Matt Clifford MBE.

I wrote last year about why I’ve been cautiously optimistic about this. Ben Reinhardt is the guy to read if you want to know more about why I'm optimistic about the potential – here, here, and sign up to his Substack here.

Whoever wins between Rishi and Liz, they should embrace this project with open arms.
Matt Clifford is a really impressive guy. That’s why we asked him to write an article on why network and talent density is the key to entrepreneurial success. If you really want to know what makes him tick, he has 224 issues of his newsletter.

I’ve not met Ilan Gur, but he has a great CV and sounds like a smart and clear thinker on this podcast with Matt on how technology collides with politics, culture and society.

Chalk or Cheese?

Whether you’re following every twist of the knife and turn of fortunes, or were bored before it started, for better or worse, the result of the Conservative Party’s leadership election will impact the entrepreneurial landscape of the UK.

There are clear differences on policy emerging between the candidates. As Sam Dumitriu explains in his latest Substack, on tax it’s a pretty stark choice between Rishi Sunak and the other candidates. And while it may not be obvious from listening to their televised pitches, Public First’s Conservative Leadership Election Policy Tracker shows battle lines are being drawn on some of the other big issues.

Similarly, Taso Advisory is tracking the candidates’ tech policy positions, with differences emerging on the Online Safety Bill. And FT Sifted has had a stab (somewhat in the dark) at ranking the candidates based on who they think would be best for startups: Sunak 9/10, Truss 8/10, Badenoch 8/10, Tugendhat 5/10, Mordaunt 4/10 (other rankings are available).

These disagreements will only get more stark in the TV debates: 7.30pm this evening on Channel 4, 7pm Sunday on ITV, and 8pm Tuesday on Sky News. And while only Conservative Party Members (0.3% of the total UK electorate) will decide the next leader, there is no escaping the consequences of their decision.

Procure Meant
While I’ve been quite critical of the capability of the outgoing government to get things done, one area where entrepreneurs will start to see progress is in public procurement. Somewhat below the radar, in his role as Minister for Government Efficiency Jacob Rees-Mogg has been driving this agenda.

We’ve been making noises behind the scenes, and this week partnered with Enterprise Nation on a report as part of our ongoing Access all Areas project. Using fresh figures from government tenders and data provider Tussell, Access all Areas: Government reveals that despite the policy ambition to increase spending with SMEs to 25%, over the past five years the government had managed to spend just 10% of its total procurement budget directly with small businesses.

Procurement in the UK accounts for a third of all government spending, and over a 10th of all spending in the economy, but many small businesses are locked out of tendering. This is bad for competition and bad for innovation. As Aria Babu argues, the system is unnecessarily bureaucratic, which is easier for larger firms to cope with as small businesses don’t have dedicated staff time and resources to searching for procurement opportunities and fill out arduously long tenders.

Here are the key recommendations, which were wholeheartedly backed by Jacob Rees-Mogg MP at the launch:

– Publish pipelines early: Public bodies should post a pipeline of contracts that are likely to come up. For example, the government knows that if it has cleaning services for their buildings and has negotiated a two-year contract, it will want some form of cleaning services again in two years' time.

– Improve pre-procurement consortium building: Provide a platform which can allow businesses to connect with each other so that they can decide to submit bids together and/or with large tier one suppliers.

– Establish a pro-innovation culture: Look for indicators other than history of procurement to deduce ability to deliver on scale. This could include things such as some staff have worked on large projects or if the company has managed to scale quickly.

– Write bids in a way that allows for more innovative solutions: Procurement teams should avoid writing tenders in a too narrow format. Instead of procuring for "a local library" they should instead consider writing a tender for a way of giving local people access to a broad catalogue of books" and see what solutions firms offer to their problems.

– Decrease bureaucracy: Dynamic procurement allows companies to submit information about their company once, which then makes them eligible for all contracts of a certain type. On this, we welcome news of the single sign-on referenced in the Procurement Bill now going through parliament.

– Stick with one method of publishing SME spending: Government should establish one method of measuring the proportion of procurement budgets going towards SMEs and stick with it.

I’ll leave the final words for Emma Jones CBE, founder of Enterprise Nation and a former SME Crown Representative:

"The government has done a great job of encouraging the growth of the UK's start-up and small business ecosystem. The next logical step is to play a role in their growth, by ensuring they are buying from them, either directly, via consortiums or through larger businesses that make a point of working in partnership with small firms.

"Working with government can be life-changing for smaller businesses. It can provide them with opportunities and experiences and can lead to sustainable and significant scale.

"We're not suggesting a 'bonfire of the red tape', but this report shows a significant reduction in bureaucracy could help to turn the dial on small business growth."

For further reading, please check out our earlier Procurement and Innovation report.

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Join Us

The writing has been on the wall for a while. The parties and lies may have sunk Boris, but as I wrote a few weeks ago, our “15-year (economic) rut” left Conservative MPs with few reasons to stick with him.

Of course, Boris has only been in the hot seat since 2019 and some of the economic challenges haven’t been of his making – the pandemic, Putin, Brexit (actually, that one's on him). But it’s undeniable that this government hasn’t delivered. Boris said as much in his resignation speech, but unlike him, I’m not sure he was ever going to. His government always felt bereft of new ideas.

We, on the other hand, like most think tanks, are full of ideas for what the next Government could do. So what’s next for us? We know lots of politicians, special advisers and people who will be involved in campaigning for the various leadership contenders. And while we might have our personally preferred contenders, it’s our job to make the case for why all of them should adopt our ideas.

We’re under no illusions about the nature of politics versus policy though. The leadership platforms will inevitably only give a rhetorical nod to entrepreneurship, and as Boris proves, that’s not enough to be a successful Prime Minister. To be successful our country needs policies that will grow the economy in a way where the majority feel better off.

As John Myers notes, there are three big things the next Prime Minister should be aware of. First, the UK is capable of delivering much higher incomes per person – with the right policies people could be earning 50% more than they do today. Second, our low incomes are largely a result of decades of bad governance. And third, few realise how easily many of these issues can be fixed. “Understanding these points will let you reach beyond your core supporters – whether they be (say) One Nation, free marketeers, traditionalists or fiscal conservatives – and give a vision that can appeal across a party, and then across a country.”

For his part, Myers suggests solutions on housing, energy and transport. We’re particularly supportive of his housing agenda, incorporating some of his ideas in our Strong Foundations paper, which focused on how expensive housing harms entrepreneurship.

We have a whole heap of policies to add to his agenda – everything from reforming the High Potential Individual (HPI) visa and establishing a new order of chivalry specifically designed to encourage invention, to cutting bureaucracy and boosting innovation in government procurement (watch out next week for another report on this), to making the UK the best place in the world for AI innovation. And that’s just the tip of the iceberg of what we’ve already done, with plenty more in the works.

None of these policies will win an election on their own. But together they form a pro-growth platform that will appeal to those who share our impatience to actually realise an optimistic vision for the country. Many of these people are entrepreneurs, of course, but they’re also overrepresented among political influencers (for desperate want of a better description). Getting their support is critical.

What’s true of the Conservative Party is true of the opposition parties too. We’re inputting into Labour’s review to ensure “Britain is the best place in the world to start and grow a business” and the Liberal Democrats have always been very open to our ideas.

We’re busy planning dinners with senior politicians across all the parties. Let Katrina know if there is anyone you think we should host. And if you think what we’re doing matters as much as we do, now is as good a time as any to become a Supporter or Adviser: Join Us!

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True Potential

As we all know, half of the UK’s fastest growing startups were co-founded by someone born overseas.

When we calculated that figure, free movement with the EU was still a thing. A lot has changed since then. We've moved to a system that's pretty open for skilled workers with jobs, but there's a huge gap in the market for people who want to move without a job offer (i.e. entrepreneurs). The UK’s new High Potential Individual (HPI) visa helps fill that gap and opens the UK up to the best talent from the rest of the world. It’s a move we called for, and welcome.

To be awarded an HPI visa, you must have attended a university that has appeared in the top 50 of at least two of the three following global university rankings: the Times Higher Education World University Rankings, QS World University Rankings, or the Academic Ranking of World Universities.

The problem is, these lists aren’t great at measuring what we want. They are great for measuring research output, the number of Nobel Laureates, and the quality of facilities, but they’re weak predictors of graduate labour market performance. That’s because they don’t even try. The closest we get is QS asking employers what they think of each uni.

We have a better idea. Or more accurately, economists Jason Sockin, Paolo Martellini and Todd Schoellman do. They’ve used real-world labour market data from Glassdoor for migrant and non-migrant graduates from around 3,300 universities across 66 countries.

Building on this work, Sockin and our Research Director Sam Dumitriu have found in True Potential that the HPI visa excludes graduates from many of the world’s top-performing universities. In fact, graduates from most of the top 25 global universities as measured by average earnings are not even eligible to join, including the Indian Institute of Technology Ropar, which tops the list.

If the UK adopted our proposed method and allowed any overseas graduates who attended a university with higher potential earnings than the median-performing, currently eligible university, it would give graduates from approximately 100 universities spanning 13 different countries access to the visa.

The additional universities include many STEM-focused institutions, small liberal arts colleges in the US, and business schools. Of the omitted universities, 33% are from the United States, 22% are from Europe, and 17% are from India.

No system is perfect, of course. But we think supplementing the current list with ours would be a serious upgrade. And we’re not the only ones:

– “No-one was suggesting a better list [until now]” – Tom Forth
– “Completely agree with this” – Sam Freedman
– “Brilliant bit of analysis. Should be adopted by govt immediately” – Jonathan Simons
– “Fantastic idea for a paper. Anecdotally, I’ve already met quite a few US grads planning to stick around in the UK because of the HPI visa. Would be great to open it up further” – Julia Pamilih
– “Excellent thread on how to make the High Potential Visa better” – Matt Cifford MBE
– “A good thread arguing Britain’s new open door visa to the graduates of the world’s leading universities needs to have a more sophisticated metric” – Ben Judah

Finn(est) Hour
This week we also released the All-Party Parliamentary Group for Entrepreneurship’s report on Entrepreneurship Education. Written by Finn Conway and kindly support by finnCap, it calls for the Government to:

– make clear which minister has the responsibility for enterprise education;
– draft a Youth Enterprise Strategy for England;
– integrate enterprise into the National Curriculum;
– provide resources and funding for pupils to engage with entrepreneurial activity in schools;
– provide incentives for businesses and local enterprise partnerships to support and engage with entrepreneurship education.

First and foremost, if you haven’t done so already, read this letter and sign it here to show your support.

Second, we want to make sure this report sparks policy change. This is just the beginning (well, it’s not actually the beginning as we’ve been researching and campaigning on this for years). Over the coming weeks and months we’ll be making the case with Ministers, MPs, Peers and civil servants making the case for change. So will Sam Smith, founder of finnCap, who also wants to see change – listen to her from 33 minutes in on Sky.

We’ve now built a sizable network within a network of entrepreneurs, educators and experts who are passionate about this topic, but the more the merrier. If you care as much as we do, get in touch.

Finally, we have a couple of reports coming out around this topic. First, we’re looking at the role of applied learning in building an innovative mindset for Young Enterprise, and looking at how to improve the connections between FE colleges and entrepreneurs in their communities for Gatsby. If you know – or are involved in – a case study to illustrate best practice in either, get in touch with Dr Anton Howes.

Copy Right
We have a solid track-record of changing policy. Unlike some other think tanks that are aligned to a political party, we don’t run our ideas past the Government or opposition parties to make sure they agree, and we don’t write reports to test the water or lay the groundwork on behalf of political parties. We try to change minds.

Latest on the growing list is Anton’s copyright reform proposals, which are starting to become part of government policy. Since Fixing Copyright was published last year, Anton has taken part in various conversations with the Intellectual Property Office and BEIS about how the UK could encourage its AI sector by extending the copyright exception for text-and-data mining to everyone, not just non-profits. These were proposals also put forward in Seb Krier’s paper for us on Making the UK the best place in the world for AI Innovation. Now the Government has announced that it intends to adopt our policy, citing many of our precise arguments – particularly around the opportunities we pointed out for making the UK more competitive in AI following Brexit.

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Skin Deep

As entrepreneurs understand better than most, having skin in the game is the best way to align incentives. The fact that all the blood, sweat, and tears aren’t only for someone else’s gain helps to drive innovation. It’s never just about the money (and innovators can actually only capture a tiny fraction of the value of their innovations), but it would be naive to suggest that those few percent aren’t a driving force.

It matters for many employees too. That’s why in the past we’ve argued for the expansion of Enterprise Management Incentives (EMIs), and why we’ll try to influence the Government’s preferred solution of reforming the tax-advantaged Company Share Option Plans (CSOPs).

For the same reasons, the Government is right to be considering removing restrictions on non-executive director remuneration, allowing them to benefit from share incentives. As fellow think tanker Robert Colville says: “If you have got a high-growth company and you want to attract the best advisers, directors and board members – especially Americans – you have got to give them a slice of the upside.”

I wouldn’t have to write this but for the fact that some have vehemently come out against the plans, connecting this reform with bankers’ bonuses (including in the articles linked to above). Even the CBI’s response has totally missed the point. They said, in response, that “high pay can only ever be justified by exceptional performance. In the midst of the cost-of-living crisis, and as many are faced with lower earnings, firms will be particularly mindful of the importance of fair executive rewards.”

This is woolly thinking, playing to the crowd but in a way that will make things worse. Of course the cost of living crisis needs addressing, but just because the timing means it might be “not a good look” right now, doesn’t mean the Government shouldn’t do the right thing for the long term. People are always complaining about how short-termist politicians are, but when they’re actually looking at the long term they’re also getting attacked. Ultimately, the policy will make the UK richer, giving us more to spend on helping the poorest during future tough times like these.

(A final thought: should politicians have skin in the game too? One proposal is for politicians’ pay to be linked to what happens to real GDP per capita over the parliamentary term, and to grow or be reduced accordingly. Our current MPs would have had over a decade of falling real wages had it been in place. Answers on a postcard please.)

Sign, Sealed, Delivered
I’ve trailed it for the last two weeks, so won’t go on too much, but on Tuesday we’re launching the All-Party Parliamentary Group for Entrepreneurship’s report on Entrepreneurship Education. To coincide with the launch, we’re asking for entrepreneurs and experts to sign a public letter calling on the Government to make entrepreneurship education a priority.

The proposals are significant, but we’re mindful of overloading teachers with more work. The curriculum is already packed with a lot and most of it’s there for a good reason. Instead, we suggest integrating entrepreneurship into subjects such as Maths, English, and Design. As well as giving children the right skills to adapt to whatever the future economy might hold, it has the added (and underappreciated) benefit of making school more enjoyable.

You can read the letter here, sign it here, and let me know if you would like to read a strictly embargoed copy of the report.

On the topic of education, we’re also currently doing some work with Young Enterprise on the value of applied learning in schools – specifically, we’re looking for case studies of what it looks like to put it into action, emphasising the usefulness of what pupils learn, and fully preparing them for the world beyond school, either through extracurricular programmes or within the classroom itself. If you happen to know of teachers or schools that really stand out in this way, then please do put us in touch by contacting my colleague Anton Howes.

On the Money
In other APPG news, we will have a new theme on SME Productivity, which we’re undertaking with the support of Virgin Money. The government is already doing a lot – or trying to – in this area, making it an opportune time to review progress and identify what is (and isn’t) working. On this, Nesta, who worked with BEIS and Innovate UK to deliver the Business Basics Programme, recently shared some key highlights of the successes and failures from the experiments of that programme.

As with all of our themes, it will kick off with a virtual roundtable on the topic. This will help shape the Call for Evidence, which will form the backbone of the final briefing paper. If this is a topic that you’re passionate and knowledgeable about, drop our events team an email to request a place.

Party Faithful

To coincide with London Tech Week, the Government has made a number of announcements, including a Digital Strategy and £30 million of small grants for cutting-edge start-ups. But today I’m going to focus on the UK’s main opposition party.

Labour has been pretty quiet in terms of business policy and engagement. But as we get closer to the election we can expect more. First out of the blocks has been Shadow Chancellor ​​Rachel Reeves, who this week launched a review to ensure “Britain is the best place in the world to start and grow a business” (we won’t sue them for pinching our tagline – not least because the Conservative Party also did it a few years ago, and because I’m not entirely sure we were the first to come up with it).

Reeves’s review will look at access to capital (in particular patient capital), incentives to scale, universities and spinouts, public procurement, the geographical distribution of high-growth businesses, the listings regime, and diversity.

The panel includes former Treasury minister and founder of Northern Gritstone, Lord Jim O’Neill; CEO of Resi Alex Depledge (who is a Member of our Female Founders Forum); Julie Devonshire, the Director of Entrepreneurship Institute at King's College London; and Tom Adeyoola, Co-Founder of Extend Ventures.

Unlike quite a few think tanks, we’re not tied to a political party, just to good ideas. So we’ll be hosting events with members of the panel over the coming months.

Although we aren’t affiliated with any political party, we appreciate that you might be. So we’ve added an optional question about it when you sign up (for free) as a Member on our website. If you have a particular interest in engaging with party-specific events, do fill it out. This won’t preclude you from being invited to other events, and nor will having no party affiliation at all, but it will help us better match event invitations to your interests.

25% Reduction
We do a lot of work helping female founders, so are always happy to see others come up with new ways to look at things. Alongside our friends at Beauhurst, JP Morgan has put out a report that finds that although female-powered businesses are attracting an increasingly large amount of equity investment, female founders give up a larger percentage of their ownership than male founders. In fact, it is almost twice that of men: a 25% reduction compared to 13%.

This is an important finding. You can read the report here, or Henry Whorwood (our Adviser and Beauhurst’s Head of Research) is happy for you to drop him an email to find out more about the report.

Times A-Changin'
The Times has released its much anticipated Education Commission report. It’s littered with quotes from entrepreneurs and framed around the need to ensure the next generation has the skills for the 21st century. In the recommendations it calls for a cadre of Career Academies with close links to industry, but I think there’s more work to be done in terms of concrete policy.

We’ll help fill in some of those gaps soon with the launch of a report through the APPG for Entrepreneurship. With support from finnCap it focuses on improving entrepreneurship education in schools. While I can’t break our own embargo, I can tell you we’ll be asking entrepreneurs to sign a letter to back the findings (assuming you agree with them of course).

If you want to be invited to sign the letter, you’ll need to sign up (for free) as a Member. Just tick that you’re interested in education and we’ll make sure the letter gets to you.

It's The Economist, Stupid

This week, The Economist took a sledgehammer to the Prime Minister, his party (in both senses of the word) and Britain’s economic prospects.

According to the magazine, we’re in a “15-year rut”. Our GDP per head is 25% lower than America’s and we’ve been falling further behind both America and Germany since the mid-2000s. Average annual GDP growth over the decade preceding the global financial crisis was 2.7%, now it’s just 1.7%.

“In the decade to 2007, British productivity growth was second only to America’s in the G7. In the decade to 2019, growth in output per hour worked stalled to just 0.7% a year, making Britain the second-slowest in the G7; only Italy was slower. Had Britain’s productivity growth rate not fallen after the financial crisis, GDP per person in 2019 would have been £6,700 ($8,380) higher than it is.”

I could go on. The Economist article does, citing export data, OECD predictions and much else to hammer home the truth.

For all these problems, there is “no shortage of ideas about how to turn the country round. But the mettle and strategic thinking that reform requires are absent.” This is fighting talk. Comparisons are made with 1979, before Thatcher came to power with the final line of the article echoing her slogan: “there is no alternative.”

We’re optimists here, and believe entrepreneurs will dig us out of this hole. But politicians set the rules of the game and can hold back innovation in thousands of ways. As the article says, it’s not for a shortage of ideas. And I don’t just mean ours that are yet to be implemented – I mean elsewhere too. I’ve been working in think tanks for decades, and when it comes to good ideas, we’ve never had it so good.

Take the Oxford-Cambridge Arc, which would link up the two cities and everywhere in between like Milton Keynes and Bedford. The original plan was to build a new ​​rail link, new homes and an expressway, but bit by bit the project has fallen apart, with only the rail link left.

Stian Westlake, CEO of the Royal Statistical Society, author, and former government adviser (and one of our Research Advisers) appeared on GB News explaining why the lack of guts on this is such a big deal.

As well as backing the Arc, Westlake suggests building a new city outside Cambridge, on a square mile of unremarkable farmland. This doesn’t need to be ugly, and he suggests looking to Edinburgh’s New Town for inspiration: “Cambridge could be a city of a million people and power economic growth into the next decade.”

Those Who Can
In a couple of weeks, we’re launching a report with the APPG for Entrepreneurship on Entrepreneurship Education. It’s a topic that we’re passionate about – and I know many of you are too. That’s why it’s a big area of focus for us.

This report is kindly sponsored by finnCap, which does some incredible work supporting young entrepreneurs through A Fairer Foundation and The Side Hustle Initiative.

It will be launched in the House of Lords. If you’re an Adviser or Supporter, drop our events team an email confirming your place. Otherwise, you can request a place here. Looking forward to seeing many of you there!

Million Pound Question
Our longest running project is the Female Founders Forum. Built and run by four incredible women – Annabel Denham, Sophie Jarvis, Katrina Sale and Aria Babu – with support from across Barclays, each year has been bigger and better than the last.

To remain at the cutting edge of research done in this area, this year we are interviewing the most ambitious female founders, to find out what their thoughts are on entrepreneurship, learn about their businesses, and profile them as examples to champion.

We’re focusing on the most successful female founders because we want to know how to get more of them. If you’ve raised over £1m (or can demonstrate your success in another way), drop Aria an email to get involved, which could include being featured as a case study in her final report.

As well as supporting our Female Founders Forum, Barclays is looking for applications for its Entrepreneur Awards, which consist of eight award categories, ranging from start-up through to sustainable success and this year. Find out more here.

Love Me Tenders

When Taavi Kotka, former chief innovation officer of Estonia, was asked about how he and his colleagues managed to build one of the world’s most advanced digital governments for £100m he quipped: “If you don’t use Accenture or McKinsey, you’d be amazed at what you can get done.”

Apologies to any management consultants reading this (for my part I think you’re unfairly maligned, as businesses often benefit from outside perspectives), but the point that a lot of taxpayer money is wasted by the Government is incontrovertible, as any reader of The Register will know.

Waste isn’t just about overspending though. By shutting out entrepreneurs from procurement we’re also wasting an opportunity to innovate.

This is a topic that I’ve wanted to tackle for a while. Time and again, entrepreneurs have described how the public procurement processes are often difficult and bureaucratic. Fortunately, it’s also a policy area that innovation expert Dr Chris Haley is passionate about fixing. He teamed up with us to write a response to the Government’s Green Paper, and now has published a report with us on it.

Procurement and Innovation reveals ​the key barriers that early-stage innovative businesses face when they go through existing public procurement processes. It argues that the recently proposed reforms in the Transforming Public Procurement Green Paper don’t go far enough and, in some cases, risked creating new barriers. And it argues how adopting best practices in procurement could deliver better-quality public services at a reduced cost to taxpayers.

Culture also matters. Many public bodies are much more risk-averse than private sector organisations, yet risk is inherent to innovation. And procurement managers need better training. In our experience, many are open to innovative solutions, but may not be aware of the state of the art.

Then there’s the issue of social value compliance requirements, which have become excessive. For example, job creation, while a noble aim for government as a whole, should not be the concern of procurement policy – it’s a direct disincentive to innovation.

We also want more pre-commercial procurement (PCP). In case you haven’t heard of it, PCP is the process of challenging industry to develop innovative solutions to a problem. The Small Business Research Initiative (SBRI) scheme is an example, and typically involves an initial competition with grants of £50,000 to £100,000. After that first phase, some ideas may be taken into the second phase, where companies are awarded grants of £250,000 to £1 million to develop a prototype.

There’s a lot more we want to see: more pre-procurement consortium-building, which helps startups collaborate in developing a more complete solution; more feedback to startups and SMEs and the publication of previously successful bids, better advertising and use of brokering platforms; the opening up of more UK public procurement data; actively identifying innovations with cross-public body applications; broadening ‘meet-the-buyer’ events; a move towards cheaper off-the-shelf solutions from start-ups, as opposed to requiring expensive bespoke solutions large companies provide; as well as the use of more innovative funding models like challenge prizes, advanced market commitments and subscription payment models.

The report already has traction with Jacob Rees-Mogg, the minister for Government Efficiency and Brexit Opportunities, who says: "The Entrepreneurs Network has produced a typically astute briefing on the opportunities of procurement reform. I want to ensure our reforms are as ambitious as possible, achieve value for money for taxpayers by reducing bureaucracy for businesses, and make it easier to procure new technologies; the public sector must not be frightened of start-ups and innovation.”

Given the Rees-Mogg endorsement, it may not surprise you that it was covered in The Express under the headline: Brexit freedoms to see £300bn of public cash spread across Britain in spending revolution. While it is true that some reforms are only possible outside the European Union, many are not. Those of a less Brexity disposition may prefer our Research Director’s Twitter thread.

This is only the beginning though. We’re busy working on a report with Enterprise Nation that will look at procurement from a small business perspective and the wider challenges for business owners interacting with government. This will be a tough nut to crack, but it’s a very tasty proposition.

Routes Two
While Brexit may have eased immigration concerns, it hasn’t actually reduced it. In fact, based on recent Home Office data, it is being reported that the number of visas handed to workers, students, family relatives and other foreign nationals rose by 35% to 994,951 in the year to March, up from a pre-pandemic high of 739,936.

As Jonathan Portes argues and the ONS admits, there’s huge uncertainty about these statistics, which are based on experimental analysis of administrative data. But the fact remains, despite the truly madcap Rwanda scheme, that this Government isn’t wholly anti-immigrant.

This is particularly true for entrepreneurial individuals, which is why they have introduced the Scaleup and High Potential visas. I have my doubts about some aspects of both them, but all visa routes are being updated – sometimes too often, leaving entrepreneurs unsure which to use.

That’s why we have a roundtable on Tuesday on these visas and wider visa policies. Join us to better understand the scheme, but also to help inform us on our future lobbying efforts to make the schemes better for you.

We will be joined by Irene Graham OBE, CEO of the Scaleup Institute, and experts from Kingsley Napley. Just drop our events team an email to request a place.

Project Runway

Inflation hit 9% this week – its highest level in 40 years. At the same time, consumer confidence has plunged to the lowest level since records began in 1974. In the public markets, tech stocks have taken a beating. So, what does this mean for entrepreneurs?

It is likely to be a very tough time to raise finance. Economic evidence, which I blogged about a couple of years ago, suggests that risky (but innovative) startups find it particularly hard to raise finance when the market cools.

If you’re concerned about what it means for your business, I recommend looking at a recent email sent out by startup accelerator Y-Combinator. It’s full of useful advice and insights from people with a track-record of building great companies. They advise cutting costs and extending runway to get to default alive: a term which means “based on current expenses, growth rate, and cash on hand – the business is on the right trajectory to reach profitability before running out of money.” They even suggest raising money from investors at existing terms if it’s necessary to get to ‘default alive’.

Y-Combinator warns that the poor performance of tech stocks will mean that VC will find it harder to raise money and that limited partners will demand more discipline. Even top-tier VCs will invest less and reduced competition will make it much harder to raise funds. Additionally, VCs will look to prioritise their best performing companies, as a result, exacerbating the problem for unfunded businesses.

But there’s an opportunity too. Many startups will not plan well and extend their runway. Their mistakes can be your gain.

Invest, Train, and Innovate
As Westminster once again debated the merits of a windfall tax on North Sea Oil and Gas, Chancellor Rishi Sunak spoke at the CBI’s annual dinner covering rising energy costs, interest rates, and his plan to get businesses to train, innovate, and invest more.

The Chancellor’s options to address the crisis are limited. As he noted in his speech:

“We need to be careful… at a time of severe supply restrictions, an unconstrained fiscal stimulus does risk making the problem worse. By pushing up prices still further. Embedding high inflation expectations. And creating a vicious cycle of even higher interest rates and more pain for tens of millions of mortgage holders and small businesses.”

This means policies such as a cut to the headline rate of VAT, as suggested by some this week, are likely off the table. He will instead continue to focus on protecting the least well-off through targeted support and easing the supply constraints.

On this front, he signalled the Autumn Budget will include tax reforms designed to increase the incentive to train more employees, invest more in capital goods, and do more R&D.

We’ve recommended a range of policies on all three fronts. We pushed for a more general training levy in our report Management Matters, called for R&D tax credit modernisation in our Startup Manifesto with Coadec, and have consistently pushed for more generous capital allowances.

And we’ll keep pushing for more pro-enterprise tax reforms because as the Chancellor rightly stated in the intro to his speech: “Change doesn’t happen behind a desk in Whitehall. Not even the Chancellor’s desk. It comes from all of you. When your businesses invest, things get built. When you train someone, they excel. When you invent new products and services that people want to buy, you change the world.”

The Queen's Speech

There was a lot for entrepreneurs to be enthusiastic about in this week’s Queen’s speech. To address the rising cost of living, the Government is focused on growing the economy – so there has been keen interest in decreasing business’ regulatory burden.

We’re particularly happy to see the Procurement Bill, which promises to simplify public sector procurement to make it easier for small businesses to participate. The current process requires too much red tape and gives businesses only a short window to put together applications. We have some ideas about what the Government can do to make this process even easier for everyone, procurers and businesses alike, but I won’t give too much away as this is the subject of our next report.

To spur on the agritech sector, the Government is also putting forward a Genetic Technology (Precision Breeding) Bill, so hopefully we will see an increase in vertical farming, GMO crops, and maybe even cultured meat.

And there will be changes to our data rules. The Government has been looking for opportunities from Brexit, and reforming the way we treat data could well be one. They will be bringing an end to bothersome cookie notices, for a start, but we’ll hopefully be seeing something more transformative. The Goldacre Review looked into how we might make the most of the goldmine of data that the NHS has, for example. I wrote earlier this week about how it could enable us to create new life-saving therapies and provide better, more personalised, healthcare to NHS patients. Data reform is a key part of getting this right.

The Levelling Up and Regeneration Bill promises to reform the planning system to give residents more involvement in local development. Regular readers of this newsletter may recognise that as being one of our favourite policies, Street Votes. In our report Strong Foundations, I wrote about how restrictive planning rules have increased the cost of housing, which, in addition to squeezing people’s budgets, also creates a drag on innovation, productivity and entrepreneurship. Among other policy ideas, like Community Land Auctions, I recommended that the Government allow for residents on a street to vote on design codes that could make their streets denser and more beautiful. It is no silver-bullet policy, and it won’t address every aspect of the housing shortage, but it will go a long way to bringing us denser, more beautiful, and more walkable city neighbourhoods.

Since the Queen’s Speech, too, we have seen more policy announcements that we’re excited about. Will Quince, the Parliamentary Under-Secretary for Education has tweeted today announcing that the Government will be consulting on childcare ratios, investigating whether it is worth moving to the Scottish model, with a ratio of one adult per five two-year olds, rather than one adult for four, as we have in England. This is very encouraging, as the UK has the most expensive childcare in the OECD, and our strict ratios are in large-part to blame.

I don’t want to overstate how good the Queen’s speech was. There were still signs of increasing burdensome regulation. The Online Safety Bill has not been scrapped and, while we think we have done a lot of work to improve the conversation around the CMA’s Digital Markets Unit, the Digital Markets, Competition and Consumer Bill may have a chilling effect on innovation in the tech space. That remains to be seen.

The APPG
The APPG for entrepreneurship has welcomed two new officers: Labour MP for Sefton Central, Bill Esterson, and Conservative MP for Stoke-on-Trent Central, Jo Gideon.

Both bring a wealth of entrepreneurial experience to the role. Before becoming an MP, Bill Esterson a customer service training company with his wife, and since joining the Commons has served as the Shadow Minister for Small Business. Jo Gideon is an entrepreneur. She started a handmade paper import and wholesale business and she was a leadership mentor for university enterprise centres.

If you want to learn more about our new officers or hear more updates from the APPG, you can sign up to the monthly digest here.