The Columnist's Dilemma

Last Sunday, Phillip Inman wrote a piece for The Observer with the headline The hard truth is that Britain’s entrepreneurs simply don’t innovate. While he may not have signed off on the headline, the rest of the article isn’t much better.

I don’t recommend reading it. It throws around lots of half baked ideas in an attempt to make the case against what he calls “the neoliberal narrative that has dominated politics for the past 40 years.” Nevertheless, it is a useful springboard for articulating why he is wrong.

The central claim of Inman’s article is that the academic evidence shows that entrepreneurs aren’t innovative, but big businesses are. This is just plain wrong. Study after academic study shows that larger firms produce fewer inventions per R&D pound spent, and that larger firms introduce fewer and less innovative new products than smaller firms.

And critically, innovation in larger firms is more likely to be incremental, focusing on upgrading existing business processes rather than developing novel products. Both types of innovation are important – but it’s new businesses that are remaking the world.

If you’ve built a company on the idea that people will pop down to their local video store to rent movies, you’re unlikely to think that the future of entertainment is streaming online. And even if you can spot the trend, good luck reorienting your large company towards a new goal. What’s true for innovations in entertainment is just as true for innovations to tackle diseases and combat climate change.

It’s common sense. It’s also academic orthodoxy: The Innovator’s Dilemma.

To steel man his article, Inman is right to call for more robust evidence as to what really works when it comes to tax breaks and other interventions. However, the starting point has to be a much fuller understanding of the academic evidence around entrepreneurship than is presented in this article.

(We’ve been working with others on a letter in response to the Observer article, so keep an eye out for it.)

What You Really Really Want
We want to get to know you better. Perhaps you’re a Manchester-based tech founder who is really interested in local events on AI policy. Or maybe you work for a large company that is passionate about ensuring the education system equips the next generation with the skill they need. Or perhaps you’re an academic intent on closing the equity funding gap between male and female founders. 

If you tell us more about you, we can direct relevant events, research, letter signing and case study opportunities in your direction.

Here is the link to our survey. (I'm also open to advice on how to improve it!)

Sign up to my Friday newsletter here.

Entrepreneurs Unwrapped

Britain backs entrepreneurs. That’s the headline finding of Entrepreneurs Unwrapped, which we put out this week with American Express.

The vast majority, nearly 9 in 10, of the public who haven’t started a business think that entrepreneurs make an important contribution to the UK economy. They also think entrepreneurs’ efforts are more down to hard work than luck – even more so than entrepreneurs themselves, on net. Perhaps because of this, 61% of the public think founders deserve the money they make – against a mere 4% who do not.

Despite the overwhelming support on show for entrepreneurs, many think we don’t appreciate them enough. Nearly four times as many people think entrepreneurs don’t get the recognition they deserve as those who think they do. Honours for Innovators anyone?

Our survey also laid bare a number of myths around entrepreneurship, with two standing out in particular. People massively overestimate how much it costs to start a business. Something that Charlotte Alt focused on in The Times, quoting our Adviser Dana Denis-Smith who founded Obelisk Support with just £500.

We also found that the public thinks entrepreneurship is a young(ish) person’s game – saying 30 is the best age at which to launch a business. As you’ll all know from reading this newsletter, academic research indicates it might be closer to 45.

Our Head of Research and the report’s co-author, Eamonn Ives wrote about it for City A.M. As he puts it:

“Entrepreneurship isn’t for everyone, and nor should it be. Productive economies, after all, are those which are built upon a healthy division of labour – where workers do what they’re comparatively best at relative to everyone else in society. But at the same time, it’s a fact that startups are engines of innovation and wealth creation. If we’re to continue to harness the unique advantages they confer, myths such as those above must be dispelled.”

(City A.M. also reported on it, and we were pleased to see Business Minister Kevin Hollinrake sharing it enthusiastically on his LinkedIn. We will be equally pleased if you were to do the same!)

Growing Pains?
The Department for Business and Trade has got in touch to ask us to share their upgraded Help to Grow hub. The aim is to provide a ‘one-stop shop’ of support and advice for small firms. If you have any feedback let us know and we can pass it on.

One Day
Inspired by the Federation of American Scientists, UK Day One was recently launched to help advance the UK’s science and tech policy landscape. Specifically, they want to develop a portfolio of proposals that can be implemented by the new government – whoever that is – within the first 100 days. 

We’re partnering with them on a salon focused on policies to attract the best and brightest scientists and technologists (we already have a fair few ideas). I’ll share more details in the next couple of weeks, but let me know if you’re keen to be involved. We’ll be looking for people with a deep knowledge of policy in this area, as the paper will be written off the back of the salon.

Into Labour
On the subject of the next government. Given the current polling, I think it’s fair for us to ask: what would a Labour Government mean for entrepreneurs? It’s the question we’re most often asked, so we’re putting on an event where you can garner more insights.

Sign up to my Friday newsletter here.

The Lilac Review

It can be tricky to write about disabilities. As Small Business Britain’s excellent Disability and Entrepreneurship report acknowledged in its introduction: “There is no single consensus on how to talk about disability. The word disability covers a wide range of conditions, manifests in an array of differing lived experiences, and is understood in different ways.” But we shouldn’t let this hold us back. 

That’s why I’m delighted to share that I’m joining the Steering Committee of The Lilac Review, a government-backed independent review, aiming to tackle the inequality faced by disabled-led businesses and level-up entrepreneurial opportunity across the UK.

It will be chaired by the Department for Business and Trade, the Department for Work and Pensions and Victoria Jenkins, CEO and founder of Unhidden. I’ll be working with a topnotch group of entrepreneurs with disabilities, including Sarah Berthon, founder of Excel Against The Odds; Dr Mark Esho MBE, founder of Easy Internet Solutions; Joseph Williams, CEO and co-founder of Clu; and Martyn Sibley, co-founder of Purple Goat Agency. 

Disability and entrepreneurship is an under-researched topic, but we’ve held a few events over the years that have shown the need for more. Our webinar Disability in the Time of Coronavirus taught me a lot. For example, while the impact of the pandemic clearly had a negative impact on many disabled people, for some the realisation that people can work and build businesses from home opened up new opportunities.

That webinar featured Liz Johnson, gold-medal winning Paralympian and co-founder of The Ability People, who shared how the sporting industry had changed in its approach to disabled athletes and suggested that we can transfer this into every aspect of our society:

“Authentic inclusion and normalising people’s differences is what’s going to make the world move forward and what’s going to support people with disabilities to use their entrepreneurial skills and opportunities [...] We have to push and work with people to constantly make sure that accessibility is the underlying factor to everything and people are included in consultation at every level because you can’t be expected to fix things for people. If you don’t know what’s wrong with them.”

Entrepreneur Kush Kanodia argued that the ‘fear’ of losing benefits is the single biggest barrier to disabled entrepreneurship: “We need to focus and enable an environment where disabled entrepreneurs feel confident and not afraid to take the additional risks that are associated with starting a new business.”

The Lilac Review was spearheaded by Michelle Ovens CBE of Small Business Britain, so I know it’s sure to be two things: laser-focused on practical change and shot through with positivity. Get in touch with me if you want to chat about this review.

Final Call
We’re deep into a piece of research on neurodiversity and entrepreneurship. To help bring our report to life, we’re looking for neurodiverse founders of tech (or tech-enabled) startups to feature as case studies. There’s still a little bit of time left to get in touch with Eamonn to learn more. 

AI-volution
There aren’t enough hours in the day to keep up with the latest developments in AI. While some people reading this will have a solid handle on how the world is being turned upside down, many more will feel perplexed. For those wanting to understand the past five years, you could do no better than carving out an hour to read Nathan Benaich’s The State of State of AI Report. 

Advisers’ Meetup
After a great evening at OakNorth, this month we’ll be hosted by Ben Greenstone, Partner of Milltown Partners. Ben is an entrepreneur, having founded Taso Advisory, which was acquired by Milltown Partners last year. The attendees will be a mix of entrepreneurs, policy people and corporates. While we need to give priority to our Advisers, please request a place and we’ll let you know early next week if there is space.

Sign up to my weekly newsletter here.

Trumping the USA

Once bitten hasn’t made enough Americans shy. It’s looking possible, if not likely, that Donald Trump will be back in the White House. But even if Trump wins a majority, there will be a sizable number of entrepreneurial people who look at their homeland and wonder if it’s where they want to build a life. I can’t be alone in looking at the States and concluding that despite its weather and success it’s not the place I would like to live.

Hot off the press, my colleague Eamonn Ives writes for the i on why the UK should be ready to poach America’s entrepreneurial class. But we can’t sit back and wait for them to come to us. We will need proactive, laser focused policies. Here’s one of a couple that Eamonn mentions:

“We should grant eligible American citizens access to the long-standing Youth Mobility Visa. This visa entitles people aged between 18 and 35 to live in the UK for up to 24 months, gain employment, or set up a company of their own. Holders cannot access public funds, or use it to bring family members or dependents across with them. They have to pay an annual £470 healthcare surcharge when they apply, plus a £298 application fee, and prove they have enough personal savings to support themselves properly when they’re here. Already, we offer this visa to people from anglophone countries such as Canada, Australia, and New Zealand. It’s time to open it up to our friends across the pond.”

I recommend reading his article in full.

Round Two
Alongside Startup Coalition, UKBAA, Alma, Extend Ventures, Enterprise Alumni, Angel Academe, Angel Investing School and EISA – and backed by thousands of entrepreneurs – we’ve sent a letter to the Chancellor to call for the reversal of the upcoming changes to the definition of High Net Worth Individual Investor. 

You can read last week’s newsletter for more context, although friend of The Entrepreneurs Network and angel investor Hailey Eustace explains why this matters more broadly and succinctly in this LinkedIn post: “Since they were first mooted, the investment market has changed. The changes were first proposed in 2021 when angel investing and VC investment spiked. Since then, first-cheque investing figures have fallen off a cliff, with the number of first-round seed-stage deals in 2023 down 28% year on year and at a ten-year low at 1,025. This is down from 1,973 in 2021, when this measure was consulted on.”

And: “Female and underrepresented founders will be hit hardest. Underrepresented founders already have a harder time accessing capital. As female-led angel groups and others have warned, the changes will squeeze out more women and ethnic minority angels. We know these investors are more likely to back companies overlooked by others. This means female entrepreneurs, diverse founders and companies outside London will find it even harder to raise the funding they need.”

As Dom Hallas at the Startup Coalition updated today: “there is no legislative mechanism now available to the Government to change the rules ahead of their implementation at the end of the month. The changes are ‘affirmative’ secondary legislation - meaning they require a debate in Parliament in order to reverse. This isn’t going to be possible before next Wednesday.”

But this doesn’t mean the fight is over. As Dom writes, there are people in government who are trying to fix things. And you can still exert pressure by signing this letter.

Till You Make it
Technological innovation isn’t always and everywhere an unalloyed good. As techUK’s latest Policy Pulse argues, one of the big stories of this year will be the potential impact of synthetic media, particularly deepfake images, audio, and videos, on democratic elections.

The policy landscape has yet to catch up. As always, the key challenge here will be threading the needle between stopping the bad stuff (which is a lot wider than influencing elections) without limiting all the good stuff that comes with this technology. It’s hard for governments and regulators to do this because they aren’t at the coalface of innovation, which is where we and other organisations must step in.

But we rely on your expertise. So let me know if this is your area of business and I’ll let you know if and when we need to tap into your brains.

Subscribe to my Friday newsletter here.

Side of the Angels

In 2019, the entrepreneur, investor, influencer, and podcaster Grace Beverley nearly crashed our website. It didn’t take much – Grace just posted a link on Instagram to her 1 million followers directing them to a report she was featured in as a case study. We had more traffic that day than at any other time in our 10 years. I was reminded of that this week as I got sent her LinkedIn post by multiple people highlighting new legislation threatening female investors and entrepreneurs.

As Grace writes: “On 31st January, new legislation will come into place that is going to impact the barriers to entry for women becoming angel investors immeasurably: As it stands, investors on angel investing platforms have to earn over 100k. New government legislation will see this raised to £170k. This will disproportionately impact the pool of female investors in the UK. In fact, there are some areas of the UK with NO women who earn over 170k.”

This isn’t the first time this issue has been raised, but this is the first time the stats have made the picture so clear. The chart, which is based on research carried out by Marla Shapiro of HERmesa Angel Syndicate and Roxane Sanguinetti of Alma Angels, is shocking. Based on 2020/21 earnings, this would mean huge declines in eligibility for investors across the board, but in some regions – namely the North West and Northern Ireland – no women at all would qualify as ‘sophisticated investors’.

Investors calling for wider tax breaks isn’t much of a story. But no women in entire regions of the UK being able to access investment reliefs is a very big deal. Clearly, it should rise with earnings inflation, but such a large amount in one go is a hammer blow to female entrepreneurs and investors alike.

Homophily is real: people invest in people like them. If this goes through, fewer female investors will mean fewer female scaleups. There’s clearly a balance to be struck between protecting investors and unlocking investors. But this isn’t balanced. Drop me an email if you want to be kept updated on this issue.

Fix Everything
On Monday, I went to Here East in the Olympic Park to see the Secretary of State for Science, Innovation and Technology deliver her #ScaleUpUK speech. In it, she announced the creation of a scaleup forum, pitching and investment opportunities, and a regulatory support service.

Alongside the speech, the Regulatory Horizons Council released a report on The Role of Regulation in Supporting Scaling-up, which echos some of the recommendations that our friends at Form Ventures have been making in their efforts to ‘fix the regulators’.

The announcements haven’t gone without criticism though. Jonny Clark went in with both feet in an article on UKTN. While I don’t agree with it all, I think he has a paragraph that should be taken seriously: “The main problems facing startups in the UK right now are education, tax, immigration, regulation, housing and transport-related. These are all exacerbated by sudden swings and changes in direction every couple of years to mask the inertia, overregulation and stagnation that permeates an increasing number of our civic institutions.”

Obviously none of this is in the power of Michelle Donelan MP to fix on her own, and we can still broadly welcome the announcements she made. But it can’t distract from the wider problems: we need to fix a whole lot more than just the regulators. Let’s hope Donelan uses her chair at the Cabinet table to get her colleagues focusing on all of those other issues Jonny mentions too.

Neurodiversity
We are busy writing a paper on neurodiversity and entrepreneurship and are looking for some case studies from people who have been diagnosed as such. Get in touch with Eamonn Ives if you would like to be considered.

New Year
I’m delighted to announce we have three new Advisers: Ilda de Sousa, Partner, Immigration at Kingsley Napley; Rodolfo Rosini, Co-Founder & CEO of Vaire Computing, and Daniel Astaire, Managing Partner at Grosvenor Law. 

We’ve been drawing on Ilda’s deep expertise on immigration policy for years, so getting her involved is long overdue. Rodolfo is an incredibly smart serial entrepreneur who thinks big and will help keep us focused on the things that really matter. Daniel sat as a cabinet member on Westminster City Council from 2001-18, so, among other things, will bring that experience and interest in local government to the table.

Our Advisers are an integral part of the work we do. Drop me an email if you’re keen to get involved.

Sign up to my Friday Newsletter here.

All Mine

Mark Twain famously quipped that he didn’t have time to write a short letter, so wrote a long one instead. The modern twist is the observation that most books should be articles, most articles blogs, and most blog posts tweets. (I’m not sure what most newsletters should be.)

Taking this advice to heart, this year we’re launching a new way to publish research. ‘Explainers’ allow us to really hone in on policy issues impacting entrepreneurs without the rigmarole of writing a full report.

Our first explainer came out today. Dr Anton Howes, our Head of Innovation Research, has written an easily digestible 1,300 words on how UK copyright is impacting the way founders train AI. Anton is reporting from the coalface, having been involved in countless meetings and negotiations on the topic with the government, regulators, AI companies and rightsholders.

As his thread on X (Twitter) explains (likes and shares are always appreciated): “It’s become a fraught issue lately. In 2022 the UK government announced it would implement an exception from copyright for all copying of material made for the purposes of text-and-data mining. But this provoked a backlash from the creative industries, and in 2023 the government dropped its proposals. Since then, it has been trying to host negotiations for a voluntary code of conduct for AI companies and copyright owners.”

The ongoing lack of clarity has been disastrous for AI startups working in this space, and confusing for creatives who don’t know where they stand.

It’s a prickly policy area, but Anton turns to other countries for inspiration. As far back as 2018, Japan created a broad exception for text-and-data mining of lawfully accessed material, on the condition that copies made are read only by machines, and not humans.

In Singapore, reforms enacted in 2021 created a blanket exception for text-and-data mining of lawfully accessed material, with a similar proviso that the copies must be made only to be read by computers, not humans. While in Israel, the Ministry of Justice has attempted to clarify things by issuing an opinion that copyright law does not prevent the mining of lawfully accessed copyrighted material.

The EU’s 2019 Copyright Directive extended the exception to mining for both commercial and non-commercial uses, but it also allows copyright owners to explicitly opt- or contract-out of having their material being used for training AI. As Anton concludes in his thread: “Funnily enough, this is very similar to an option that was floated in the UK before the government made its 2022 announcement that it had to u-turn on!”

This sort of uncertainty impacts investment and jobs. It’s time for clarity.

Got Form
While important for UK economic growth, the odds are high that text-and-data mining isn’t a key issue for you. So what’s your small or big ask? 

If we think what you’re suggesting is a step towards making the UK the best place in the world to start and grow a business, we will amplify your voice. It’s why we exist.

Whether it’s for our explainers or for our upcoming manifesto report now is the time to let us know what you – or the businesses you work with – need to succeed. I put out requests for your ideas quite regularly, but that’s because we always get interesting responses. So here is a Google form to make the whole process easier.

As our Head of Research Eamonn Ives wrote in his latest APPG newsletter: “In an ideal world, the trials and tribulations of government affairs wouldn’t be a concern for business owners – who we would rather were able to focus their energies on improving their products, upskilling their staff and so on. But the truth is, politics does matter. And it matters that entrepreneurs’ voices are heard at the volume they deserve.”

Sign up to my Friday Newsletter here.
 

Making Progress

2024 will be a big year for entrepreneurship policy. There will be manifestos and (almost certainly) a General Election. The Prime Minister has done us all a huge favour by nixing the dullest question in politics: when do you think the election will be? Sunak’s answer: the second half of the year.

For our part, we’ll be celebrating our 10-year anniversary. Alongside a party to thank everyone who has supported us, we’ll be launching our own manifesto that all the major parties are welcome to steal ideas from. (Equally, if you have any policy ideas you think we should steal from you, share them with Eamonn Ives.)

A lot has changed in ten years. First and foremost, the Great Stagnation is over. Entrepreneurs are driving forward ever more mind blowing innovations. Whether in artificial intelligence, quantum, CRISPR, or renewables, UK companies have been integral to the progress we’ve seen.

Despite this, outside of my bubble of wonder – where literally every day something incredible is happening – things seem bleaker. Over a longer period than 10 years, and using Ngram data, John Burn-Murdoch argues in the FT that we’ve begun to shift away from a culture of progress, and towards one of caution, worry and risk-aversion. Crucially, his argument isn’t just that progress changes people’s minds, but that there is growing evidence it also works the other way – that people’s changed minds cause economic progress. It’s something that we have been banging on about for a while, and it’s a truism for entrepreneurs who are quite literally waking up each day and remaking the world in their image.

If, as a country, we were to make a collective New Year’s Resolution, it should be to eulogise more about the incredible progress that is being made in the world. This isn’t about being panglossian – quite the opposite. It’s because we know we aren’t living in the best of all possible worlds that we aspire to make it so.

Order, Order
Back in 2021 our Head of Innovation Policy Anton Howes and Ned Donovan called for the creation of a new order of chivalry – an Elizabethan Order – to raise the status of innovators, entrepreneurs, engineers, and scientists. Part of the reason was that the Order of the British Empire failed to do this, with on average only 6.7% of the awards being given for those activities. Instead, it largely goes to philanthropists, civil servants, or people who are already famous for sports, acting, and music. 

With the 2024 New Years Honours, we had hoped for some improvement, but this year it’s actually fallen again, for the second year running. Last year it fell to 6.2%, in the Birthday Honours in July it fell again to 6.1%, and in this year’s New Years Honours it’s just 5.95%. Once again, it shows the need for a new and dedicated order.

Still, that 5.95% contains some incredible people. For example, our Adviser Andrew Dixon (now Andrew Dixon OBE) received recognition for his work for services to prisoners and ex-offenders, to property tax reform and to entrepreneurship.

As per our collective New Year’s Resolution, here are Andrew’s thoughts on why the UK is such an attractive place to grow a business: “The UK has an amazing combination of incredible entrepreneurial talent with some of the world’s best academic research institutions. This combination makes for a very powerful mix: not only do we have people who are able to see ahead of the curve and anticipate the rapidly changing needs of customers, but we also have the technology to do just that in new and more efficient ways.”

You Say Hello
We have two events this month that may be of interest. First, if you’re considering becoming an Adviser, we might be able to squeeze you into our inaugural monthly Advisers' Meetup. Second, we have an event in the House of Lords on how entrepreneurs can support the next generation. We will need to prioritise Patrons, Advisers and Supporters, but we will try our best to accept as many of you as the room allows.

Sign up for the newsletter here.

Year Out

There was a time when my end-of-year roundup would be a chronological overview of everything we’ve done and achieved. We’re quite a lot bigger now, so doing so would be tiring to write, and, more importantly, tiresome to read. I’ll try to keep it brief (and there is always this Twitter thread if you want to keep it even briefer).

What We Believe
Perhaps the biggest undertaking of 2023 was our April essay collection Operation Innovation, which had the unenviable task of living up to its unsubtle subtitle “How to Make Society Richer, Healthier and Happier.” Driven and edited by our Head of Research Eamonn Ives, it manages to both lift you up in showing the incredible future which entrepreneurs are building, but also wake you up to policy failure modes holding them back from realising their ambitions.

If you read nothing else, the opening essay (which I had little hand in writing) does a sterling job of explaining what we believe in fewer than 1,000 words.

In October, we released another wide-ranging report with Mishcon de Reya: our inaugural Risk Readiness Report 2023, which set out to better understand entrepreneurs’ broad attitudes to risk – as well as the ones keeping them up right now. Among other things, we revealed that entrepreneurs don’t think they are natural risk takers, but because risk-taking is important to business growth their risk tolerance increases as businesses grow older. (You’ll also need to click through if you haven’t yet read the juicy stats on what entrepreneurs think about the various risks associated with a Labour versus Conservative win next year.)

Culture Club
Our ambitions are big – we want to build an institution that impacts our very culture. That is why in May we released Blueprint for a New Great Exhibition, which pretty much does exactly what it says on the tin. This isn’t a theoretical paper – it’s a call to arms and description from our Head of Innovation Research Dr Anton Howes detailing how to hold a twenty-first-century Great Exhibition.

Anton’s long-term, practical vision also came through in January’s What Applied Learning Really Looks Like, kindly supported by Young Enterprise, and recently championed by the former secretary of state for education Justine Greening. We turned our attention to a very different part of the education system in Academic to Entrepreneur in July, making the specific case for Professor’s Privilege to ensure academic founders are able to more easily spin their companies out or universities, and broader recommendations that fed into the Government’s recent Spinouts Review.

Greatness From Anywhere
Immigration has always been a critical issue for the most ambitious founders in our network. Not least, because so many of them are themselves immigrants. August’s Job Creators 2023 landed big, with many asking the question: “​​Is the UK losing some of its pull for foreign founders?”

For anyone who really wants to understand the international dynamics driving the dearth and demand for talent, our new Researcher Derin Kocer wrote a cracking report in September with kind support from ABE: Passport to Progress. It highlights best practices from around the world – including from the UK. (Though this could be offset depending on how the Government’s 'evolving' immigration changes land.)

We also continued our long-running work with Barclays on our Female Founders Forum. In Accelerate to Excel, Margaret Mitchell took stock of the data – particularly the stubborn equity funding gap – and our many previous reports, concluding that there’s lots to be encouraged by, lots more to do; and every reason to work harder. A view echoed by The Times.

Taxing & Access
In March, through the All-Party Parliamentary Group for Entrepreneurship, we released Funding to Flourish, alongside a letter to the Telegraph letter signed by many of you, which made the case for why the Enterprise Investment Schemes and Venture Capital Trusts have been integral to supporting UK entrepreneurship and innovation. The recommendation were adopted in the Spring Budget.

In October, in partnership with Enterprise Nation and Intuit we released Making Tax Simple, which looked at how digital technology from both the private and public sector could drive productivity gains. We also partnered with Enterprise Nation on three Access All Areas briefing papers, looking at access to markets in March, access to space in June and access to entrepreneurialism for older workers in September.

TEN More Years
Next year we’ll be celebrating our ten-year anniversary. I hope our commitment to the cause and successes are clear, but we’re only too aware that with better policies entrepreneurs would be able to make many more people in the UK richer, healthier and happier. 

Now is the time to join us on our journey. As an individual, you can become an Adviser or Supporter online in a few minutes, while if you run or work for an organisation aligned to our goals, you can partner with us on research or events – book a time in my calendar here for a chat.

And a huge thanks to all our Patrons, Advisers, Supporters, and Partners. It's may be a truism, but it is still true: none of this is possible without your support.

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

World's Safest Museum

As Philip is on a well-deserved break, our Researcher Derin Kocer took over today’s newsletter. 

In his annual presentation, technology analyst Benedict Evans revealed that he refuses to talk about artificial general intelligence because – like anybody else – he “doesn’t know” what it can be. 

Frankly, this is true for most AI talk. Although there is a general feeling that this novel technology has the potential to change our lives, the consensus fades when it comes to what that change may look like. 

At the extremes, 'doomsters' think that one day somebody will ask a chatbot to handle their taxes and the AGI will conclude that destroying humanity is the best way to complete the task (the only two things certain in life: superintelligence and taxes). 'Boomsters' assume that any day now it’ll cure cancer for us. Nobody knows who is right. 

Other than European policymakers. EU lawmakers have been awkwardly boasting about writing the world’s first comprehensive AI regulation framework. Debate on how to regulate this novel technology matters a great deal. It’s not a coincidence that American conglomerates are spending so much money to shape the debate or that European startups are hiring former ministers to lobby on their behalf. 

However, regulation shouldn’t come at the expense of killing innovation. Europe should’ve been aware of this: compared to the US in market value, Europe’s tech sector is just a blip. No wonder why some worry about Europe turning into an open-air museum. Moving to America is part of the business plan for many successful European startups. Regulations aren’t the only reason, but they aren’t helping – that’s for sure. 

The AI Act risks being a part of this negative story. The EU could have produced a rulebook for startups to follow in the use cases of artificial intelligence, but policymakers went further. If this Act becomes the law of the continent, AI companies that build foundational models will need to “adhere to transparency requirements, including technical documentation and compliance with EU copyright law; conduct model evaluations, assess and mitigate systemic risks, conduct adversarial testing, report to the Commission on serious incidents, ensure cybersecurity and report on energy efficiency.”

It is estimated that compliance may cost around €300,000 for a 50-person startup. It will inevitably mean more lawyers and fewer AI engineers. While agreeing that a regulatory framework is needed for this technology, DigitalEurope’s Director General Cecilia Bonefeld-Dahl asks the right question: “At what cost?” 

Rule Britannia
If we play our hand well, all this can be good news for Britain. 

The UK is already Europe’s leading technology hub; it has a few of the world’s best universities and research institutions and, according to our survey with Mishcon de Reya, British entrepreneurs see more opportunities in AI than risks. The foundations are there to lead Europe on this novel technology. 

Putting more barriers in front of our startups’ access to talent is the only thing we shouldn’t do. However, the government doesn’t seem to agree. 

As I wrote in the New Statesman this week, the newly proposed immigration rules – which will increase the salary threshold for workers’ visas to £38,000 (£4,000 higher than the national average) – will disproportionately impact startups and research institutions. Most growing firms don’t have the financial resources to afford high salaries and, currently, a postdoc researcher starts at £36,000 at the University of Oxford. 

Before changing immigration rules for good, the government should do three things to make it work for our inventors and innovators: 

• The salary threshold for recent graduates of British universities should be lowered;

• Equity ownership should count towards the salary threshold;

• Academic institutions and research facilities should be kept outside the new salary thresholds. 

If you have any other policy suggestions to make the new immigration policy work, get in touch!

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

Small Wonders

This shouldn’t be a controversial opinion, but in some quarters it is:  we as a society should back businesses, no matter their size.

The vast majority of businesses are delivering the goods and services that make us healthier, wealthier and happier, even if there will be a few headline-grabbing bad apples from time to time. Good businesses are good businesses, whether they’re a sole trader or a multinational conglomerate.

Perhaps most controversially, we should defend large businesses because their economies of scale mean they deliver at low cost, ensuring that the poorest in society can afford things that were unimaginable luxuries for previous generations. We should back medium-sized businesses that are often the drivers of the most radical innovations, as they scale to become large businesses. And we should support small businesses that provide a level of service and human connectedness that can only be delivered at a local level. We think all these businesses can be entrepreneurial. 

Tomorrow I’ll be celebrating the smallest, as it's Small Business Saturday. It was founded by American Express in the US back in 2010, with Small Business Britain launching it with them in the UK a little later. The campaign shines a huge spotlight on the UK’s small business community, generating mass media coverage and gaining high-level support from across the political spectrum. Many small businesses take part in the day by hosting events or promotions, and joining in with the conversation online using #SmallBizSatUK hashtag.

Find out more about Small Business Saturday here, and find out if their tour across the UK will be visiting your town or city here.

Value Creation
I’m delighted to announce that Steve Rigby has joined us as a Patron. As I wrote earlier today for Forbes, “over the last ten years he has helped create over £500 million of value for his family business Rigby Group – one of the UK’s top ten wholly-owned private companies.” Now, he  wants to lend a hand to help the rest of the UK build and grow.

He is already doing a fair amount. Among other things, he is on the Board of Family Business UK, a national judge this year for EY Entrepreneur of the Year, chair of the Rigby Foundation, and a long-term supporter of Place2Be, most recently as Chair of the charity’s development board.

He recently wrote for The Times on what the UK needs to do to support family businesses, but his interests are even broader. He wants to answer questions like: How do we encourage entrepreneurialism? What is the role of venture capital? Where are our universities and IP? Do we as a country embrace capitalism?

Patrons are vital for supporting key policy areas. The great thing is seeing how our shared vision translates into change. Whether that’s Emma Jones CBE partnering with us on our Small Business Forum and the multitude of Access All Areas reports we produced together; Chris Hulatt, co-founder of Octopus Group, our first sponsor with whom we’ve worked with on multiple reports over the years, including Future Founders; Sam Smith who built finnCap and backed our ongoing efforts to imbed enterprise education in the curriculum; or Sukpal Singh Ahluwalia, who arrived in the UK in 1972 as a refugee, and went on to build and sell a company for £280m before sponsoring our influential Job Creators report. 

Smarter Regulation
The Department for Business and Trade has been in touch for us to share a couple of upcoming roundtables and call for evidence on smarter regulation. If you’re in or near Salford on 11 December 2023, or Cardiff on 12 December 2023, then register here. The call for evidence can be accessed here, and you can get in touch with any questions here.

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Statement Piece

As regular readers will know, we aren’t afraid to criticise the Government, or opposition, when we think they’re doing the wrong thing. However, it would be churlish to not give them a metaphorical ‘pat on the back’ when they get things right. As we responded: “To his credit, the Chancellor put the long-term interests of British businesses front and centre of the Autumn Statement.” 

I wrote about the impact on entrepreneurs for Forbes, and I was quoted alongside many others in UKTN. Following up on last week’s predictions, we welcomed the Government’s decision to make full expensing permanent, to extend the sunset clauses of the Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCTs), and to offer some compromise on R&D tax credits.

All the way back in 2018, we made the case for full expensing in a report for the APPG for Entrepreneurship unimaginatively titled Tax Reform, while the APPG more recently produced the much better named Funding to Flourish report, which called for the extension of the sunset clause for the EIS and VCTs.

We weren’t the only organisation calling for these and other things announced in the Autumn Statement. But Sam Dumitriu, our previous Research Director and now Adviser must surely take a lot of credit – along with Sam Bowman, another of our other Advisers, and Tom Clougherty of the Centre for Policy Studies – for convincing those in power that full expensing is as important as the headline rate of corporation tax. When it comes to EIS and VCTs, Christiana Hambro of the EISA deserves a special mention, alongside Will Fraser-Allen (Albion Capital) and Justine Duggan (Octopus Group) of the Venture Capital Trust Association (VCTA).

This is a long way of making the obvious point that all policy successes have many mothers and fathers, but it’s also testament to the fact that the UK’s civil society of think tanks, business and trade groups work well at educating and holding the Government to account.

Also of note, the Autumn Statement also accepted the findings of the spinouts review, which recommended  more standardised equity terms, clearer timeframe expectations and increased public funding for proof of concept funds. Our Head of Research Eamonn has an X thread for the tldr. While it didn’t go as far as we called for in Academic to Entrepreneur, it went as far as we could have expected.

As Sifted reported: “Founders will own more of their spinouts and will be free to focus on building breakthrough companies, rather than negotiating with TTOs,” says Nathan Benaich, the founder of Air Street Capital. “Today’s review is a significant victory for founders and the UK’s science and tech ecosystem.”

There was certainly some devil in the details (most obviously the fact that freezing income tax thresholds will more than offset the NICs reductions), but there were also a couple of angelic details that didn’t get picked up by many.

For example, Stian Westlake revealed that there will be funding for a new metascience unit, which will fund research into important questions about what sorts of innovation funding works, and how to improve them, and conduct experiments on funding methods.

While The Economist dug deep to uncover news that could transform the cutting-edge of medicine: “Medicines and Health-care products Regulatory Agency (MHRA) is working with Genomics England, Oxford University and Mila’s Miracle Foundation, a charity, to develop a regulatory pathway to allow one-off drugs to be designed and approved for use in individual patients in less than a year.” This is a big regulatory win, and added to the recent news that the UK is the first to approve CRISPR treatment for diseases, it is encouraging that the UK could be on the verge of fulfilling our call to become a Testbed Nation.

There is much more to unpick over the coming weeks, but I’ll summarise with the conclusion from my Forbes article:

“With the OBR’s growth forecasts down, Hunt was right to focus on Britain’s businesses as the key driver of future prosperity. It’s just a shame that this long-term thinking has not always been present in other fiscal announcements made in the last 13 years. With Brexit, the pandemic and crippling energy prices, the last few years have been incredibly tough for entrepreneurs. As our recent Risk Readiness Report with Mishcon de Reya showed, a significant proportion of entrepreneurs (39%) believe the overall level of risk in the business environment is higher now than it was 12 months ago, and the same proportion (39%) think the level of risk will only increase in the coming year. A bit of good news was well overdue.”

Wise Purchase
James Wise of Balderton Capital has just published Start-Up Century. It is based on two observations: more people than ever are choosing to, or having to, start their own businesses and become self-employed. But at the same time the obstacles to scaling a business and thriving as an entrepreneur are as prevalent as ever. This book is his attempt to address this challenge, to point out the many positives of having a more entrepreneurial economy, and to weave a way through the regulatory, financial, educational and cultural changes we need to make to seize on this renewed interest in entrepreneurialism.

I was lucky enough to have an early sight of the book. Recommended reading.

Join Us
On the 24th of January from 6pm to 8pm, OakNorth is hosting an informal drinks event for our Patrons and Advisers. In 2024, we’re going to host events every couple of months just aimed at our Patrons and Advisers. The second will be a more formal roundtable with the British Business Bank.  If you want to come along, just let us know. And if you want to find out more about becoming an Adviser, drop me an email.

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Our Response to the Autumn Statement

Overall verdict for entrepreneurs

The Entrepreneurs Network’s Founder, Philip Salter, said: 

“To his credit, the Chancellor put the long-term interests of British businesses front and centre of the Autumn Statement. 

Entrepreneurs will be particularly encouraged to see the sunset clause for the Enterprise Investment Schemes and Venture Capital Trusts, which have been such important drivers of UK startups, extended until 2035. With Labour also backing the policy, making full expensing permanent will give businesses the incentives and certainty to invest. And while it’s not perfect, the compromise on a merged R&D tax credits scheme is long overdue and will hopefully give clarity to businesses that have been disrupted for years by so much chopping and changing.

With the OBR’s growth forecasts down, Hunt is right to focus on Britain’s businesses as the key driver of prosperity. It’s just a shame that this long-term thinking has not always been present in other fiscal announcements made in the last 13 years.”

On steps to commercialise more academic research

The Government announced it would be accepting all of the recommendations of the Independent Review of Spin-outs. Among these recommendations are calls for: academics and their institutions to agree spin-out deals on market terms which avoid unnecessary negotiations; greater disclosure of deals to increase transparency; and the ability for universities to use funding to cover the costs of university technology transfer offices.  

Responding to the announcement, The Entrepreneurs Network’s Head of Research, Eamonn Ives, said:

“Ensuring that as much of the research as possible which takes place in Britain’s universities can be turned into dynamic companies will be essential for growing the economy and tackling problems such as climate change or our ageing population. In theory, the recommendations made in the Independent Review of Spin-outs represent a good first step for enabling academic entrepreneurs to build investable startups of their own, but it remains to be seen how they work in practice. If problems continue to persist, the Government should not be afraid to go further when it comes to boosting Britain’s spinout landscape.” 

[Note: In Academic to Entrepreneur, published by The Entrepreneurs Network this July, we set out how the status quo is failing academic entrepreneurs.]

On full expensing 

The Government announced it would be making its policy of full expensing permanent. 

The Entrepreneurs Network’s Derin Kocer said:

“Full expensing gives businesses what they need: incentives to make long-term investments. Making this policy permanent will offer certainty to invest and drive businesses to upgrade the nation’s capital stock, boosting our productivity and unlocking new opportunities for entrepreneurs and innovators across the country.” 

[Note: In June 2018, the All-Party Parliamentary Group (APPG) for Entrepreneurship was one of the first organisations to make the case for the full expensing in the UK in June 2018.]

On planning reforms

The Government announced it will progress the National Infrastructure Commission’s (NIC)

April recommendations on planning by delivering reforms to return the Nationally Significant Infrastructure Project regime, that it will strengthen the capacity of the planning system to deliver a better service for businesses, and that it will bring forward plans for authorities to offer guaranteed accelerated decision dates for major developments in England in exchange for a fee, ensuring refunds are given where deadlines are not met and limiting use of extension of time agreements.

The Entrepreneurs Network’s Head of Research, Eamonn Ives, said:

“Britain’s sclerotic planning system makes new infrastructure and housing more expensive to build and longer to develop. This hurts businesses who can’t otherwise make use of it, and denies opportunities for those who want to build it. Meanwhile, agglomeration is curtailed as people are prevented from moving to more productive areas to fulfil their potential. We therefore welcome the incentives for local councils and other reforms to speed up development.” 

[Note: In Strong Foundations, we highlighted how the UK’s rigid planning system drives up the cost of housing, office space, and lab space, and explained how this holds back our startup hotspots around the country.]

Shadows of Doubt

Entrepreneurs are uncertain about the future of Britain. That was a key finding from our inaugural Risk Readiness Report with Mishcon de Reya. It found that the challenging economic climate, supply chain disruptions and our unfavourable tax regime to be the most common risks impacting entrepreneurs’ businesses. And they expect things to get worse: not even a quarter (23%) of entrepreneurs believe the level of risk in the business environment will be lower in 12 months’ time. 

As Beauhurst revealed this week, equity funding has dropped off a cliff, with just 491 deals announced in Q3 2023. That’s a 17% decrease from the same period last year, and a 37% decrease in the amount invested. In fact, it’s the lowest number of completed deals in a quarter since Q3 2018.

This lack of business and investor confidence makes next week’s Autumn Statement all the more important. There is enough risk out there already without the added weight of political risk exacerbating things. 

A glimpse of a silver lining comes in hearing that the Chancellor is considering extending full expensing – which allows firms to deduct the full cost of any new investment in productivity-enhancing equipment from their corporate tax bill – into the next parliament. He should make it permanent.

As our Adviser Sam Dumitriu notes, between 2010 and 2019 the Annual Investment Allowance changed six times. “A ‘use or lose it’ time limited sale might be a great way for DFS to shift some sofas,” he writes, “but it is a terrible way to get business to make multi-million pound investments.”

The need for business certainty extends across many areas of policy. It’s why Hunt really needs to confirm the future EIS and VCTs on Wednesday, and why he should also take heed of Startup Coalition’s warning to offer stability and compromise around R&D tax credits, which have been chopped and changed to the deep detriment and distrust of entrepreneurs. 

Call Him Cameron
Who could have predicted it? However, like everyone else, we have written about the former PM’s return to politics. But more importantly, we’ve also dissected the wider reshuffle, and its impact on entrepreneurs, in the latest All-Party Parliamentary Group for Entrepreneurship monthly newsletter. Check it out.

Justice for the Young
Those of a nervous disposition should look away now. First shot: To keep pace with the cost of the welfare state, the UK will need to see annual economic growth of 2.9% over the next 50 years – a rate it has hit just twice in the last two decades, excluding the post-pandemic rebound. 

Second shot: By the end of 2026, the UK will have more people aged 65+ than under 18 for the first time in its history. 

Third shot: On current trends, the workforce is set to start shrinking in absolute terms as soon as 2043, potentially ushering in an era of negative growth. By 2072, the UK will have 1.9 potential workers per pensioner, down from around 3.3 today.

Chaser: Eamonn Ives, our Head of Research, and others have written for the CPS about how to fix things. Eamonn’s chapter in Justice for the Young is on the Power of Entrepreneurship and covers everything from planning policy, transport, culture and immigration. Recommended reading.

More Chaser?
Valentina Kristensen, Director of Growth and Communications at OakNorth has joined us as an Adviser. Valentina has been a big supporter of the ecosystem, most recently by supporting some solid research on scaleups by the Social Market Foundation – Full Scale and The Scale of the Opportunity.

We ask all our Advisers to let us know why they think the UK is an attractive place to grow a business. Valentina quotes OakNorth’s co-founder and CEO, Rishi Khosla: “The UK has so much to offer: we have world-class research universities (four of the world’s top 10 universities are here); forward-thinking regulators with an open approach to innovation; a strong framework of common law and a common language; and a timezone that allows true global operations across EMEA, APAC, and the Americas. The result is that the UK has created more tech unicorns than any other country, bar the US and China, and is a world leader in terms of attracting investment. London is particularly unique being home to a global finance centre (including the London Stock Exchange), a tech centre, and a policy / regulatory centre all within a few tube stops of one another, making it an exceptional place for innovative companies to be born and thrive.”

Get in touch if you want to find out more about becoming an Adviser.

And relax.

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Nature's Course

In partnership with

Nature has a great article making the case that postdocs “need improved career guidance and programmes that teach them about entrepreneurship, expanding their career options and increasing their capacity to tackle the many problems facing humanity today.”

This is spot on. While 65% of postdocs are planning careers in academia, there are nowhere near enough jobs for them. We should harness their talents for entrepreneurship. 

Nature profiles Canada’s Invention to Innovation (i2I) programme. Developed in 2015 at Simon Fraser University in Burnaby, it provides academic assistance and financial help to graduate students whose research has the potential to be commercialised. To simplify: it’s an entrepreneurship course for researchers. It’s since expanded across the country in partnership with other institutions. 

Surprisingly, the article doesn’t mention Innovate UK’s ICURe, which, when I last looked at the promising programme, had equally impressive stats and was estimated to have created £3.94 of economic benefits for every £1 invested. 

But beyond the big numbers (which probably deserve a bit more interrogation), we want to hear from those with experience of the UK’s or other systems. Given how open this Government has been to shaking up spinouts, this might be another fruitful area for reform.

Delicious! Excelente!
I’ll have more details in the coming weeks, but we’re scoping out some research into entrepreneurs’ experience of British embassies and consulates around the world, when it comes to getting help with exporting and internationalising. If you have any experiences to share, get in touch with Derin.

Lilac Review
Michelle Ovens CBE, founder of Small Business Britain, is campaigning for a Government-led independent review aimed at making the UK the best place for disabled entrepreneurs to start a business: The Lilac Review. Mich has a post on LinkedIn where you can pledge your support.

Phoenix Founders
Our friends at Beauhurst are conducting research on "Phoenix" founders. (It’s a new term to me, but I think it works.) Phoenix founders are entrepreneurs who had an earlier business that failed but who are finding more success in a subsequent venture. They're keen to hear from founders who are willing to talk about how what they learnt the first time round helped them achieve success. Drop Henry an email if you want to share your story.

It’s a truism that bears repeating, but in the UK we don’t talk enough about failure; nor are we as accepting that it is inevitable if you want a dynamic, competitive, innovative and risk-taking business environment. Past research has found that even after failure, second, third, or even tenth time founders are more likely to be successful. But seeing Beauhurst’s data brought to bear on this question will add a lot more weight – as will any insights you can provide on how you bounced back. It could also serve an inspiration.

Natural Intelligence
Progress in artificial intelligence rests on some of the world’s smartest people’s natural intelligence. Currently, the UK, alongside the US and China, is one of the best places in the world to work in AI. But if we fail to bring in more elite talent, it’ll only get harder to compete. As our researcher Derin Kocer argues in City A.M., an optical obsession with ‘overall migration figures’ has made talking about any kind of immigration an uneasy subject, but this silence needs to come to an end.

Derin’s article was picked up by International Business Times, which highlighted Canada’s work in trying to poach talent from Silicon Valley. A point not new to us. 

And it’s not just AI. As I wrote about Nazim Valimahomed, co-founder of Kroo – this week’s newsletter sponsor: “Originally born in Uganda, Nazim and his family fled to the UK as refugees following Idi Amin’s seizure of power. They then moved to Canada, where Nazim spent the rest of his childhood growing up before going to university. After graduating, he relocated to Moscow as Russia was opening up economically. In 2015, Nazim became a permanent UK resident using an Entrepreneur Visa.”

There are lots of policy levers for getting more talent like Nazim into the UK, but if you were to just give me one it would be tweaking the incredible High Potential Individual (HPI) visa – which currently gives graduates of the top 100 universities a two-year work permit – by expanding the list of universities and higher education institutions it includes. As Derin points out in relation to AI talent, the current list doesn’t include highly selective research facilities such as Carnegie Mellon and the Indian Institutes of Technology. It really, really should.

Message from our Partners
Kroo has launched a round of crowdfunding in partnership with Crowdcube. With £72m raised from private investors, including £14.5m in Kroo’s B+ round, crowdfunding opens the investment opportunity for Kroo’s customers and the wider public. Since launch, Kroo has opened 145k current accounts and acquired £765m in deposits with an average acquisition cost of £31 over the last 6 months. 

Early access for this crowdfunding round opened for current customers on 1 November, with public access beginning 15 November. Supporters can invest from £10 to £500,000. This low threshold for investing is designed to ensure as many people can be part of the community Kroo is building to change banking for the better. The funds will support Kroo’s ambition to put money and power back into customers’ hands, and become the first bank people trust and love.

Those interested in supporting the crowdfunding round can head here – public access will go live on 15 November.

Don’t invest unless you’re prepared to lose all the money you invest. This is a high-risk investment and you are unlikely to be protected if something goes wrong.

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Accelerate to Excel

Yesterday we launched Accelerate to Excel, the latest annual report from the Female Founders Forum, which we have run with Barclays for many years. It was covered in The Times, CapX, UKTN, and elsewhere.

I’m afraid the headline data doesn’t make for pretty reading: just 3.5% of equity investment for the first half of 2023 went to female-led businesses, while 85.1% went to male-led firms, and 11.4% went to startups co-led by women and men. To put that into context, according to Beauhurst data, since 2013 that 3.5% figure is fourth lowest of the last 10 years (chart here). You would have to squint incredibly hard to see a trend going in the right direction.

It’s not for want of female founders. In February, we learned that more than 150,000 companies had been started by women in 2022, which means they now represent 20.5% of all UK businesses, up from 16.7% in 2018. And there is a pleasing (if moderate) trend towards the number of deals going to female-led firms. But ultimately, female founders aren’t getting the cash.

We know the policy around this isn’t easy. That is why over the years we’ve looked at this from a number of different angles – always backed up by hard data – from first revealing the extent of the equity funding gap, the role of networks and mentoring, the importance of the education system, the impact of the pandemic, the breakdown of female founders in high-growth sectors, and the insights of female founders who have raised in excess of £1 million. One in A Million was one of my favourites: it showed the breadth of challenges faced by some of the UK’s most fearlessly ambitious founders, alongside the incredible success stories too.

As Annabel Denham, founder of the Female Founders Forum, said in her speech at the House of Lords yesterday, hard-fought progress has been made on things like childcare reforms, but as Caroline Nokes, Chair of the Women and Equalities Committee made clear in her speech, there is much work to be done.

“It is immensely rewarding to see the positive progress made from the concerted efforts across the financial services industry, education institutions and government to lower the barriers to female entrepreneurialism,” said Juliet Gouldman of Barclays. “However, the systemic issues identified will not be resolved overnight, so an ongoing determination will be required if we are to achieve lasting change.”

The title of the latest report is about the need for speed when it comes to closing the gap, but also references the positive role that accelerators are playing in supporting female founders – 56% of entirely female-founded high-growth companies have attended an accelerator, compared to 27% for men. And in 2022, our friends at the Centre for Entrepreneurs uncovered over 400 active incubators and 300 accelerators, representing a near doubling of provision since the last comparable survey was conducted by Nesta in 2017.

To this end, Barclays Eagle Labs and AccelerateHER have launched the Female Founder Accelerator for which applications are open. Alongside policy change, we need practical efforts like this too.

So what next for the Female Founders Forum to move the needle? That’s the question we’ll be asking ourselves in the coming weeks and months, as we draw up plans for 2024. This isn’t a rhetorical question. We’re keen to hear your ideas about both policy and practical support we can offer.

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Running with Risks

As Eamonn discussed last week, we recently released the first Risk Readiness Report with Mishcon de Reya.

There is a lot in the report, but Eamonn, and the media at large, understandably focused on the fact that our survey revealed that Labour politicians received a net approval score of +17% on the question of whether entrepreneurs thought they understand the needs of their businesses. This is versus +5% for Liberal Democrat politicians, -2% for Conservative Party politicians, -2% for Greens and -3% for SNP. While it’s easy to be popular in opposition, it’s even easier to forget how far and how quickly Labour has come since the days of Jeremy Corbyn.

Nevertheless, whoever wins the next election has their work cut out, as the report makes clear.

A significant proportion of entrepreneurs (39%) believe the overall level of risk in the business environment is higher now than it was 12 months ago, and the same proportion (39%) think the level of risk will only increase in the coming year. Less than a quarter (23%) of entrepreneurs think the level of risk will be lower in 12 months’ time.

The most common risk affecting entrepreneurs’ businesses right now is the difficult economic climate – with 49% of founders stating it is impacting them. This is followed by supply chain disruptions (38%), and Britain’s unfavourable tax regime (27%). Entrepreneurs expect these three challenges to remain as the biggest risks impacting their businesses in 12 months’ time.  
Despite this, nearly three fifths (59%) of entrepreneurs believe it will be easy to attract the funding their business needs or to achieve an appropriate market valuation within the next 12 months in Britain, against 13% who think it would be difficult. We will wait to see whether this optimism on funding is misplaced.

I urge you to read the report in full (or at least scan the charts). For example, it may surprise you that potential investors were seen very positively by entrepreneurs (+50% net positive), and regulators are looked upon kindly too (+35% net positive). Universities, in contrast, have some work to do (+14% net positive) – we expect the government will go some way to helping this by implementing some of our recommendations for overhauling the spinouts regime.

As Ed Turner, Chair of Mishcon Future writes in his foreword: “Entrepreneurs are pivotal actors in ensuring that we continue to innovate and grow. Their ability to do this, however, is limited if they’re preoccupied with battling headwinds. Some risks are inherent, but many others can be reduced, and we hope this research gives policymakers a better idea of how to go about doing that.”

Coding Enigma
The inaugural Risk Readiness Report also finds that 76% of founders see AI as an opportunity for their current business model. Which is why it was great to see Startup Coalition, Onward, and Tony Blair Institute for Global Change join forces to release The UK’s AI Startup Roadmap. 

It won’t surprise you to know that we agree with much in the broad-ranging report. One area it touches upon is the lack of clarity over copyright. It’s a genuinely thorny issue, as Benedict Evans shows in this typically insightful essay. Some questions he asks:

• What happens if I “make me a song in the style of Taylor Swift” or, even more puzzling, “make me a song in the style of the top pop hits of the last decade”? 

• What if I use an engine trained on the last 50 years of music to make something that sounds entirely new and original?

• ​​Ultimately, if you put all the world’s knowledge into an AI model and use it to make something new, who owns that and who gets paid?

Behind the scenes, Dr Anton Howes has been working for months on trying to crack the code. We’ll have more to say on this next week to coincide with the Bletchley Park AI Safety Summit.

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Betting on Red

Spirits are rightly running high in the Labour Party. Victory in the Tamworth by-election, victory in the Mid Beds by-election, and most importantly of all, victory in our latest batch of opinion polling. Specifically, we asked entrepreneurs for their views on which politicians best understand what their businesses need to succeed – and by far and away, it was those with red rosettes pinned to their chests who came up on top. 

Forty-three percent of founders agreed that Labour politicians know what they require, against 26% who disagreed (giving a ‘net approval’ score of +17%). To rub salt in the wounds of their Conservative counterparts, more entrepreneurs believed Tory politicians do not understand what their businesses need (37%) than do (35%), giving a net negative figure overall (-2%).

Before they get carried away, however, it’s perhaps worth pausing for a moment. Despite Labour’s impressive lead, still less than half of entrepreneurs believe that the party which looks set to lead the next government properly gets business. What’s more, we also found out that scepticism about all parties’ entrepreneurial acumen dwindles when we look specifically at responses from founders running smaller operations. If our polling tells us anything at all, it’s that entrepreneurs still feel there’s a disconnect between their world and Westminster – encouragement enough to us that we need to keep banging the drum for policy reforms to ensure Britain’s startup scene is as vibrant and successful as possible. (More on this later.)

The numbers above were the results of just one of many questions which we asked to underpin our latest publication. Alongside the leading law firm Mishcon de Reya, we launched our inaugural Risk Readiness Report – which will be an annual fixture, aiming to better understand entrepreneurs’ thoughts and feelings towards various aspects of risk. As well as the political stuff, we quizzed founders on AI, raising investment, regulators, future risk expectations, and more. You can read the report in full by clicking here, get the TL;DR on X, and I’ve written about it for CityA.M. if you’re still keen for more. (As ever, we’re eager to hear what you think about our work, and please do consider sharing among your own networks – it really does help us to get the message out.)  

Smarten up

Regulation can make or break a startup. In extremis, if what you’re selling is prohibited, your business simply cannot operate (not legally, at least). Short of this, regulations can still fatally encumber entrepreneurs – by raising the costs of doing business and making otherwise viable ventures uneconomical. 

Of course, plenty of regulations exist for a reason. Well-designed rules protect consumers, workers, the environment, and so on, and society as a whole is better off for them. But others have less logical origins. Decades of academic work from ‘public choice’ economists have, to my mind, convincingly explained why we tend to get the regulations we do, which serve special purposes rather than the collective interest. Less cynically, regulations often get introduced with the best intentions, but can quickly end up backfiring. (Our Adviser Sam Dumitriu wrote a great piece on this last year.)

Successive governments have long sought to bear down on red tape, and the current one is no different. This week, the Department for Business and Trade issued a call for evidence about delivering a smarter regulatory landscape. They “are particularly interested in success stories and areas for improvement on regulatory agility; proportionality; and consistency of approach,” and want “to understand any further steps we can take to reform the existing stock of regulation on the UK statute book.” 

As followers of our work will know, recommending regulatory tweaks to enable easy win-wins is something we pride ourselves on, so we’re looking forward to feeding into the consultation. But we can’t do it alone – many of our best ideas come from the entrepreneurs we work with, who are at the coal face of abiding by rules which hold them back for no apparent reason. 

So, if there’s a regulation that’s stifling your success, do let us know. Readers will also remember last week’s call for ideas to go into our manifesto for entrepreneurs – consider this a reminder to drop us an email with your thoughts. 

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Building Up Hopes

Regular readers will know that building more homes in the places where people want to live is something we’ve been campaigning on for a while. While it might not be the first thing people think of when it comes to supporting startups, a coherent housing policy is critical for entrepreneurs to flourish. 

As things stand: “Talent is priced out of our most productive cities, threatening the position of the UK’s entrepreneurial ecosystem. British startup employees have to face long commutes, over-crowded conditions, and lower disposable incomes. They are discouraged from taking entrepreneurial risks, and the growth of their businesses is curtailed. They struggle to hire and retain the best and brightest.”

In Strong Foundations we made the case for more housing in detail, with some of the UK’s leading entrepreneurs signing a letter to back it. We think new homes would make the country more dynamic, more productive, more entrepreneurial and a much nicer place to live. Over the years it has amazed me that the majority of business organisations fail to campaign around this elephant in the room.

The Entrepreneurs Network is both a business group and think tank, and as a think tank we are just one of countless voices making the case that this is an absolutely critical issue. I couldn’t name a think tank – from the rightest of right to the leftist of left – that didn’t agree that our lack of homes where people want to live and work is holding us back. Of course, they have different remedies, but we all agree that the patient is sick. 

Which is why ‘think tankers’ were buzzing following Keir Starmer’s conference speech and his later claim that he is a Yimby.

So far, Starmer has promised to build 1.5 million homes if elected, to build a wave of new towns near English cities, echoing the likes of Clement Attlee who built Basildon, Stevenage and Slough, to encourage Georgian-style townhouse blocks, and to restrict the ability of councils to stop developments on under-used urban land.

It’s not just Labour. Michael Gove burnished his Yimby credentials earlier in the year, when he announced plans for a new urban extension from Cambridge that would include both mid-rise residential and commercial lab space. 
Of course, when it comes to promises on housing, government after government has proved that talk, unlike housing, can be incredibly cheap.

Nevertheless, as Ant Breach from the Centre for Cities argued even before Starmer’s announcement, there are reasons to be optimistic: “The Conservatives have a clearer vision about where the new housing should go and the importance of cities to doing so. But the politics shaping their proposals is dominated by the next election. Labour is currently much more vague on detail, but is more confident than the Conservatives talking about the political choices that have really driven the housing crisis – the planning system’s broad restrictions on new housebuilding and the damage that does to the national economy.”

There is a great deal of ruin in a nation. Experience teaches us that whoever wins the next election has the option to kick the can down the road some more. But not forever.

It Ain’t Broke
Our very first report back in 2014 was a manifesto for entrepreneurs. In 2019 and 2022 we joined forces with our pals at Startup Coalition to produce a couple more. As we head towards another election, it’s time, once again, to publicly make the case to the UK’s political parties that our policies should be in their manifestos.

Your think tank needs you.

You don’t need a fully formed policy solution. Maybe you’re an entrepreneur who has a persistent challenge that you know could be tackled – but you’re too busy running your business to know how. We can devote some time to finding and promoting a solution.

You don’t need to be an entrepreneur. Maybe you work advising or supporting founders and have unique insights on where the stumbling blocks really are. Or maybe you have an issue in your large company that also impacts startups.

You don’t need to be original. Maybe you’ve seen a policy idea that you think we should also champion (we’ll give due credit), or you have experience of things working better in another country that we should copy.

We aren’t short of ideas, but we don’t want to miss a thing. Thousands of people receive this email – and please forward this opportunity on to anyone who cares about making the UK the best palace in the world to start and grow a business.

Drop me an email with what you think should be in our manifesto.

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

Proof of Burden

It was the Conservative Party’s turn to put on their conference this week. If you want to dig a little below the headline announcements of the scrapping of HS2’s northern leg, the new post-16 qualification, or the plan to phase out smoking, you can read Sunak’s, Hunt’s, Donelan’s, Badenoch’s, or any of the other major speeches here.

You won’t find much in the way of new policies though. Conferences are primarily about energising the base, which is why so many of the speeches look so odd to outsiders: the base of most political parties is, in the kindest possible way, a little weird.

Back in the real world, Britain’s entrepreneurs are busy working hard and paying (plentiful) taxes. Dan Neidle has crunched the numbers and can say with some confidence that UK companies will pay more tax in 2023, as a percentage of their profits, than at any time since the 1970s, and plausibly more than at any time since 1946.

Remember, corporation tax was at 52% in 1984 before being cut to 35% under the Conservatives, further reduced by Labour to 31% in 1997, 30% in 1999, and 28% in 2007. The Conservative-Liberal Democrat coalition lowered the rate further to 27% in 2010, then 24% in 2012, with the Conservatives cutting it to 20% in 2015 and 19% in 2020. Boris/Rishi hiked it back to 25%; Truss/Kwarteng reversed it; then Rishi/Hunt reversed the reversal back to 25%.

Taking the long view might suggest that businesses must be paying less. However, at the same time the tax base expanded dramatically, particularly through the abolition of the allowances. So hiking our corporate tax rates means we’ve been leapfrogged by the likes of Switzerland, Latvia, Iceland, Finland, Estonia, Sweden, Slovakia, Norway, Greece, Denmark, Turkey, Israel and Luxembourg.

Of course, there are plenty of early-stage companies that don’t pay corporation tax, and there are lower rates and reliefs for smaller companies, but in living memory the incentive to get bigger has scarcely been less appealing.

If taxes on business are to come down, whoever ends up forming the next government will need to make some tough decisions on cutting spending – not just scrapping HS2 and using the money elsewhere, but actual cuts. Or they could raise taxes elsewhere, but not through personal taxes, which are already pushing founders to offshore before exiting. Or they could deliver a laser-focused growth agenda of the sort we and others push for.

Reporting for Business

On the topic of tax, another week, another report. This time on making it simple with Intuit and Enterprise Nation. In it, we argue that HMRC needs an upgrade.

As Mark Neild, entrepreneur, academic and small business adviser, says: “Finding help on the HMRC website is difficult and generally counter-intuitive. Things are unnecessarily complicated. Why does it take two forms and several hours on the helpline to claim back overpayment of National Insurance when the surplus is clearly showing on the agent’s portal? Why does it take over £500 of admin costs to manage a £60 tax liability as trustee of my niece’s will trust? Why do I need six Government Gateways?”

Meanwhile, Susan Holmes, founder of Bluebears Allsorts, told us: “Making Tax Digital is a good thing because it’s all online. However, on Government Gateway, I don’t think enough people know how to get on it. If you have a business as well, you’ve got two identities – I think that could be clearer. It’s sometimes really difficult to get through to HMRC – it took me four hours one week.”

Susan has been undergoing cancer treatment and is on Universal Credit and ESA, so she must submit her expenditure to the government at different times, due to the payment period she is in. These do not tie in with the VAT submission dates for the business, which is like having to do it twice – once for Universal Credit and once for HMRC.

It doesn’t need to be like this. We can just copy Sweden’s whole-of-Government approach, Hungary’s support for startups and new taxpayers, and Australia’s virtual tax assistant ‘Alex’.

This is one area where spending a bit on fixing things would quickly pay off. First and foremost, we need to ensure HMRC is able to deliver a reasonable level of service for business owners. At the same time, we need to make sure that the extension of Making Tax Digital (MTD) isn’t further delayed. Second, Government Gateway needs a serious upgrade and data shared across government (the once-only principle will get this done). Third, we can and should lead the world on the use of virtual assistants and artificial intelligence.

You can read the full report here.

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Nudge zero: can we save the planet with behaviour change?

On Monday (2nd October, 2023), I spoke at the Conservative Environment Network’s panel discussion entitled ‘Nudge zero: can we save the planet with behaviour change?’ – alongside the Minister for Energy Efficiency and Green Finance Lord Callanan, Katherine Fletcher MP, Nesta’s Katy King, and Smart Energy GB’s Mark Lund. It was brilliantly chaired by CEN’s Sam Payne, with some excellent questions from the audience.

For those who couldn’t make it along, I’ve written up a rough version of my opening remarks – let us know what you think! 

Let’s cut straight to the chase: can we save the planet with behaviour change? My answer, unfortunately, can only be a straightforward “no – absolutely not.” 

While there will be some people in society who are happy to change the way they live their lives in order to help cut emissions, that appetite is simply not shared by anywhere near enough of us to make a meaningful difference. 

More to the point, even for those who say they would be happy to change their lifestyles, I’m sceptical that they’d be willing to do so in such a way that genuinely mitigates their contribution towards climate change.

Now to be clear, I am not saying we shouldn’t discourage those who do engage in behaviour change, and there certainly are small tweaks we can embrace to make a difference at the margin.

But to put it bluntly, to think we can rely on behaviour change to plot our way out of this problem is utterly fanciful.

So that poses a second question: what’s the alternative? Or do we have to accept that we’re condemned to an ever warmer planet?

I like to think not, and that’s because I believe in the power of human ingenuity and innovation to invent technological solutions which allow us to maintain our ways of life while meeting our climate objectives.

Just as we created the technologies that got us into this mess, we can create ones which help us to overcome it – without getting rid of all the wondrous conveniences we gained along the way.

And the good news is that to a large extent, we’ve already invented many of the technologies we will need on the path to net zero.

We’ve driven coal out of our electricity mix by installing solar and wind power; we’re decarbonising our vehicle fleet at a reasonable clip; we’re slowly but surely swapping out gas boilers for heat pumps. Even with things like our diets, the advent of lab-grown meat and alternative proteins mean that I’m confident that we can begin significantly cutting emissions from agriculture as well.

But with all of these things, further progress is still needed. Clean alternatives must become the natural first choice for consumers – which means they must come at a price point that makes the net zero transition not just the right thing to do environmentally, but economically too. 

So you might detect that I’m optimistic that we can meet net zero without massively upending the economy or society at large. But I’m not saying that we can just sit back and wait for these technologies to magically come along.

We do need government to step in and play a role – and I think there’s a range of different things it can do. But as time is limited, I’ll begin by throwing out a few general ideas which will have the biggest impact. 

First, we need to take seriously the idea of carbon pricing – where we make polluters pay for the emissions they create, which would put polluting and non-polluting activities on a more level playing field, gently nudging people towards green options and away from dirty ones.

Most economists agree that carbon pricing will allow us to decarbonise in the most economically efficient way possible, and it would mean we do not have to rely as much on top down bans and mandates, which recent events show us are subject to political whims of the day. 

Second, we need to embrace pro-climate deregulation: this ranges from the specific to the more nebulous, but we need to look closely at what rules and regulations are holding back green entrepreneurs.

In the past, I’ve written about how companies working in the alternative proteins sector are stifled by nonsensical red-tape, as are heat pump installers, but it’s probably best if I save those for the discussion later.

Finally, investment in innovation will be essential. Developing all of the answers to the climate crisis won’t come cheap, and we have to support the scientific and entrepreneurial community in researching, developing, and commercialising the technologies we require to cut emissions. 

That means funding innovation research properly, and it means allocating that funding effectively too. I’m encouraged by the creation of ARIA, and the government’s wider plans for spurring technology and science. But there’s so much more to we can do to increase the attractiveness of the UK as a place to carry out research – from having a welcoming immigration system to top talent, to ensuring lab-space can get built in the areas where it’s needed most.

So to conclude, no – we cannot get to net zero on behaviour change alone. Rather, what we must do is to provide people with the tools and technologies to make decarbonisation the natural first choice. We need to make the reason for getting to net zero not just a great moral ambition, but because it’s simply the common sense thing to do.