Start me up: Creating Britain’s entrepreneurial ecosystem fileStart me up: Creating Britain’s...

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Start me up: Creating Britain’s entrepreneurial ecosystem A Barclays report, written by The Economist Intelligence Unit

Transcript of Start me up: Creating Britain’s entrepreneurial ecosystem fileStart me up: Creating Britain’s...

Page 1: Start me up: Creating Britain’s entrepreneurial ecosystem fileStart me up: Creating Britain’s entrepreneurial ecosystem A Barclays report, written by The Economist Intelligence

Start me up: Creating Britain’s entrepreneurial ecosystemA Barclays report, written by The Economist Intelligence Unit

Page 2: Start me up: Creating Britain’s entrepreneurial ecosystem fileStart me up: Creating Britain’s entrepreneurial ecosystem A Barclays report, written by The Economist Intelligence

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3 Foreword

4 Executivesummary

5 Theshiftinggroundofthelabourmarket

8 Growthofinnovationhotspots

9 TheUK’semerginginnovationhotspots12 Casestudy

14 Entrepreneurialchallengesandopportunities17 Casestudy

21 Conclusion

22 Aboutthisreport

Contents

ThisreportwaswrittenbyAnnaLawlorandeditedbyZoeTabaryandMonicaWoodley.

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ForewordWith a competitive global market and rising social challenges such as youth unemployment and an ageing population, there exists an opportunity to create an environment here in the UK that values and practices lifelong enterprise learning; one that encourages direct ownership and responsibility to respond to these challenges.

Entrepreneursareahugesourceofeconomicgrowth,innovationandjobcreation.AndintheUKtheyrepresentadiverseclusterofindividuals.Newbusinesses,rangingfromtechstart-upstomanufacturersandretailers,arepioneeringnewproductsandservices.FromBristoltoLeeds,CambridgetoGlasgow,entrepreneursarethriving.Butthereismuchmorethatcanbedonetosupporttheirgrowth.

Stakeholdersoftheentrepreneurialecosystemmustshareawillingnesstothinkcriticallyandcreativelyaboutsolutions.Togetherwemustprovideaccesstofinancialcapitalandhumancapital,therighteducationandskills,acompetitivebusinessenvironmentandclear,non-onerousregulationthatdoesnotneedlesslyburdenbusinessmodels.

Theeconomicpotentialofentrepreneursistremendous.Andunlessthispotentialisproperlyharnessedandbuddingentrepreneursprovidedwiththeskillsandresourcestheyneedtobuildtheirideasintosuccessfulbusinesses,theUKeconomywillnotflourishinfuture.

AntonyJenkinsChiefExecutiveBarclays

ThisreporttakesacloserlookattheentrepreneurialpotentialacrosstheUKandpresentstheopportunitytounderstandhowitcanbebettersupported.ItisbasedonprimaryresearchundertakenbyTheEconomistIntelligenceUnitaswellasaroundtablediscussionconductedatTheEscalatorinWhitechapel,London.

Iwouldliketotakethisopportunitytothankallthoseinvolvedfortheircontributiontothisreport.

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Aninnovationecosystemreferstothecombinationoffactorsforinnovationthatfunctiontogetherinasymbioticrelationship.Thereal-wordapplicationistheenvironmentwithinwhichentrepreneursfunctionasoneintegralcomponent.Thishasaknock-oneffectonthebroadereconomy,whichthrivesoffthevitalityofinnovativeentrepreneurs.

ThisBarclaysreport,writtenbyTheEconomistIntelligenceUnit,looksathowtocreateanenvironmentwhereentrepreneurscanflourishintheUK,drawingonbestpracticesfromotherinnovationecosystemsaroundtheworld.Basedonin-depthinterviewsofentrepreneursandotherexperts,substantialdeskresearchandsocialdatamining,itskeyfindingsarelistedbelow.

Entrepreneurialcommunitiesextendbeyondthecapital,London,andSouthEastEnglandLondonaccountsforthelargestshareofonlineactivityrelatingtodiscussionsaboutinnovationandentrepreneurialism,witha48%shareof‘voice’.However,thenextlargestsharesof‘voice’comefromCambridge(9.3%)andManchester(6.9%),andthereisaclearnortherncorridorstretchingfromwesttoeast(LiverpooltoYork).MikeWright,ProfessorofEntrepreneurshipatImperialCollegeLondon,explains:“Welookedatthenotionthatthere’sa‘goldentriangle’intheSouthEastforentrepreneurshipintermsofaccesstofinance,butfoundthatsomesuccessfuluniversityspin-offswereactuallynotlocatedintheSouthEastbutwere,nevertheless,abletoattractfinancefromthere.That’soneexampleofwheretheecosystemisn’tquiteaslocation-basedaswemightadmit,andmaysuggestthatweneeddifferentmechanismstostimulateamorevirtualecosystemratherthanaphysicallocation.”

ThelabellingofinnovationhotspotsproducesacompoundeffectthatfostersentrepreneurialismThisviewrewardsaninterventionistapproachacrosstheeducationsystem,start-upincubatorsandcentresofexcellence,whichempowerandfacilitateBritishpeopleofalldemographicstofulfiltheirentrepreneurialpotential.Insodoing,itisargued,thrivingsectorhubsandthepublicity‘buzz’thataccompaniesthembroadenequalaccesstoentrepreneurialopportunity,wealthcreationandemployment.

Entrepreneurial Britain is beginning to flourish as policy changes and increased investment in the UK’s innovation ecosystem take root.

Executive summary

Entrepreneursaremade,notbornEntrepreneurialismisnotaninnatetrait,butrathersomethingthatcanbefosteredwiththerightmixoflearnedskills,accesstoopportunitiesandconfidence,accordingtoexpertsinterviewedforthisreport.Governmentandtheschoolsystemalonecannotcreateentrepreneurs,buttheycansendsignificantsignalsaboutentrepreneurship,that‘failingwell’(takingcalculatedrisksandlearningfromfailures)iskeytosuccess,andthatstartingabusinessisaviableandrespectedcareerroute.

Creatinganenvironmentwhereentrepreneurscanthriverequiresaco-ordinatedstrategycoveringarangeofareasEncouragingentrepreneurialhubsbeyondtraditionalcityboundaries,strengtheningtiesbetweeneducationsystemsandthebusinesscommunity,removingdemographic-specificbarrierstoentrepreneurialismandbettermatchingthefundingneedsofentrepreneursaresomeofthespecificprioritiesthatpolicymakers,businessesandacademianeedtoaddress.

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The shifting ground of the labour market

Thisevolutionhasincreasedregionalinequalities,andoneoftheconsequencesofthe2008financialcrisisontheUKeconomyisthatyoungpeople(aged18-24)havebornethebruntofunemploymentandhavebeenthemostaffectedbyunderemployment

Thefinancialcrisispromptedincreasingnumbersofemployerstointroduce‘zero-hourscontracts’,givingthemtheflexibilitytoemploycasuallabourasandwhenrequired,withnoneoftheresponsibilitiesassociatedwithhiringemployees.Youngpeopleareagainthemostvulnerabletosuchemploymentpractices.

ResearchfromtheUniversityofStirlingfoundthatwhilenationalunderemploymentroseto9.9%in2012,for16-24yearoldstheratewassignificantlyhigher,at30%3.

The UK has evolved from a manufacturing- and product-based economy into a service-sector- and knowledge-based economy.

1&2http://www.ons.gov.uk/ons/rel/census/2011-census-analysis/170-years-of-industry/sty-170-years-of-labour-market-change.html3http://www.stir.ac.uk/news/news-archive/13/april/meet-the-underemployed/name-44068-en.html

Employmentbysector

Source:OfficeforNationalStatistics1.

Percentageofworkforceineachindustry

Source:OfficeforNationalStatistics2.

1841 2011

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Somearguethatthishaslededucatedandtechnologicallyproficientyoungpeopletodiscovertheirentrepreneurialflair,pouringtheireffortsintostart-upbusinessventuresandturningtonon-traditionalfundingroutessuchasonlinecrowdfundingsitesKickstarterandIndiegogo.However,whilethevolumeofnewlyregisteredbusinessesisgrowingandisoftenheraldedasasignofflourishingBritishentrepreneurialism,theycouldsimplybereflectinganincreasein‘bedroombusinesses’(acolloquialismforbusinessesstartingoutofthehome,requiringlittleornostart-upfunding)andinthenumberofpeoplerepurposingthemselvesasself-employedconsultantsasaresultofredundancy.SuchchangesinlabourdynamicscanskewwhatappearstobepromisingdataaboutthetrueextentoftheUK’sentrepreneurialactivityoneconomicproductivity.

4http://www.parliament.uk/business/publications/research/key-issues-for-the-new-parliament/economic-recovery/young-people-in-the-labour-market/

Source:OfficeforNationalStatisticscitedinParliament4.

Youthunemploymentcomparedwithworking-ageunemployment

Thereisconcernthatbusinessstart-upsaretooeasilycategorisedasbeingentrepreneurialeventhoughmanycompeteonpriceandserviceratherthanbyprovidingauniqueofferinginthemarketplace.Thisincreasesthechallengesofaddressingbarrierstoinnovativeentrepreneurialismandidentifyingnewandcommerciallyviablesolutionstoproblemsbecause,whiletheyarefrequentlyregardedasthesame,entrepreneursandstart-upbusinessesoftenfaceverydifferentchallengesandoperateverydifferentbusinessmodels.

Some,suchasMarthaLaneFox,aserialentrepreneur,believethereisnotthesameriskappetiteamongBritishentrepreneursasthereisintheUSortheEU.ThiscreatesitsownprobleminthattheBritishliketothinkthereisarichseamofentrepreneurialismintheircountrywheninfact,MsLaneFoxargues,therearelimitedexamplesofBritishstart-upsthathavegoneontobecomeinternationally-renownedbrandsandhaveremainedBritishcompanies.

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BusinessbirthsbyUKregion

Source:OfficeforNationalStatistics.

2009

2010

2011

2012

WillHutton,PrincipalofHertfordCollege,OxfordUniversity,andChairoftheBigInnovationCentre,saysthatthelackofaBritishinnovationecosystemisa“principledeficiencyintheUKeconomy.Oneofthelongstandingareasofweaknesseshasbeenfinancingandcommercialisingnewideas.”However,hesayschangeisafoot;thecurrentgovernmentisatlastspeakingthelanguageofinnovationecosystems,introducingentrepreneurialprogrammesandputtingforthgovernmentfundingtosupportthem.“Isitenough?No.Isitfollowingthetrendtowardsopeninnovation,sharing,relaxingofintellectualpropertylawthatneedstotakeplace?No.Butitwouldbeunfairandwrongtosaythatnothinghashappened.”

DougRichard,FounderofSchoolforStartupsandaserialentrepreneur,saysthattheUKisaworldleaderintax-incentivisedseedandangelinvesting.TheSeedEnterpriseInvestmentScheme(SEIS)has,hesays,increasedthelikelihoodofangelinvestmentforvery-early-stageBritishbusinessesbyminimisingtheriskasmuchaspossiblefortheinvestor.“Idon’tknowofanyothercountrythathasanythingasclosetoaggressiveasthat[inusingtaxincentives].”

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Suchpubliclabellinghasacompoundeffect;thesoftpowerinherentinthe(oftengovernment-backed)promotionofareasasinnovationhotspotscreatesahoney-poteffect,whichsubsequentlyattractsventurecapitalists,bigconsultancyfirmsandotherspecialistorganisationsthatattendtotheneedsofgrowingfirmsincomplexindustries.

Suchlabellingmayalsobecomeself-fulfillingintermsofencouragingalocation-specificcultureofentrepreneurialism,withtheirownsuccesscasesandrolemodels,enticingwould-beentrepreneursfrom‘safe’salariedrolestouniversityspin-offsinordertoinstigatetheirstart-upplan.

Detractorsoflocation-specifichubscontendthatwhilepromotinghotspotsattractsresources,infrastructureandesteemforthefew,themanyothercitiesandlargetowns

Whether it is Cambridge’s ‘Silicon Fen’, London’s ‘Tech City’ or Oxford’s ‘business incubator centres’, labelling locations as ‘hotspots’ for technological innovation has become commonplace.

Growth of innovation hotspots

Top10sectorsfundedbyGrowthAcceleratorschemes

Source:http://www.growthaccelerator.com/

RegionalfundingfromGrowthAcceleratorschemes

Source:http://www.growthaccelerator.com/

NorthEast

NorthEast

EastMidlands

East

London

4%

9%

8%

9%

16%16%

11%

12%

15%

SouthEastSouthWest

NorthWest

WestMidlands

acrossthecountryareexcluded,theirsuccessstoriesandrolemodelseclipsed.Arguably,theapproachcontributestomoreacuteregionalinequalitiesanddeepensasouthernconcentrationofwealth,opportunityaccessandemployment.

CliveHoltham,ProfessorofInformationManagementandDirectorofCassLearningLaboratoryatCassBusinessSchool,says:“I’mprettyscepticalabout[theidea]thatwecangetscientificandbusinessinnovationthroughlargesumsofmoneygoingtoafewpeople.CentresofExcellence,forexample,arepartofthehugeamountofrhetoricandfashioninhigh-levelallocationsofmoney,whichgivetheimpressionthatthere’satop-downsolution.It’sanecosystem,soyouneedallthecomponents.”

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Pulsar,developedbyUK-basedcompanyFACE,isasocialdataintelligenceplatformthatisreinventingsocialmediamonitoring,customerserviceandenterprisecollaboration.Itscoured200,000postsoverthreemonthstoMarch162014,mappingtheUKlocationsthathadthehighestvolumesofonlineconversationsaboutthesearchterms‘innovate’,‘innovation’,‘entrepreneur’or‘start-up’.

While academic examination of Britain’s entrepreneurial community draws from hard, statistical and often lagging data, social data (from publicly available social media conversations) provide an alternative ‘bottom-up’ perspective, taking the pulse of entrepreneurs – what they actually talk about and how they communicate with key stakeholders and each other.

The UK’s emerging innovation hotspots

Shareofgeo-locatedinnovationcontentonlineInorderofconversationsize

Whilenotstatisticallysignificant,thefindingscautionagainstanarrowconceptionofentrepreneurialcommunitiesthrivingonlyinsouthernEngland.

City Numberofresults

London 7,705

Manchester 426

Sheffield 202

Edinburgh 189

Liverpool 166

Glasgow 153

Oxford 152

Nottingham 147

Darlington 136

Leeds 132

Brighton 130

Birmingham 130

Bristol 127

Cambridge 107

Poynton 106

Whilefewerthan5%ofsocialmediausersmaketheirlocationpubliclyavailable,thefindingsareanindicatorofwhereonlineconversationsaboutentrepreneurialismandinnovationareoccurring,whenuserschoosetosharetheirlocations.

WhileLondontopsthelistwith7,705results,northerncitiesareprevalent,withaclearcorridorstretchingfromwesttoeast(LiverpooltoYork).

Source:Pulsar.

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Locationsofhigh-volumesocialconversationsaboutinnovationInordertoextrapolatemorecomprehensivesocialdata,Pulsarapplieda‘smartfilter’toallpubliclyavailablesocialcontentontheInternet,irrespectiveofusers’setlocations.High-densityurbanareasandhigh-rankinguniversitiesarebothwidelyconsideredtobekeyfactorsinfluencingtheemergenceofaninnovationecosystem.

“Clusteringcanbringpositiveproductivitybenefitsforindividualsectors,althoughtheeffectisnearlyalwaysoutweighedbytheimportanceofbeinginalargeurbanenvironment,”theManchesterIndependentEconomicReviewstatedinits2009report,TheCaseforAgglomerationEconomies5.Thereportwentontoarguethatlargercitiesmakeiteasierfordifferenttypesofworkersandfirmstofindeachother,whichchimeswiththeviewofJaideepPrabhu,JawaharlalNehruProfessorofBusinessandEnterpriseattheJudgeBusinessSchooloftheUniversityofCambridge(England).Hesaysthatcitydwellersareatagreateradvantage,particularlythoseconnectedtouniversities,becausethereisaconstantlyreplenishingsupplyofdiversecommunitiesandyoung,educatedpeoplewithfreshideas.

MarkGlover,DirectorofBusinessPlanningattheTechnologyStrategyBoard,adds:“Innovativepeoplewithbrightideasareanimportantelementofanylocalisedcluster.High-calibreuniversitiesarelikelytoattractandtrainthesepeople,andoftenhaveadditionalinfrastructure(suchasscienceparks)tohelpcommercialiseideas.ThisisthecasewithCambridge,SiliconValleyandStanfordUniversity.”

BycombiningtheUK’stoptenuniversities6,toptenurbancities(bypopulationsize)7,pluslocationsthatTechCitynamedas‘CitiestoWatch’forinnovation8,18keylocationswereaddedtoPulsar’sdatafilter:London,Birmingham,Leeds,Edinburgh,Glasgow,Sheffield,Bradford,Liverpool,Manchester,Bristol,Newcastle,Cambridge,Oxford,Durham,Bath,Exeter,StAndrewsandWarwick.

ThePulsardatafindthatLondonstillaccountsforthelargestshareofonlineactivity(48%)relatingtodiscussionsaboutinnovationandentrepreneurialism.ThenextlargestsharecomesfromCambridge(9.3%),Manchester(6.9%)andOxford(5.9%).

ThenextlargestcitiesbypopulationafterLondon–Birmingham,Leeds,GlasgowandSheffield–donothaveacorrespondingshareof‘voice’.Rather,thesocialconversationsaboutinnovation,entrepreneursandstart-upsarehappeninginCambridge,whichisnotahigh-densityurbanareaandissituatedinaregionthathasreceivedjust9%ofthegovernment’sGrowthAcceleratorfunding.

However,itsworld-renowneduniversity(aswithOxford)hasbecomeknownforuniversity-basedtechnologyspin-offs.CambridgeUniversityhasaportfolioof68companies–includingARM,theworld’sleadingsemiconductorintellectualpropertysupplier,valuedat£12bn9(US$20bn)–whichhaveraisedover£800minfurtherinvestmentandgrantfunding,andtogethergenerateanannualturnoverof£170m10.

Manchester’sproportionoftheshareof‘voice’leapfrogsthatoflargercities,includingneighbouringLeeds.Again,academiaappearssignificantasManchesterBusinessSchoolisthesecondmosthighly-rankedforpostgraduateentrepreneurshipcoursesintheUK11,behindUniversityofCambridge’sJudgeBusinessSchool.ThecitywasalsolistedbyTechCityasa‘CitytoWatch’12–alongwithBirmingham,BristolandNewcastle–andatthetimeofthedatacollectionhadjustannouncedthatithadbeenawarded£1.5mingovernmentfundingforaSocialEnterpriseAcceleratorscheme.

5http://www.manchester-review.org.uk/projects/view/?id=7186http://www.thecompleteuniversityguide.co.uk/league-tables/rankings7http://www.ukcities.co.uk/populations/8http://techcitynews.com/2014/02/27/the-battle-for-britains-next-tech-city/

Source:Pulsar.Theremainingeightlocationsaccountedforlessthan2%ofshareofvoice.

London48%

Shareofvoiceofthe18selectedcitiesintopic-specificconversations

Cambridge9.3%

Manchester6.9%

Birmingham4.9%

Leeds3.1%

Bath3%

Bristol3.2%

Edinburgh2.8%Liverpool2.7%

Oxford5.9%

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9http://www.digitallook.com/companyresearch/10111/ARM_Holdings/company_research.html10http://www.enterprise.cam.ac.uk/industry/portfolio-companies/11http://www.best-masters.com/ranking-master-entrepreneurship.html12http://techcitynews.com/2014/02/27/the-battle-for-britains-next-tech-city/

andrelatedtopicssuchas‘collegeadmissioncourses’,‘studies’,‘degree’and‘prestigiousuniversity’areallveryprevalentintheseonlineconversations,butparticularlyconspicuousistheabsenceofsocialdiscussionsaboutfunding,crowdfunding,businessloans,grants,investors,oreventaxbreaksandgovernmentschemesforentrepreneurs.

Thisfunding-relatedconversationvacuumcouldeitherbeconsideredcauseforconcern–asignthatgovernmentinitiativesarenottrulytricklingdowntotheentrepreneurialcommunitiesthattheyaredesignedtosupport–orcauseforcelebration,ifsocialsilenceindicatesthatfurtherdebateaboutfundingoptionsisunnecessarybecauseentrepreneursareconfidentintheiraccesstoresourcesandsimplydonotwishpubliclytodiscusstheirfinancingneeds.

Thesocialconversationswithineachlocationalsorevealthenuancesoftheirspecificecosystems.WhilesocialconversationsmentioningLondonhavealargeshareof‘voice’,thedatashowthatthenoiseiscrowdingoutanynuances,highlightingeachofthekeytopicsasequallyconnectedtoeachother(seechartbelow).Bycontrast,theManchesterdatasetidentifiesaninfrastructureforsupportingyoungentrepreneursinfast-growingcreativefieldssuchasgamedevelopment.

City-to-cityconnectionsIntermsofevidenceoflocationsparticipatinginabroader,nationalecosystem,onemightexpectahighlevelofreferencingofotherlocationswhendiscussinginnovation.ThisistrueforLondon,whichmentionsCambridge,andforCambridgeandBirmingham,whichmentionLondon,duringonlineconversationsaboutinnovationandentrepreneurialism.Thehighestvolumeoflocation-referencingpostscomesfromManchesterdiscussingLeedsinthiscontext(itistheninthmostmentionedkeyword),whichcouldreinforcetheconceptofthenortherncorridor.

However,inter-connectednessbetweenlocationsislowerthanexpectedandsocialconversationsregardingOxforddonotmentionanyotherlocation.Oxfordalsoproducesuniversity-basedspin-offcompanies,withasimilarnumbertoCambridgeat65,andcurrentlyvaluedat£40m,soitissurprisingnottoseethedatarepresentamoresimilarsocialconversationpattern.

ContentclustersfromonlineconversationsAcrossall18locations,socialnetworksaredominatedbyconversationsabouttechnology,newtechniques,socialinnovationand,interestingly,Cambridge.TwitterasachanneltendstobemoreLondon-centric,withahighprevalenceofstart-up,business-centredconversationsinvolvinginnovationandentrepreneurialism.Universities

Source:Pulsar.

London Cambridge Oxford Manchester Birmingham

1 new new new new new

2 time university world business business

3 years time university time time

4 world world years people 2014

5 year year time world firms

6 help years work 2014 years

7 good technology people years people

8 technology home best united year

9 business good business Leeds free

10 university group research start work

Top10keywordsmentionedbyeachlocation

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Ascanbeseenintheassociatedchart,largenodesinthenetworkuniverseindicateveryactiveonlineparticipants,withtheCentreforEntrepreneurialLearning(CfEL)Cambridgethemostactiveduringthedataperiod.

CfELCambridgeisanot-for-profitorganisationbasedinJudgeBusinessSchool,whichprovidescoursesforundergraduate,postgraduateandnon-academicaspiringentrepreneursdesignedtosharebestpractice,unlockentrepreneurialpotentialand‘plug-in’attendeestoanetworkofCfELCambridgealumni,mentorsandfacilitators13.

VirginStartUp,anot-for-profitorganisationthatpromotesbusinessfinancingthroughitspartners(includingVirginMoney)andthenconnectsstart-upswithbusinessmentors14,isthesecond-largestinfluencerinthedataset.

Interestingly, the Pulsar data finds that accelerator programmes and those providing funding guidance and introductions to funding resources are key ‘influencers’ across the social web.

Case study – Accelerator programmes dominate online conversation in the UK

13http://www.cfel.jbs.cam.ac.uk/aboutus/index.html14http://www.virginstartup.org/about/what-we-do/15http://www.entrepreneurial-spark.com/the-accelerator.aspx

Influencers’network

Source:Pulsar.Includes‘smartfiltered’data.

ThethirdisEntrepreneurialSpark(ESparkUK),abusinessacceleratorinGlasgow,EdinburghandAyrshirethatoffersfreeofficespace,ITandstructuredsupportfor18monthstohigh-growth,early-stagebusinesseswithanannualturnoveroflessthan£1m15.

Thisdataindicatesthatsourcesofpracticalsupportandfundingprovisionsareintegraltotheonlineconversationabouthigh-growthbusinessesandstart-upsintheUKandavaluablesocialsignalguidingentrepreneurstoresourcesandrolemodels.

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Inthebundlechartbelow,theprominenceofthis‘virtualecosystem’linkingthekeycategoriesof‘gamedesign’,‘development’,‘youngentrepreneurs’and‘training’isvisible.ThistopicwassparkedbyTwitterengagementrelatedtotheannouncementofaManchester-basedgamedesignstudioprovidingtrainingingamedesignanddevelopmentforyoungentrepreneurs.

Today,theUKisthefifth-largestvideo-gamedeveloperintheworld,withthesectorcontributing£947mtoGDPin2012,employingmorethan9,000peopleingamedevelopmentandindirectlysupportingalmost17,000furtherjobs,accordingtotradeassociation,TIGA16.Whatthesocialdatadoesnotshowisthattheyoungentrepreneurstowhomthegamedevelopersareappealingarethemselvespromotinginnovationinthisspace.Engagementinsocialmediaincludesrelativelypassiveactionssuchasforwardingand‘liking’contentpostedbyothers–inthiscase,agamedesignstudio–notnecessarilycommentingonthepost,althoughthecontentisbeingdigestedbyitsintendedaudience.

AsimilarinnovationecosystemisevidentintheCambridgedataset,withthekeytopic‘co-foundinggroup’mentionedinthesamepostsas‘pharmacology’and‘prestigiousuniversity’.Toptweetsduringtheperiodfeature‘hotCambridgeshares’andcontentabouttheCambridgeSatchelCompanyexpandingintoChina.ThePulsardatafindsthattechnologyisnotasstronglylinkedtoacademia-relatedtopicsasmightbeexpected;instead‘technology’ismentionedinconjunctionwith‘socialinnovation’,‘newtechnique’and‘world’.

IntheManchester-relatedsocialconversations,thegovernment’sannouncementinJanuaryofa£300mtaxbreakforretailbusinessesaroundtheUKappearstohavegainedsignificanttractioninonlineconversations,asitisfeaturedinthedataasakeytopic.Whilethislookspositiveonthesurface,whenthedataisanalyseditshowsthatthistopicoftaxbreaksistheresultofdigitalpublishing,ratherthansocialconversation;traditionalnewspublicationsreportingonlineandsharingnewsofthetaxbreakacrosstheirsocialmediaaccounts.

16http://www.cbi.org.uk/about-the-cbi/business-voice/february-march-2014/creative-industries-gaming/

Londondataset:inter-relatedkeytopics

Source:Pulsar

college-admissioncourses

collegeofficials

co-foundinggroup

costlylab

pharmacology

studies

potentialsocialinnovation

cambridge

degree

startup

technology

time

london

Connectioninsocialconversationsbetween‘GameDesign’andotherkeytopics–‘development’,‘training’and‘youngentrepreneurs’

Source:Pulsar

techentrepreneurs

gamedesign

leeds

dev

training

youngentrepreneurs

bizitalk

liverpool

startup

business

manchester

entrepreneurs

300mtaxbreak

retailfirms

innovation

Manchesterdataset:relationshipbetween‘£300mtaxbreak’topiconline

Source:Pulsar

techentrepreneurs

gamedesign

leeds

dev

training

youngentrepreneurs bizitalkliverpool

startup

business

manchester

entrepreneurs

300mtaxbreak

uk

nhstechnology

nhsbossretailfirmscbeinnovation

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Fosteringtomorrow’sGenerationCreativeTooofteninnovationisconsideredfromatop-downperspectiveandtoorarelyfromabottom-up,child-centricsolutionforcreatingtheUK’sfuturegenerationsofentrepreneurs,sayexperts.Prof.HolthamclaimsthatBritain’sschoolsystemlimitscreativethinkingbecauseitdoesnotrewardadiversityofapproaches,whichmeansthattheUKproducesyoungpeopleill-equippedtobecometomorrow’sentrepreneurs.

“Unlessyouaddresstheeducationsystem,eitherwithinschoolsanduniversitiesorsubsequentlyinadultlife,you’renevergoingtoachieveasatisfactorylevelofinnovationinsociety,”heexplains.

To address the question of how best to power the UK’s economy by empowering its entrepreneurs, a host of eminent thinkers and doers in the field of entrepreneurialism were consulted. Here, they share what they perceive to be the biggest barriers prohibiting innovative businesses from thriving in the UK, and set out proposed solutions.

Entrepreneurial challenges and opportunities

17http://www.gazellecolleges.com/about-us18http://www.pjea.org.uk/about-us

Source:RosanBosch.

TelefonplanschoolinStockholm,Sweden

TheroleoffurthereducationisequallyimportantashighereducationincreatingaUKentrepreneurialecosystem.GazelleCollegesGroup,whichlaunchedinJanuary2012,operatesentrepreneurialprogrammeswithin22collegesaroundtheUK,providingappliedlearningmodelsandworkingstrategicallywithlocalenterprisepartnerships,studentsandemployerstodevelopentrepreneurialcapacityinthoselocalcommunities17.Inhighereducation,thePeterJonesEnterpriseAcademy18workswith31regionalcollegestoprovideone-yearpractical‘learningbydoing’coursesdesignedtoprovideyoungpeoplewiththeskillsandconfidencetothinklikeanentrepreneurandpotentiallystartabusiness.

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BorrowingfromtheLatinrootof‘education’,Prof.HolthamsaysthateducationatalllevelsintheUKneedsto‘drawout’theintrinsiccreativityofpeople,bethatcreativityinconceivinganideapreviouslyunimaginedoringeneratinganalternativeapproachtosystemsandoperations.Toflourish,hesays,“theinnovationprocessneedsalltypesofpeople,generallyworkingtogetherinteams”.

JaneChen,Co-FounderofEmbrace,believesthatthetypesofworkshopsundertakeningraduateandpostgraduatedesignandentrepreneurialismcoursescaneasilybeadaptedtoandintroducedatanearlierstageintheeducationsystem,aswellaswithinexistingcompanies,tohelpcultivateacreativeapproach.Suchworkshopsarebasedonanunderstandingthatallbrainstormingandapproachesarevalid,withnojudgementfromanyparticipantsmadeifanideaisoutlandishordoesnotwork.

OrganisationssuchasGooglehavelongadvocatedandprovidedcreativeworkenvironmentsfortheirstaffinordertoassistwork-basedcreativity.IntheUK,companiessuchasMindCandyinLondon,MelbourneServerHostinginManchesterandVirginMoneyinEdinburghhavefollowedthistrend19.ThispromptsthequestionofwhetherBritain’sschoolsshouldconsiderintroducingsimilarliberalanddesign-ledideas,suchasthoseembeddedinSweden’sTelefonplanschool,whichemphasisesbothindependentandcollaborativeworking.Itisarguedthattraditionalworkspaces–fromformaleducationthroughtotheworkplace–quashcreativityandcollaborativeworking,whichisnowaprerequisiteforatechnology-enabledworkforceandaservice-driveneconomy.

Prof.HolthamreliesontheacademicmodelofinnovationforcoursesattheCassBusinessSchool,anecological‘CreativeProblem-Solving’(CPS)modelinwhichthefourcomponents–Product,Process,PeopleandPlace–allpositivelyinteractwitheachother.Hearguesthatpolicymakers’andbusinessleaders’attentionistoonarrowlyfocusedonproduct-basedinnovationorplace-specificentrepreneurs.

EzeVidra,HeadofCampusLondonandGoogleforEntrepreneursEurope,saysthereneedstobean‘alternativeeducation’outsidetheformaleducationsystem,where‘theneedisbiggest’astherearenoprofessorsontapandnoaccesstoclassroomfacilitiesorresources.HepointstoschemessuchasGoogle’sCampusforMoms20,whichisababy-friendlyeight-weekstart-upschool,attheendofwhichtheparticipantspitchtheirbusinessideatocourseleaders,guestentrepreneurspeakersandventurecapitalinvestors.

Demographic-specificbarriersAccordingtotheWomen’sBusinessCouncil21,theentrepreneurialgenderdivideisrobbingBritainofmorethan1mmoreentrepreneurs;totalentrepreneurialactivityin2012(calculatedastheproportionoftheworking-agepopulationeitherintheprocessofstartingabusinessorrunninganewbusiness)was11.6%formencomparedwith6.3%forwomen.

AsMsLaneFoxsays:“Womendon’tneedspecialtreatment,theyarenotdisadvantagedbyanythingotherthanlong-rootedculturalreasons”,illustratedbyclaimsthatmenareneurologically‘hard-wired’differentlytowomen,makingtheminnatelymoreentrepreneurial.Examplesofmisogynyfacingwomenincertainsectors,includingscience,technology,engineeringandmathematics(STEM)areprolific.Insuchacultureitisunsurprisingthat,statisticallyspeaking,womendonotfulfilthe‘typical’profileofanentrepreneur;thisisaconsequenceratherthananexplanation.

KathrynParsons,FounderofDecoded,atechnologyeducationbusiness,saysresearchonDecodedpupilsfoundthatwomenaregenerally30%lessconfidentthantheirmalecounterpartsinbelievingtheycanmastercoding.Childcareissuesalsoprovideachallengetoprofessionalwomen,whocontinuetobeprimarycaregiversdespiteincreasesinflexibleparentalleave.Thepaceoftechnologicalchangemagnifiesanyperiodawayfromwork,yetthebenchmarkforbasicdigitalliteracyintheUKisfrighteninglylow,andtheeconomycannotaffordtoexcludewomenfromfuturedigitalbusiness,MsParsonsadds.

Itisnotjustwomenwhofacehaving“entrepreneurshipinstitutionalisedoutofthem”,asJillHuntley,ManagingDirectorforCorporateCitizenshipatAccentureputsit,butolderpeopletoo.Whilethepotentialforengagingthisdemographicinentrepreneurialactivityishuge(thereare3.6mpeopleintheUKaged50-64whoarenoteconomicallyactive),toooftenthefocusisonfosteringyoungentrepreneurs.

“Unlessyouaddresstheeducationsystem,eitherwithinschoolsanduniversitiesorsubsequentlyinadultlife,you’renevergoingtoachieveasatisfactorylevelofinnovationinsociety.”CliveHoltham,ProfessorofInformationManagementandDirectorofCassLearningLaboratory,CassBusinessSchool

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AlastairCleggisChiefExecutiveofThePrince’sInitiativeforMatureEnterprise(PRIME),whichistheonlynationalorganisationdedicatedtoprovidingover-50swiththesupporttosetuptheirownbusiness.Heexplainsthatwhilemanypeopledreamofstartingabusinessintheir30sor40s,theycanbehinderedbyfamilyandfinancialcommitmentsinawaythatover-50sarenot.

“Thereisenormousentrepreneurialzealinthisagegroup,”hesays.“Whatwedoisgivethemconfidenceandpointthemintherightdirectionofwhatstepstheyneedtotaketostartasuccessfulbusiness,suchasgettingabusinessplaninplaceorseekingadvicefrommentors.Theover50stendtohavetheskillssoit’smoreaboutdemystifyingtheprocessandgivingthemtherighttoolssotheycangetupandrunning.”Fearandasenseofrisk-takingcomesfromnotunderstandinghowsomethingworksorwhattoexpect–areasthatcanbedemystifiedthroughcoachingandsupport.

Programmesthataimtodismantlethebarriersaffectingspecificdemographicsshouldbeapplauded,butMsHuntleyurgescorporationstofacilitatechangewithintheirorganisation.“Giventhefutureofworkandthestructuralchangestotheeconomy,inordertogrowestablishedbusinessesthereneedstobeabetterculturalpipelineofinnovationandentrepreneurshipandsomeofthatneedstocomefrominsidethecompany,”shesays.

“Werunanumberofprogrammesinternallytotryandopentheinnovationmindsetandencourageemployeestobringideas,and[forusto]providemechanismsoffundingthoseandspinningthemoutifnecessary,”sheadds.

TheroleofuniversitiesinseamlesslymovingentrepreneursintothebusinessenvironmentUniversityspin-offcompaniesarenotnew,butMrHuttonarguesthatBritishuniversitiesshouldshiftawayfromtheir“extremelyconservativeviewaboutintellectualpropertyrights”andabouthowtodivideanycommercialgainsemanatingfromuniversityspin-offs,toadoptwhathedescribedasthe“MITorStanfordmodel”.

HesaysthattheUSbenefitsfromuniversitiesattractingcompanies,whichsupportemergingentrepreneurialventuresbyactingasabridgefromacademiatobusiness.Bylinkingtheentrepreneurswithinfluentialalumniinamentoringandnetworkingcapacity(aswasthecaseforEmbraceInnovations),universitiesareabletofast-trackthecommercialisationofearly-stageideas.

MrHuttonfurthersuggeststhatpromisinguniversityprojectscouldbefundedbyembeddinggrantsintotheparticipants’PhDormastersdegreetofundtheirdevelopmentforafurtheroneortwoyears,effectivelybuyingtimetoenableaninnovativeconcepttobedevelopedtoacommercialleveloncompletion.“It’sveryhardinacademiclifesimultaneouslytobeanentrepreneurandhaveanacademiccareer;thesystemisnotstructuredtohelpyoudothat.Universitiesarenotassignificantastheyshouldbe.”

AccordingtoProf.Wright,UKuniversitiesarealreadymovingawayfromthetraditionalapproachofcommercialisingentrepreneurialactivitythroughlicensingagreementsandequitystakesinspin-offs,andmovingtowardsgainingfrom‘indirectreturns’.Heidentifiestheseasbeingthevirtuouscycleofsuccessfulalumniprovidingpracticalbusinesssupporttoentrepreneurialstudents,whichmakesalumnimoreinvestedintheuniversityandlikelytodonatefinancially.

“IthinktheUShasbeenbetteratthatthantheUKbutwe’restartingtoseeaconnectionbetweentwoareasinuniversitiesthatarequiteseparate:thedevelopmentoffice,whichistryingtoconvincealumnitodonate,andtheofficesthataretryingtopromotecommercialisation,”Prof.Wrightsays.Forexample,theNationalCentreforEntrepreneurshipEducation,basedatCoventryUniversity,launchedaprogrammecalled‘MakeItHappen’,whichhashelpedwiththelaunchof1,900newbusinessessince2009byprovidingresources,toolsandonlinementoringforgraduatesstartingupacompany.

DavidGill,ManagingDirectorofStJohn’sInnovationCentre(ownedbyStJohn’sCollege,Cambridge),saysthatdespitesome20yearsofpoliciestoencourageuniversitiestoprovidealinkwiththebusinesscommunitysothatuniversity-associatedenterprisescanflourishcommercially,thisremainsa“missingpiece…inthemajorityof[UK]universities”.

MrGilladvocatescollaborationbetweenuniversitiesandhubsofentrepreneurialactivity,suchasinnovationparkswherepioneeringstart-upswiththepotentialforhighgrowthareprovidedwithflexibleandsubsidisedworkspaceandsupportedbyancillaryservicesbasedinthesameplace.Heexplainsthat“gatekeeperswhounderstandtheneedsofbothsides”arevital,andencouragesuniversitystudentstoundertakeworkplacementswithinstart-upbusinesses,sothattheycanshareandapplytheirknowledgeinabusinesssetting,whilethestart-upbenefitsfromastudent’sexpertiseatnocost.

19http://www.telegraph.co.uk/finance/jobs/9640237/Top-10-coolest-offices-in-UK.html?frame=238363420http://googleblog.blogspot.co.uk/2013/07/campus-for-moms-helping-women.html21http://womensbusinesscouncil.dcms.gov.uk/appendices/

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Case study – Turning a crisis into an opportunity: EmbraceWhileimprovementshavebeenmadetotheUKinnovationecosystem,itisstillconsideredtobesomewaybehindinmanyareascomparedwiththeUS.Bycontemplatingthejourneyofasuccessful,innovativeenterprisethatfollowswhatwilllaterbediscussedas‘theStanfordmodel’,Britishpolicymakersandbusinessleaderscantakeheedof,andevenenhance,similarfactorsandpracticesinordertostrengthentheUKinnovationecosystem.

DuringherMBAatStanfordUniversity,JaneChenandherpeersonamulti-disciplinary‘entrepreneurialdesignforextremeaffordability’classcreatedtheworld’sfirstlow-costbabyincubator,whichcostsabout1%oftheusualUS$20,000.Whatstartedasanacademicchallengeevolvedintotheaward-winningsocialbusiness,EmbraceInnovations,whichhasdistributedEmbraceWarmersthathavereachedover60,000hypothermicinfantsin11developingcountriesaroundtheworld23.

Process:design-ledinnovationMsChenassertsthatthedesignprocesscanbetaughtandfosteredacrossacademicandbusinessfields,drawingonthecreativityinherentineachindividual.Thatprocessistounderstandtheproblem;listthecriteriarequiredtoaddresstheproblem;userapid‘low-resolution’prototypinganditerationbasedontrialanderror;andtoco-createwiththeenduser,notjustintermsofreceivingfeedbackbutinorderto“understandtheecosystemaroundsomethingthat’sgoingtomakeyourproductsuccessfulornot”.

TheEmbraceWarmerusesaninnovativewaxincorporatedinasleepingbagtoregulateababy’stemperature.Itstayswarmwithoutelectricity,issafeandintuitivetouse–acrucialfactorgiventhehighnumbersofbabiesborninremoteruralareas,withoutaccesstohospitalfacilities,meaningthatfamilymembersneedtobeabletooperatetheproductthemselves.

TheentrepreneurialstructurePullingtogethermulti-disciplinaryteamsisalsoimportant,MsChensays.TheEmbraceprojectteamoriginallycomprisedanelectricalengineer,anaerospaceengineer,acomputerscientistand(inMsChen’scase)apublichealthprofessional,whichallowedthemtoconsiderthechallengeofregulatinganeonate’sbodytemperatureunburdenedbymedicalpreconceptions.

Shebelievescorporationswouldbenefitfrom“bringingthatdiversityofbackgroundsandviewpointsintotheirwork”andencouraginginnovation-basedcorporatespin-offsinthesamewayasuniversitiesdo.

MsChenalsoadvocates“verticalintegration”ofthesupplychain,suchasmanufacturingandsales,areasthattheteamfirstassumedcouldbeoutsourcedtothirdparties.“You’resellingabrandnewconcept,whichdoesn’tplugintoanyexistingsalesinfrastructure.Wetriedtopartnerwiththird-partydistributorsandevenmultinationalsandthatsimplydidnotwork.So,forground-breakingideas,Ithinkyouneedverticallytointegratetosomeextent,”sheexplains.

Consequently,Embracehasdevelopedasmall-scalemanufacturing,trainingandsalesteam,whichMsChensaysnotonlygivesEmbraceend-to-endcontrolofitsproduct,butalsoprovidesinsightsintothepricepoint,effectivesalespitches,controloverhowitsproductandbrandispositionedinitsmarket,aswellasproduct-specificfeedback.

EcosystemsupportforentrepreneursStanfordUniversityplayedacriticalroleinassistingEmbrace,notleastbyfacilitatingaccesstootherinfluentialstakeholdersandfundingopportunities.EmbracewonUS$125,000inseedfundingfromtheStanfordBusinessPlanCompetition,andEchoingGreenFellowshipawards.

Asanon-profitorganisation,Embracereceivescontributionsfromfoundationsandindividualdonors,aswellasasmallpercentageoffundingfromroyaltiesoncommercialsalesoftheinfantwarmertogovernmentsandprivateentitiesthatcanaffordalow-costsolutiontoneonatalhypothermia.BothStanfordandEchoingGreenFellowshipadditionallyprovideaccesstotheirrespectivealumniandpartners,whichMsChenconsiderstobecrucialinEmbrace’ssuccess.

“Corporationswouldbenefitfrombringingadiversityofbackgroundsandviewpointsintotheirworkandencouraginginnovation-basedcorporatespin-offsinthesamewayasuniversitiesdo.”JaneChen,Co-Founder,Embrace

23http://embraceglobal.org/who-we-are/mission-impact/

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Couldvaluingintellectualpropertyunlockmainstreamstart-uplending?Prof.Wrightconsidersfundinglessofabarrierforentrepreneurialstart-upsbecausetheinitialcostsformanyknowledge-basedbusinessesarenowlow.However,MrHuttonadvocatesBritaincreatingitsownmarketforintellectualproperty,whichhebelieveswillcreatemoremainstreamlendingopportunitiestostart-upsthatwouldotherwisenotqualifyforsuchfunding.

Britishbusinessesnowinvestmoreinintangibleassets,suchasintellectualproperty,brandinganddesign–investing£138bnon‘knowledgeassets’in2011–thantheydoinbuildings,enginesandmachinery(£90bnin2011)24.Thatsuchassetsarecurrently‘unbankable’,accordingtotheIntellectualPropertyOffice25,providesahugeopportunityfornewfinancialinstrumentstounlockthislatentvalue.Initsrecentreport,BankingonIP:Theroleofintellectualpropertyandintangibleassetsinfacilitatingbusinessfinance26,theIntellectualPropertyOfficestated:“Balancesheetsdonotrepresenttheirvalue,andcurrentregulationsactivelyworkagainstconsiderationofIP(intellectualproperty)asanassetclassbuttheresultisarealandimportantdisconnectbetweenbankingregulationandpracticeandtheUK’sambitionforgrowth.”

MrHuttonexplains:“OneoftheinterestingdevelopmentsintheUShasbeenM-CAM,acompanythatunderwritesthevalueofintellectualproperty,againstwhichbankscanlend.Thisgivesinventorsandentrepreneurssomeprofitbutalsogivesbankerssomecomfortthateventhoughnothinghasbeencommercialised,thereisanideabehindthepotentialcommercialventurethathassomeintrinsicvalue.”

AsChairoftheBigInnovationCentreatTheWorkFoundation,MrHuttonsupportsthecreationofagovernment-backednationalInnovationBank,whichwoulddrawtogethersomeoftheUK’sbiggestcompanies,suchasGlaxoSmithKlineandBAESystems,withauniversityconsortiumincludingOxford,CambridgeandUniversityCollegeLondon.ThevisionisthatsuchanInnovationBankwoulddevelopinsuranceschemestounderwritethevalueofintangibleassets,aswellasmentoringUKbusinessesandplayersinthefinancialsector,includingbanksandventurecapitalists.

However,MrRichardiscriticalofanymovetofosteramarketforintellectualproperty,encouragingfinancialinstitutionseffectivelytovalueconceptsbeforeanycommerciallyviableproductorservicehasbeenproduced.“They’retakinganotionatonestageofabusinesswiththetypeofactivitythathappensatadifferentstageandsaying:ifwerealisetheintellectualpropertyandgiveitanassetvalue,then[start-upbusinesses]couldborrowagainsttheasset.It’snotthelackofassetbackingthatstopsthemfromgettingaloanatthatstageofthebusiness,it’sthelackofserviceabilityontheloan,”hesays.

Thefutureofseed-stagefundingissocialWhileadvocatesofanIPvaluationmarketbelievethiscouldhelpstart-upsgainfundingatseedstage,MrRichardthinksthisisunlikelybecausetraditionalbankloanshingeontwoquestions:canyoupaybacktheloan;and,ifyoucan’tpaytheloanback,whatassetcanbeclaimedinitsstead?

“Ifthebusinessisfailingthentheintellectualpropertymayhavebeenprovedinthemarketplacetobeofnovalue,”hesays.Atseedstage,thebusinessissimply“aconcept,adream,adesire”.SimplyvaluingIPdoesnothingtofreestart-upsfromrelianceoninvestmentsfromthe“threeF’s”–family,friendsandfools–becausetheconceptisnotasset-backed.

Instead,heoffers,socialloanscanprovideasolution.Theyareunsecuredloansprovidedunderverydifferentlendingcriteriatotraditionalloans(designedforstart-ups)bycommercialfinancialinstitutionsandunderwrittenbythegovernment,withalownominalinterestrateof6%.

“Sociallendingisinterestingbecauseitpreservestheentrepreneur’sequity.Peoplethinkthataloanisworsesomehowthanthesaleofequity,butintruththesaleofequityisthemostexpensivemoneyyou’lleverspend,ifyousucceed.”DougRichard,Founder,SchoolforStartups

24http://www.theguardian.com/business/2014/may/04/innovators-mcam-knowledge-underwriter-value-intangible-assets-intellectual-property25http://www.ipo.gov.uk/ipresearch-bankingip-sum-281013.pdf26http://www.ipo.gov.uk/ipresearch-bankingip-sum-281013.pdf

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Loanrecipientsarematchedwithabusinessmentortoguidethedeploymentoftheloanfundingwiselyandtopassonreal-lifeexperiencethatthementorhasgainedbybeingasuccessfulentrepreneur.Theaverageloansizeis£6,000andSchoolforStartupsisthelargestdeliverypartneroftheStartUpLoansschemeintheUK,throughitslauncherprogramme,saysMrRichard.“Sociallendingisinterestingbecauseitpreservestheentrepreneur’sequity.Peoplethinkthataloanisworsesomehowthanthesaleofequity,butintruththesaleofequityisthemostexpensivemoneyyou’lleverspend,ifyousucceed,”headds.

However,MrRichardbelievesthattheUKgovernmentcouldbemoreinnovativeitselfinitsfundingstrategyforentrepreneurs.Traditionalloans,hesays,donotfitstart-upsbecausetheytypicallyhaveavolatilecashflowyetloansrequireregularrepayments.Instead,countriessuchasColombiaarecreatingcustomfinancialinstrumentstosuitthestart-up,bethatasteppedaccelerationininterestratetowardstheendoftheloantoencouragequickerrepaymentsooneroracertainpercentageoftheloantoberepaiddependingonvaryingrevenuelevels.

Start-upLoans:Keystatsanddemographics

Source:www.startuploans.co.uk

MrRichardsayssuchapproachesdefytraditionallending,butlendingtostart-upbusinesshasneverbeenpartofthetraditionalbankingremitbecauseitisdeemedtoorisky.Thatriskyelementofthemarketindevelopedeconomiescanbeaddressed,heexplains,byborrowingandadaptinginnovativeapproachesthatworkwellindevelopingcountrieswheretheyseektoassistthe‘unbanked’(peopleexcludedfromthebankingsector).

Combatingsell-out‘gazelle’companiesThefactthatUKtechnologystart-upsbeingsnappedupbyfarlargerUScompetitorsonanacquisitionbentissocelebratedintheUKhighlights“ambitionandscalebarriers”thatcouldbepartiallygeographic,suggestsMsLaneFox.“Ifyou’rebornintheUSthenyourhomemarketisimmediately300mpeople,whichgivesyouadifferentideaofscaleandambitioncomparedwiththeUK,wherethehomemarketis60mpeople.Togetaccesstorealscale,youhavetogointoEuropeandthat’sharder,”shesays.

MrHuttonagrees:“TheAmericanshaveasinglemarket.ThemarketinEuropeisformarketingmanufacturedgoods,notinknowledgeservices,wherealltheactionis.ThatmakesitverydifficultforBritishentrepreneurstopitchtheirstart-upcapitalwithanychanceofbuildingabilliondollarcorporation,becausethesinglemarketinwhichitmightdothatdoesn’texist.”

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At the heart of the Eurozone project is the concept of borderless free-trade movement (of people and goods) but, unlike in a domestic single market the size of the US, UK companies face different legal and administrative environments, different languages and cultural nuances on the Continent, as well as the need to select a suitable corporate structure for expansion – whether to franchise, partner or otherwise enter a less familiar marketplace.

Nicholas Davis, Director and Head of Europe at the World Economic Forum, says: “At the EU level there’s a huge amount of work still to be done to reduce fragmentation and create a digital single market. This would allow companies that start here in Britain to seamlessly access 500 million people rather than just 8 million in London, for example.”

Ms Lane Fox also says that European businesses tend to have “longevity and levity”, which UK businesses lack, suggesting “there’s a cultural point about that kind of ambition and really not trying to get out of your business before you’ve achieved scale”.

Mr Hutton adds: “Too many companies have to exit or sell all their equity at the crucial juncture of £2m turnover. [As entrepreneurs] they have no scope to grow unless they sell out completely and that indicates a dysfunction in the system.”

Prof. Wright believes this dysfunction is compounded by government policy, which is too narrowly focused on measuring start-up volumes and using that as an indicator of entrepreneurship in the UK, without also focusing on whether the start-ups actually grow or create wealth. “I think there’s probably not enough done after the incentives to start up a business to help it to grow,” he says. “There are a lot of problems there with policy; the growth side [of businesses] is where the impact from innovative entrepreneurship is really going to be.”

There is also a case for greater promotion of alternative funding and growth options, making it less attractive for successful UK businesses to sell out to acquisitive (typically foreign) competitors, which then benefit from the UK’s cultivation of a business during its riskiest phase and draw the future profit potential of the business away from the UK economy.

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AstheUK’seconomyisweightedtowardsknowledge-basedenterprises,encouragingentrepreneurialismthatadvancesnewapproaches,processesandproductsthatcanbebothcommercialiseddomesticallyandscaleduptorivalinternationalpeersiscrucialtothefutureoftheUKeconomy.Withoutawell-functioningandoptimallysupportedentrepreneurialecosystem,theUKrisksactingasanationalstart-upincubatorsupplyingforeignmultinationals.

ExpertsinterviewedinthisreportofferadviceonhowtosucceedinbuildingaUKentrepreneurialecosystem.

• Whilesoletraders,theself-employedandsmallandmedium-sizedbusinessesmakeaconsiderablecontributiontotheUKeconomy,greatercaremustbetakentoaddressthespecificneedsofeachofthesegroupsandcautionexercisedsoasnottoallowterminologytobeusedinterchangeablytodescribebusinessesthataresodiverseintermsoftheirbusinessmodel,riskappetite,scalabilityandcapacityforemploymentgrowth

• Location-basedhubsofentrepreneurialactivityshouldnotbeconsideredsimplywithincityboundaries.ThesocialdataincludedinthisreportmakeacaseforfosteringentrepreneurialactivityalongtheLiverpool-to-Yorkcorridorratherthanprovidingcity-specificsupportandignoringtheagglomeration.Supportforentrepreneursinsuchagglomerationsmayneedtobeindirect,suchasprovidingenhancedtransportinfrastructureandfosteringsupportandbusinessnetworksthatspanthemultiplecitiesandareasconnectingthem

• Thesocialdataindicatethatsourcesofpracticalsupport(suchasacceleratorprogrammes)andfundingprovisionsareintegraltotheonlineconversationabouthigh-growthbusinessesandstart-upsintheUK.Consequently,these‘influencers’canbeusedtoamplifythesuccessesofBritishentrepreneursandprovideawarenessofrolemodelstohelpcultivateamoreambitiouscultureofentrepreneurialismtorivalthoseoftheUSandEurope

While improvements to foster an innovation ecosystem in the UK have begun, much more can and should be done.

Conclusion

• Theseinfluencersshouldbeusednotonlytosignpostentrepreneurstoresources,butshouldbeconsideredaslong-termpartnersforentrepreneurswhiletheygrowtheirbusinessesfromstart-upphasethroughtohigher-scalematurity,completewithoptionsforexpandingabovethe£2mturnoverthreshold

• Thetiesbetweenacademiaandthebusinesscommunitymustcontinuetobestrengthenedandpublicisedsothatawiderrangeofbusinessescanbenefit,andlessbusiness-mindeduniversitiescanbeencouragedtofollowsuit.Partnershipsbetweenalumnianduniversityenterprises,withtheformermentoringthelatteronhowtocommercialisetheirprojectsisoneelement,butbroaderintegrationintothelocalbusinesscommunitieswillensurewiderparticipationinaknowledgeeconomy.Giventhatuniversitiesarepubliclyfunded,asharperpushtowardsawidernon-academiccontributiontoenterpriseactivityisneeded

• Aninnovativeapproachtofinancialinstrumentsthatarebetterabletomatchthefundingneedsandpracticalconstraintsofentrepreneursatthedifferentstagesoftheirbusinesses’lifecyclesisrequired.Traditionalfinancialinstitutionswillbepivotalinprovidingthis.Thegovernment,whichcanwieldtaxandotherfinancialincentives,alsohasacrucialroleinreducingthebarriersthatentrepreneurscomeupagainstingettingfundingtocommercialisetheirideas,andthebarriersthatthemarketfacesinpricingriskaroundentrepreneurialventures.Forstart-ups,matchingfundingwithmentorshipappearstobeagoodfirststep,butmorecanbedonetomatchtheriskandliabilityprofileofbusinessesatdifferentstages.ThisshouldbeapproachedcollaborativelyfrombothagovernmentandfinancialservicesstandpointtoensureacohesivefundingstrategyisadoptedfortheUK.

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Inadditiontowide-rangingdeskresearchanddatafromPulsar,asocialdataintelligenceplatform,thisreportisbasedonqualitativeinterviewsandaroundtablediscussionwithexperts.Ourthanksgotothefollowingfortheirspecificcontribution.

MarkAnderson,ManagingDirector,PearsonEducationUK

JaneChen,Co-Founder,Embrace

AlastairClegg,ChiefExecutive,ThePrince’sInitiativeforMatureEnterprise(PRIME)

NicholasDavis,DirectorandHeadofEurope,WorldEconomicForum

GraemeFisher,HeadofPolicy&ExternalAffairs,FederationofSmallBusinesses(FSB)

RossFobian,CEOandCo-founderofResponseTapLimited

DavidGill,ManagingDirector,StJohn’sInnovationCentre,StJohn’sCollege,UniversityofCambridge

MarkGlover,DirectorofBusinessPlanning,TechnologyStrategyBoard

CliveHoltham,ProfessorofInformationManagementandDirectorofCassLearningLaboratory,CassBusinessSchool

TomHulme,DesignDirector,IDEO

JillHuntley,ManagingDirector,CorporateCitizenship,Accenture

WillHutton,PrincipalofHertfordCollege,UniversityofOxford,andChairoftheBigInnovationCentre

Barclays approached The Economist Intelligence Unit in February 2014 to investigate how entrepreneurs in the UK are supported and the barriers that hinder them, as well as wider trends that are shaping the UK’s innovation ecosystem.

About this report

MarthaLaneFox,Co-Founder,lastminute.com

JamesLayfield,SerialEntrepreneurandCEO,CentralWorking

KathrynParsons,Founder,Decoded

JaideepPrabhu,JawaharlalNehruProfessorofBusinessandEnterprise,JudgeBusinessSchool,UniversityofCambridge

DougRichard,Founder,SchoolforStartups

SumonSadhu,Founder,Quid

PhilipSalter,Director,TheEntrepreneursNetwork(TEN)

PeterTufano,PeterMooresDean,SaidBusinessSchool,UniversityofOxford

EzeVidra,HeadofCampusLondonandGoogleforEntrepreneursEurope

MikeWright,ProfessorofEntrepreneurship,ImperialCollegeLondon

ThisreportwaswrittenbyAnnaLawlorandeditedbyZoeTabaryandMonicaWoodley.

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BarclaysisatradingnameofBarclaysBankPLCanditssubsidiaries.BarclaysBankPLCisauthorisedbythePrudentialRegulationAuthorityandregulatedbytheFinancialConductAuthorityandthePrudentialRegulationAuthority(FinancialServicesRegisterNo.122702).RegisteredinEngland.Registerednumberis1026167withregisteredofficeat1ChurchillPlace,LondonE145HP.

June2014.

barclays.com/entrepreneurs