StartMeUp

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

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3 Foreword

4 Executive summary

5 The shifting ground of the labour market

8 Growth of innovation hotspots

9 The UK’s emerging innovation hotspots

12 Case study

14 Entrepreneurial challenges and opportunities

17 Case study

22 Conclusion

23 About this report

Contents

2

This report was written by Anna Lawlor and edited

by Zoe Tabary and Monica Woodley.

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Foreword

With 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; onethat encourages direct ownership and responsibility to respond to these challenges.

Entrepreneurs are a huge source of economic growth,

innovation and job creation. And in the UK they represent

a diverse cluster of individuals. New businesses, ranging

from tech start-ups to manufacturers and retailers, are

pioneering new products and services. From Bristol to

Leeds, Cambridge to Glasgow, entrepreneurs are thriving.

But there is much more that can be done to support

their growth.

Stakeholders of the entrepreneurial ecosystem must

share a willingness to think critically and creatively about

solutions. Together we must provide access to financial

capital and human capital, the right education and

skills, a competitive business environment and clear,

non-onerous regulation that does not needlessly burden

business models.

The economic potential of entrepreneurs is tremendous.

And unless this potential is properly harnessed and

budding entrepreneurs provided with the skills and

resources they need to build their ideas into successful

businesses, the UK economy will not flourish in future.

This report takes a closer look at the entrepreneurial

potential across the UK and presents the opportunity to

understand how it can be better supported. It is based onprimary research undertaken by The Economist Intelligence

Unit as well as a roundtable discussion conducted at

The Escalator in Whitechapel, London.

I would like to take this opportunity to thank all those

involved for their contribution to this report.

Antony Jenkins

Chief Executive

Barclays

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An innovation ecosystem refers to the combination

of factors for innovation that function together in a

symbiotic relationship. The real-word application is the

environment within which entrepreneurs function as one

integral component. This has a knock-on effect on the

broader economy, which thrives off the vitality of

innovative entrepreneurs.

This Barclays report, written by The Economist Intelligence

Unit, looks at how to create an environment where

entrepreneurs can flourish in the UK, drawing on best

practices from other innovation ecosystems around the

world. Based on in-depth interviews of entrepreneurs and

other experts, substantial desk research and social data

mining, its key findings are listed below.

Entrepreneurial communities extend beyond the

capital, London, and South East England

London accounts for the largest share of online activity

relating to discussions about innovation and

entrepreneurialism, with a 48% share of ‘voice’. However,

the next largest shares of ‘voice’ come from Cambridge

(9.3%) and Manchester (6.9%), and there is a clearnorthern corridor stretching from west to east (Liverpool to

York). Mike Wright, Professor of Entrepreneurship at

Imperial College London, explains: “We looked at the notion

that there’s a ‘golden triangle’ in the South East for

entrepreneurship in terms of access to finance, but found

Entrepreneurial Britain is beginning to flourish as policy changes and increased

investment in the UK’s innovation ecosystem take root.

Executive summary

that some successful university spin-offs were actually not

located in the South East but were, nevertheless, able to

attract finance from there. That’s one example of where

the ecosystem isn’t quite as location-based as we might

admit, and may suggest that we need different mechanisms

to stimulate a more virtual ecosystem rather than a

physical location.”

The labelling of innovation hotspots produces a

compound effect that fosters entrepreneurialism

This view rewards an interventionist approach across the

education system, start-up incubators and centres of

excellence, which empower and facilitate British people

of all demographics to fulfil their entrepreneurial potential.

In so doing, it is argued, thriving sector hubs and the

publicity ‘buzz’ that accompanies them broaden equal

access to entrepreneurial opportunity, wealth creation

and employment.

Entrepreneurs are made, not born

Entrepreneurialism is not an innate trait, but rather

something that can be fostered with the right mix of learned

skills, access to opportunities and confidence, according toexperts interviewed for this report. Government and the

school system alone cannot create entrepreneurs, but they

can send significant signals about entrepreneurship, that

‘failing well’ (taking calculated risks and learning from

failures) is key to success, and that starting a business is

a viable and respected career route.

Creating an environment where entrepreneurs can

thrive requires a co-ordinated strategy covering a

range of areas

Encouraging entrepreneurial hubs beyond traditional city

boundaries, strengthening ties between education systems

and the business community, removing demographic-

specific barriers to entrepreneurialism and better matchingthe funding needs of entrepreneurs are some of the specific

priorities that policymakers, businesses and academia need

to address.

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The shifting ground of the labour market

This evolution has increased regional inequalities, and one

of the consequences of the 2008 financial crisis on the UK

economy is that young people (aged 18-24) have borne the

brunt of unemployment and have been the most affected

by underemployment.

Employment by sector Percentage of workforce in each industry

The UK has evolved from a manufacturing- and product-based economy into

a service-sector- and knowledge-based economy.

Source: Office for National Statistics1. Source: Office for National Statistics2.

1&2http://www.ons.gov.uk/ons/rel/census/2011-census-analysis/170-years-of-industry/sty-170-years-of-labour-market-change.html

1841 2011

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The financial crisis prompted increasing numbers of

employers to introduce ‘zero-hours contracts’, giving them

the flexibility to employ casual labour as and when required,

with none of the responsibilities associated with hiring

employees. Young people are again the most vulnerable

to such employment practices.

Research from the University of Stirling found that while

national underemployment rose to 9.9% in 2012, for

16-24 year olds the rate was significantly higher, at 30%4 .

Some argue that this has led educated and technologically

proficient young people to discover their entrepreneurial

flair, pouring their efforts into start-up business ventures

and turning to non-traditional funding routes such as online

crowdfunding sites Kickstarter and Indiegogo. However,

while the volume of newly registered businesses is growing

and is often heralded as a sign of flourishing British

entrepreneurialism, they could simply be reflecting an

increase in ‘bedroom businesses’ (a colloquialism for

businesses starting out of the home, requiring little or no

start-up funding) and in the number of people repurposing

themselves as self-employed consultants as a result of

redundancy. Such changes in labour dynamics can skew

what appears to be promising data about the true extent of

the UK’s entrepreneurial activity on economic productivity.

There is concern that business start-ups are too easily

categorised as being entrepreneurial even though

many compete on price and service rather than byproviding a unique offering in the marketplace. This

increases the challenges of addressing barriers to

innovative entrepreneurialism and identifying new

Source: Office for National Statistics cited in Parliament3.

Youth unemployment compared with working-age

unemployment

3http://www.parliament.uk/business/publications/research/key-issues-for-the-new-parliament/economic-recovery/young-people-in-the-labour-market/4http://www.stir.ac.uk/news/news-archive/13/april/meet-the-underemployed/name-44068-en.html

and commercially viable solutions to problems

because, while they are frequently regarded as the

same, entrepreneurs and start-up businesses often face

very different challenges and operate very different

business models.

Some, such as Martha Lane Fox, a serial entrepreneur,

believe there is not the same risk appetite among British

entrepreneurs as there is in the US or the EU. This creates

its own problem in that the British like to think there is

a rich seam of entrepreneurialism in their country when

in fact, Ms Lane Fox argues, there are limited examples

of British start-ups that have gone on to become

internationally-renowned brands and have remained

British companies.

Will Hutton, Principal of Hertford College, Oxford University,

and Chair of the Big Innovation Centre, says that the lack

of a British innovation ecosystem is a “principle deficiency

in the UK economy. One of the longstanding areas of

weaknesses has been financing and commercialising

new ideas.” However, he says change is afoot; the current

government is at last speaking the language of innovationecosystems, introducing entrepreneurial programmes and

putting forth government funding to support them.

“Is it enough? No. Is it following the trend towards open

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innovation, sharing, relaxing of intellectual property law

that needs to take place? No. But it would be unfair and

wrong to say that nothing has happened.”

Business births by UK region

Source: Office for National Statistics.

2009

2010

2011

2012

“The UK is a worldleader in tax-incentivised seedand angel investing”.Doug Richard, Founder of School for Startups

Doug Richard, Founder of School for Startups and a serial

entrepreneur, says that the UK is a world leader in tax-

incentivised seed and angel investing. The Seed Enterprise

Investment Scheme (SEIS) has, he says, increased the

likelihood of angel investment for very-early-stage British

businesses by minimising the risk as much as possible

for the investor. “I don’t know of any other country that

has anything as close to aggressive as that [in using

tax incentives].”

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Such public labelling has a compound effect; the soft power

inherent in the (often government-backed) promotion of

areas as innovation hotspots creates a honey-pot effect,

which subsequently attracts venture capitalists, big

consultancy firms and other specialist organisations that

attend to the needs of growing firms in complex industries.

Such labelling may also become self-fulfilling in terms of

encouraging a location-specific culture of entrepreneurialism,

with their own success cases and role models, enticing

would-be entrepreneurs from ‘safe’ salaried roles to university

spin-offs in order to instigate their start-up plan.

Detractors of location-specific hubs contend that while

promoting hotspots attracts resources, infrastructure and

esteem for the few, the many other cities and large towns

across the country are excluded, their success stories and

role models eclipsed. Arguably, the approach contributes

to more acute regional inequalities and deepens a

southern concentration of wealth, opportunity access

and employment.

Clive Holtham, Professor of Information Management and

Director of Cass Learning Laboratory at Cass Business

School, says: “I’m pretty sceptical about [the idea] that

we can get scientific and business innovation through

large sums of money going to a few people. Centres of

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

Excellence, for example, are part of the huge amount of

rhetoric and fashion in high-level allocations of money,

which give the impression that there’s a top-down solution.

It’s an ecosystem, so you need all the components.”

Regional funding from GrowthAccelerator

schemes

Top 10 sectors funded by GrowthAccelerator

schemes

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

North East

North East

East Midlands

East

London

4%

9%

8%

9%

16%

16%

11%

12%

15%

South EastSouth West

North West

West Midlands

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In order of conversation size Share of geo-located innovation content onlinePulsar, developed by UK-based company FACE, is a social

data intelligence platform that is reinventing social media

monitoring, customer service and enterprise collaboration.

It scoured 200,000 posts over three months to

March 16 2014, mapping the UK locations that had the

highest volumes of online conversations about the search

terms ‘innovate’, ‘innovation’, ‘entrepreneur’ or ‘start-up’.

While fewer than 5% of social media users make their

location publicly available, the findings are an indicator of

where online conversations about entrepreneurialism and

innovation are occurring, when users choose to share

their locations.

While London tops the list with 7,705 results, northern

cities are prevalent, with a clear corridor stretching from

west to east (Liverpool to York).

While not statistically significant, the findings caution against a narrow

conception of entrepreneurial communities thriving only in southern England.

Source: Pulsar.

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 actuallytalk about and how they communicate with key stakeholders and each other.

The UK’s emerging innovation hotspots

City Number of results

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

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Locations of high-volume social conversations

about innovation

In order to extrapolate more comprehensive social data,

Pulsar applied a ‘smart filter’ to all publicly available social

content on the Internet, irrespective of users’ set locations.

High-density urban areas and high-ranking universities are

both widely considered to be key factors influencing theemergence of an innovation ecosystem.

“Clustering can bring positive productivity benefits for

individual sectors, although the effect is nearly always

outweighed by the importance of being in a large urban

environment,” the Manchester Independent Economic

Review stated in its 2009 report, The Case for

Agglomeration Economies5. The report went on to argue

that larger cities make it easier for different types of

workers and firms to find each other, which chimes with

the view of Jaideep Prabhu, Jawaharlal Nehru Professor of

Business and Enterprise at the Judge Business School ofthe University of Cambridge (England). He says that city

dwellers are at a greater advantage, particularly those

connected to universities, because there is a constantly

replenishing supply of diverse communities and young,

educated people with fresh ideas.

Mark Glover, Director of Business Planning at the

Technology Strategy Board, adds: “Innovative people with

bright ideas are an important element of any localised

cluster. High-calibre universities are likely to attract and

train these people, and often have additional infrastructure

(such as science parks) to help commercialise ideas.

This is the case with Cambridge, Silicon Valley and

Stanford University.”

By combining the UK’s top ten universities6, top ten urban

cities (by population size)7, plus locations that Tech City

named as ‘Cities to Watch’ for innovation8, 18 key locations

were added to Pulsar’s data filter: London, Birmingham,

Leeds, Edinburgh, Glasgow, Sheffield, Bradford, Liverpool,

Manchester, Bristol, Newcastle, Cambridge, Oxford,

Durham, Bath, Exeter, St Andrews and Warwick.

The Pulsar data find that London still accounts for the

largest share of online activity (48%) relating to discussions

about innovation and entrepreneurialism. The next largest

share comes from Cambridge (9.3%), Manchester (6.9%)

and Oxford (5.9%).

The next largest cities by population after London –

Birmingham, Leeds, Glasgow and Sheffield – do not

have a corresponding share of ‘voice’. Rather, the social

conversations about innovation, entrepreneurs and start-ups

are happening in Cambridge, which is not a high-density

urban area and is situated in a region that has received just

9% of the government’s GrowthAccelerator funding.

However, its world-renowned university (as with Oxford)has become known for university-based technology

spin-offs. Cambridge University has a portfolio of 68

companies – including ARM, the world’s leading

semiconductor intellectual property supplier, valued at

£12bn9 (US$20bn) – which have raised over £800m in

further investment and grant funding, and together

generate an annual turnover of £170m10.

Manchester’s proportion of the share of ‘voice’ leapfrogs that

of larger cities, including neighbouring Leeds. Again, academia

appears significant as Manchester Business School is the

second most highly-ranked for postgraduate entrepreneurshipcourses in the UK11, behind University of Cambridge’s Judge

Business School. The city was also listed by Tech City as a

‘City to Watch’12 – along with Birmingham, Bristol and

Newcastle – and at the time of the data collection had just

announced that it had been awarded £1.5m in government

funding for a Social Enterprise Accelerator scheme.

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. The remaining eight locations accounted for less than

2% of share of voice.

London48%

Share of voice of the 18 selected cities in

topic-specific conversations

Cambridge 9.3%

Manchester6.9%

Birmingham 4.9%

Leeds 3.1%

Bath 3%

Bristol 3.2%

Edinburgh 2.8%

Liverpool 2.7%

Oxford 5.9%

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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/

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

This funding-related conversation vacuum could either

be considered cause for concern – a sign that government

initiatives are not truly trickling down to the entrepreneurial

communities that they are designed to support – or cause

for celebration, if social silence indicates that further

debate about funding options is unnecessary because

entrepreneurs are confident in their access to resources

and simply do not wish publicly to discuss their

financing needs.

The social conversations within each location also reveal

the nuances of their specific ecosystems. While social

conversations mentioning London have a large share of

‘voice’, the data show that the noise is crowding out any

nuances, highlighting each of the key topics as equally

connected to each other (see chart below). By contrast,

the Manchester data set identifies an infrastructure for

supporting young entrepreneurs in fast-growing creative

fields such as game development.

City-to-city connections

In terms of evidence of locations participating in a

broader, national ecosystem, one might expect a high

level of referencing of other locations when discussing

innovation. This is true for London, which mentions

Cambridge, and for Cambridge and Birmingham, which

mention London, during online conversations aboutinnovation and entrepreneurialism. The highest volume

of location-referencing posts comes from Manchester

discussing Leeds in this context (it is the ninth most

mentioned keyword), which could reinforce the concept

of the northern corridor.

However, inter-connectedness between locations is lower

than expected and social conversations regarding Oxford

do not mention any other location. Oxford also produces

university-based spin-off companies, with a similar number

to Cambridge at 65, and currently valued at £40m, so it is

surprising not to see the data represent a more similarsocial conversation pattern.

Content clusters from online conversations

Across all 18 locations, social networks are dominated by

conversations about technology, new techniques, social

innovation and, interestingly, Cambridge. Twitter as a

channel tends to be more London-centric, with a high

prevalence of start-up, business-centred conversations

involving innovation and entrepreneurialism. Universities

and related topics such as ‘college admission courses’,

‘studies’, ‘degree’ and ‘prestigious university’ are all very

prevalent in these online conversations, but particularlyconspicuous is the absence of social discussions about

funding, crowdfunding, business loans, grants, investors, or

even tax breaks and government schemes for entrepreneurs.

Top 10 keywords mentioned by each location

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As can be seen in the associated chart, large nodes

in the network universe indicate very active online

participants, with the Centre for Entrepreneurial

Learning (CfEL) Cambridge the most active during

the data period.

CfEL Cambridge is a not-for-profit organisation based

in Judge Business School, which provides courses for

undergraduate, postgraduate and non-academic

aspiring entrepreneurs designed to share best

practice, unlock entrepreneurial potential and ‘plug-in’

attendees to a network of CfEL Cambridge alumni,

mentors and facilitators13.

Virgin StartUp, a not-for-profit organisation that

promotes business financing through its partners

(including Virgin Money) and then connects

start-ups with business mentors14, is the second-

largest influencer in the data set. The third is

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 dominateonline 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 ‘smart filtered’ data.

Entrepreneurial Spark (ESparkUK), a business accelerator

in Glasgow, Edinburgh and Ayrshire that offers free office

space, IT and structured support for 18 months to high-

growth, early-stage businesses with an annual turnover of

less than £1m15.

This data indicates that sources of practical support

and funding provisions are integral to the online

conversation about high-growth businesses and

start-ups in the UK and a valuable social signal

guiding entrepreneurs to resources and role models.

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London data set: inter-related key topics Connection in social conversations between ‘Game

Design’ and other key topics – ‘development’,‘training’ and ‘young entrepreneurs’

In the bundle chart below, the prominence of this ‘virtual

ecosystem’ linking the key categories of ‘game design’,

‘development’, ‘young entrepreneurs’ and ‘training’ is

visible. This topic was sparked by Twitter engagement

related to the announcement of a Manchester-based game

design studio providing training in game design and

development for young entrepreneurs.

Today, the UK is the fifth-largest video-game developer in the

world, with the sector contributing £947m to GDP in 2012,

employing more than 9,000 people in game development

and indirectly supporting almost 17,000 further jobs,

according to trade association, TIGA16. What the social data

does not show is that the young entrepreneurs to whom the

game developers are appealing are themselves promoting

innovation in this space. Engagement in social media

includes relatively passive actions such as forwarding

and ‘liking’ content posted by others – in this case, a

game design studio – not necessarily commenting on

the post, although the content is being digested by its

intended audience.

A similar innovation ecosystem is evident in the Cambridge

data set, with the key topic ‘co-founding group’ mentioned

in the same posts as ‘pharmacology’ and ‘prestigious

university’. Top tweets during the period feature ‘hot

Cambridge shares’ and content about the Cambridge

Satchel Company expanding into China. The Pulsar data

finds that technology is not as strongly linked to academia-

related topics as might be expected; instead ‘technology’

is mentioned in conjunction with ‘social innovation’, ‘new

technique’ and ‘world’.

In the Manchester-related social conversations, the

government’s announcement in January of a £300m tax

break for retail businesses around the UK appears to have

gained significant traction in online conversations, as it is

featured in the data as a key topic. While this looks positive

on the surface, when the data is analysed it shows that this

topic of tax breaks is the result of digital publishing, rather

than social conversation; traditional news publications

reporting online and sharing news of the tax break across

their social media accounts.

Manchester data set: relationship between

‘£300m tax break’ topic online

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

Source: Pulsar Source: Pulsar Source: Pulsar

college-admission courses

college officials

co-founding group

costly lab

pharmacology

studies

potentialsocial innovation

cambridge

degree

startup

technology

time

london

tech entrepreneurs

game design

leeds

dev

training

young entrepreneurs

bizitalk

liverpool

startup

business

manchester

entrepreneurs

300m tax break

retail firms

innovation

tech entrepreneurs

game design

leeds

dev

training

young entrepreneursbizitalk

liverpool

startup

business

manchester

entrepreneurs

300m tax break

uk

nhs technology

nhs bossretail firmscbe

innovation

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Borrowing from the Latin root of ‘education’, Prof.

Holtham says that education at all levels in the UK needs

to ‘draw out’ the intrinsic creativity of people, be that

creativity in conceiving an idea previously unimagined or

in generating an alternative approach to systems and

operations. To flourish, he says, “the innovation process

needs all types of people , generally working together

in teams”.

Jane Chen, Co-Founder of Embrace, believes that the types

of workshops undertaken in graduate and postgraduate

design and entrepreneurialism courses can easily be

adapted to and introduced at an earlier stage in the

education system, as well as within existing companies,

to help cultivate a creative approach. Such workshops are

based on an understanding that all brainstorming and

approaches are valid, with no judgement from any

participants made if an idea is outlandish or does not work.

Organisations such as Google have long advocated and

provided creative work environments for their staff in order

to assist work-based creativity. In the UK, companies such

as Mind Candy in London, Melbourne Server Hosting in

Manchester and Virgin Money in Edinburgh have followed

this trend19. This prompts the question of whether Britain’s

schools should consider introducing similar liberal and

design-led ideas, such as those embedded in Sweden’s

Telefonplan school, which emphasises both independent

and collaborative working. It is argued that traditional work

spaces – from formal education through to the workplace

– quash creativity and collaborative working, which is nowa prerequisite for a technology-enabled workforce and a

service-driven economy.

Prof. Holtham relies on the academic model of innovation

for courses at the Cass Business School, an ecological

‘Creative Problem-Solving’ (CPS) model in which the four

components – Product, Process, People and Place –

all positively interact with each other. He argues that

policymakers’ and business leaders’ attention is too

narrowly focused on product-based innovation or place-

specific entrepreneurs.

Eze Vidra, Head of Campus London and Google for

Entrepreneurs Europe, says there needs to be an ‘alternative

education’ outside the formal education system, where ‘the

need is biggest’ as there are no professors on tap and no

access to classroom facilities or resources. He points to

schemes such as Google’s Campus for Moms20, which is

a baby-friendly eight-week start-up school, at the end of

which the participants pitch their business idea to course

leaders, guest entrepreneur speakers and venture capital

investors.

Demographic-specific barriers

According to the Women’s Business Council21, the

entrepreneurial gender divide is robbing Britain of more

than 1m more entrepreneurs; total entrepreneurial activity

in 2012 (calculated as the proportion of the working-age

population either in the process of starting a business or

running a new business) was 11.6% for men compared

with 6.3% for women.

As Ms Lane Fox says: “Women don’t need special

treatment, they are not disadvantaged by anything other

than long-rooted cultural reasons”, illustrated by claims

that men are neurologically ‘hard-wired’ differently to

women, making them innately more entrepreneurial.

Examples of misogyny facing women in certain sectors,

including science, technology, engineering and

mathematics (STEM) are prolific. In such a culture it is

unsurprising that, statistically speaking, women do not

fulfil the ‘typical’ profile of an entrepreneur; this is a

consequence rather than an explanation.

Kathryn Parsons, Founder of Decoded, a technology

education business, says research on Decoded pupils

found that women are generally 30% less confident than

their male counterparts in believing they can master

coding. Childcare issues also provide a challenge to

professional women, who continue to be primary care

givers despite increases in flexible parental leave. The paceof technological change magnifies any period away from

work, yet the benchmark for basic digital literacy in the

UK is frighteningly low, and the economy cannot afford

to exclude women from future digital business,

Ms Parsons adds.

It is not just women who face having “entrepreneurship

institutionalised out of them”, as Jill Huntley, Managing

Director for Corporate Citizenship at Accenture puts it,

but older people too. While the potential for engaging this

demographic in entrepreneurial activity is huge (there are

3.6m people in the UK aged 50-64 who are noteconomically active), too often the focus is on fostering

young entrepreneurs.

“Unless you address the education

system, either within schoolsand universities or subsequentlyin adult life, you’re never goingto achieve a satisfactory level ofinnovation in society.”


Director of Cass Learning Laboratory, Cass Business School

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Alastair Clegg is Chief Executive of The Prince’s Initiative

for Mature Enterprise (PRIME), which is the only national

organisation dedicated to providing over-50s with the

support to set up their own business. He explains that

while many people dream of starting a business in their

30s or 40s, they can be hindered by family and financial

commitments in a way that over-50s are not.

“There is enormous entrepreneurial zeal in this age group,”

he says. “What we do is give them confidence and point

them in the right direction of what steps they need to take to

start a successful business, such as getting a business plan

in place or seeking advice from mentors. The over 50s tend

to have the skills so it’s more about demystifying the process

and giving them the right tools so they can get up and

running.” Fear and a sense of risk-taking comes from not

understanding how something works or what to expect –

areas that can be demystified through coaching and support.

Programmes that aim to dismantle the barriers affectingspecific demographics should be applauded, but Ms

Huntley urges corporations to facilitate change within their

organisation. “Given the future of work and the structural

changes to the economy, in order to grow established

businesses there needs to be a better cultural pipeline of

innovation and entrepreneurship and some of that needs

to come from inside the company,” she says.

“We run a number of programmes internally to try and

open the innovation mindset and encourage employees to

bring ideas, and [for us to] provide mechanisms of funding

those and spinning them out if necessary,” she adds.

The role of universities in seamlessly moving

entrepreneurs into the business environment

University spin-off companies are not new, but Mr Hutton

argues that British universities should shift away from their

“extremely conservative view about intellectual property

rights” and about how to divide any commercial gains

emanating from university spin-offs, to adopt what he

described as the “MIT or Stanford model”.

He says that the US benefits from universities attracting

companies, which support emerging entrepreneurial

ventures by acting as a bridge from academia to business.

By linking the entrepreneurs with influential alumni in a

mentoring and networking capacity (as was the case for

Embrace Innovations), universities are able to fast-track thecommercialisation of early-stage ideas.

Mr Hutton further suggests that promising university

projects could be funded by embedding grants into the

participants’ PhD or masters degree to fund their

development for a further one or two years, effectively

buying time to enable an innovative concept to be

developed to a commercial level on completion. “It’s very

hard in academic life simultaneously to be an entrepreneur

and have an academic career; the system is not structured

to help you do that. Universities are not as significant as

they should be.”

According to Prof. Wright, UK universities are already moving

away from the traditional approach of commercialising

entrepreneurial activity through licensing agreements and

equity stakes in spin-offs, and moving towards gaining from

‘indirect returns’. He identifies these as being the virtuous

cycle of successful alumni providing practical business

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/

support to entrepreneurial students, which makes alumni

more invested in the university and likely to donate financially.

“I think the US has been better at that than the UK but

we’re starting to see a connection between two areas in

universities that are quite separate: the development office,

which is trying to convince alumni to donate, and the

offices that are trying to promote commercialisation,”Prof. Wright says. For example, the National Centre for

Entrepreneurship Education, based at Coventry University,

launched a programme called ‘Make It Happen’, which has

helped with the launch of 1,900 new businesses since 2009

by providing resources, tools and online mentoring for

graduates starting up a company.

David Gill, Managing Director of St John’s Innovation Centre

(owned by St John’s College, Cambridge), says that despite

some 20 years of policies to encourage universities to

provide a link with the business community so that

university-associated enterprises can flourish commercially,this remains a “missing piece … in the majority of

[UK] universities”.

Mr Gill advocates collaboration between universities and

hubs of entrepreneurial activity, such as innovation parks

where pioneering start-ups with the potential for high

growth are provided with flexible and subsidised work

space and supported by ancillary services based in the

same place. He explains that “gatekeepers who understand

the needs of both sides” are vital, and encourages

university students to undertake work placements within

start-up businesses, so that they can share and apply their

knowledge in a business setting, while the start-up benefits

from a student’s expertise at no cost.

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Case study – Turning a crisis into an opportunity: Embracewhich allowed them to consider the challenge of

regulating a neonate’s body temperature unburdened

by medical preconceptions.

She believes corporations would benefit f rom “bringing

that diversity of backgrounds and viewpoints into their

work” and encouraging innovation-based corporate

spin-offs in the same way as universities do.

Ms Chen also advocates “vertical integration” of the

supply chain, such as manufacturing and sales, areas

that the team first assumed could be outsourced to

third parties. “You’re selling a brand new concept, which

doesn’t plug into any existing sales infrastructure. We

tried to partner with third-party distributors and even

multinationals and that simply did not work. So, for

ground-breaking ideas, I think you need vertically to

integrate to some extent,” she explains.

Consequently, Embrace has developed a small-scale

manufacturing, training and sales team, which Ms

Chen says not only gives Embrace end-to-end control

of its product, but also provides insights into the price

point, effective sales pitches, control over how its

product and brand is positioned in its market,

as well as product-specific feedback.

While improvements have been made to the UK

innovation ecosystem, it is still considered to be

some way behind in many areas compared with the

US. By contemplating the journey of a successful,

innovative enterprise that follows what will l ater

be discussed as ‘the Stanford model’, British

policymakers and business leaders can take heed

of, and even enhance, similar factors and practices

in order to strengthen the UK innovation ecosystem.

During her MBA at Stanford University, Jane Chen

and her peers on a multi-disciplinary ‘entrepreneurial

design for extreme affordability’ class created the

world’s first low-cost baby incubator, which costsabout 1% of the usual US$20,000. What started

as an academic challenge evolved into the award-

winning social business, Embrace Innovations,

which has distributed Embrace Warmers that

have reached over 60,000 hypothermic infants

in 11 developing countries around the world23.

Process: design-led innovation

Ms Chen asserts that the design process can be

taught and fostered across academic and business

fields, drawing on the creativity inherent in each

individual. That process is to understand the problem;list the criteria required to address the problem; use

rapid ‘low-resolution’ prototyping and iteration based

on trial and error; and to co-create with the end user,

not just in terms of receiving feedback but in order to

“understand the ecosystem around something that’s

going to make your product successful or not”.

The Embrace Warmer uses an innovative wax incorporated

in a sleeping bag to regulate a baby’s temperature. It stays

warm without electricity, is safe and intuitive to use –

a crucial factor given the high numbers of babies born

in remote rural areas, without access to hospital facilities,

meaning that family members need to be able to operate

the product themselves.

The entrepreneurial structure

Pulling together multi-disciplinary teams is alsoimportant, Ms Chen says. The Embrace project

team originally comprised an electrical engineer,

an aerospace engineer, a computer scientist and

(in Ms Chen’s case) a public health professional,

“Corporations would benefit

from bringing a diversity ofbackgrounds and viewpointsinto their work and encouraginginnovation-based corporatespin-offs in the same way asuniversities do.”

Jane Chen, Co-Founder, Embrace

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Ecosystem support for entrepreneurs

Stanford University played a critical role in

assisting Embrace, not least by facilitating

access to other influential stakeholders

and funding opportunities. Embrace won

US$125,000 in seed funding from the

Stanford Business Plan Competition, and

Echoing Green Fellowship awards.

As a non-profit organisation, Embrace receives

contributions from foundations and individual

donors, as well as a small percentage of funding

from royalties on commercial sales of the infant

warmer to governments and private entities that

can afford a low-cost solution to neonatal

hypothermia. Both Stanford and Echoing Green

Fellowship additionally provide access to their

respective alumni and partners, which Ms Chen

considers to be crucial in Embrace’s success.

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

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Could valuing intellectual property unlock

mainstream start-up lending?

Prof. Wright considers funding less of a barrier for

entrepreneurial start-ups because the initial costs for many

knowledge-based businesses are now low. However, Mr

Hutton advocates Britain creating its own market for

intellectual property, which he believes will create more

mainstream lending opportunities to start-ups that would

otherwise not qualify for such funding.

British businesses now invest more in intangible assets,

such as intellectual property, branding and design –

investing £138bn on ‘knowledge assets’ in 2011 – than they

do in buildings, engines and machinery (£90bn in 2011)24.

That such assets are currently ‘unbankable’, according to

the Intellectual Property Office25, provides a huge

opportunity for new financial instruments to unlock this

latent value. In its recent report, Banking on IP: The role of

intellectual property and intangible assets in facilitatingbusiness finance26, the Intellectual Property Office stated:

“Balance sheets do not represent their value, and current

regulations actively work against consideration of IP

(intellectual property) as an asset class but the result is a

real and important disconnect between banking regulation

and practice and the UK’s ambition for growth.”

Mr Hutton explains: “One of the interesting developments

in the US has been NCAB, a company that underwrites the

value of intellectual property, against which banks can lend.

This gives inventors and entrepreneurs some profit but also

gives bankers some comfort that even though nothing hasbeen commercialised, there is an idea behind the potential

commercial venture that has some intrinsic value.”

As Chair of the Big Innovation Centre at The Work

Foundation, Mr Hutton supports the creation of a

government-backed national Innovation Bank, which would

draw together some of the UK’s biggest companies, such

as GlaxoSmithKline and BAE Systems, with a university

consortium including Oxford, Cambridge and University

College London. The vision is that such an Innovation Bank

would develop insurance schemes to underwrite the value

of intangible assets, as well as mentoring UK businesses

and players in the financial sector, including banks and

venture capitalists.

However, Mr Richard is critical of any move to foster a

market for intellectual property, encouraging financial

institutions effectively to value concepts before any

commercially viable product or service has been produced.

“They’re taking a notion at one stage of a business with the

type of activity that happens at a different stage and saying:

if we realise the intellectual property and give it an asset

value, then [start-up businesses] could borrow against theasset. It’s not the lack of asset backing that stops them

from getting a loan at that stage of the business, it’s the

lack of serviceability on the loan,” he says.

The future of seed-stage funding is social

While advocates of an IP valuation market believe this

could help start-ups gain funding at seed stage, Mr Richard

thinks this is unlikely because traditional bank loans hinge

on two questions: can you pay back the loan; and, if you

can’t pay the loan back, what asset can be claimed in

its stead?

“If the business is failing then the intellectual property may

have been proved in the marketplace to be of no value,” he

says. At seed stage, the business is simply “a concept, a

dream, a desire”. Simply valuing IP does nothing to free

start-ups from reliance on investments from the “three

F’s”– family, friends and fools – because the concept is not

asset-backed.

Instead, he offers, social loans can provide a solution. They

are unsecured loans provided under very different lending

criteria to traditional loans (designed for start-ups) by

commercial financial institutions and underwritten by the

government, with a low nominal interest rate of 6%.

Loan recipients are matched with a business mentor to

guide the deployment of the loan funding wisely and to

pass on real-life experience that the mentor has gained by

being a successful entrepreneur. The average loan size is

£6,000 and School for Startups is the largest delivery

partner of the Start Up Loans scheme in the UK, through its

launcher programme, says Mr Richard. “Social lending i s

interesting because it preserves the entrepreneur’s equity.

People think that a loan is worse somehow than the sale ofequity, but in truth the sale of equity i s the most expensive

money you’ll ever spend, if you succeed,” he adds.

“Social lending is interesting because it

preserves the entrepreneur’s equity. People

think that a loan is worse somehow than

the sale of equity, but in truth the sale of

equity is the most expensive money you’llever spend, if you succeed.”

Doug Richard, Founder, School for Startups

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.pdf 26http://www.ipo.gov.uk/ipresearch-bankingip-sum-281013.pdf

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However, Mr Richard believes that the UK government

could be more innovative itself in its funding strategy for

entrepreneurs. Traditional loans, he says, do not fit

start-ups because they typically have a volatile cashflow

yet loans require regular repayments. Instead, countries

such as Colombia are creating custom financial

instruments to suit the start-up, be that a stepped

acceleration in interest rate towards the end of the loan to

encourage quicker repayment sooner or a certain

percentage of the loan to be repaid depending on varying

revenue levels.

Mr Richard says such approaches defy traditional lending,

but lending to start-up business has never been part of the

traditional banking remit because it is deemed too risky.

That risky element of the market in developed economies

can be addressed, he explains, by borrowing and adapting

innovative approaches that work well in developing

countries where they seek to assist the ‘unbanked’ (people

excluded from the banking sector).

Combating sell-out ‘gazelle’ companies

The fact that UK technology start-ups being snapped up by

far larger US competitors on an acquisition bent i s so

celebrated in the UK highlights “ambition and scale

barriers” that could be partially geographic, suggests Ms

Lane Fox. “If you’re born in the US then your home market

is immediately 300m people, which gives you a different

idea of scale and ambition compared with the UK, where

the home market is 60m people. To get access to real scale,

you have to go into Europe and that’s harder,” she says.

Start-up Loans: Key stats and demographics

Source: ww w.startuploans.co.uk

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Mr Hutton agrees: “The Americans have a single market.

The market in Europe is for marketing manufactured

goods, not in knowledge services, where all the action is.

That makes it very difficult for British entrepreneurs to pitch

their start-up capital with any chance of building a billion

dollar corporation, because the single market in which it

might do that doesn’t exist.”

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 sel 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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As the UK’s economy is weighted towards knowledge-

based enterprises, encouraging entrepreneurialism that

advances new approaches, processes and products that

can be both commercialised domestically and scaled up

to rival international peers is crucial to the future of the

UK economy. Without a well-functioning and opt imally

supported entrepreneurial ecosystem, the UK risks

acting as a national start-up incubator supplying

foreign multinationals.

Experts interviewed in this report offer advice on how to

succeed in building a UK entrepreneurial ecosystem.

• While sole traders, the self-employed and small and

medium-sized businesses make a considerable

contribution to the UK economy, greater care must

be taken to address the specific needs of each of

these groups and caution exercised so as not to allow

terminology to be used interchangeably to describe

businesses that are so diverse in terms of their

business model, risk appetite, scalability and capacity

for employment growth

While improvements to foster an innovation ecosystem in the UK have begun,

much more can and should be done.

Conclusion

• Location-based hubs of entrepreneurial activity should

not be considered simply within city boundaries.

The social data included in this report make a case for

fostering entrepreneurial activity along the Liverpool-

to-York corridor rather than providing city-specific

support and ignoring the agglomeration. Support for

entrepreneurs in such agglomerations may need to be

indirect, such as providing enhanced transport

infrastructure and fostering support and business

networks that span the multiple cities and areas

connecting them

• The social data indicate that sources of practical

support (such as accelerator programmes) and funding

provisions are integral to the online conversation about

high-growth businesses and start-ups in the UK.

Consequently, these ‘influencers’ can be used to amplify

the successes of British entrepreneurs and provide

awareness of role models to help cultivate a more

ambitious culture of entrepreneurialism to rival those

of the US and Europe

• These influencers should be used not only to signpost

entrepreneurs to resources, but should be considered

as long-term partners for entrepreneurs while they

grow their businesses from start-up phase through to

higher-scale maturity, complete with options for

expanding above the £2m turnover threshold

• The ties between academia and the business

community must continue to be strengthened and

publicised so that a wider range of businesses can

benefit, and less business-minded universities can be

encouraged to follow suit. Partnerships between alumni

and university enterprises, with the former mentoring

the latter on how to commercialise their projects is one

element, but broader integration into the local business

communities will ensure wider participation in a

knowledge economy. Given that universities are publicly

funded, a sharper push towards a wider non-academic

contribution to enterprise activity is needed

• An innovative approach to financial instruments that

are better able to match the funding needs and practical

constraints of entrepreneurs at the different stages

of their businesses’ lifecycles is required. Traditional

financial institutions will be pivotal in providing this.

The government, which can wield tax and other financial

incentives, also has a crucial role in reducing the barriers

that entrepreneurs come up against in getting funding

to commercialise their ideas, and the barriers that the

market faces in pricing risk around entrepreneurial

ventures. For start-ups, matching funding with

mentorship appears to be a good first step, but more can

be done to match the risk and liability profile of

businesses at different stages. This should be

approached collaboratively from both a government

and financial services standpoint to ensure a cohesive

funding strategy is adopted for the UK.

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In addition to wide-ranging desk research and data from

Pulsar, a social data intelligence platform, this report is

based on qualitative interviews and a roundtable discussion

with experts. Our thanks go to the following for their

specific contribution.

Jane Chen, Co-Founder, Embrace

Alastair Clegg, Chief Executive, The Prince’s Initiative for

Mature Enterprise (PRIME)

Nicholas Davis, Director and Head of Europe, World

Economic Forum

David Gill, Managing Director, St John’s Innovation Centre,

St John’s College, University of Cambridge

Mark Glover, Director of Business Planning, Technology

Strategy Board


Director of Cass Learning Laboratory, Cass Business School

Jill Huntley, Managing Director, Corporate Citizenship,Accenture

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

Will Hutton, Principal of Hertford College, University

of Oxford, and Chair of the Big Innovation Centre

Martha Lane Fox, Co-Founder, lastminute.com

Kathryn Parsons, Founder, Decoded

Jaideep Prabhu, Jawaharlal Nehru Professor of Business and

Enterprise, Judge Business School, University of Cambridge

Doug Richard, Founder, School for Startups

Eze Vidra, Head of Campus London and Google for

Entrepreneurs Europe

Mike Wright, Professor of Entrepreneurship,

Imperial College London

This report was written by Anna Lawlor and edited by

Zoe Tabary and Monica Woodley.

8/12/2019 StartMeUp


Barclays is a trading name of Barclays Bank PLC and its subsidiaries. Barclays Bank PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority (Financial Services Register No. 122702). Registered in England.

Registered number is 1026167 with registered office at 1 Churchill Place, London E14 5HP.

June 2014.

barclays.com/entrepreneurs

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