The UK is a massive force in the global economy and has produced an extraordinary amount of innovation. But, our little island could easily do more and learn a host of lessons to build on the business success we already have.
It all starts with skills. Like, right at the beginning. Digital work is complicated and technology evolves quickly so there is a huge amount to learn. Already there is a huge skills shortage with virtually every startup at any event saying “We’re great, come and work for us! Please?!”. In the face of mass unemployment it shows the strength of the industry already. But, it is a limiting factor and without skills nothing follows.
So, where do skills start? Well, I started to code when I was 9 on a ZX Spectrum 128k (showing my age slightly). This had a cassette player to allow games to be loaded. It sounded a bit like someone trying to fax a cat but you got games eventually. You couldn’t save though so when your mum unplugged it you lost everything which was a little bit annoying. You could also buy books (yes, real ones made of paper) and type the basic code in by hand and get a game too. I realised pretty quickly that you could easily cheat if you figured the code out so made my games ridiculously simple and kinda boring. Again, you could not save anything so when your mum unplugged it after you spent 12 days solid typing a game in it was very annoying!
Anyway, the point I’m trying to make is that software skills need to start at primary school. By the time someone leaves school they have lost maybe a decade of learning and that is pretty hard to catch up on. The brightest kids will teach themselves but there are moves for software engineering to be included in the school syllabus. I’m contributing at my school (I’m a parent governor or Bewdley Primary School) by running a whole day workshop in February 2012 which I will no doubt blog about.
But, the short version is Teach kids to code!
Once you have a bunch of people with the relevant skills they need to come up with some ideas. Loads of people have loads of great ideas but things like hackathons, competitions, workshops and seminars from other innovators will only increase this. Higher education has a big role here as university is the melting pot for people of all backgrounds and is a unique time where inspiration, education and collaboration all happen at once (as well as a very large amount of alcohol).
Part of the thing here is that people need problems to solve. If life is too easy no-one can be bothered to innovate. But, people need to feel that it is possible to do something about whatever their problem is so a nurturing environment is vital too.
Now, this is the point where we go from concept to commercial reality. In some ways this is the hardest part as many of the skills that have gotten us to here are completely irrelevant when it comes to business and equally skills like accountancy, HR, understanding IP, sales and so on don’t register on the innovation scale. When I started my first real company (a digital agency called MS Internet) I had a bit of an idea of how business worked because my father runs a jewellery repair business so I had seen it done. But, I was making it up as I went along and I knew it. I read pretty much the whole of the business link website and a LOT of Wikipedia and muddled through. Looking back, I wish I had learned more about book keeping and accountancy early on as I got in a bit of a mess which could easily have been avoided.
There are two ways people can get these skills and I think both are important. The first is from a book or other formal training route. Some have called for this kind of thing to be compulsory in schools also which might work but being pretty dry subjects I can imagine that a lot will just be forgotten. But, as business link do already, making the information available is really important. The second way this set of skills can be acquired is through mentoring. This is a really under-done thing but massively powerful. For any young entrepreneurs reading this I urge you to reach out to people in your network that have this experience and ask (politely) for advice. Most people will be flattered that you value their opinion and the views of a veteran business person are a million times more relevant than any literature. Networking has a role here but just don’t try to sell to everyone all the time, build the relationships.
Silicon Valley undoubtedly has the archetype start-up ecosystem but the strength of Silicon Valley is the willingness people have to collaborate and maybe there is a lesson there. Businesses need to collaborate more and stop being so paranoid about having their ideas stolen. Sure it happens but if a business is strong they stand to gain far more than they would lose. It starts with the network but the people running companies need to be more open and active in sharing ideas; in the end everyone will benefit.
Some businesses can’t start without money. This might be because machinery is needed or licences or a hundred other things. Other businesses can grow from pretty much nothing up to a fair size but the rate of growth is limited by the amount of revenue generated. In both of these situations funding is needed. The first port of call for many is debt and this is why the credit crunch had such a large impact. Overdrafts and loans are a staple of British business and are very important. That said though, warranties or guarantees are often needed and if you have a family you may not be willing to put your house on the line no matter how confident you are about your business. I did this with an EFG loan and I can happily say that it was the single most stupid thing I ever did. The government is doing the right things in trying to make debt capital more available but the banks aren’t entirely playing ball and on the other side of things sometimes credit should just be refused instead of given out on the grounds that the government and guarantors will pick up the tab.
Another option for innovation type businesses is grants and other similar funding from e.g. The technology strategy board. There are a number of pretty disjointed schemes that all boil down to competitions, which I have always thought was a strange choice of words although if ideas get funded I guess it doesn’t matter. What could be done better I think is joining things together a bit more so it is easier for people to find out what is available and accessing funds that are appropriate more easily.
The other option to gain finance is investment. Investment isn’t for everyone because in taking money you are giving away equity, gaining a new business partner and effectively agreeing to sell your company in a small number of years. If you are ok with these things then taking investment might be an option. Investments work over a series of stages, from seed (£50k-500k) which might be from an angel investor or a VC seed fund, through series A (generally £2-4m or there about) and upwards. There are a number of tax breaks for angel investors, notably the EIS scheme which gives a 30% capital gains discount and can protect a significant part of the investment amount. The EIS scheme is valid for investments of £500-£1m. There is also the newer SEIS scheme which offers a higher rate of relief but only for investments up to £100k.
With investment though disjointedness is still a problem and although there are some groupings of investors more could be done to join the dots between the different stages. The other issue is maybe cultural and I think that many entrepreneurs are resistant to the idea of giving up equity or are just not aware of the option. I think this is decreasing, partly thanks to the tech city initiative but this trend needs to continue. Outside of London there is also a real availability issue which some enterprising VC firms could easily address.
The final part of the puzzle is the ability for British companies to get good exits through acquisitions or flotation. Exits are important to investors and the more confident an investor has that a high value exit is possible the more willing they will be to invest. The other benefit from good exits is that entrepreneurs can recycle their exit money to do it all over again creating a cycle of company growth and value creation or at least providing additional investment capital. For this we rely on the big guys. Google etc are known for their acquisitive nature but European companies, and particularly British, FTSE100, companies need to make more acquisitions. It might cost money but it is a great way to gain a whole cohesive team and it only serves to make the business environment more healthy.