Serial entrepreneur Christian Lane explains why the UK needs to do more to boost its start-up culture.
In last week’s Autumn Statement, the first since the Brexit vote, Chancellor Phillip Hammond has committed £400m of venture capital in an effort to provide additional resources and opportunities for home-grown VCs to invest in the most exciting businesses in the UK. The aim is to keep these fast-growth businesses in the UK, rather than sending them overseas.
Whilst the announcement was welcome, it is difficult to ignore the news that leading travel search engine, Skyscanner, is jetting off to a bigger investment group this week. The company, which was started in a bedroom in Edinburgh, was acquired by Chinese travel company Ctrip. The deal is estimated to be worth £1.4 billion.
This sale has emphasised that UK businesses are too often left with little or no support from the UK government. If and when an acquisition offer comes in, it can be hard to say no, as the risk of continuing to scale up compared to selling out is just too high. Selling remains an attractive option.
While the £400m pledged by Hammond does show willing, it will be a case of watch and see to know if it will have any impact on growing businesses in the long term – in funding terms, it doesn’t represent a massive injection of cash into a growing part of the economy. In the case of Skyscanner, it was just too risky to continue. When reasonable buyout offers come along they are usually snapped up – the example of Arm Holdings also springs to mind. This of course then risks removing profits, jobs and technology out of the UK, which inevitably reduces economic growth in this country when we could be a thriving technology centre.
As an owner of a London-based start-up company, I am amazed that it has taken the government such a long time to stand firmly behind local start-ups, with so many other countries already loudly showing their support.
You only have to look at places like Silicon Valley, South-East Asia and other parts of Europe to see what fantastic breeding grounds are out there for start-ups. In Finland, for example, a state-backed organisation will triple the money angel investors and venture capitalists put into start-ups through non-dilutive grants, or provide cheap loans tied to further funding rounds.
Although the Autumn Statement announcement is a step in the right direction, Hammond has in no way addressed the skills shortage as part of his vision, and that is one of the most pressing matters for start-ups and scale-ups alike. Brexit negotiations have had a massive impact on developing businesses, as without free borders we risk losing tech companies to other EU countries such as France, Germany, Ireland and Holland. The skills shortage in the UK is difficult enough to contend with in our current state, let alone if we reduce access to talent across borders.
In the first quarter of 2015, investors pumped a record £459 million of venture capitalist funds into London’s digital sector. This is a rise of 66 per cent on the same quarter in 2014. What is clear is that Britain’s tech industry, estimated to be worth around £20 billion in annual revenues collectively, needs support, championing and focus to grow further and compete even more on the world stage. The tech industry needs more stability and security following the uncertainty of Brexit. The announcement is positive but should be just the start.
Article originally sourced from http://www.growthbusiness.co.uk/uk-start-culture-needs-cultivated-2549027/