The Great Debate UK
Why Osborne should use venture capital to drive the British growth agenda
–Simon Cook is CEO if DFJ Esprit. The opinions expressed are his own.–
With George Osborne’s Autumn Statement due to be announced on Wednesday, vehicles to boost the British economy have once again been thrust into the spotlight. Venture capital, much discussed and essential to the government’s innovation-led recovery, is uniquely designed to grow companies from small concerns into large multi-national organisations, and the government could be doing far more to support development of these high growth gazelles by learning from Silicon Valley’s emphasis on venture backing.
The UK is suffering from a £2 billion equity gap compared with investment levels in Silicon Valley.* For investments under £3 million, the UK is not doing too badly, running at about 80% the level of Silicon Valley, but on deals of more than £3 million it enjoys just 20% as much venture investment (according to VentureSource figures). As Google’s executive chairman Eric Schmidt’s said: “The UK does a great job of backing small firms and cottage industries, but there’s little point in getting a thousand seeds to sprout if they’re then left to wither or get transplanted overseas.”
The good news is that catching up with Silicon Valley is a solvable problem. To close the gap, Osborne needs to concentrate on providing vehicles for the long-term development of British businesses – taking them from small concerns to major players in the global market.
Startup accelerators and Internet bubbles
–Joe White is COO of Moonfruit.com. The opinions expressed are his own.–
All this week Seedcamp, a UK-based internet startup accelerator, has been running its headline annual event Seedcamp Week in London.
As an accelerator, Seedcamp has mimicked a successful process established in the U.S. by Y Combinator, Techstars and others of taking early stage internet entrepreneurs and running them through an intense programme of mentoring and business development. Mentors are laid on from different disciplines and work with the entrepreneurs each day. They cover founders, product experts, venture capitalists, marketing specialists and more. The best ideas at the end of the programme get funding to get started. Seedcamp Week brings the best of the best from the Seedcamps throughout the year and around the world for a final London mentor and pitch feast.
from The Great Debate:
Impact capital is the new venture capital (Part II)
By Sir Ronald Cohen
The views expressed are his own.
The first part of this essay laid out the rationale for impact investing, whereby investors can simultaneously create social impact and achieve financial returns. How can we bring it about? First, we need an enabling environment. In the 1970s and 1980s, the venture capital community argued successfully for changes in taxation and the regulation of financial institutions to foster investment in venture funds. Governments were lobbied to improve the climate for start-up and early-stage ventures. Markets to raise equity and trade stocks in pre-profit companies were introduced in the US (Nasdaq in 1970) and in the UK (USM in 1979). Rates of direct, personal taxation were reduced. And, in 1978, amendments to the USA’s ERISA legislation were specifically designed to foster venture investment by U.S. corporate pension funds. Such liberalizing measures were adopted first in the USA, which, as it turned out, reaped most of the benefit of the high-tech revolution, largely funded through venture capital.
Social enterprise and impact investment need similar rule-changes to foster investment in mission-driven ventures that deliver social returns in combination with financial returns. We need tax incentives, as well as several rule changes: in the permitted scope of activities by charitable foundations; in the role of banks in low-income areas; and in the rules governing institutional investment. In particular, the restrictions on investment by charitable foundations and financial institutions need to be adapted to enable the inclusion of social investment. For example, regulatory encouragement for pension funds is needed, so that social investments are included within the definition of prudent investment.
from The Great Debate:
Impact capital is the new venture capital (Part I)
By Sir Ronald Cohen
The views expressed are his own.
Broadly speaking, capitalism does not deal with its social consequences. Even as communities grow richer on average, so the gap between the “haves” and the “have-nots” increases. For example, since the mid-1970s, both the USA and UK have actually become less equal rather than more equal. In the long post-war boom many governments did make significant headway in ameliorating the consequences of social inequality. This can be seen in levels of investment in areas such as health and in critical performance measures such as life expectancy. Nevertheless, governments, despite their best efforts and even in the best of times, have not been able to resolve all social problems.
Commentators on one side of the political spectrum attribute this failure to the lack of resources available to the state and to the state’s reluctance or inability to act appropriately. Commentators on the other side attribute government’s shortcomings to the inherent inefficiency of the state itself. The truth is that the political process, which focuses on short-term gains, does not favor long-term, preventative investment of the type required to address major social problems.
from The Great Debate:
The death and resurrection of the tech IPO
-- Eric Auchard is a Reuters columnist. The opinions expressed are his own --
The U.S. venture capital industry is desperate to repair the market for initial public stock offerings, but reviving the goose that once laid hundreds of golden eggs may not get very far.
The National Venture Capital Association (NVCA) this week set out its comprehensive plan to revive the IPO market and the heady investment returns that once fueled the tightly knit venture capital industry's success.
Women entrepreneurs to dispel micro myth
- Glenda Stone is chief executive and founder of Aurora, a recruitment advertising and market intelligence company, and co-chairs the UK Women’s Enterprise Taskforce established by Prime Minister Gordon Brown. The opinions expressed are her own. -
Most venture capital and angel investment tend to go to a specific breed of entrepreneur – innovative, well networked, intelligent, confident … male. Is this the result of deep-rooted discrimination or is this simply an issue of supply and demand? Women-owned businesses are largely under-capitalised and this leads to inhibited growth.
