With the news that the British Venture Capital Association (BVCA) is advocating for a champion of VC to advise the government on driving investment in the asset class (BVCA to Tories: appoint a ‘venture czar’, Private Equity International, 23 February 2011), we are all left wondering just why investors still need convincing to increase their exposure. Why is it the UK still can’t believe in the potential for return for VC?
The BVCA cited the lack of a star case study for this disinterest, arguing that “too often Britain has failed to create the next Google” due to a deficiency of subsequent funding rounds and tax benefits for potential investors.
But there is a more fundamental reason that Britain hasn’t produced a Google. There is a distinct lack of belief that the UK can do ‘big’- that small becomes big, that these start-ups will change the world, becoming FTSE 100 businesses. But most businesses that become Google-sized start off as a small business with a big idea. And Britain does have some fantastic entrepreneurs – just look at Alastair Lukies, CEO of Monitise, a now AIM –listed company with £164 million market cap.
That change in attitude aside, it is certainly the case that further steps could and should be taken to improve funding for start-ups. For example, why not waive PAYE and NIC until a company is solidly on its feet and in profit for more than three years in a row? That would certainly give small businesses more confidence to create more jobs.
NESTA, the national innovation agency, has proven that small and medium enterprises represent 6 percent of the company market yet account for 54 percent of all new jobs – that start-ups help drive economic growth. Imagine how many more jobs might be created if there were special concessions for young, high growth companies.
Julie Meyer is founder and chief executive council of Ariadne Capital.