A couple of times recently I’ve written about how pleased I am that the UK government is increasing its support for the startup ecosystem here, and how they are largely going about it in the right way. A significant number of their initiatives are designed to increase the amount of finance available for startups – e.g. relaxation of the EIS and VCT rules. I’m hearing rumours now that they are thinking about going much further with the aim of increasing the size of the UK venture industry 3-10x by the end of next year.
It is well understood now that Silicon Valley only got to where it is today by virtue of government support in the early years and that additional scale would bring great benefits to the UK startup scene and by extension the UK economy. It is also well understood that left to their own devices ecosystems take a long time to build.
The emerging consensus then is that the best way forward for the UK is to give the venture capital industry one huge boost to take it well past critical mass and firmly establish the East London tech city as a rival to Silicon Valley.
Amazingly there seems to be cross party support for this initiative. Labour are happy to get behind what they see as a job creation initiative, although there is a danger they will insist that participating VCs are obliged to meet strict targets including investment rate and regional targets. The coalition see this as an extension of their existing policies and one that is likely to play very well with the voters and won’t cost too much to implement in the short term. The other thing, I think, is that the success or failure of the initiative won’t be clear until after the next election. The right wing of the conservative party is concerned about market distortion, but they are keen on stealing back the initiative from France where a tax incentive scheme for VC investment that has been running for a few years has radically increased investment levels and could lead to Paris threatening London’s position as the tech centre of Europe.
If it comes to fruition there would be a massive increase in fund size and a big payday for VCs – I even heard one VC say ‘if we play this right we could make enough money over the next five years to be hated as much as much as the hedgies are today’. Another said ‘I’m all for growing the size of the venture capital industry, UK plc needs it, but the great thing is that this could be awesome for us all at a personal level. We might be talking about the biggest transfer of tax payers money to already wealthy individuals since the bank bail out in 2008’.
Mike Butcher, editor of Techcrunch UK, who has the ear of the government and has been pushing the East London tech city agenda hard is also excited. He said:
“A capital injection of this scale from government would provide a much needed boost to the UK startup scene.
And Elizabeth Varley, CEO of TechHub said:
With more startups and more money we could increase the rents at TechHub and work towards our dream of owning all the property on City Road from the bowling green up to Old Street roundabout”
I haven’t been able to find much else about it on the web – the only reference was here.