I think I’m right in saying that this is the first guest post we’ve ever had on The Equity Kicker and it’s from my partner Simon Cook who has a few things to say about the budget. If you think the government should be supporting startups and want to know more about how they should go about it then read on.
Simon Cook, CEO of DFJ Esprit on the 2013 UK Budget.
We knew this was going to be a tough budget. With little money in the pot and pressure from all sides, Mr Osborne can’t get off the spend/cut treadmill just yet. We need to boost confidence in the UK and reduce debt (which grew by another £100k just yesterday). Growth remains the fundamental issue with the UK economy. We must support the small businesses in emerging industries (like tech) to help give us the boost we so very much need need.
While infrastructure projects will undoubtedly help create short-term jobs, this must be balanced with longer-term sustainable job growth and rebalancing to manufacturing and exports.
Show (S)ME the money
It’s widely acknowledged that many SMEs lack access to finance. Even the highest growth, most successful job-creating technology businesses are unable to access bank lending for routine day to day working capital needs. The UK needs to ensure these so called “gazelles” reach their full potential which means supporting their growth.
The business angel community remains the backbone of growth equity financing in UK and should continue to be supported by the world leading Enterprise Investment Scheme (EIS). Business angels, whilst very keen to invest in UK Growth, remain constrained by the time they each have to find individual deals. Larger angel networks and funds should be empowered through the use of better EIS funds, which the current legislation does not enable easily. The Seed EIS (SEIS) CGT holiday extension for another year is great to boost again a scheme which is just getting going, but we need more growth incentives as well as more great start-ups.
We need a banking body that understands technology and the innovation leaders of the future. This body should also lend to businesses backed by intellectual property and patents, rather than physical assets.
The government should also continue to look for structural solutions to SME and venture lending, such as offering loans at the venture fund level rather than the company level, as they do with their ground breaking Enterprise Capital Funds (ECFs).
A reduction on stamp duty on AIM shares and their allowance into ISA’s will also help kickstart growth finance through IPOs for our fastest growing companies.
UK vs. rest of the world
The gap between the UK and Silicon Valley in terms of technology investing is only about £2bn a year. With the right framework of government, angels, fund managers, institutions and entrepreneurial innovators working together this is a bridgeable gap; the Olympics have proven that with the right investment, the UK can compete at the global level, and dominate.