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Data pertaining to start me up creating britains entrepreneurial ecosystem.
Start me up: Creating Britain’s
entrepreneurial ecosystem
A Barclays report, written by The Economist Intelligence Unit
2
3 Foreword
4 Executive summary
5 The shifting ground of the labour market
8 Growth of innovation hotspots
9 The UK’s emerging innovation hotspots
12 Case study
14 Entrepreneurial challenges and opportunities
17 Case study
21 Conclusion
22 About this report
Contents
This report was written by Anna Lawlor and edited
by Zoe Tabary and Monica Woodley.
3
Foreword
With a competitive global market and rising social challenges such as youth
unemployment and an ageing population, there exists an opportunity to create
an environment here in the UK that values and practices lifelong enterprise
learning; one that encourages direct ownership and responsibility to respond to
these challenges.
Entrepreneurs are a huge source of economic growth,
innovation and job creation. And in the UK they represent
a diverse cluster of individuals. New businesses, ranging
from tech start-ups to manufacturers and retailers, are
pioneering new products and services. From Bristol to
Leeds, Cambridge to Glasgow, entrepreneurs are thriving.
But there is much more that can be done to support
their growth.
Stakeholders of the entrepreneurial ecosystem must
share a willingness to think critically and creatively about
solutions. Together we must provide access to ?nancial
capital and human capital, the right education and
skills, a competitive business environment and clear,
non-onerous regulation that does not needlessly burden
business models.
The economic potential of entrepreneurs is tremendous.
And unless this potential is properly harnessed and
budding entrepreneurs provided with the skills and
resources they need to build their ideas into successful
businesses, the UK economy will not ?ourish in future.
Antony Jenkins
Chief Executive
Barclays
This report takes a closer look at the entrepreneurial
potential across the UK and presents the opportunity to
understand how it can be better supported. It is based on
primary research undertaken by The Economist
Intelligence Unit as well as a roundtable discussion
conducted at The Escalator in Whitechapel, London.
I would like to take this opportunity to thank all those
involved for their contribution to this report.
4
An innovation ecosystem refers to the combination of
factors for innovation that function together in a symbiotic
relationship. The real-word application is the environment
within which entrepreneurs function as one integral
component. This has a knock-on effect on the broader
economy, which thrives off the vitality of innovative
entrepreneurs.
This Barclays report, written by The Economist Intelligence
Unit, looks at how to create an environment where
entrepreneurs can ?ourish in the UK, drawing on best
practices from other innovation ecosystems around the
world. Based on in-depth interviews of entrepreneurs and
other experts, substantial desk research and social data
mining, its key ?ndings are listed below.
Entrepreneurial communities extend beyond the
capital, London, and South East England
London accounts for the largest share of online activity
relating to discussions about innovation and
entrepreneurialism, with a 48% share of ‘voice’.
However, the next largest shares of ‘voice’ come from
Cambridge (9.3%) and Manchester (6.9%), and there
is a clear northern corridor stretching from west to
east (Liverpool to York). Mike Wright, Professor of
Entrepreneurship at Imperial College London, explains:
“We looked at the notion that there’s a ‘golden triangle’
in the South East for entrepreneurship in terms of access
to ?nance, but found that some successful university
spin-offs were actually not located in the South East but
were, nevertheless, able to attract ?nance from there.
That’s one example of where the ecosystem isn’t quite as
location-based as we might admit, and may suggest that
we need different mechanisms to stimulate a more virtual
ecosystem rather than a physical location.”
The labelling of innovation hotspots produces a
compound effect that fosters entrepreneurialism
This view rewards an interventionist approach across the
education system, start-up incubators and centres of
excellence, which empower and facilitate British people
of all demographics to ful?l their entrepreneurial potential.
In so doing, it is argued, thriving sector hubs and the
publicity ‘buzz’ that accompanies them broaden equal
access to entrepreneurial opportunity, wealth creation
and employment.
Entrepreneurial Britain is beginning to ?ourish as policy changes and increased
investment in the UK’s innovation ecosystem take root.
Executive summary
Entrepreneurs are made, not born
Entrepreneurialism is not an innate trait, but rather
something that can be fostered with the right mix of learned
skills, access to opportunities and con?dence, according to
experts interviewed for this report. Government and the
school system alone cannot create entrepreneurs, but they
can send signi?cant signals about entrepreneurship, that
‘failing well’ (taking calculated risks and learning from
failures) is key to success, and that starting a business is a
viable and respected career route.
Creating an environment where entrepreneurs can
thrive requires a co-ordinated strategy covering a
range of areas
Encouraging entrepreneurial hubs beyond traditional city
boundaries, strengthening ties between education systems
and the business community, removing demographic-
speci?c barriers to entrepreneurialism and better matching
the funding needs of entrepreneurs are some of the
speci?c priorities that policymakers, businesses and
academia need to address.
5
The shifting ground of the labour market
This evolution has increased regional inequalities, and one
of the consequences of the 2008 ?nancial crisis on the UK
economy is that young people (aged 18-24) have borne
the brunt of unemployment and have been the most
affected by underemployment
The ?nancial crisis prompted increasing numbers of
employers to introduce ‘zero-hours contracts’, giving
them the ?exibility to employ casual labour as and when
required, with none of the responsibilities associated with
hiring employees. Young people are again the most
vulnerable to such employment practices.
Research from the University of Stirling found that while
national underemployment rose to 9.9% in 2012, for
16-24 year olds the rate was signi?cantly higher, at 30%
3
.
The UK has evolved from a manufacturing- and product-based economy into
a service-sector- and knowledge-based economy.
1&2http://www.ons.gov.uk/ons/rel/censu...ry/sty-170-years-of-labour-market-change.html
3http://www.stir.ac.uk/news/news-archive/13/april/meet-the-underemployed/name-44068-en.html
Employment by sector
Source: Of?ce for National Statistics
1
.
Percentage of workforce in each industry
Source: Of?ce for National Statistics
2
.
1841 2011
6
Some argue that this has led educated and technologically
pro?cient young people to discover their entrepreneurial
?air, pouring their efforts into start-up business ventures
and turning to non-traditional funding routes such as
online crowdfunding sites Kickstarter and Indiegogo.
However, while the volume of newly registered businesses
is growing and is often heralded as a sign of ?ourishing
British entrepreneurialism, they could simply be re?ecting
an increase in ‘bedroom businesses’ (a colloquialism for
businesses starting out of the home, requiring little or
no start-up funding) and in the number of people
repurposing themselves as self-employed consultants
as a result of redundancy. Such changes in labour
dynamics can skew what appears to be promising data
about the true extent of the UK’s entrepreneurial activity
on economic productivity.
4http://www.parliament.uk/business/p...c-recovery/young-people-in-the-labour-market/
Source: Of?ce for National Statistics cited in Parliament
4
.
Youth unemployment compared with working-age unemployment
There is concern that business start-ups are too easily
categorised as being entrepreneurial even though
many compete on price and service rather than by
providing a unique offering in the marketplace. This
increases the challenges of addressing barriers to
innovative entrepreneurialism and identifying new
and commercially viable solutions to problems
because, while they are frequently regarded as the
same, entrepreneurs and start-up businesses often face
very different challenges and operate very different
business models.
Some, such as Martha Lane Fox, a serial entrepreneur,
believe there is not the same risk appetite among British
entrepreneurs as there is in the US or the EU. This creates
its own problem in that the British like to think there is
a rich seam of entrepreneurialism in their country when
in fact, Ms Lane Fox argues, there are limited examples
of British start-ups that have gone on to become
internationally-renowned brands and have remained
British companies.
7
Business births by UK region
Source: Of?ce for National Statistics.
2009
2010
2011
2012
Will Hutton, Principal of Hertford College, Oxford
University, and Chair of the Big Innovation Centre, says
that the lack of a British innovation ecosystem is a
“principle de?ciency in the UK economy. One of the
longstanding areas of weaknesses has been ?nancing
and commercialising new ideas.” However, he says
change is afoot; the current government is at last speaking
the language of innovation ecosystems, introducing
entrepreneurial programmes and putting forth
government funding to support them. “Is it enough? No.
Is it following the trend towards open innovation, sharing,
relaxing of intellectual property law that needs to take
place? No. But it would be unfair and wrong to say that
nothing has happened.”
Doug Richard, Founder of School for Startups and a serial
entrepreneur, says that the UK is a world leader in tax-
incentivised seed and angel investing. The Seed Enterprise
Investment Scheme (SEIS) has, he says, increased the
likelihood of angel investment for very-early-stage British
businesses by minimising the risk as much as possible
for the investor. “I don’t know of any other country that
has anything as close to aggressive as that [in using
tax incentives].”
8
Such public labelling has a compound effect; the soft
power inherent in the (often government-backed)
promotion of areas as innovation hotspots creates a
honey-pot effect, which subsequently attracts venture
capitalists, big consultancy ?rms and other specialist
organisations that attend to the needs of growing ?rms in
complex industries.
Such labelling may also become self-ful?lling in terms of
encouraging a location-speci?c culture of
entrepreneurialism, with their own success cases and role
models, enticing would-be entrepreneurs from ‘safe’
salaried roles to university spin-offs in order to instigate
their start-up plan.
Detractors of location-speci?c hubs contend that while
promoting hotspots attracts resources, infrastructure and
esteem for the few, the many other cities and large towns
Whether it is Cambridge’s ‘Silicon Fen’, London’s ‘Tech City’ or Oxford’s ‘business
incubator centres’, labelling locations as ‘hotspots’ for technological innovation has
become commonplace.
Growth of innovation hotspots
Top 10 sectors funded by GrowthAccelerator
schemes
Source:http://www.growthaccelerator.com/
Regional funding from GrowthAccelerator schemes
Source:http://www.growthaccelerator.com/
North East
North East
East Midlands
East
London
4%
9%
8%
9%
16%
16%
11%
12%
15%
South East
South West
North West
West Midlands
across the country are excluded, their success stories and
role models eclipsed. Arguably, the approach contributes
to more acute regional inequalities and deepens a
southern concentration of wealth, opportunity access
and employment.
Clive Holtham, Professor of Information Management
and Director of Cass Learning Laboratory at Cass
Business School, says: “I’m pretty sceptical about [the
idea] that we can get scienti?c and business innovation
through large sums of money going to a few people.
Centres of Excellence, for example, are part of the huge
amount of rhetoric and fashion in high-level allocations
of money, which give the impression that there’s a
top-down solution. It’s an ecosystem, so you need all
the components.”
9
Pulsar, developed by UK-based company FACE, is a social
data intelligence platform that is reinventing social media
monitoring, customer service and enterprise collaboration.
It scoured 200,000 posts over three months to
March 16 2014, mapping the UK locations that had the
highest volumes of online conversations about the search
terms ‘innovate’, ‘innovation’, ‘entrepreneur’ or ‘start-up’.
While academic examination of Britain’s entrepreneurial community draws from
hard, statistical and often lagging data, social data (from publicly available social
media conversations) provide an alternative ‘bottom-up’ perspective, taking the
pulse of entrepreneurs – what they actually talk about and how they communicate
with key stakeholders and each other.
The UK’s emerging innovation hotspots
Share of geo-located innovation content online In order of conversation size
While not statistically signi?cant, the ?ndings caution against a narrow
conception of entrepreneurial communities thriving only in southern England.
City Number of results
London 7,705
Manchester 426
Shef?eld 202
Edinburgh 189
Liverpool 166
Glasgow 153
Oxford 152
Nottingham 147
Darlington 136
Leeds 132
Brighton 130
Birmingham 130
Bristol 127
Cambridge 107
Poynton 106
While fewer than 5% of social media users make their
location publicly available, the ?ndings are an indicator of
where online conversations about entrepreneurialism and
innovation are occurring, when users choose to share
their locations.
While London tops the list with 7,705 results, northern
cities are prevalent, with a clear corridor stretching from
west to east (Liverpool to York).
Source: Pulsar.
10
Locations of high-volume social conversations
about innovation
In order to extrapolate more comprehensive social data,
Pulsar applied a ‘smart ?lter’ to all publicly available social
content on the Internet, irrespective of users’ set locations.
High-density urban areas and high-ranking universities are
both widely considered to be key factors in?uencing the
emergence of an innovation ecosystem.
“Clustering can bring positive productivity bene?ts for
individual sectors, although the effect is nearly always
outweighed by the importance of being in a large urban
environment,” the Manchester Independent Economic
Review stated in its 2009 report, The Case for
Agglomeration Economies
5
. The report went on to argue
that larger cities make it easier for different types of
workers and ?rms to ?nd each other, which chimes with
the view of Jaideep Prabhu, Jawaharlal Nehru Professor of
Business and Enterprise at the Judge Business School of
the University of Cambridge (England). He says that city
dwellers are at a greater advantage, particularly those
connected to universities, because there is a constantly
replenishing supply of diverse communities and young,
educated people with fresh ideas.
Mark Glover, Director of Business Planning at the
Technology Strategy Board, adds: “Innovative people with
bright ideas are an important element of any localised
cluster. High-calibre universities are likely to attract and
train these people, and often have additional infrastructure
(such as science parks) to help commercialise ideas.
This is the case with Cambridge, Silicon Valley and
Stanford University.”
By combining the UK’s top ten universities
6
, top ten urban
cities (by population size)
7
, plus locations that Tech City
named as ‘Cities to Watch’ for innovation
8
, 18 key locations
were added to Pulsar’s data ?lter: London, Birmingham,
Leeds, Edinburgh, Glasgow, Shef?eld, Bradford, Liverpool,
Manchester, Bristol, Newcastle, Cambridge, Oxford,
Durham, Bath, Exeter, St Andrews and Warwick.
The Pulsar data ?nd that London still accounts for the
largest share of online activity (48%) relating to
discussions about innovation and entrepreneurialism. The
next largest share comes from Cambridge (9.3%),
Manchester (6.9%) and Oxford (5.9%).
The next largest cities by population after London –
Birmingham, Leeds, Glasgow and Shef?eld – do not
have a corresponding share of ‘voice’. Rather, the social
conversations about innovation, entrepreneurs and start-ups
are happening in Cambridge, which is not a high-density
urban area and is situated in a region that has received just
9% of the government’s GrowthAccelerator funding.
However, its world-renowned university (as with Oxford)
has become known for university-based technology
spin-offs. Cambridge University has a portfolio of 68
companies – including ARM, the world’s leading
semiconductor intellectual property supplier, valued at
£12bn
9
(US$20bn) – which have raised over £800m in
further investment and grant funding, and together
generate an annual turnover of £170m
10
.
Manchester’s proportion of the share of ‘voice’ leapfrogs
that of larger cities, including neighbouring Leeds. Again,
academia appears signi?cant as Manchester Business
School is the second most highly-ranked for postgraduate
entrepreneurship courses in the UK
11
, behind University of
Cambridge’s Judge Business School. The city was also listed
by Tech City as a ‘City to Watch’
12
– along with Birmingham,
Bristol and Newcastle – and at the time of the data
collection had just announced that it had been awarded
£1.5m in government funding for a Social Enterprise
Accelerator scheme.
5http://www.manchester-review.org.uk/projects/view/?id=718
6http://www.thecompleteuniversityguide.co.uk/league-tables/rankings
7http://www.ukcities.co.uk/populations/
8http://techcitynews.com/2014/02/27/the-battle-for-britains-next-tech-city/
Source: Pulsar. The remaining eight locations accounted for less than
2% of share of voice.
London 48%
Share of voice of the 18 selected cities in
topic-speci?c conversations
Cambridge 9.3%
Manchester 6.9%
Birmingham 4.9%
Leeds 3.1%
Bath 3%
Bristol 3.2%
Edinburgh 2.8%
Liverpool 2.7%
Oxford 5.9%
11
9http://www.digitallook.com/companyresearch/10111/ARM_Holdings/company_research.html
10http://www.enterprise.cam.ac.uk/industry/portfolio-companies/
11http://www.best-masters.com/ranking-master-entrepreneurship.html
12http://techcitynews.com/2014/02/27/the-battle-for-britains-next-tech-city/
and related topics such as ‘college admission courses’,
‘studies’, ‘degree’ and ‘prestigious university’ are all very
prevalent in these online conversations, but particularly
conspicuous is the absence of social discussions about
funding, crowdfunding, business loans, grants, investors,
or even tax breaks and government schemes for
entrepreneurs.
This funding-related conversation vacuum could either
be considered cause for concern – a sign that government
initiatives are not truly trickling down to the
entrepreneurial communities that they are designed to
support – or cause for celebration, if social silence
indicates that further debate about funding options is
unnecessary because entrepreneurs are con?dent in their
access to resources and simply do not wish publicly to
discuss their ?nancing needs.
The social conversations within each location also reveal
the nuances of their speci?c ecosystems. While social
conversations mentioning London have a large share of
‘voice’, the data show that the noise is crowding out any
nuances, highlighting each of the key topics as equally
connected to each other (see chart below). By contrast,
the Manchester data set identi?es an infrastructure for
supporting young entrepreneurs in fast-growing creative
?elds such as game development.
City-to-city connections
In terms of evidence of locations participating in a
broader, national ecosystem, one might expect a high
level of referencing of other locations when discussing
innovation. This is true for London, which mentions
Cambridge, and for Cambridge and Birmingham, which
mention London, during online conversations about
innovation and entrepreneurialism. The highest volume
of location-referencing posts comes from Manchester
discussing Leeds in this context (it is the ninth most
mentioned keyword), which could reinforce the concept
of the northern corridor.
However, inter-connectedness between locations is lower
than expected and social conversations regarding Oxford
do not mention any other location. Oxford also produces
university-based spin-off companies, with a similar
number to Cambridge at 65, and currently valued at £40m,
so it is surprising not to see the data represent a more
similar social conversation pattern.
Content clusters from online conversations
Across all 18 locations, social networks are dominated by
conversations about technology, new techniques, social
innovation and, interestingly, Cambridge. Twitter as a
channel tends to be more London-centric, with a high
prevalence of start-up, business-centred conversations
involving innovation and entrepreneurialism. Universities
Source: Pulsar.
London Cambridge Oxford Manchester Birmingham
1 new new new new new
2 time university world business business
3 years time university time time
4 world world years people 2014
5 year year time world ?rms
6 help years work 2014 years
7 good technology people years people
8 technology home best united year
9 business good business Leeds free
10 university group research start work
Top 10 keywords mentioned by each location
12
As can be seen in the associated chart, large nodes in the
network universe indicate very active online participants,
with the Centre for Entrepreneurial Learning (CfEL)
Cambridge the most active during the data period.
CfEL Cambridge is a not-for-pro?t organisation based in
Judge Business School, which provides courses for
undergraduate, postgraduate and non-academic aspiring
entrepreneurs designed to share best practice, unlock
entrepreneurial potential and ‘plug-in’ attendees to a network
of CfEL Cambridge alumni, mentors and facilitators
13
.
Virgin StartUp, a not-for-pro?t organisation that promotes
business ?nancing through its partners (including Virgin
Money) and then connects start-ups with business
mentors
14
, is the second-largest in?uencer in the data set.
Interestingly, the Pulsar data ?nds that accelerator programmes and those
providing funding guidance and introductions to funding resources are key
‘in?uencers’ across the social web.
Case study – Accelerator programmes
dominate online conversation in the UK
13http://www.cfel.jbs.cam.ac.uk/aboutus/index.html
14http://www.virginstartup.org/about/what-we-do/
15http://www.entrepreneurial-spark.com/the-accelerator.aspx
In?uencers’ network
Source: Pulsar. Includes ‘smart ?ltered’ data.
The third is Entrepreneurial Spark (ESparkUK), a business
accelerator in Glasgow, Edinburgh and Ayrshire that offers
free of?ce space, IT and structured support for 18 months
to high-growth, early-stage businesses with an annual
turnover of less than £1m
15
.
This data indicates that sources of practical support and
funding provisions are integral to the online conversation
about high-growth businesses and start-ups in the UK and
a valuable social signal guiding entrepreneurs to resources
and role models.
13
In the bundle chart below, the prominence of this ‘virtual
ecosystem’ linking the key categories of ‘game design’,
‘development’, ‘young entrepreneurs’ and ‘training’ is
visible. This topic was sparked by Twitter engagement
related to the announcement of a Manchester-based game
design studio providing training in game design and
development for young entrepreneurs.
Today, the UK is the ?fth-largest video-game developer in
the world, with the sector contributing £947m to GDP in
2012, employing more than 9,000 people in game
development and indirectly supporting almost 17,000
further jobs, according to trade association, TIGA
16
. What
the social data does not show is that the young
entrepreneurs to whom the game developers are appealing
are themselves promoting innovation in this space.
Engagement in social media includes relatively passive
actions such as forwarding and ‘liking’ content posted by
others – in this case, a game design studio – not necessarily
commenting on the post, although the content is being
digested by its intended audience.
A similar innovation ecosystem is evident in the Cambridge
data set, with the key topic ‘co-founding group’ mentioned
in the same posts as ‘pharmacology’ and ‘prestigious
university’. Top tweets during the period feature ‘hot
Cambridge shares’ and content about the Cambridge
Satchel Company expanding into China. The Pulsar data
?nds that technology is not as strongly linked to academia-
related topics as might be expected; instead ‘technology’ is
mentioned in conjunction with ‘social innovation’, ‘new
technique’ and ‘world’.
In the Manchester-related social conversations, the
government’s announcement in January of a £300m tax
break for retail businesses around the UK appears to have
gained signi?cant traction in online conversations, as it is
featured in the data as a key topic. While this looks positive
on the surface, when the data is analysed it shows that this
topic of tax breaks is the result of digital publishing, rather
than social conversation; traditional news publications
reporting online and sharing news of the tax break across
their social media accounts.
16http://www.cbi.org.uk/about-the-cbi/business-voice/
february-march-2014/creative-industries-gaming/
London data set: inter-related key topics
Source: Pulsar
college-admission courses
college of?cials
co-founding group
costly lab
pharmacology
studies
potential
social innovation
cambridge
degree
startup
technology
time
london
Connection in social conversations between ‘Game
Design’ and other key topics – ‘development’, ‘training’
and ‘young entrepreneurs’
Source: Pulsar
tech entrepreneurs
game design
leeds
dev
training
young entrepreneurs
bizitalk
liverpool
startup
business
manchester
entrepreneurs
300m tax break
retail ?rms
innovation
Manchester data set: relationship between ‘£300m
tax break’ topic online
Source: Pulsar
tech entrepreneurs
game design
leeds
dev
training
young entrepreneurs
bizitalk
liverpool
startup
business
manchester
entrepreneurs
300m tax break
uk
nhs technology
nhs boss
retail ?rms
cbe
innovation
14
Fostering tomorrow’s Generation Creative
Too often innovation is considered from a top-down
perspective and too rarely from a bottom-up, child-centric
solution for creating the UK’s future generations of
entrepreneurs, say experts. Prof. Holtham claims that
Britain’s school system limits creative thinking because it
does not reward a diversity of approaches, which means that
the UK produces young people ill-equipped to become
tomorrow’s entrepreneurs.
“Unless you address the education system, either within
schools and universities or subsequently in adult life,
you’re never going to achieve a satisfactory level of
innovation in society,” he explains.
To address the question of how best to power the UK’s economy by empowering
its entrepreneurs, a host of eminent thinkers and doers in the ?eld of
entrepreneurialism were consulted. Here, they share what they perceive to be the
biggest barriers prohibiting innovative businesses from thriving in the UK, and set
out proposed solutions.
Entrepreneurial challenges and opportunities
17http://www.gazellecolleges.com/about-us
18http://www.pjea.org.uk/about-us
Source: Rosan Bosch.
Telefonplan school in Stockholm, Sweden
The role of further education is equally important as higher
education in creating a UK entrepreneurial ecosystem.
Gazelle Colleges Group, which launched in January 2012,
operates entrepreneurial programmes within 22 colleges
around the UK, providing applied learning models and
working strategically with local enterprise partnerships,
students and employers to develop entrepreneurial capacity
in those local communities
17
. In higher education, the Peter
Jones Enterprise Academy
18
works with 31 regional colleges
to provide one-year practical ‘learning by doing’ courses
designed to provide young people with the skills and
con?dence to think like an entrepreneur and potentially
start a business.
15
Borrowing from the Latin root of ‘education’, Prof. Holtham
says that education at all levels in the UK needs to ‘draw
out’ the intrinsic creativity of people, be that creativity in
conceiving an idea previously unimagined or in generating
an alternative approach to systems and operations. To
?ourish, he says, “the innovation process needs all types of
people, generally working together in teams”.
Jane Chen, Co-Founder of Embrace, believes that the types
of workshops undertaken in graduate and postgraduate
design and entrepreneurialism courses can easily be
adapted to and introduced at an earlier stage in the
education system, as well as within existing companies,
to help cultivate a creative approach. Such workshops are
based on an understanding that all brainstorming and
approaches are valid, with no judgement from any
participants made if an idea is outlandish or does not work.
Organisations such as Google have long advocated and
provided creative work environments for their staff in order
to assist work-based creativity. In the UK, companies such
as Mind Candy in London, Melbourne Server Hosting in
Manchester and Virgin Money in Edinburgh have followed
this trend
19
. This prompts the question of whether Britain’s
schools should consider introducing similar liberal and
design-led ideas, such as those embedded in Sweden’s
Telefonplan school, which emphasises both independent
and collaborative working. It is argued that traditional work
spaces – from formal education through to the workplace
– quash creativity and collaborative working, which is now
a prerequisite for a technology-enabled workforce and a
service-driven economy.
Prof. Holtham relies on the academic model of innovation
for courses at the Cass Business School, an ecological
‘Creative Problem-Solving’ (CPS) model in which the four
components – Product, Process, People and Place – all
positively interact with each other. He argues that
policymakers’ and business leaders’ attention is too
narrowly focused on product-based innovation or place-
speci?c entrepreneurs.
Eze Vidra, Head of Campus London and Google for
Entrepreneurs Europe, says there needs to be an
‘alternative education’ outside the formal education
system, where ‘the need is biggest’ as there are no
professors on tap and no access to classroom facilities or
resources. He points to schemes such as Google’s Campus
for Moms
20
, which is a baby-friendly eight-week start-up
school, at the end of which the participants pitch their
business idea to course leaders, guest entrepreneur
speakers and venture capital investors.
Demographic-speci?c barriers
According to the Women’s Business Council
21
, the
entrepreneurial gender divide is robbing Britain of more
than 1m more entrepreneurs; total entrepreneurial activity
in 2012 (calculated as the proportion of the working-age
population either in the process of starting a business or
running a new business) was 11.6% for men compared
with 6.3% for women.
As Ms Lane Fox says: “Women don’t need special
treatment, they are not disadvantaged by anything other
than long-rooted cultural reasons”, illustrated by claims
that men are neurologically ‘hard-wired’ differently to
women, making them innately more entrepreneurial.
Examples of misogyny facing women in certain sectors,
including science, technology, engineering and
mathematics (STEM) are proli?c. In such a culture it is
unsurprising that, statistically speaking, women do not
ful?l the ‘typical’ pro?le of an entrepreneur; this is a
consequence rather than an explanation.
Kathryn Parsons, Founder of Decoded, a technology
education business, says research on Decoded pupils
found that women are generally 30% less con?dent than
their male counterparts in believing they can master
coding. Childcare issues also provide a challenge to
professional women, who continue to be primary care
givers despite increases in ?exible parental leave. The pace
of technological change magni?es any period away from
work, yet the benchmark for basic digital literacy in the
UK is frighteningly low, and the economy cannot afford
to exclude women from future digital business,
Ms Parsons adds.
It is not just women who face having “entrepreneurship
institutionalised out of them”, as Jill Huntley, Managing
Director for Corporate Citizenship at Accenture puts it,
but older people too. While the potential for engaging this
demographic in entrepreneurial activity is huge (there are
3.6m people in the UK aged 50-64 who are not
economically active), too often the focus is on fostering
young entrepreneurs.
“Unless you address the education
system, either within schools
and universities or subsequently
in adult life, you’re never going
to achieve a satisfactory level of
innovation in society.”
Clive Holtham, Professor of Information Management and
Director of Cass Learning Laboratory, Cass Business School
16
Alastair Clegg is Chief Executive of The Prince’s Initiative
for Mature Enterprise (PRIME), which is the only national
organisation dedicated to providing over-50s with the
support to set up their own business. He explains that
while many people dream of starting a business in their
30s or 40s, they can be hindered by family and ?nancial
commitments in a way that over-50s are not.
“There is enormous entrepreneurial zeal in this age group,”
he says. “What we do is give them con?dence and point
them in the right direction of what steps they need to take
to start a successful business, such as getting a business
plan in place or seeking advice from mentors. The over 50s
tend to have the skills so it’s more about demystifying the
process and giving them the right tools so they can get up
and running.” Fear and a sense of risk-taking comes from
not understanding how something works or what to
expect –areas that can be demysti?ed through coaching
and support.
Programmes that aim to dismantle the barriers affecting
speci?c demographics should be applauded, but Ms
Huntley urges corporations to facilitate change within their
organisation. “Given the future of work and the structural
changes to the economy, in order to grow established
businesses there needs to be a better cultural pipeline of
innovation and entrepreneurship and some of that needs
to come from inside the company,” she says.
“We run a number of programmes internally to try and
open the innovation mindset and encourage employees to
bring ideas, and [for us to] provide mechanisms of funding
those and spinning them out if necessary,” she adds.
The role of universities in seamlessly moving
entrepreneurs into the business environment
University spin-off companies are not new, but Mr Hutton
argues that British universities should shift away from their
“extremely conservative view about intellectual property
rights” and about how to divide any commercial gains
emanating from university spin-offs, to adopt what he
described as the “MIT or Stanford model”.
He says that the US bene?ts from universities attracting
companies, which support emerging entrepreneurial
ventures by acting as a bridge from academia to business.
By linking the entrepreneurs with in?uential alumni in a
mentoring and networking capacity (as was the case for
Embrace Innovations), universities are able to fast-track the
commercialisation of early-stage ideas.
Mr Hutton further suggests that promising university
projects could be funded by embedding grants into the
participants’ PhD or masters degree to fund their
development for a further one or two years, effectively
buying time to enable an innovative concept to be
developed to a commercial level on completion. “It’s very
hard in academic life simultaneously to be an entrepreneur
and have an academic career; the system is not structured
to help you do that. Universities are not as signi?cant as
they should be.”
According to Prof. Wright, UK universities are already moving
away from the traditional approach of commercialising
entrepreneurial activity through licensing agreements and
equity stakes in spin-offs, and moving towards gaining from
‘indirect returns’. He identi?es these as being the virtuous
cycle of successful alumni providing practical business
support to entrepreneurial students, which makes alumni
more invested in the university and likely to donate ?nancially.
“I think the US has been better at that than the UK but
we’re starting to see a connection between two areas in
universities that are quite separate: the development of?ce,
which is trying to convince alumni to donate, and the
of?ces that are trying to promote commercialisation,”
Prof. Wright says. For example, the National Centre for
Entrepreneurship Education, based at Coventry University,
launched a programme called ‘Make It Happen’, which has
helped with the launch of 1,900 new businesses since
2009 by providing resources, tools and online mentoring
for graduates starting up a company.
David Gill, Managing Director of St John’s Innovation
Centre (owned by St John’s College, Cambridge), says that
despite some 20 years of policies to encourage universities
to provide a link with the business community so that
university-associated enterprises can ?ourish
commercially, this remains a “missing piece … in the
majority of [UK] universities”.
Mr Gill advocates collaboration between universities and
hubs of entrepreneurial activity, such as innovation parks
where pioneering start-ups with the potential for high
growth are provided with ?exible and subsidised work
space and supported by ancillary services based in the
same place. He explains that “gatekeepers who understand
the needs of both sides” are vital, and encourages
university students to undertake work placements within
start-up businesses, so that they can share and apply their
knowledge in a business setting, while the start-up
bene?ts from a student’s expertise at no cost.
19http://www.telegraph.co.uk/?nance/jobs/9640237/Top-10-coolest-of?ces-in-UK.html?frame=2383634
20http://googleblog.blogspot.co.uk/2013/07/campus-for-moms-helping-women.html
21http://womensbusinesscouncil.dcms.gov.uk/appendices/
17
Case study – Turning a crisis into an
opportunity: Embrace
While improvements have been made to the UK innovation
ecosystem, it is still considered to be some way behind in
many areas compared with the US. By contemplating the
journey of a successful, innovative enterprise that follows
what will later be discussed as ‘the Stanford model’, British
policymakers and business leaders can take heed of, and
even enhance, similar factors and practices in order to
strengthen the UK innovation ecosystem.
During her MBA at Stanford University, Jane Chen and her
peers on a multi-disciplinary ‘entrepreneurial design for
extreme affordability’ class created the world’s ?rst
low-cost baby incubator, which costs about 1% of the
usual US$20,000. What started as an academic challenge
evolved into the award-winning social business, Embrace
Innovations, which has distributed Embrace Warmers that
have reached over 60,000 hypothermic infants in 11
developing countries around the world
23
.
Process: design-led innovation
Ms Chen asserts that the design process can be taught and
fostered across academic and business ?elds, drawing on
the creativity inherent in each individual. That process is to
understand the problem; list the criteria required to
address the problem; use rapid ‘low-resolution’
prototyping and iteration based on trial and error; and to
co-create with the end user, not just in terms of receiving
feedback but in order to “understand the ecosystem
around something that’s going to make your product
successful or not”.
The Embrace Warmer uses an innovative wax incorporated
in a sleeping bag to regulate a baby’s temperature. It stays
warm without electricity, is safe and intuitive to use –
a crucial factor given the high numbers of babies born
in remote rural areas, without access to hospital facilities,
meaning that family members need to be able to operate
the product themselves.
The entrepreneurial structure
Pulling together multi-disciplinary teams is also important,
Ms Chen says. The Embrace project team originally
comprised an electrical engineer, an aerospace engineer, a
computer scientist and (in Ms Chen’s case) a public health
professional, which allowed them to consider the
challenge of regulating a neonate’s body temperature
unburdened by medical preconceptions.
She believes corporations would bene?t from “bringing
that diversity of backgrounds and viewpoints into their
work” and encouraging innovation-based corporate
spin-offs in the same way as universities do.
Ms Chen also advocates “vertical integration” of the supply
chain, such as manufacturing and sales, areas that the
team ?rst assumed could be outsourced to third parties.
“You’re selling a brand new concept, which doesn’t plug
into any existing sales infrastructure. We tried to partner
with third-party distributors and even multinationals and
that simply did not work. So, for ground-breaking ideas,
I think you need vertically to integrate to some extent,”
she explains.
Consequently, Embrace has developed a small-scale
manufacturing, training and sales team, which Ms Chen
says not only gives Embrace end-to-end control of its
product, but also provides insights into the price point,
effective sales pitches, control over how its product and
brand is positioned in its market, as well as product-
speci?c feedback.
Ecosystem support for entrepreneurs
Stanford University played a critical role in assisting
Embrace, not least by facilitating access to other in?uential
stakeholders and funding opportunities. Embrace won
US$125,000 in seed funding from the Stanford Business
Plan Competition, and Echoing Green Fellowship awards.
As a non-pro?t organisation, Embrace receives
contributions from foundations and individual donors, as
well as a small percentage of funding from royalties on
commercial sales of the infant warmer to governments
and private entities that can afford a low-cost solution to
neonatal hypothermia. Both Stanford and Echoing Green
Fellowship additionally provide access to their respective
alumni and partners, which Ms Chen considers to be
crucial in Embrace’s success.
“Corporations would bene?t from
bringing a diversity of backgrounds
and viewpoints into their work and
encouraging innovation-based
corporate spin-offs in the same
way as universities do.”
Jane Chen, Co-Founder, Embrace
23http://embraceglobal.org/who-we-are/mission-impact/
18
Could valuing intellectual property unlock
mainstream start-up lending?
Prof. Wright considers funding less of a barrier for
entrepreneurial start-ups because the initial costs for many
knowledge-based businesses are now low. However, Mr
Hutton advocates Britain creating its own market for
intellectual property, which he believes will create more
mainstream lending opportunities to start-ups that would
otherwise not qualify for such funding.
British businesses now invest more in intangible assets,
such as intellectual property, branding and design –
investing £138bn on ‘knowledge assets’ in 2011 – than
they do in buildings, engines and machinery (£90bn in
2011)
24
. That such assets are currently ‘unbankable’,
according to the Intellectual Property Of?ce
25
, provides a
huge opportunity for new ?nancial instruments to unlock
this latent value. In its recent report, Banking on IP: The
role of intellectual property and intangible assets in
facilitating business ?nance
26
, the Intellectual Property
Of?ce stated: “Balance sheets do not represent their value,
and current regulations actively work against consideration
of IP (intellectual property) as an asset class but the result
is a real and important disconnect between banking
regulation and practice and the UK’s ambition for growth.”
Mr Hutton explains: “One of the interesting developments
in the US has been M-CAM, a company that underwrites
the value of intellectual property, against which banks
can lend. This gives inventors and entrepreneurs some
pro?t but also gives bankers some comfort that even
though nothing has been commercialised, there is an idea
behind the potential commercial venture that has some
intrinsic value.”
As Chair of the Big Innovation Centre at The Work
Foundation, Mr Hutton supports the creation of a
government-backed national Innovation Bank, which
would draw together some of the UK’s biggest companies,
such as GlaxoSmithKline and BAE Systems, with a
university consortium including Oxford, Cambridge and
University College London. The vision is that such an
Innovation Bank would develop insurance schemes to
underwrite the value of intangible assets, as well as
mentoring UK businesses and players in the ?nancial
sector, including banks and venture capitalists.
However, Mr Richard is critical of any move to foster a
market for intellectual property, encouraging ?nancial
institutions effectively to value concepts before any
commercially viable product or service has been produced.
“They’re taking a notion at one stage of a business with
the type of activity that happens at a different stage and
saying: if we realise the intellectual property and give it
an asset value, then [start-up businesses] could borrow
against the asset. It’s not the lack of asset backing that
stops them from getting a loan at that stage of the
business, it’s the lack of serviceability on the loan,”
he says.
The future of seed-stage funding is social
While advocates of an IP valuation market believe this could
help start-ups gain funding at seed stage, Mr Richard thinks
this is unlikely because traditional bank loans hinge on two
questions: can you pay back the loan; and, if you can’t pay
the loan back, what asset can be claimed in its stead?
“If the business is failing then the intellectual property may
have been proved in the marketplace to be of no value,” he
says. At seed stage, the business is simply “a concept, a
dream, a desire”. Simply valuing IP does nothing to free
start-ups from reliance on investments from the “three
F’s”– family, friends and fools – because the concept is not
asset-backed.
Instead, he offers, social loans can provide a solution. They
are unsecured loans provided under very different lending
criteria to traditional loans (designed for start-ups) by
commercial ?nancial institutions and underwritten by the
government, with a low nominal interest rate of 6%.
“Social lending is interesting because it
preserves the entrepreneur’s equity. People
think that a loan is worse somehow than
the sale of equity, but in truth the sale of
equity is the most expensive money you’ll
ever spend, if you succeed.”
Doug Richard, Founder, School for Startups
24http://www.theguardian.com/business...value-intangible-assets-intellectual-property
25http://www.ipo.gov.uk/ipresearch-bankingip-sum-281013.pdf
26http://www.ipo.gov.uk/ipresearch-bankingip-sum-281013.pdf
19
Loan recipients are matched with a business mentor to
guide the deployment of the loan funding wisely and to
pass on real-life experience that the mentor has gained by
being a successful entrepreneur. The average loan size is
£6,000 and School for Startups is the largest delivery
partner of the Start Up Loans scheme in the UK, through its
launcher programme, says Mr Richard. “Social lending is
interesting because it preserves the entrepreneur’s equity.
People think that a loan is worse somehow than the sale of
equity, but in truth the sale of equity is the most expensive
money you’ll ever spend, if you succeed,” he adds.
However, Mr Richard believes that the UK government
could be more innovative itself in its funding strategy for
entrepreneurs. Traditional loans, he says, do not ?t
start-ups because they typically have a volatile cash?ow
yet loans require regular repayments. Instead, countries
such as Colombia are creating custom ?nancial
instruments to suit the start-up, be that a stepped
acceleration in interest rate towards the end of the loan
to encourage quicker repayment sooner or a certain
percentage of the loan to be repaid depending on varying
revenue levels.
Start-up Loans: Key stats and demographics
Source: www.startuploans.co.uk
Mr Richard says such approaches defy traditional lending,
but lending to start-up business has never been part of the
traditional banking remit because it is deemed too risky.
That risky element of the market in developed economies
can be addressed, he explains, by borrowing and adapting
innovative approaches that work well in developing
countries where they seek to assist the ‘unbanked’ (people
excluded from the banking sector).
Combating sell-out ‘gazelle’ companies
The fact that UK technology start-ups being snapped up
by far larger US competitors on an acquisition bent is so
celebrated in the UK highlights “ambition and scale
barriers” that could be partially geographic, suggests
Ms Lane Fox. “If you’re born in the US then your home
market is immediately 300m people, which gives you a
different idea of scale and ambition compared with the
UK, where the home market is 60m people. To get access
to real scale, you have to go into Europe and that’s harder,”
she says.
Mr Hutton agrees: “The Americans have a single market.
The market in Europe is for marketing manufactured
goods, not in knowledge services, where all the action is.
That makes it very dif?cult for British entrepreneurs to
pitch their start-up capital with any chance of building a
billion dollar corporation, because the single market in
which it might do that doesn’t exist.”
20
At the heart of the Eurozone project is the concept of
borderless free-trade movement (of people and goods)
but, unlike in a domestic single market the size of the US,
UK companies face different legal and administrative
environments, different languages and cultural nuances
on the Continent, as well as the need to select a suitable
corporate structure for expansion – whether to franchise,
partner or otherwise enter a less familiar marketplace.
Nicholas Davis, Director and Head of Europe at the World
Economic Forum, says: “At the EU level there’s a huge
amount of work still to be done to reduce fragmentation
and create a digital single market. This would allow
companies that start here in Britain to seamlessly access
500 million people rather than just 8 million in London,
for example.”
Ms Lane Fox also says that European businesses tend to
have “longevity and levity”, which UK businesses lack,
suggesting “there’s a cultural point about that kind of
ambition and really not trying to get out of your business
before you’ve achieved scale”.
Mr Hutton adds: “Too many companies have to exit or sell
all their equity at the crucial juncture of £2m turnover.
[As entrepreneurs] they have no scope to grow unless
they sell out completely and that indicates a dysfunction
in the system.”
Prof. Wright believes this dysfunction is compounded by
government policy, which is too narrowly focused on
measuring start-up volumes and using that as an
indicator of entrepreneurship in the UK, without also
focusing on whether the start-ups actually grow or create
wealth. “I think there’s probably not enough done after the
incentives to start up a business to help it to grow,” he
says. “There are a lot of problems there with policy; the
growth side [of businesses] is where the impact from
innovative entrepreneurship is really going to be.”
There is also a case for greater promotion of alternative
funding and growth options, making it less attractive for
successful UK businesses to sell out to acquisitive (typically
foreign) competitors, which then bene?t from the UK’s
cultivation of a business during its riskiest phase and draw
the future pro?t potential of the business away from the
UK economy.
21
As the UK’s economy is weighted towards knowledge-
based enterprises, encouraging entrepreneurialism that
advances new approaches, processes and products that
can be both commercialised domestically and scaled up
to rival international peers is crucial to the future of the
UK economy. Without a well-functioning and optimally
supported entrepreneurial ecosystem, the UK risks
acting as a national start-up incubator supplying
foreign multinationals.
Experts interviewed in this report offer advice on how to
succeed in building a UK entrepreneurial ecosystem.
• While sole traders, the self-employed and small and
medium-sized businesses make a considerable
contribution to the UK economy, greater care must
be taken to address the speci?c needs of each of
these groups and caution exercised so as not to allow
terminology to be used interchangeably to describe
businesses that are so diverse in terms of their
business model, risk appetite, scalability and capacity
for employment growth
• Location-based hubs of entrepreneurial activity should
not be considered simply within city boundaries.
The social data included in this report make a case for
fostering entrepreneurial activity along the Liverpool-
to-York corridor rather than providing city-speci?c
support and ignoring the agglomeration. Support for
entrepreneurs in such agglomerations may need to be
indirect, such as providing enhanced transport
infrastructure and fostering support and business
networks that span the multiple cities and areas
connecting them
• The social data indicate that sources of practical
support (such as accelerator programmes) and funding
provisions are integral to the online conversation about
high-growth businesses and start-ups in the UK.
Consequently, these ‘in?uencers’ can be used to
amplify the successes of British entrepreneurs and
provide awareness of role models to help cultivate a
more ambitious culture of entrepreneurialism to rival
those of the US and Europe
While improvements to foster an innovation ecosystem in the UK have begun,
much more can and should be done.
Conclusion
• These in?uencers should be used not only to signpost
entrepreneurs to resources, but should be considered
as long-term partners for entrepreneurs while they
grow their businesses from start-up phase through to
higher-scale maturity, complete with options for
expanding above the £2m turnover threshold
• The ties between academia and the business
community must continue to be strengthened and
publicised so that a wider range of businesses can
bene?t, and less business-minded universities can be
encouraged to follow suit. Partnerships between
alumni and university enterprises, with the former
mentoring the latter on how to commercialise their
projects is one element, but broader integration into
the local business communities will ensure wider
participation in a knowledge economy. Given that
universities are publicly funded, a sharper push
towards a wider non-academic contribution to
enterprise activity is needed
• An innovative approach to ?nancial instruments that
are better able to match the funding needs and practical
constraints of entrepreneurs at the different stages
of their businesses’ lifecycles is required. Traditional
?nancial institutions will be pivotal in providing this.
The government, which can wield tax and other ?nancial
incentives, also has a crucial role in reducing the barriers
that entrepreneurs come up against in getting funding
to commercialise their ideas, and the barriers that the
market faces in pricing risk around entrepreneurial
ventures. For start-ups, matching funding with
mentorship appears to be a good ?rst step, but more
can be done to match the risk and liability pro?le of
businesses at different stages. This should be
approached collaboratively from both a government
and ?nancial services standpoint to ensure a cohesive
funding strategy is adopted for the UK.
22
In addition to wide-ranging desk research and data from
Pulsar, a social data intelligence platform, this report is
based on qualitative interviews and a roundtable discussion
with experts. Our thanks go to the following for their
speci?c contribution.
Mark Anderson, Managing Director, Pearson Education UK
Jane Chen, Co-Founder, Embrace
Alastair Clegg, Chief Executive, The Prince’s Initiative for
Mature Enterprise (PRIME)
Nicholas Davis, Director and Head of Europe, World
Economic Forum
Graeme Fisher, Head of Policy & External Affairs, Federation
of Small Businesses (FSB)
Ross Fobian, CEO and Co-founder of ResponseTap Limited
David Gill, Managing Director, St John’s Innovation Centre,
St John’s College, University of Cambridge
Mark Glover, Director of Business Planning, Technology
Strategy Board
Clive Holtham, Professor of Information Management and
Director of Cass Learning Laboratory, Cass Business School
Tom Hulme, Design Director, IDEO
Jill Huntley, Managing Director, Corporate Citizenship,
Accenture
Will Hutton, Principal of Hertford College, University
of Oxford, and Chair of the Big Innovation Centre
Barclays approached The Economist Intelligence Unit in February 2014 to
investigate how entrepreneurs in the UK are supported and the barriers that hinder
them, as well as wider trends that are shaping the UK’s innovation ecosystem.
About this report
Martha Lane Fox, Co-Founder, lastminute.com
James Lay?eld, Serial Entrepreneur and CEO,
Central Working
Kathryn Parsons, Founder, Decoded
Jaideep Prabhu, Jawaharlal Nehru Professor of
Business and Enterprise, Judge Business School,
University of Cambridge
Doug Richard, Founder, School for Startups
Sumon Sadhu, Founder, Quid
Philip Salter, Director, The Entrepreneurs Network (TEN)
Peter Tufano, Peter Moores Dean, Said Business School,
University of Oxford
Eze Vidra, Head of Campus London and Google for
Entrepreneurs Europe
Mike Wright, Professor of Entrepreneurship,
Imperial College London
This report was written by Anna Lawlor and edited by
Zoe Tabary and Monica Woodley.
Barclays is a trading name of Barclays Bank PLC and its subsidiaries. Barclays Bank PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential
Regulation Authority (Financial Services Register No. 122702). Registered in England. Registered number is 1026167 with registered of?ce at 1 Churchill Place, London E14 5HP.
June 2014.
barclays.com/entrepreneurs
doc_365782674.pdf
Data pertaining to start me up creating britains entrepreneurial ecosystem.
Start me up: Creating Britain’s
entrepreneurial ecosystem
A Barclays report, written by The Economist Intelligence Unit
2
3 Foreword
4 Executive summary
5 The shifting ground of the labour market
8 Growth of innovation hotspots
9 The UK’s emerging innovation hotspots
12 Case study
14 Entrepreneurial challenges and opportunities
17 Case study
21 Conclusion
22 About this report
Contents
This report was written by Anna Lawlor and edited
by Zoe Tabary and Monica Woodley.
3
Foreword
With a competitive global market and rising social challenges such as youth
unemployment and an ageing population, there exists an opportunity to create
an environment here in the UK that values and practices lifelong enterprise
learning; one that encourages direct ownership and responsibility to respond to
these challenges.
Entrepreneurs are a huge source of economic growth,
innovation and job creation. And in the UK they represent
a diverse cluster of individuals. New businesses, ranging
from tech start-ups to manufacturers and retailers, are
pioneering new products and services. From Bristol to
Leeds, Cambridge to Glasgow, entrepreneurs are thriving.
But there is much more that can be done to support
their growth.
Stakeholders of the entrepreneurial ecosystem must
share a willingness to think critically and creatively about
solutions. Together we must provide access to ?nancial
capital and human capital, the right education and
skills, a competitive business environment and clear,
non-onerous regulation that does not needlessly burden
business models.
The economic potential of entrepreneurs is tremendous.
And unless this potential is properly harnessed and
budding entrepreneurs provided with the skills and
resources they need to build their ideas into successful
businesses, the UK economy will not ?ourish in future.
Antony Jenkins
Chief Executive
Barclays
This report takes a closer look at the entrepreneurial
potential across the UK and presents the opportunity to
understand how it can be better supported. It is based on
primary research undertaken by The Economist
Intelligence Unit as well as a roundtable discussion
conducted at The Escalator in Whitechapel, London.
I would like to take this opportunity to thank all those
involved for their contribution to this report.
4
An innovation ecosystem refers to the combination of
factors for innovation that function together in a symbiotic
relationship. The real-word application is the environment
within which entrepreneurs function as one integral
component. This has a knock-on effect on the broader
economy, which thrives off the vitality of innovative
entrepreneurs.
This Barclays report, written by The Economist Intelligence
Unit, looks at how to create an environment where
entrepreneurs can ?ourish in the UK, drawing on best
practices from other innovation ecosystems around the
world. Based on in-depth interviews of entrepreneurs and
other experts, substantial desk research and social data
mining, its key ?ndings are listed below.
Entrepreneurial communities extend beyond the
capital, London, and South East England
London accounts for the largest share of online activity
relating to discussions about innovation and
entrepreneurialism, with a 48% share of ‘voice’.
However, the next largest shares of ‘voice’ come from
Cambridge (9.3%) and Manchester (6.9%), and there
is a clear northern corridor stretching from west to
east (Liverpool to York). Mike Wright, Professor of
Entrepreneurship at Imperial College London, explains:
“We looked at the notion that there’s a ‘golden triangle’
in the South East for entrepreneurship in terms of access
to ?nance, but found that some successful university
spin-offs were actually not located in the South East but
were, nevertheless, able to attract ?nance from there.
That’s one example of where the ecosystem isn’t quite as
location-based as we might admit, and may suggest that
we need different mechanisms to stimulate a more virtual
ecosystem rather than a physical location.”
The labelling of innovation hotspots produces a
compound effect that fosters entrepreneurialism
This view rewards an interventionist approach across the
education system, start-up incubators and centres of
excellence, which empower and facilitate British people
of all demographics to ful?l their entrepreneurial potential.
In so doing, it is argued, thriving sector hubs and the
publicity ‘buzz’ that accompanies them broaden equal
access to entrepreneurial opportunity, wealth creation
and employment.
Entrepreneurial Britain is beginning to ?ourish as policy changes and increased
investment in the UK’s innovation ecosystem take root.
Executive summary
Entrepreneurs are made, not born
Entrepreneurialism is not an innate trait, but rather
something that can be fostered with the right mix of learned
skills, access to opportunities and con?dence, according to
experts interviewed for this report. Government and the
school system alone cannot create entrepreneurs, but they
can send signi?cant signals about entrepreneurship, that
‘failing well’ (taking calculated risks and learning from
failures) is key to success, and that starting a business is a
viable and respected career route.
Creating an environment where entrepreneurs can
thrive requires a co-ordinated strategy covering a
range of areas
Encouraging entrepreneurial hubs beyond traditional city
boundaries, strengthening ties between education systems
and the business community, removing demographic-
speci?c barriers to entrepreneurialism and better matching
the funding needs of entrepreneurs are some of the
speci?c priorities that policymakers, businesses and
academia need to address.
5
The shifting ground of the labour market
This evolution has increased regional inequalities, and one
of the consequences of the 2008 ?nancial crisis on the UK
economy is that young people (aged 18-24) have borne
the brunt of unemployment and have been the most
affected by underemployment
The ?nancial crisis prompted increasing numbers of
employers to introduce ‘zero-hours contracts’, giving
them the ?exibility to employ casual labour as and when
required, with none of the responsibilities associated with
hiring employees. Young people are again the most
vulnerable to such employment practices.
Research from the University of Stirling found that while
national underemployment rose to 9.9% in 2012, for
16-24 year olds the rate was signi?cantly higher, at 30%
3
.
The UK has evolved from a manufacturing- and product-based economy into
a service-sector- and knowledge-based economy.
1&2http://www.ons.gov.uk/ons/rel/censu...ry/sty-170-years-of-labour-market-change.html
3http://www.stir.ac.uk/news/news-archive/13/april/meet-the-underemployed/name-44068-en.html
Employment by sector
Source: Of?ce for National Statistics
1
.
Percentage of workforce in each industry
Source: Of?ce for National Statistics
2
.
1841 2011
6
Some argue that this has led educated and technologically
pro?cient young people to discover their entrepreneurial
?air, pouring their efforts into start-up business ventures
and turning to non-traditional funding routes such as
online crowdfunding sites Kickstarter and Indiegogo.
However, while the volume of newly registered businesses
is growing and is often heralded as a sign of ?ourishing
British entrepreneurialism, they could simply be re?ecting
an increase in ‘bedroom businesses’ (a colloquialism for
businesses starting out of the home, requiring little or
no start-up funding) and in the number of people
repurposing themselves as self-employed consultants
as a result of redundancy. Such changes in labour
dynamics can skew what appears to be promising data
about the true extent of the UK’s entrepreneurial activity
on economic productivity.
4http://www.parliament.uk/business/p...c-recovery/young-people-in-the-labour-market/
Source: Of?ce for National Statistics cited in Parliament
4
.
Youth unemployment compared with working-age unemployment
There is concern that business start-ups are too easily
categorised as being entrepreneurial even though
many compete on price and service rather than by
providing a unique offering in the marketplace. This
increases the challenges of addressing barriers to
innovative entrepreneurialism and identifying new
and commercially viable solutions to problems
because, while they are frequently regarded as the
same, entrepreneurs and start-up businesses often face
very different challenges and operate very different
business models.
Some, such as Martha Lane Fox, a serial entrepreneur,
believe there is not the same risk appetite among British
entrepreneurs as there is in the US or the EU. This creates
its own problem in that the British like to think there is
a rich seam of entrepreneurialism in their country when
in fact, Ms Lane Fox argues, there are limited examples
of British start-ups that have gone on to become
internationally-renowned brands and have remained
British companies.
7
Business births by UK region
Source: Of?ce for National Statistics.
2009
2010
2011
2012
Will Hutton, Principal of Hertford College, Oxford
University, and Chair of the Big Innovation Centre, says
that the lack of a British innovation ecosystem is a
“principle de?ciency in the UK economy. One of the
longstanding areas of weaknesses has been ?nancing
and commercialising new ideas.” However, he says
change is afoot; the current government is at last speaking
the language of innovation ecosystems, introducing
entrepreneurial programmes and putting forth
government funding to support them. “Is it enough? No.
Is it following the trend towards open innovation, sharing,
relaxing of intellectual property law that needs to take
place? No. But it would be unfair and wrong to say that
nothing has happened.”
Doug Richard, Founder of School for Startups and a serial
entrepreneur, says that the UK is a world leader in tax-
incentivised seed and angel investing. The Seed Enterprise
Investment Scheme (SEIS) has, he says, increased the
likelihood of angel investment for very-early-stage British
businesses by minimising the risk as much as possible
for the investor. “I don’t know of any other country that
has anything as close to aggressive as that [in using
tax incentives].”
8
Such public labelling has a compound effect; the soft
power inherent in the (often government-backed)
promotion of areas as innovation hotspots creates a
honey-pot effect, which subsequently attracts venture
capitalists, big consultancy ?rms and other specialist
organisations that attend to the needs of growing ?rms in
complex industries.
Such labelling may also become self-ful?lling in terms of
encouraging a location-speci?c culture of
entrepreneurialism, with their own success cases and role
models, enticing would-be entrepreneurs from ‘safe’
salaried roles to university spin-offs in order to instigate
their start-up plan.
Detractors of location-speci?c hubs contend that while
promoting hotspots attracts resources, infrastructure and
esteem for the few, the many other cities and large towns
Whether it is Cambridge’s ‘Silicon Fen’, London’s ‘Tech City’ or Oxford’s ‘business
incubator centres’, labelling locations as ‘hotspots’ for technological innovation has
become commonplace.
Growth of innovation hotspots
Top 10 sectors funded by GrowthAccelerator
schemes
Source:http://www.growthaccelerator.com/
Regional funding from GrowthAccelerator schemes
Source:http://www.growthaccelerator.com/
North East
North East
East Midlands
East
London
4%
9%
8%
9%
16%
16%
11%
12%
15%
South East
South West
North West
West Midlands
across the country are excluded, their success stories and
role models eclipsed. Arguably, the approach contributes
to more acute regional inequalities and deepens a
southern concentration of wealth, opportunity access
and employment.
Clive Holtham, Professor of Information Management
and Director of Cass Learning Laboratory at Cass
Business School, says: “I’m pretty sceptical about [the
idea] that we can get scienti?c and business innovation
through large sums of money going to a few people.
Centres of Excellence, for example, are part of the huge
amount of rhetoric and fashion in high-level allocations
of money, which give the impression that there’s a
top-down solution. It’s an ecosystem, so you need all
the components.”
9
Pulsar, developed by UK-based company FACE, is a social
data intelligence platform that is reinventing social media
monitoring, customer service and enterprise collaboration.
It scoured 200,000 posts over three months to
March 16 2014, mapping the UK locations that had the
highest volumes of online conversations about the search
terms ‘innovate’, ‘innovation’, ‘entrepreneur’ or ‘start-up’.
While academic examination of Britain’s entrepreneurial community draws from
hard, statistical and often lagging data, social data (from publicly available social
media conversations) provide an alternative ‘bottom-up’ perspective, taking the
pulse of entrepreneurs – what they actually talk about and how they communicate
with key stakeholders and each other.
The UK’s emerging innovation hotspots
Share of geo-located innovation content online In order of conversation size
While not statistically signi?cant, the ?ndings caution against a narrow
conception of entrepreneurial communities thriving only in southern England.
City Number of results
London 7,705
Manchester 426
Shef?eld 202
Edinburgh 189
Liverpool 166
Glasgow 153
Oxford 152
Nottingham 147
Darlington 136
Leeds 132
Brighton 130
Birmingham 130
Bristol 127
Cambridge 107
Poynton 106
While fewer than 5% of social media users make their
location publicly available, the ?ndings are an indicator of
where online conversations about entrepreneurialism and
innovation are occurring, when users choose to share
their locations.
While London tops the list with 7,705 results, northern
cities are prevalent, with a clear corridor stretching from
west to east (Liverpool to York).
Source: Pulsar.
10
Locations of high-volume social conversations
about innovation
In order to extrapolate more comprehensive social data,
Pulsar applied a ‘smart ?lter’ to all publicly available social
content on the Internet, irrespective of users’ set locations.
High-density urban areas and high-ranking universities are
both widely considered to be key factors in?uencing the
emergence of an innovation ecosystem.
“Clustering can bring positive productivity bene?ts for
individual sectors, although the effect is nearly always
outweighed by the importance of being in a large urban
environment,” the Manchester Independent Economic
Review stated in its 2009 report, The Case for
Agglomeration Economies
5
. The report went on to argue
that larger cities make it easier for different types of
workers and ?rms to ?nd each other, which chimes with
the view of Jaideep Prabhu, Jawaharlal Nehru Professor of
Business and Enterprise at the Judge Business School of
the University of Cambridge (England). He says that city
dwellers are at a greater advantage, particularly those
connected to universities, because there is a constantly
replenishing supply of diverse communities and young,
educated people with fresh ideas.
Mark Glover, Director of Business Planning at the
Technology Strategy Board, adds: “Innovative people with
bright ideas are an important element of any localised
cluster. High-calibre universities are likely to attract and
train these people, and often have additional infrastructure
(such as science parks) to help commercialise ideas.
This is the case with Cambridge, Silicon Valley and
Stanford University.”
By combining the UK’s top ten universities
6
, top ten urban
cities (by population size)
7
, plus locations that Tech City
named as ‘Cities to Watch’ for innovation
8
, 18 key locations
were added to Pulsar’s data ?lter: London, Birmingham,
Leeds, Edinburgh, Glasgow, Shef?eld, Bradford, Liverpool,
Manchester, Bristol, Newcastle, Cambridge, Oxford,
Durham, Bath, Exeter, St Andrews and Warwick.
The Pulsar data ?nd that London still accounts for the
largest share of online activity (48%) relating to
discussions about innovation and entrepreneurialism. The
next largest share comes from Cambridge (9.3%),
Manchester (6.9%) and Oxford (5.9%).
The next largest cities by population after London –
Birmingham, Leeds, Glasgow and Shef?eld – do not
have a corresponding share of ‘voice’. Rather, the social
conversations about innovation, entrepreneurs and start-ups
are happening in Cambridge, which is not a high-density
urban area and is situated in a region that has received just
9% of the government’s GrowthAccelerator funding.
However, its world-renowned university (as with Oxford)
has become known for university-based technology
spin-offs. Cambridge University has a portfolio of 68
companies – including ARM, the world’s leading
semiconductor intellectual property supplier, valued at
£12bn
9
(US$20bn) – which have raised over £800m in
further investment and grant funding, and together
generate an annual turnover of £170m
10
.
Manchester’s proportion of the share of ‘voice’ leapfrogs
that of larger cities, including neighbouring Leeds. Again,
academia appears signi?cant as Manchester Business
School is the second most highly-ranked for postgraduate
entrepreneurship courses in the UK
11
, behind University of
Cambridge’s Judge Business School. The city was also listed
by Tech City as a ‘City to Watch’
12
– along with Birmingham,
Bristol and Newcastle – and at the time of the data
collection had just announced that it had been awarded
£1.5m in government funding for a Social Enterprise
Accelerator scheme.
5http://www.manchester-review.org.uk/projects/view/?id=718
6http://www.thecompleteuniversityguide.co.uk/league-tables/rankings
7http://www.ukcities.co.uk/populations/
8http://techcitynews.com/2014/02/27/the-battle-for-britains-next-tech-city/
Source: Pulsar. The remaining eight locations accounted for less than
2% of share of voice.
London 48%
Share of voice of the 18 selected cities in
topic-speci?c conversations
Cambridge 9.3%
Manchester 6.9%
Birmingham 4.9%
Leeds 3.1%
Bath 3%
Bristol 3.2%
Edinburgh 2.8%
Liverpool 2.7%
Oxford 5.9%
11
9http://www.digitallook.com/companyresearch/10111/ARM_Holdings/company_research.html
10http://www.enterprise.cam.ac.uk/industry/portfolio-companies/
11http://www.best-masters.com/ranking-master-entrepreneurship.html
12http://techcitynews.com/2014/02/27/the-battle-for-britains-next-tech-city/
and related topics such as ‘college admission courses’,
‘studies’, ‘degree’ and ‘prestigious university’ are all very
prevalent in these online conversations, but particularly
conspicuous is the absence of social discussions about
funding, crowdfunding, business loans, grants, investors,
or even tax breaks and government schemes for
entrepreneurs.
This funding-related conversation vacuum could either
be considered cause for concern – a sign that government
initiatives are not truly trickling down to the
entrepreneurial communities that they are designed to
support – or cause for celebration, if social silence
indicates that further debate about funding options is
unnecessary because entrepreneurs are con?dent in their
access to resources and simply do not wish publicly to
discuss their ?nancing needs.
The social conversations within each location also reveal
the nuances of their speci?c ecosystems. While social
conversations mentioning London have a large share of
‘voice’, the data show that the noise is crowding out any
nuances, highlighting each of the key topics as equally
connected to each other (see chart below). By contrast,
the Manchester data set identi?es an infrastructure for
supporting young entrepreneurs in fast-growing creative
?elds such as game development.
City-to-city connections
In terms of evidence of locations participating in a
broader, national ecosystem, one might expect a high
level of referencing of other locations when discussing
innovation. This is true for London, which mentions
Cambridge, and for Cambridge and Birmingham, which
mention London, during online conversations about
innovation and entrepreneurialism. The highest volume
of location-referencing posts comes from Manchester
discussing Leeds in this context (it is the ninth most
mentioned keyword), which could reinforce the concept
of the northern corridor.
However, inter-connectedness between locations is lower
than expected and social conversations regarding Oxford
do not mention any other location. Oxford also produces
university-based spin-off companies, with a similar
number to Cambridge at 65, and currently valued at £40m,
so it is surprising not to see the data represent a more
similar social conversation pattern.
Content clusters from online conversations
Across all 18 locations, social networks are dominated by
conversations about technology, new techniques, social
innovation and, interestingly, Cambridge. Twitter as a
channel tends to be more London-centric, with a high
prevalence of start-up, business-centred conversations
involving innovation and entrepreneurialism. Universities
Source: Pulsar.
London Cambridge Oxford Manchester Birmingham
1 new new new new new
2 time university world business business
3 years time university time time
4 world world years people 2014
5 year year time world ?rms
6 help years work 2014 years
7 good technology people years people
8 technology home best united year
9 business good business Leeds free
10 university group research start work
Top 10 keywords mentioned by each location
12
As can be seen in the associated chart, large nodes in the
network universe indicate very active online participants,
with the Centre for Entrepreneurial Learning (CfEL)
Cambridge the most active during the data period.
CfEL Cambridge is a not-for-pro?t organisation based in
Judge Business School, which provides courses for
undergraduate, postgraduate and non-academic aspiring
entrepreneurs designed to share best practice, unlock
entrepreneurial potential and ‘plug-in’ attendees to a network
of CfEL Cambridge alumni, mentors and facilitators
13
.
Virgin StartUp, a not-for-pro?t organisation that promotes
business ?nancing through its partners (including Virgin
Money) and then connects start-ups with business
mentors
14
, is the second-largest in?uencer in the data set.
Interestingly, the Pulsar data ?nds that accelerator programmes and those
providing funding guidance and introductions to funding resources are key
‘in?uencers’ across the social web.
Case study – Accelerator programmes
dominate online conversation in the UK
13http://www.cfel.jbs.cam.ac.uk/aboutus/index.html
14http://www.virginstartup.org/about/what-we-do/
15http://www.entrepreneurial-spark.com/the-accelerator.aspx
In?uencers’ network
Source: Pulsar. Includes ‘smart ?ltered’ data.
The third is Entrepreneurial Spark (ESparkUK), a business
accelerator in Glasgow, Edinburgh and Ayrshire that offers
free of?ce space, IT and structured support for 18 months
to high-growth, early-stage businesses with an annual
turnover of less than £1m
15
.
This data indicates that sources of practical support and
funding provisions are integral to the online conversation
about high-growth businesses and start-ups in the UK and
a valuable social signal guiding entrepreneurs to resources
and role models.
13
In the bundle chart below, the prominence of this ‘virtual
ecosystem’ linking the key categories of ‘game design’,
‘development’, ‘young entrepreneurs’ and ‘training’ is
visible. This topic was sparked by Twitter engagement
related to the announcement of a Manchester-based game
design studio providing training in game design and
development for young entrepreneurs.
Today, the UK is the ?fth-largest video-game developer in
the world, with the sector contributing £947m to GDP in
2012, employing more than 9,000 people in game
development and indirectly supporting almost 17,000
further jobs, according to trade association, TIGA
16
. What
the social data does not show is that the young
entrepreneurs to whom the game developers are appealing
are themselves promoting innovation in this space.
Engagement in social media includes relatively passive
actions such as forwarding and ‘liking’ content posted by
others – in this case, a game design studio – not necessarily
commenting on the post, although the content is being
digested by its intended audience.
A similar innovation ecosystem is evident in the Cambridge
data set, with the key topic ‘co-founding group’ mentioned
in the same posts as ‘pharmacology’ and ‘prestigious
university’. Top tweets during the period feature ‘hot
Cambridge shares’ and content about the Cambridge
Satchel Company expanding into China. The Pulsar data
?nds that technology is not as strongly linked to academia-
related topics as might be expected; instead ‘technology’ is
mentioned in conjunction with ‘social innovation’, ‘new
technique’ and ‘world’.
In the Manchester-related social conversations, the
government’s announcement in January of a £300m tax
break for retail businesses around the UK appears to have
gained signi?cant traction in online conversations, as it is
featured in the data as a key topic. While this looks positive
on the surface, when the data is analysed it shows that this
topic of tax breaks is the result of digital publishing, rather
than social conversation; traditional news publications
reporting online and sharing news of the tax break across
their social media accounts.
16http://www.cbi.org.uk/about-the-cbi/business-voice/
february-march-2014/creative-industries-gaming/
London data set: inter-related key topics
Source: Pulsar
college-admission courses
college of?cials
co-founding group
costly lab
pharmacology
studies
potential
social innovation
cambridge
degree
startup
technology
time
london
Connection in social conversations between ‘Game
Design’ and other key topics – ‘development’, ‘training’
and ‘young entrepreneurs’
Source: Pulsar
tech entrepreneurs
game design
leeds
dev
training
young entrepreneurs
bizitalk
liverpool
startup
business
manchester
entrepreneurs
300m tax break
retail ?rms
innovation
Manchester data set: relationship between ‘£300m
tax break’ topic online
Source: Pulsar
tech entrepreneurs
game design
leeds
dev
training
young entrepreneurs
bizitalk
liverpool
startup
business
manchester
entrepreneurs
300m tax break
uk
nhs technology
nhs boss
retail ?rms
cbe
innovation
14
Fostering tomorrow’s Generation Creative
Too often innovation is considered from a top-down
perspective and too rarely from a bottom-up, child-centric
solution for creating the UK’s future generations of
entrepreneurs, say experts. Prof. Holtham claims that
Britain’s school system limits creative thinking because it
does not reward a diversity of approaches, which means that
the UK produces young people ill-equipped to become
tomorrow’s entrepreneurs.
“Unless you address the education system, either within
schools and universities or subsequently in adult life,
you’re never going to achieve a satisfactory level of
innovation in society,” he explains.
To address the question of how best to power the UK’s economy by empowering
its entrepreneurs, a host of eminent thinkers and doers in the ?eld of
entrepreneurialism were consulted. Here, they share what they perceive to be the
biggest barriers prohibiting innovative businesses from thriving in the UK, and set
out proposed solutions.
Entrepreneurial challenges and opportunities
17http://www.gazellecolleges.com/about-us
18http://www.pjea.org.uk/about-us
Source: Rosan Bosch.
Telefonplan school in Stockholm, Sweden
The role of further education is equally important as higher
education in creating a UK entrepreneurial ecosystem.
Gazelle Colleges Group, which launched in January 2012,
operates entrepreneurial programmes within 22 colleges
around the UK, providing applied learning models and
working strategically with local enterprise partnerships,
students and employers to develop entrepreneurial capacity
in those local communities
17
. In higher education, the Peter
Jones Enterprise Academy
18
works with 31 regional colleges
to provide one-year practical ‘learning by doing’ courses
designed to provide young people with the skills and
con?dence to think like an entrepreneur and potentially
start a business.
15
Borrowing from the Latin root of ‘education’, Prof. Holtham
says that education at all levels in the UK needs to ‘draw
out’ the intrinsic creativity of people, be that creativity in
conceiving an idea previously unimagined or in generating
an alternative approach to systems and operations. To
?ourish, he says, “the innovation process needs all types of
people, generally working together in teams”.
Jane Chen, Co-Founder of Embrace, believes that the types
of workshops undertaken in graduate and postgraduate
design and entrepreneurialism courses can easily be
adapted to and introduced at an earlier stage in the
education system, as well as within existing companies,
to help cultivate a creative approach. Such workshops are
based on an understanding that all brainstorming and
approaches are valid, with no judgement from any
participants made if an idea is outlandish or does not work.
Organisations such as Google have long advocated and
provided creative work environments for their staff in order
to assist work-based creativity. In the UK, companies such
as Mind Candy in London, Melbourne Server Hosting in
Manchester and Virgin Money in Edinburgh have followed
this trend
19
. This prompts the question of whether Britain’s
schools should consider introducing similar liberal and
design-led ideas, such as those embedded in Sweden’s
Telefonplan school, which emphasises both independent
and collaborative working. It is argued that traditional work
spaces – from formal education through to the workplace
– quash creativity and collaborative working, which is now
a prerequisite for a technology-enabled workforce and a
service-driven economy.
Prof. Holtham relies on the academic model of innovation
for courses at the Cass Business School, an ecological
‘Creative Problem-Solving’ (CPS) model in which the four
components – Product, Process, People and Place – all
positively interact with each other. He argues that
policymakers’ and business leaders’ attention is too
narrowly focused on product-based innovation or place-
speci?c entrepreneurs.
Eze Vidra, Head of Campus London and Google for
Entrepreneurs Europe, says there needs to be an
‘alternative education’ outside the formal education
system, where ‘the need is biggest’ as there are no
professors on tap and no access to classroom facilities or
resources. He points to schemes such as Google’s Campus
for Moms
20
, which is a baby-friendly eight-week start-up
school, at the end of which the participants pitch their
business idea to course leaders, guest entrepreneur
speakers and venture capital investors.
Demographic-speci?c barriers
According to the Women’s Business Council
21
, the
entrepreneurial gender divide is robbing Britain of more
than 1m more entrepreneurs; total entrepreneurial activity
in 2012 (calculated as the proportion of the working-age
population either in the process of starting a business or
running a new business) was 11.6% for men compared
with 6.3% for women.
As Ms Lane Fox says: “Women don’t need special
treatment, they are not disadvantaged by anything other
than long-rooted cultural reasons”, illustrated by claims
that men are neurologically ‘hard-wired’ differently to
women, making them innately more entrepreneurial.
Examples of misogyny facing women in certain sectors,
including science, technology, engineering and
mathematics (STEM) are proli?c. In such a culture it is
unsurprising that, statistically speaking, women do not
ful?l the ‘typical’ pro?le of an entrepreneur; this is a
consequence rather than an explanation.
Kathryn Parsons, Founder of Decoded, a technology
education business, says research on Decoded pupils
found that women are generally 30% less con?dent than
their male counterparts in believing they can master
coding. Childcare issues also provide a challenge to
professional women, who continue to be primary care
givers despite increases in ?exible parental leave. The pace
of technological change magni?es any period away from
work, yet the benchmark for basic digital literacy in the
UK is frighteningly low, and the economy cannot afford
to exclude women from future digital business,
Ms Parsons adds.
It is not just women who face having “entrepreneurship
institutionalised out of them”, as Jill Huntley, Managing
Director for Corporate Citizenship at Accenture puts it,
but older people too. While the potential for engaging this
demographic in entrepreneurial activity is huge (there are
3.6m people in the UK aged 50-64 who are not
economically active), too often the focus is on fostering
young entrepreneurs.
“Unless you address the education
system, either within schools
and universities or subsequently
in adult life, you’re never going
to achieve a satisfactory level of
innovation in society.”
Clive Holtham, Professor of Information Management and
Director of Cass Learning Laboratory, Cass Business School
16
Alastair Clegg is Chief Executive of The Prince’s Initiative
for Mature Enterprise (PRIME), which is the only national
organisation dedicated to providing over-50s with the
support to set up their own business. He explains that
while many people dream of starting a business in their
30s or 40s, they can be hindered by family and ?nancial
commitments in a way that over-50s are not.
“There is enormous entrepreneurial zeal in this age group,”
he says. “What we do is give them con?dence and point
them in the right direction of what steps they need to take
to start a successful business, such as getting a business
plan in place or seeking advice from mentors. The over 50s
tend to have the skills so it’s more about demystifying the
process and giving them the right tools so they can get up
and running.” Fear and a sense of risk-taking comes from
not understanding how something works or what to
expect –areas that can be demysti?ed through coaching
and support.
Programmes that aim to dismantle the barriers affecting
speci?c demographics should be applauded, but Ms
Huntley urges corporations to facilitate change within their
organisation. “Given the future of work and the structural
changes to the economy, in order to grow established
businesses there needs to be a better cultural pipeline of
innovation and entrepreneurship and some of that needs
to come from inside the company,” she says.
“We run a number of programmes internally to try and
open the innovation mindset and encourage employees to
bring ideas, and [for us to] provide mechanisms of funding
those and spinning them out if necessary,” she adds.
The role of universities in seamlessly moving
entrepreneurs into the business environment
University spin-off companies are not new, but Mr Hutton
argues that British universities should shift away from their
“extremely conservative view about intellectual property
rights” and about how to divide any commercial gains
emanating from university spin-offs, to adopt what he
described as the “MIT or Stanford model”.
He says that the US bene?ts from universities attracting
companies, which support emerging entrepreneurial
ventures by acting as a bridge from academia to business.
By linking the entrepreneurs with in?uential alumni in a
mentoring and networking capacity (as was the case for
Embrace Innovations), universities are able to fast-track the
commercialisation of early-stage ideas.
Mr Hutton further suggests that promising university
projects could be funded by embedding grants into the
participants’ PhD or masters degree to fund their
development for a further one or two years, effectively
buying time to enable an innovative concept to be
developed to a commercial level on completion. “It’s very
hard in academic life simultaneously to be an entrepreneur
and have an academic career; the system is not structured
to help you do that. Universities are not as signi?cant as
they should be.”
According to Prof. Wright, UK universities are already moving
away from the traditional approach of commercialising
entrepreneurial activity through licensing agreements and
equity stakes in spin-offs, and moving towards gaining from
‘indirect returns’. He identi?es these as being the virtuous
cycle of successful alumni providing practical business
support to entrepreneurial students, which makes alumni
more invested in the university and likely to donate ?nancially.
“I think the US has been better at that than the UK but
we’re starting to see a connection between two areas in
universities that are quite separate: the development of?ce,
which is trying to convince alumni to donate, and the
of?ces that are trying to promote commercialisation,”
Prof. Wright says. For example, the National Centre for
Entrepreneurship Education, based at Coventry University,
launched a programme called ‘Make It Happen’, which has
helped with the launch of 1,900 new businesses since
2009 by providing resources, tools and online mentoring
for graduates starting up a company.
David Gill, Managing Director of St John’s Innovation
Centre (owned by St John’s College, Cambridge), says that
despite some 20 years of policies to encourage universities
to provide a link with the business community so that
university-associated enterprises can ?ourish
commercially, this remains a “missing piece … in the
majority of [UK] universities”.
Mr Gill advocates collaboration between universities and
hubs of entrepreneurial activity, such as innovation parks
where pioneering start-ups with the potential for high
growth are provided with ?exible and subsidised work
space and supported by ancillary services based in the
same place. He explains that “gatekeepers who understand
the needs of both sides” are vital, and encourages
university students to undertake work placements within
start-up businesses, so that they can share and apply their
knowledge in a business setting, while the start-up
bene?ts from a student’s expertise at no cost.
19http://www.telegraph.co.uk/?nance/jobs/9640237/Top-10-coolest-of?ces-in-UK.html?frame=2383634
20http://googleblog.blogspot.co.uk/2013/07/campus-for-moms-helping-women.html
21http://womensbusinesscouncil.dcms.gov.uk/appendices/
17
Case study – Turning a crisis into an
opportunity: Embrace
While improvements have been made to the UK innovation
ecosystem, it is still considered to be some way behind in
many areas compared with the US. By contemplating the
journey of a successful, innovative enterprise that follows
what will later be discussed as ‘the Stanford model’, British
policymakers and business leaders can take heed of, and
even enhance, similar factors and practices in order to
strengthen the UK innovation ecosystem.
During her MBA at Stanford University, Jane Chen and her
peers on a multi-disciplinary ‘entrepreneurial design for
extreme affordability’ class created the world’s ?rst
low-cost baby incubator, which costs about 1% of the
usual US$20,000. What started as an academic challenge
evolved into the award-winning social business, Embrace
Innovations, which has distributed Embrace Warmers that
have reached over 60,000 hypothermic infants in 11
developing countries around the world
23
.
Process: design-led innovation
Ms Chen asserts that the design process can be taught and
fostered across academic and business ?elds, drawing on
the creativity inherent in each individual. That process is to
understand the problem; list the criteria required to
address the problem; use rapid ‘low-resolution’
prototyping and iteration based on trial and error; and to
co-create with the end user, not just in terms of receiving
feedback but in order to “understand the ecosystem
around something that’s going to make your product
successful or not”.
The Embrace Warmer uses an innovative wax incorporated
in a sleeping bag to regulate a baby’s temperature. It stays
warm without electricity, is safe and intuitive to use –
a crucial factor given the high numbers of babies born
in remote rural areas, without access to hospital facilities,
meaning that family members need to be able to operate
the product themselves.
The entrepreneurial structure
Pulling together multi-disciplinary teams is also important,
Ms Chen says. The Embrace project team originally
comprised an electrical engineer, an aerospace engineer, a
computer scientist and (in Ms Chen’s case) a public health
professional, which allowed them to consider the
challenge of regulating a neonate’s body temperature
unburdened by medical preconceptions.
She believes corporations would bene?t from “bringing
that diversity of backgrounds and viewpoints into their
work” and encouraging innovation-based corporate
spin-offs in the same way as universities do.
Ms Chen also advocates “vertical integration” of the supply
chain, such as manufacturing and sales, areas that the
team ?rst assumed could be outsourced to third parties.
“You’re selling a brand new concept, which doesn’t plug
into any existing sales infrastructure. We tried to partner
with third-party distributors and even multinationals and
that simply did not work. So, for ground-breaking ideas,
I think you need vertically to integrate to some extent,”
she explains.
Consequently, Embrace has developed a small-scale
manufacturing, training and sales team, which Ms Chen
says not only gives Embrace end-to-end control of its
product, but also provides insights into the price point,
effective sales pitches, control over how its product and
brand is positioned in its market, as well as product-
speci?c feedback.
Ecosystem support for entrepreneurs
Stanford University played a critical role in assisting
Embrace, not least by facilitating access to other in?uential
stakeholders and funding opportunities. Embrace won
US$125,000 in seed funding from the Stanford Business
Plan Competition, and Echoing Green Fellowship awards.
As a non-pro?t organisation, Embrace receives
contributions from foundations and individual donors, as
well as a small percentage of funding from royalties on
commercial sales of the infant warmer to governments
and private entities that can afford a low-cost solution to
neonatal hypothermia. Both Stanford and Echoing Green
Fellowship additionally provide access to their respective
alumni and partners, which Ms Chen considers to be
crucial in Embrace’s success.
“Corporations would bene?t from
bringing a diversity of backgrounds
and viewpoints into their work and
encouraging innovation-based
corporate spin-offs in the same
way as universities do.”
Jane Chen, Co-Founder, Embrace
23http://embraceglobal.org/who-we-are/mission-impact/
18
Could valuing intellectual property unlock
mainstream start-up lending?
Prof. Wright considers funding less of a barrier for
entrepreneurial start-ups because the initial costs for many
knowledge-based businesses are now low. However, Mr
Hutton advocates Britain creating its own market for
intellectual property, which he believes will create more
mainstream lending opportunities to start-ups that would
otherwise not qualify for such funding.
British businesses now invest more in intangible assets,
such as intellectual property, branding and design –
investing £138bn on ‘knowledge assets’ in 2011 – than
they do in buildings, engines and machinery (£90bn in
2011)
24
. That such assets are currently ‘unbankable’,
according to the Intellectual Property Of?ce
25
, provides a
huge opportunity for new ?nancial instruments to unlock
this latent value. In its recent report, Banking on IP: The
role of intellectual property and intangible assets in
facilitating business ?nance
26
, the Intellectual Property
Of?ce stated: “Balance sheets do not represent their value,
and current regulations actively work against consideration
of IP (intellectual property) as an asset class but the result
is a real and important disconnect between banking
regulation and practice and the UK’s ambition for growth.”
Mr Hutton explains: “One of the interesting developments
in the US has been M-CAM, a company that underwrites
the value of intellectual property, against which banks
can lend. This gives inventors and entrepreneurs some
pro?t but also gives bankers some comfort that even
though nothing has been commercialised, there is an idea
behind the potential commercial venture that has some
intrinsic value.”
As Chair of the Big Innovation Centre at The Work
Foundation, Mr Hutton supports the creation of a
government-backed national Innovation Bank, which
would draw together some of the UK’s biggest companies,
such as GlaxoSmithKline and BAE Systems, with a
university consortium including Oxford, Cambridge and
University College London. The vision is that such an
Innovation Bank would develop insurance schemes to
underwrite the value of intangible assets, as well as
mentoring UK businesses and players in the ?nancial
sector, including banks and venture capitalists.
However, Mr Richard is critical of any move to foster a
market for intellectual property, encouraging ?nancial
institutions effectively to value concepts before any
commercially viable product or service has been produced.
“They’re taking a notion at one stage of a business with
the type of activity that happens at a different stage and
saying: if we realise the intellectual property and give it
an asset value, then [start-up businesses] could borrow
against the asset. It’s not the lack of asset backing that
stops them from getting a loan at that stage of the
business, it’s the lack of serviceability on the loan,”
he says.
The future of seed-stage funding is social
While advocates of an IP valuation market believe this could
help start-ups gain funding at seed stage, Mr Richard thinks
this is unlikely because traditional bank loans hinge on two
questions: can you pay back the loan; and, if you can’t pay
the loan back, what asset can be claimed in its stead?
“If the business is failing then the intellectual property may
have been proved in the marketplace to be of no value,” he
says. At seed stage, the business is simply “a concept, a
dream, a desire”. Simply valuing IP does nothing to free
start-ups from reliance on investments from the “three
F’s”– family, friends and fools – because the concept is not
asset-backed.
Instead, he offers, social loans can provide a solution. They
are unsecured loans provided under very different lending
criteria to traditional loans (designed for start-ups) by
commercial ?nancial institutions and underwritten by the
government, with a low nominal interest rate of 6%.
“Social lending is interesting because it
preserves the entrepreneur’s equity. People
think that a loan is worse somehow than
the sale of equity, but in truth the sale of
equity is the most expensive money you’ll
ever spend, if you succeed.”
Doug Richard, Founder, School for Startups
24http://www.theguardian.com/business...value-intangible-assets-intellectual-property
25http://www.ipo.gov.uk/ipresearch-bankingip-sum-281013.pdf
26http://www.ipo.gov.uk/ipresearch-bankingip-sum-281013.pdf
19
Loan recipients are matched with a business mentor to
guide the deployment of the loan funding wisely and to
pass on real-life experience that the mentor has gained by
being a successful entrepreneur. The average loan size is
£6,000 and School for Startups is the largest delivery
partner of the Start Up Loans scheme in the UK, through its
launcher programme, says Mr Richard. “Social lending is
interesting because it preserves the entrepreneur’s equity.
People think that a loan is worse somehow than the sale of
equity, but in truth the sale of equity is the most expensive
money you’ll ever spend, if you succeed,” he adds.
However, Mr Richard believes that the UK government
could be more innovative itself in its funding strategy for
entrepreneurs. Traditional loans, he says, do not ?t
start-ups because they typically have a volatile cash?ow
yet loans require regular repayments. Instead, countries
such as Colombia are creating custom ?nancial
instruments to suit the start-up, be that a stepped
acceleration in interest rate towards the end of the loan
to encourage quicker repayment sooner or a certain
percentage of the loan to be repaid depending on varying
revenue levels.
Start-up Loans: Key stats and demographics
Source: www.startuploans.co.uk
Mr Richard says such approaches defy traditional lending,
but lending to start-up business has never been part of the
traditional banking remit because it is deemed too risky.
That risky element of the market in developed economies
can be addressed, he explains, by borrowing and adapting
innovative approaches that work well in developing
countries where they seek to assist the ‘unbanked’ (people
excluded from the banking sector).
Combating sell-out ‘gazelle’ companies
The fact that UK technology start-ups being snapped up
by far larger US competitors on an acquisition bent is so
celebrated in the UK highlights “ambition and scale
barriers” that could be partially geographic, suggests
Ms Lane Fox. “If you’re born in the US then your home
market is immediately 300m people, which gives you a
different idea of scale and ambition compared with the
UK, where the home market is 60m people. To get access
to real scale, you have to go into Europe and that’s harder,”
she says.
Mr Hutton agrees: “The Americans have a single market.
The market in Europe is for marketing manufactured
goods, not in knowledge services, where all the action is.
That makes it very dif?cult for British entrepreneurs to
pitch their start-up capital with any chance of building a
billion dollar corporation, because the single market in
which it might do that doesn’t exist.”
20
At the heart of the Eurozone project is the concept of
borderless free-trade movement (of people and goods)
but, unlike in a domestic single market the size of the US,
UK companies face different legal and administrative
environments, different languages and cultural nuances
on the Continent, as well as the need to select a suitable
corporate structure for expansion – whether to franchise,
partner or otherwise enter a less familiar marketplace.
Nicholas Davis, Director and Head of Europe at the World
Economic Forum, says: “At the EU level there’s a huge
amount of work still to be done to reduce fragmentation
and create a digital single market. This would allow
companies that start here in Britain to seamlessly access
500 million people rather than just 8 million in London,
for example.”
Ms Lane Fox also says that European businesses tend to
have “longevity and levity”, which UK businesses lack,
suggesting “there’s a cultural point about that kind of
ambition and really not trying to get out of your business
before you’ve achieved scale”.
Mr Hutton adds: “Too many companies have to exit or sell
all their equity at the crucial juncture of £2m turnover.
[As entrepreneurs] they have no scope to grow unless
they sell out completely and that indicates a dysfunction
in the system.”
Prof. Wright believes this dysfunction is compounded by
government policy, which is too narrowly focused on
measuring start-up volumes and using that as an
indicator of entrepreneurship in the UK, without also
focusing on whether the start-ups actually grow or create
wealth. “I think there’s probably not enough done after the
incentives to start up a business to help it to grow,” he
says. “There are a lot of problems there with policy; the
growth side [of businesses] is where the impact from
innovative entrepreneurship is really going to be.”
There is also a case for greater promotion of alternative
funding and growth options, making it less attractive for
successful UK businesses to sell out to acquisitive (typically
foreign) competitors, which then bene?t from the UK’s
cultivation of a business during its riskiest phase and draw
the future pro?t potential of the business away from the
UK economy.
21
As the UK’s economy is weighted towards knowledge-
based enterprises, encouraging entrepreneurialism that
advances new approaches, processes and products that
can be both commercialised domestically and scaled up
to rival international peers is crucial to the future of the
UK economy. Without a well-functioning and optimally
supported entrepreneurial ecosystem, the UK risks
acting as a national start-up incubator supplying
foreign multinationals.
Experts interviewed in this report offer advice on how to
succeed in building a UK entrepreneurial ecosystem.
• While sole traders, the self-employed and small and
medium-sized businesses make a considerable
contribution to the UK economy, greater care must
be taken to address the speci?c needs of each of
these groups and caution exercised so as not to allow
terminology to be used interchangeably to describe
businesses that are so diverse in terms of their
business model, risk appetite, scalability and capacity
for employment growth
• Location-based hubs of entrepreneurial activity should
not be considered simply within city boundaries.
The social data included in this report make a case for
fostering entrepreneurial activity along the Liverpool-
to-York corridor rather than providing city-speci?c
support and ignoring the agglomeration. Support for
entrepreneurs in such agglomerations may need to be
indirect, such as providing enhanced transport
infrastructure and fostering support and business
networks that span the multiple cities and areas
connecting them
• The social data indicate that sources of practical
support (such as accelerator programmes) and funding
provisions are integral to the online conversation about
high-growth businesses and start-ups in the UK.
Consequently, these ‘in?uencers’ can be used to
amplify the successes of British entrepreneurs and
provide awareness of role models to help cultivate a
more ambitious culture of entrepreneurialism to rival
those of the US and Europe
While improvements to foster an innovation ecosystem in the UK have begun,
much more can and should be done.
Conclusion
• These in?uencers should be used not only to signpost
entrepreneurs to resources, but should be considered
as long-term partners for entrepreneurs while they
grow their businesses from start-up phase through to
higher-scale maturity, complete with options for
expanding above the £2m turnover threshold
• The ties between academia and the business
community must continue to be strengthened and
publicised so that a wider range of businesses can
bene?t, and less business-minded universities can be
encouraged to follow suit. Partnerships between
alumni and university enterprises, with the former
mentoring the latter on how to commercialise their
projects is one element, but broader integration into
the local business communities will ensure wider
participation in a knowledge economy. Given that
universities are publicly funded, a sharper push
towards a wider non-academic contribution to
enterprise activity is needed
• An innovative approach to ?nancial instruments that
are better able to match the funding needs and practical
constraints of entrepreneurs at the different stages
of their businesses’ lifecycles is required. Traditional
?nancial institutions will be pivotal in providing this.
The government, which can wield tax and other ?nancial
incentives, also has a crucial role in reducing the barriers
that entrepreneurs come up against in getting funding
to commercialise their ideas, and the barriers that the
market faces in pricing risk around entrepreneurial
ventures. For start-ups, matching funding with
mentorship appears to be a good ?rst step, but more
can be done to match the risk and liability pro?le of
businesses at different stages. This should be
approached collaboratively from both a government
and ?nancial services standpoint to ensure a cohesive
funding strategy is adopted for the UK.
22
In addition to wide-ranging desk research and data from
Pulsar, a social data intelligence platform, this report is
based on qualitative interviews and a roundtable discussion
with experts. Our thanks go to the following for their
speci?c contribution.
Mark Anderson, Managing Director, Pearson Education UK
Jane Chen, Co-Founder, Embrace
Alastair Clegg, Chief Executive, The Prince’s Initiative for
Mature Enterprise (PRIME)
Nicholas Davis, Director and Head of Europe, World
Economic Forum
Graeme Fisher, Head of Policy & External Affairs, Federation
of Small Businesses (FSB)
Ross Fobian, CEO and Co-founder of ResponseTap Limited
David Gill, Managing Director, St John’s Innovation Centre,
St John’s College, University of Cambridge
Mark Glover, Director of Business Planning, Technology
Strategy Board
Clive Holtham, Professor of Information Management and
Director of Cass Learning Laboratory, Cass Business School
Tom Hulme, Design Director, IDEO
Jill Huntley, Managing Director, Corporate Citizenship,
Accenture
Will Hutton, Principal of Hertford College, University
of Oxford, and Chair of the Big Innovation Centre
Barclays approached The Economist Intelligence Unit in February 2014 to
investigate how entrepreneurs in the UK are supported and the barriers that hinder
them, as well as wider trends that are shaping the UK’s innovation ecosystem.
About this report
Martha Lane Fox, Co-Founder, lastminute.com
James Lay?eld, Serial Entrepreneur and CEO,
Central Working
Kathryn Parsons, Founder, Decoded
Jaideep Prabhu, Jawaharlal Nehru Professor of
Business and Enterprise, Judge Business School,
University of Cambridge
Doug Richard, Founder, School for Startups
Sumon Sadhu, Founder, Quid
Philip Salter, Director, The Entrepreneurs Network (TEN)
Peter Tufano, Peter Moores Dean, Said Business School,
University of Oxford
Eze Vidra, Head of Campus London and Google for
Entrepreneurs Europe
Mike Wright, Professor of Entrepreneurship,
Imperial College London
This report was written by Anna Lawlor and edited by
Zoe Tabary and Monica Woodley.
Barclays is a trading name of Barclays Bank PLC and its subsidiaries. Barclays Bank PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential
Regulation Authority (Financial Services Register No. 122702). Registered in England. Registered number is 1026167 with registered of?ce at 1 Churchill Place, London E14 5HP.
June 2014.
barclays.com/entrepreneurs
doc_365782674.pdf