Bloomberg – 12 November 2014
Bloomberg - 6 October 2014
Bloomberg – 22 April 2014
Bloomberg - 22 April 2014
Bloomberg - 24 February 2014
Bloomberg - 21 February 2014
What do a German Razor Factory, an American Thermostat Firm and a Drones business led by a Greek entrepreneur have in common? They are all vertically integrated plays.
Backed by Tiger Global, Harry’s, an Internet razor factory, not even a year old acquired a factory near Nurembourg which makes razors which was 93 years old. They have done this in order to control the entire customer experience, while allowing the company to change its products quickly. There are hints of Zara in their approach.
But also of Nest, the so-called thermostat company, which set out to turn unloved items in your home into objects of desire; it was recently acquired by Google for >$3 billion. If you unpack what the Nest team had to understand to do what they did, they had to dealt with the guts of houses and their pipes as well as customer design issues and user behaviour.
What a change! Time was where horizontal (not vertical) tech start-ups were the darling of the Valley Venture Capitalists. Once upon a time the world was PC-centric, and Wintel, the Windows-Intel alliance, ruled the PC Platform. Software was the greatest invention to make people wealthy as the margins were massive once you sold the stuff. Niches had to be found amongst the horizontal layers above the operating systems. Nobody dethroned Microsoft until the world started to move beyond the PC.
Fast forward to the Consumer Electronics Show in Vegas January 2014, and I saw platforms everywhere – the car, the home, the person. Elsewhere we know that the ship, the space rocket ship, the airplane, the train are all becoming platforms as well. How are each of these industries catching up? They are looking for entrepreneurs who are taking a system-level approach to the total customer experience in these new ecosystems around the new platforms.
What defines an ecosystem or a platform I hear you ask? Well, in a multi-stakeholder world, an industry is an ecosystem. It’s a system with a sense of order, natural allies or camps, but not an inherent hierarchy. Those who organise the economics for those ecosystems are the winners. I call those companies platforms.
It’s a good place to be.
Those who touch ground – whether telcos, hospitals, schools, airlines – get regulated, must build infrastructure, pay tax. Infrastructure is a tough place to be. That’s why the technology platform companies are winning – iphone & ios are in the ascendancy, not Vodafone or Telefonica. They leverage the investment that other people are making, and organise the economics for the ecosystem. Upside without the pain.
The challenge for the CEO of a traditional larger enterprise whatever sector is to reimagine their industry as an ecosystem, identify their natural allies, ask what they can do to make in their interests to work collaboratively, and to open themselves up to consumer-orientated applications to run over them. British Gas could have created Nest. British Telecom could have created Skype. Volkswagen or General Motors could have created Tesla.
But they didn’t. They didn’t reimagine their industries as ecosystems, so an entrepreneur did.
The transportation sector is no different. Amazon’s announcement that they were testing drone delivery forced the CFO of every DHL, Fedex, UPS and TNT to do two things before Christmas:
That’s the thing – again and again – Goliath doesn’t have the clockspeed, rests on his laurels, doesn’t anticipate change much less embrace change, and that gives the David the opportunity. I saw that in 2003 when I had just started advising Skype, and the CEO of a major incumbent telco told me I would lose my shirt with Skype and they would go bust. I responded, ‘how fascinating: you’ve decided to underestimate the entrepreneur who disrupted the entire music industry with Kazaa. Let me tell you – he is so glad you are underestimating him right now. You are buying him time. To change the world.’
Andreas Raptopoulous, Founder of Matternet, is creating a vertically integrated drones company. It is the most loved and inspiring UAV business in an industry which is feared. He aims to create a wonderful total customer experience with drones, re-imaging the way that delivery of necessary goods come to people and their interaction with them. He has to be an expert in robotics as well as customer design. This system-level approach combining hardware and software is making the company one with huge momentum.
So if you want to build a billion dollar company, it’s a hardware & software combination today. The Harry’s, Tesla’s, Nest’s, and Matternet’s show the way.
Silicon Valley can’t save the world, but a federated model with
rich toolkit can.
I grew up near Palo Alto, so if I
had a bias, it should be that Palo Alto is the epicentre of the tech
world. And as ‘all things tech’ come
to be understood as the driver of growth in business, like a massive snowball
picking up speed down the mountain, it should be more important what’s
happening in and around Palo Alto.
And yet the world is becoming more
and more flat. Entrepreneurs who
change not just the world, but major industries, can come from any corner on
the planet. Skype put Estonia on
the map. Nathalie Kaspersky put Russia
on the map. Daniel Ek – Sweden. Mark Shuttleworth South Africa. Roman Stanek who has sold to Sun, HP and
now is backed by Andreesen Horowitz, the number 1 venture fund in the valley,
the Czech Republic, etc etc etc.
But what Palo Alto does very well is
to say, ‘if you aren’t a Delaware Corp, if your accounts aren’t done in US
Gaap, if your angels didn’t hail from Stanford, and you don’t know where the
University Café is, then we don’t think we can engage with you. It structures the unstructured data of
start-ups. And the cartographers
always win. Those who structure
industries make all the money as they create a self-fulfilling loop. ‘I define what’s good; therefore what’s good
comes to me’. As a marketer, I tip my
hat to Silicon Valley.
So God help you if you are from
Odessa, Doha or Cairo, and don’t land and stay at San Francisco Airport. You don’t stand a chance.
Or do you?
The world is driven by networks
today, but it is also driven by the tug of rope between the incumbents in every
industry and their eying up the ascendancy of the challengers. This David and Goliath struggle is always
epic, and defines how broad prosperity travels through the populace. The new David’s seek to solve problems
that they can perceive in society, and so mass adoption of their solutions
tends to be good for most of the population.
Entrepreneurs have to be inclusive in their approach or they may fail to
find a market. So the essential
challenge that David brings to Goliath is to open up. The winners of the last generation’s game
establishes Goliath as the king pin.
But there is always another round.
There’s always another subversive entrepreneur who seeks to topple all
of the established winners and incumbents and create a new order of
things. And I’ve worked with a few of
the big ones; it’s an awesome battle to witness up close.
In one vision of the future, ‘big
tech’ and mostly US tech by the way takes over every industry as Amazon has
taken over storage and books, Apple music and telecoms, Google advertising, and
you get the picture. But there is
another version of the future whereby large enterprise get wise to the game and
lean in to the tech challenge. They
realise that tech is no longer an industry, but a layer. And the CEO’s of those large industries
embrace that layer. They crave those
digital revenues whether they are radio stations, banks, telcos, retail shops,
airlines or health care firms. And
they suss out that the problem lies in the business model that they’ve been
working to. Innovation is not about
technology but economics; otherwise, we’d all be flying the Concorde – we’re
not; we’re stuffed into jumbo jets.
Case in point: Kodak and Polaroid and Instagram were in
the same industry. And yet they didn’t
have a dialogue Instagram was organised
around the consumer, and the former were working for their suppliers.
Size used to drive market
power. You couldn’t be small or young,
and be listened to. I’m a record
label, so I’m big, and you, artist, are small.
Take it or leave it. But then
canny David’s decided to play a trick on those old Goliaths. They changed the rules of the game. They realised that the world had gone
network. Business was no longer
linear. It wasn’t that I sold, you
bought, and one of us had to win, but that we were participating in a
transaction with multiple parties:
consumer of music, artist, distributor etc. Someone needed to organise those economics,
and David stepped up to the plate.
Enter Apple which broke the hold
that mobile telecoms firms’ had on the consumer. Enter Spotify who exploded a market enabling
mass discovery by reducing the cost of production and distribution but also by
organising the economics for the ecosystem at the heart of the music industry.
Enter Monitise whose CEO and Founder
Alastair Lukies said a very basic thing at the beginning of his 10 year
journey: ‘If mobile banking is going to
work, it has to work for everyone – the telco, the bank, and the individual who
gets a lower cost of capital’. Watch
out Western Union who’ll charge you 22% if you’re poor. More than 1,000 financial institutions are
now serviced by Monitise who have bought their US competitor and been backed by
VISA 5 times. Monitise created the
economics for the mobile banking industry; that’s why it’s experiencing the
biggest J curve in UK tech industry history.
But how do you repeat the success of
a Monitise over and over again.
Where’s the entrepreneur factory?
How do we breed in the right software in the mindset? Truth is that there have always been great
entrepreneurs throughout history distributed around the world. But the infrastructure for releasing their
gift is not evenly distributed around the world. And Palo Alto exerts a very firm control.
Once upon a time, Britain took over
the world. It cleverly said, ‘The
language is English, and the civil service works like this, and the currency is
the pound.’ They structured their
universe, and the benefits came back multipled, reinforcing their place at the
centre of the world they touched.
Today’s challenge to take Palo Alto
to the world is no different. The
cartographers win. As Wayne Gretzky
said, ‘a good hockey player plays to where the puck is, but a great one plays
to where it is going.’ We must grab
hold of where the world is going, and internalise that future vision in order
to play our best game today.
We must opensource the tools to
win. Our corporates must become a
legitimate highway for the digital cars who are looking for distribution. We must desire to become the industry
architects and to position our companies as the operating systems of their
A couple of years ago, I set up a
venture capital fund. We have found
great British entrepreneurs to back.
But what I hadn’t fully internalised at the beginning was the game
despite 25 years working in the tech industry.
The ‘game’ for every European tech venture capitalist is to back a
start-up and sell it to a US big tech firm.
That’s it. It’s actually not
creative. But I didn’t get into venture
capital to sell to the Americans.
We must change the rules of the
game. We must aspire to organise
industries. If we genuinely know
where that puck is going, then the game we play today is not a Palo Alto-centric
one. It’s a game of disruptive
economics with open-sourced productivity
tools. The software is actually in the
brains of the entrepreneurs and the CEO’s of large corporates who will dominate
this next decade. Whose code are you
--- Julie Meyer is the founder of
Erdogan, the Prime Minister of Turkey, is not listening to his focus group. The thing about focus groups is that you don’t (always) get to choose them. The web gives a voice to special interest groups and brings sites which rate value like Trip Advisor, Mumsnet, IWantGreatCare to life. Governments and politicians will be rated online soon too.
Just as technology and digital business models are transforming mature industries, so ‘the crowd’ is transforming democracy. This isn’t about mob rule or Arab Spring. We all will be doing the governing, not being governed in the future.
The infrastructure of democracy- otherwise known as government – hasn’t really changed in 500 years. When people required horses to get to London in order to be represented, then the concept of parliament and the need for Westminster was a powerful one.
Today, people, and not just 200 year olds or digital natives can make themselves heard through YouTube, Twitter, Tumblr and Facebook. Direct. Not in the slow motion of representative
democracy currently on offer in major western democracies: I vote you in, and you go off to Westminster and do what you do. I learn about it later, and shrug my shoulders if I disagree.
Indirect is *out*. We all feel we know best. We demand to be heard. We don’t accept the proxy of government as it’s currently constructed. We are ignoring it or voting for UKIP which might be the same thing.
After the devastation of World War II, the world quite rightly gave itself a bearhug. It wanted a collective kind of bond, and established models of ‘collective exchange’: the NHS being the prime example. The implicit social contract was one of deference: we vote you in, we trust you, and we endure the consequences. The web flips that on its head, making peer to peer exchange and crowd-sourcing the de facto model of social exchange: collective action through individual empowerment
is not only possible but the imperative.
I thought about all of this as I spent the last 4 days in Istanbul at the Dell Women’s ntrepreneurship Network (DWEN) annual event where the protests went right in front of our hotel. Here 200 alpha females descended upon this city of 13 million to talk about the bottom-up, tech-fueled, Dell-enabled empowerment while the protests surged by individuals who begged to differ with a very
top-down, patriarchal approach to government.
At its core, the Istanbul protests are about a symbol – the one major park in the city which could be torn down. But it’s really about the transparency over the decision-making as to what to do with the park. And it’s even more about whether the government is sliding towards a disintegration of church and state separation. You have to peel back the onion a bit to really understand what’s going on. The Erdogan government believes it’s delivered on its social contract. They’ve ushered in growth over 3 elections spanning a decade. Whether growth would have happened anyway is another matter.
I couldn’t help but think of Valery Gisard d’Estaing’s remark when France voted ‘No’ to the Lisbon treaty; ‘Vote again to get the right answer’.
Government with representation – the very basis upon which democracy has its credibility – is getting granular. What ‘representation’ means is being defined very specifically these days.
As data expands exponentially, sampling is becoming less relevant as there is a very real sense that all data can be measured if you have the right tools. That is, I don’t need to be represented; I only really need to be counted, and I want to participate directly in the major decisions, not just the one big decision about who gets into office. A very powerful form of direct democracy could be waiting in the wings. Representation doesn’t mean that you ‘get into office’ and then you shut the door, and do your job. The door is open. If you are a political leader, you must keep establishing your connection, your mandate, your leadership. Government is a constant campaign.
Leadership without followership is bankrupt. Erdogan’s decision to fly to North Africa while the country is erupting in protests and now a general strike shows perhaps fatal signs of arrogance. It
is a strategic error to aggravate your citizens by turning your back on them while they are flexing their muscles.
The average 20 year old in the United Kingdom doesn’t identify with the political party offerings.
They are however socially and politically aware and active, but traditional party membership is lower than ever. The digital natives see that things can change quickly in the online world. Why is government so slow to implement change in the ‘real world’?
Institutions preserve problems, and entrepreneurs and start-ups are created to solve problems which the founders can’t believe don’t exist. In their mind’s eye, the world should work a certain way, and they become obsessed to bring that future to the present. There are strong similarities
between entrepreneurs and how they shape the world, and how citizens see their ability to shape society today. Not everyone will be an entrepreneur. However, we will all play a role in shaping our societies in an increasing entrepreneurial way. The world of kickstarter and kiva where people contribute their own funding to solve social problems is coming soon to your local community.
I can see a world very soon where people shrug their shoulders about what their local government does with their tax money, but they will contribute amounts – perhaps small at first – towards solving community problems. On top of paying their taxes. They will just assume that the collective exchange model of local governments will be ineffective, and that they will have to take charge. The rise of new schools is evidence as well as new models of healthcare like the Circle
Partnership. Could it be that the Big Society is really little societies in action all around us?
Not too long ago, my eye caught a Times article which stated that 57% of all revenue collected through Stamp Duty went to administer – you guessed it – stamp duty. That’s collective exchange in action. It’s fat, it’s not using technology to be efficient. New lean government which is being
co-created with local little societies have low administration fees if any. It’s not that social justice is less important; it’s the means whereby it’s achieved is not through big government, not through a 60’s era collective exchange framework.
The individual is on the rise. No longer are strong individuals thought of as narcissistic, selfish, greedy. They are seen as capable of creating positive change for society. The web enables us to choose what we consume more easily than ever. We will consume government differently as
well as we will co-create it on a regular basis, not just at the time of the election. We will not be separated by terms like ‘labour’ and ‘conservative’, but empowered by causes, campaigns and
beliefs. The early adopters of ‘new government’ or ‘government in the internet age’ are on the streets of Istanbul as well as taking their GCSE’s in London. But early adopters spread to the majority and before you know it, you have a revolution on your hands.
Government is being redefined. Leaders emerge when history taps them on their shoulders. Witness Mandela, Thatcher, Aung San Suu Kyi, Pope John Paul II. The next Prime Minister of both Britain and Turkey are not only listening to their focus groups right now, they are
building them. They must have a systematic way of listening daily to what the people want or the people will find someone who will. The entrepreneur knows he or she must think big, start small, and move fast. That world has reached the altar of politics. The holy curtain has been ripped, and behind it, stands just you and me. We the people. The revolution is afoot.
SERIAL ENTREPRENEUR ED BUSSEY
RECEIVES £1 MILLION INVESTMENT FOR QUILL
ANNOUNCES FUNDING FROM ARIADNE CAPITAL’S FUND AND LEADING ENTREPRENEUR
27 May 2013 – LONDON – Three-time entrepreneur Ed Bussey today announces the successful closure of £1 million investment in Quill, the pioneering content creation platform he founded in 2011.
The investment comes from Ariadne Capital’s Fund and leading entrepreneur investors, including Shakil Khan (Spotify, Summly, buy.at), Rupert Ashe (Graze, Videojug), Karen Hanton(toptable.com), Andrew Burge (King Content, iSUBSCRiBE), Nick Beare (BBC
Worldwide, LGI), Peter Read (Techlightenment, Songkick) and Andrew Grahame (Mr
& Mrs Smith).
Formerly called iTrigga, Quill provides businesses, including Shop Direct Group, Swiftcover/AXA, WPP and Aegis, with high quality, web-optimised content, on any topic and in any language, helping them increase both revenues and reputation.
In a move to capitalise on the rapidly increasing demand for digital content, Quill has developed a ground breaking technology platform, which it uses to manage the workflow and quality
assurance of a global network of writers, editors and video producers, across 30+ languages. Quill offers a more efficient, hassle-free and cost-effective way of producing content than is possible in house or via traditional content production agencies, whilst guaranteeing that all of its content is of a consistently high “on brand” standard.
The funding will be used by Quill to grow its management team in the UK and overseas, to expand its specialist, multi-lingual writer and editor base to meet the rapidly increasing client demand for its services, and to accelerate the global roll out of its technology platform.
Prior to launching Quill, Ed was COO at mobile phone utility and social networking site ZYB,
which was acquired by Vodafone in 2008 for €31.5m. Ed joined his first start-up team at online fashion retailer figleaves.com in 2000, which was sold to N Brown, the home shopping group, in October 2010 for £11.5m.
Ed Bussey, Founder and CEO of Quill, said:
“We have an outstanding investor base of leading digital entrepreneurs and we wanted to build on that investment approach with the ‘Entrepreneurs Backing Entrepreneurs’ ethos of Ariadne’s
investment platform. Ariadne has backed some explosive growth companies over the past decade, and we’re excited to be joining their portfolio.”
Commenting on the investment, Julie Meyer, CEO of Ariadne Capital and Managing Partner of Ariadne Fund commented:
“Not only has Ed impressed me over the years - and I was always looking for an opportunity to work with him - but I loved the fact that he was ex-special forces. Compared to that, entrepreneurship is a piece of cake!”
- ENDS -
To organise an interview with Ed Bussey, please contact Seven Hills:
+44 (0) 20 7199 2212
+44 (0) 20 7199 2218
Quill (formerly called iTrigga) is a fast-growth content marketing company that specialises in writing for the web, on any topic, and in any language.
They are building a global network of specialist writers, editors and video producers around the Quill technology to meet the rapid growth in demand for bespoke digital content. Their vision is to be the leading worldwide platform for writers.
Quill helps businesses to reach and engage better with their target audiences using tailored, web-optimised content. Quill offers a more efficient, cost-effective and scalable way of doing so than is possible in-house or via traditional content production agencies.
The workflow and quality assurance capabilities of the Quill Platform, coupled with in-house editors, ensures that all of the content is at a consistently high standard – from product descriptions and bite-sized news round ups to feature articles and in-depth opinion pieces, while guaranteeing “on brand” content for clients.
Clients, which include Shop Direct Group, 888, Swiftcover/AXA, WPP, Aegis and Publicis - count on Quill to write in their language, helping them improve their revenues and reputations.
Quill offers a number of other content services, in addition to editorial production: strategy – designing tailored content plans for clients; video; infographics; easy-to-integrate, customised news feeds for client websites; and content distribution, including blogger outreach, automated social publishing and article syndication.
About Ariadne Fund
Ariadne Capital has £5.3 million under management, and 25 leading Limited Partners (LP’s) who are individuals who lead global leading firms in private equity, media and telecoms and technology. The fund invests in ‘digital enablers’ – the enabling technology and tools firms which are transforming the large industrial sectors (financial services, media, retail, healthcare and energy). A typical investment is £250,000 to £500,000, but the co-investment and follow-on investment from the LP’s is substantially more. Ariadne has within its shareholder base and LP’s the access to capital to ensure rapid growth for its portfolio firms.
DrLiam Fox - SPEECH to ‘FOLLOW THE ENTREPRENEUR’ SUMMIT – Hampshire -24THMay 2013; 09:20
If any of us in this room run up debts, which - if we are typical UK citizens, we will - we know that there are two remediesthat we can take to deal with the problem. The first is to spend less and the
second is to increase our income. If we are able to do them both simultaneously, so much the better. And so it is for government.
It seems very surprising to me that there are still some who do not understand how important it is to deal with our current level of debt. The global economy has expanded by almost 55% in real terms since the year 2000, growing from $32.2 trillion dollars, to $69.7 trillion last year. Why, we should be asking ourselves, are we not sharing in that growth. The answer is that we are too heavily indebted, too heavily taxed and too heavily regulated, especially in today’s global economy. Money goes to where money can be made and money can be moved, and the sad truth is that
Britain and the other Western economies are less attractive destinations for such money than we need them to be.
But let me have a minor digression to consider debt as a strategic issue. Our past is littered with examples of empires weakening, or in some cases falling, as a result of economic weakness.
Hapsburg Spain defaulted on its debt 14 times between 1557 and 1696 and suffered rapid inflation as a result of an influx of New World Silver.
This economic weakness coupled with the outcome of the Nine Years War and the death Spain’s Charles II saw the end of Hapsburg Spain.
Or look at pre-Revolution France.
By 1788, Bourbon France was spending 62% of royal revenue on servicing its debt.
It is no coincidence that some historians claim 1788, and not 1789, to be the true start of the French Revolution.
It was on the 7th of June of that year that one of the first revolts occurred over an attempt by the government to enact new taxes to deal with France's unmanageable public debt.
Or look at the Ottoman Empire.
The Ottoman Empire was paying 50 percent of their budget on debt interest payments by 1875.
In fact, the last payment on Ottoman debt was finally made by the Republic of Turkey in 1954 - even though the Ottoman Empire was dissolved 36 years previously!
The dire economic situation was only exacerbated by numerous wars and conflicts leading up to World War I and the Ottoman’s ultimate defeat.
And we shouldn’t forget our own history.
The contraction of European influence in the 20th century was driven as much by the economic exhaustion of European nations over two World Wars as it was by political enlightenment in support of decolonisation.
As a result of the First World War in the 1920s and 30s, Britain’s national debt was regularly over 150% of GDP.
After World War Two, it peaked at around 250% of GDP.
As examples of the effect on UK foreign policy, economic considerations underpinned both the British withdrawal from Palestine in 1948, and the abandonment of the Suez campaign in 1956.
It wasn’t until the 1970s that the debt position recovered to under 50% of GDP – a quarter of a century after the end of the War.
Britain’s so-called ‘East of Suez’ moment in 1967 when the Wilson Government announced a major withdrawal of UK forces from South East Asia, was a response to the decline in the country’s relative economic strength.
Thus, big government debt is a strategic liability for our country, but it is also the enemy of wealth creation.
So where are we now? At the end of this financial year, our public sector net debt will be around £1200 billion and we will be paying over £47 billion in interest payments alone – costing each
taxpayer around £1250 per year, rising to around £1700 each by 2015/16. Our debt interest is now the fourth biggest recipient of public money in Whitehall. What is worse is that the year after next, our debt interest will be higher than our education budget and the third biggest recipient of taxpayer’s money. In a true monument to socialism, we will be spending more money servicing our
debt than educating our children.
And this is the real problem with debt. It has to be repaid by someone, some time. So let’s start to talk about what debt really is – it is simply deferred taxation. Government debt requires us to have
tax rates far higher than they need to be, creating a disadvantage for our wealth creators compared to their competitors in other, lower tax, economies.
But there are a few other ground rules that we also need to understand if we are to help our entrepreneurs.
First, growth and wealth creation are not the same thing. You can get economic growth with higher government spending and borrowing, but it is only an illusion of prosperity.
Second, Governments can create the optimal conditions for wealth creation, but it is entrepreneurs who will ultimately provide it.
Third, Government must champion both aspiration and opportunity. Without opportunity, aspiration can merely result in disappointment and bitterness.
If we are to begin to set the appropriate conditions for more wealth creation, then Government must control its spending or it will squeeze out the entrepreneurs. I believe that we should aim to
freeze public spending for at least three years, a move that would see baseline spending totals £70.4 billion lower than today. If we were to go further still and freeze public spending for five years at 2012/13 levels, annual spending would be £91.2 billion lower in 2017/18 and the cumulative saving over five years would be an incredible £345 billion. It would go a long way to putting us on a sound and sustainable footing in our public finances and maximise the chances of finances being available for a growing private sector.
As economic recovery gathers pace we need to return to the concept of sharing the proceeds of growth. But this time, instead of sharing the proceeds between public spending and deficit reduction, we need to share the proceeds of any growth between tax reduction and ultimately debt
We must encourage competition as it is the means by which we measure our respective talents against one another and generate efficiency and excellence.
We must reform our tax and benefits systems, translating universal benefits into tax cuts wherever possible.
We will also need to take a radical review about what government does, and does not, need to do. A further round of privatisations and asset sales would not only improve the public finances but
would create a competitive space in many sectors of the economy.
Small businesses are the cornerstone of our economy and will create the employment of the future. We must support the corner shop owner who stays open late at the expense of family life, the small
business owner who hasn’t had a holiday for years, and the young graduate with the bright idea who needs finance to turn it into a wealth creating reality.
We must reward those who take risk in the taxation system for without risk, there will be no innovation. If we see every tax break and incentive for the wealth creators as “a tax on the rich”, we will not create the environment where would-be innovators will see the balance of risk and reward as being in their favour.
Let me just take one example – capital gains tax. You’d be hard pressed to find an independent economic analyst to dispute the assertion that a tax on capital gains does not inhibit investors from
realising their assets. That’s why I would like to see the tax reduced, if possible to zero, for a minimum period of at least three years, creating a tax window that will encourage businesses to sell assets, invest in capital, and generate value for the economy. Any fall in revenue at the Treasury would be offset handsomely by the increased business activity and job creation the measure would encourage.
Suspending capital gains tax would be a radical statement that shows the world Britain is open for business. We have travelled too far down the road of allowing ourselves to believe that wealth is
an embarrassment, where in fact, it is what creates jobs, higher tax revenues and new inward investment.
We need to understand that in the new, highly competitive global economic environment, entrepreneurs will be the drivers of change and the generators of prosperity. Only by creating the appropriate financial, regulatory and political environment will we be able to set free the talents of the entrepreneurs who will enable us to provide the cutting edge technologies, we will require to compete in the globalised era.
There is no question that entrepreneurship is booming - as Lord Young’s recent report on small businesses showed, the recession has produced half a million net new businesses. If we are to
encourage this trend we need to have a tax cutting agenda.
The future is not with big Government but with big ideas, not with the suffocating state but with the empowered individual, with the wealth creators not the wealth consumers. Much of it will be in this
Higher taxes limit aspiration, but most pressingly, they encourage businesses to sit on their hands rather than get out into the global market and sell hard. It should go without saying that, if we are to create growth, economic activity must be encouraged, not stifled, but that is not the conclusion an external observer would draw from our existing tax system.
Britain is brimming with entrepreneurial individuals who want to make a better life for themselves - to own a home, run a business and secure a more prosperous future for their children. To give them the opportunity to realise this aspiration, bold and strategic measures are necessary. A radical approach, rewarding the risk-takers, and energising the entrepreneurs, is what can get us back on track, and reverse the damage wrought by Labour.
There is a lot of publicity over Sheryl Sandberg's book this weekend, and I have to say that I think her book is brilliant. I don't know her, but what she writes rings exceptionally true.... perhaps it's just because we were both born on the 28th of August ... :)
The point of her book is that there is nothing exceptional about her. That's right - I stand by that. She's not an heiress to the Heinz family business, or a Kennedy, or a Rothschild, or a trust fund baby of any size, sort etc. She came from an ordinary family where she was encouraged to excel. She wasn't even in one of the meccas of wealth in the east coast or west coast. She's from Florida.
I love how she encourages women to take ownership of their lives. Don't let life happen to you - have a plan, and make it happen. That is precisely what we/she/anyone should tell women. And it's not that it will lead you to becoming a billionaire as that's not the point. What life is about is figuring out what you are meant to do - why are you here? - what's your contribution? She's clearly figured that out, and is clearly happy.
We can at any point in our life wait. We can wait for the government to do something, for our company to do something, for the media to showcase inequality, for the world to rally around us, or we can act. In the privacy of our own little chateau - wherever that little chateau is - we can create the life that we want. It really does come down to you/me/us deciding that we will be the director of our life, not the back up crew for someone else's drama.
Tomorrow at the Queen Elizabeth Conference Center at 12 noon the International Festival for Business will kick off! The IFB will be a 61 day event in 2014 celebrating British Business. Tomorrow Sir Terry Leahy and other leading business figures will talk about the festival and how you can get involved.
This week also Entrepreneur Country Forum commences on the 27th of February at the Royal Institution of Great Britain - www.entrepreneurcountryforum.com. Mike Lynch will be announcing a UK first - the launch of a $1 billion venture fund, funded heavily by his own money.
And in Barcelona, Global Mobile World Congress will be happening, and much discussion about 4G. So far I've seen plenty little about the economics which will drive this new technology into society, and too much about the tech.
Interesting that Centrica in the Sunday Telegraph today has published an economic impact report showing that it contributes £14.1 billion to the economy - the equivalent to the size of the economy of Manchester.
The Observer had a great profile piece on Sheryl Sandberg, COO of Facebook, today anticipating the launch of her Lead In book and movement. I like what she's doing - she's encouraging women to have a plan for their lives, and not just let life happen to them. Although she's been criticised as a super woman and rich, I can't help but think that we'd have more Sheryl Sandberg's if we had more women who thought like her.
The Sunday Times reported that RBS may be about to sell 0ff its shares. One of the best ideas I had seen floated was that they would divy the shares up across the UK population. Now that would be radical - to actually put into the hands of the individual citizen the property of the state. I love it!
And from the Mail on Sunday, an article by Adam Afriyie who is the first person across the political spectrum who is claiming that we should get rid of National Insurance on the very sound basis that it's a tax on jobs, and why would we ever want to do that if we want to grow jobs? This doesn't surprise me from an entrepreneur which Mr Afriyi is, and apparently was a very successful one. Cutting tax dramatically - the Laffer Curve - seems to be completely missing from the debate about how to drive growth in the economy, and yet it has been shown again and again - all the way back to John Kennedy that if you drop the % of tax, you drive up overall tax revenue. There are also always unintended consequences of taxation. Take the £2 million mansion tax that the Lib Dems are trying to push through in their vain attempt to incite jealousy. This actually has the effect of making the property market worse for poor people, but you have to do the analysis of the market and the effect of the tax to see that. The problem is that politicians don't do the analysis, and there is so much jealousy out there.
We have to get comfortable that to create an expanding economy, some people will get rich. You can't create wealth in society without creating wealthy people. And there is nothing wrong with that.
And from the Sunday Times an article on the Masculine Mystique describing how men are ill at ease with themselves due to the rise of strong feminine women these days. It seems that we need great mothers to raise young boys/men to be very comfortable with independent, strong and feminine women - not to feel emasculated by them ...
This week we got a lot done at the global international headquarters of Ariadne Capital :)
We finalized our decisions about where to invest £2 million into high-growth ‘digital enablers’. We are backing the enabling tech and tools which are transforming the big piece of the iceberg (normal industry) which needs to be remade with software, digital business models, and organized around consumer data. James McClurg doing an awesome job on the Ariadne fund.
I went up to Gateshead (Newcastle) on Monday as one of the legs on my book tour for WELCOME
TO ENTREPRENEUR COUNTRY. After signing 100 books, and talking for an hour to local entrepreneurs came home on the train into King’s Cross. The Today Programme asked me to comment on Barclays’ results the next morning which I did, and the reaction was phenomenal
on twitter, email, etc…..
Here the interview: http://www.bbc.co.uk/programmes/b01qhqrq with Evan Davies and myself about 2h30 minutes in….
My point wasn’t to bash bankers (I know a lot of good ones and ones who care about society) although the couple hundred people who tweeted by comment: “If life were a video game, being a white male banker would be the lowest level of difficulty’ – may have thought I was,
my point was to focus on being a productive member of society, and measuring one’s success based on the overall outcome for society.
Great lunch with Fintan Donohue of the Gazelle Group at the new Savoy Hotel restaurant
(which I hadn’t been inside yet) on Tuesday …. This is a country-wide movement
to get colleges shaped around enterprise education.
We’re taking on more space at our new Trafalgar Square offices – turning the fourth floor
into a Start-up Village for all of our portfolio companies. I’m also starting to work on a bigger plan for Start-up Village too …
I heard Mervyn King, out-going Governor of the Bank of England, speak at the Hurlingham
Club on Wednesday night. He said in response to the Queen’s famous comment early on in the financial crisis – ‘Why did no one see it coming?’ – that everyone had.
I found myself deep in conversation with an entrepreneur over dinner, and then escaped into the night in SW6
Also met with Nick D'Alisio of Summly, backed by Horizon Ventures. They make a summarisation engine which is helping new organisations monetise content. There's something very good about the state of UK PLC if a 17 year old can have this effect.
Clickslide Board mtg on Thursday … Gabriel Ortiz will be speaking at Entrepreneur Country
on the 27th of February. The beta of Abacus is looking good, and like all early stage companies
we back, lots to do, but lots of fun…. The start-up addiction rocks on.
Out to dinner for Valentines Day … have to interrupt life every once in a while for a
Hallmark moment, but then back into the jet the next day
Brainstorming session with my friends Michael Hayman and Nick Giles at the Seven Hills Office
in Wandsworth late Friday … these guys are not only fantastic campaigners, but
pretty amazing strategists as well …
And then nothing could be better than settling down on a Friday night at Amaya with your
confidant, and just exhaling ….
Great News for the CEO of large companies! There are entrepreneurs out there working on solving the problems that you face running your FTSE 100 business, or your medium-sized enterprise of 1000 employees, or your multinational. You have scale, distribution, reach, audience, established brand and reputation: you are a highway. But the entrepreneur, the digital industrialist, is the car that will drive you into the high-growth, digital economy. The cars need a highway for high-growth, and you can put in a toll booth to exact your fee for the assets you're 'sharing'.
If you are running a large corporation and looking for high-growth, you can count on the entrepreneur as your problem solver. But you have a bigger problem if you don't have a reliable means for engaging with him or her.
Technology is no longer an industry, but a layer. You can't be a high-growth firm unless you leverage technology, but this is not an article about disruptive technology. That time is past. Technology is an enabler, and what's disruptive are the economics.
Carlotta Perez, a Venezuelan economist, in her book, The Theory of Disruptive Technology and Adoption, very helpfully has reviewed the last 300 years and found that there have been 5 sixty or seventy year periods which stem from a big bang of disruptive technology, and then settle into society over the next period. We are - according to her - going into the second half of a very long first phase, stemming from microprocessor which burst into the world in 1971.
What this means is that it's less about the installation of new derivative technologies from that microprocessor today, and more about how the existing industries deploy them. Overall, we are working towards a 'new common sense' of how the world will work by the end of the cycle. Large corporates will migrate to dominate positions, or fade into insignificance over the next 20 years, based on how they adopt those new technologies, or not.
Economic forces are in the ascendancy, and the network-orientation at the core of everything is guiding those economic forces in the development of that new common sense. Examples include:
The winners are those companies who will use digital business models to create what I believe is the new industrial model, 'Ecosystem Economics' TM.
This structural change, which comes along every sixty to seventy years due to technology, touches more than just business and the individual, however. It forces government and the bodies which regulate money supply to rethink their assumptions. Monetary policy without the context of where we are in the Perez technology cycle is akin to diagnosing the patient without taking the temperature, or a blood test. You simply don't have all the data to understand what comes next.
We have a two-sided debate today about how to create a high-growth economy. Some say demand is created when the economy grows, and they recommend low tax, cutting government spending, and resizing government to get the economy growing. Others claim that government stimulus must drive demand, and then the economy will spring back.
The latter, Keynesians, say that while a family can gets its finances back on track by spending less than it earns, it's impossible for everyone to do that at the same time. When the baker skips a haircut, the barber can't afford to buy his bread.
What everyone needs to include in their hypotheses, however, is how technology creates prosperity. It lifts. Technology, as we enter the second half of the Perez cycle, creates a new common sense, which expands the pie - meaning it drives growth in the economy, if, and it's a big if, it is embraced.
The pure online economy is a fraction of the total economy. Like an iceberg, online is the 1/9th of the real ice mass which is above the water, and the rest of the existing, traditional, offline industries are 8/9th which are submerged for the moment. Traditional businesses in non-sexy industries like transportation, chemicals, oil and gas, construction, and pharma are being remade by leveraging software, adopting cloud technology, and engaging with the digital start-ups, or cars, who need their highway, bringing new network-based business models to their industry. David with his slingshot in 2013 doesn't assassinate Goliath; they must dance.
Corporates who believe they can choose the moment at which they engage with 'digital' will have a rude awakening. If 'digital' is a 2014 issue for you, you will find that David has more power in this asymmetrical game of warfare than you give him credit for. As a venture capitalist, there seems to be an unspoken rule: invest and sell to US tech firms. If European and UK corporates don't engage with digital, the future is clear. [Mostly] US tech firms will continue to steamroll through other industries, as they have with books (Amazon), music (Apple), advertising (Google), etc.
Today, money is not with governments, and not generally with banks who are pre-occupied sorting out historical messes. It is with corporates on balance sheets, and should be used to get the company safely to a leadership position in the new world where this new common sense is apparent to 100% of society, not just the early adopters, or even the digital industrialists.
In this context, it is crazy to argue with companies whether based in the US or the UK about how much tax they bring to the UK treasury. Yes, we should be asking for an appropriate contribution to the nation, but the contribution should be using their cash to partner, invest or buy digital start-ups built by the local entrepreneurs, or back new fund managers, not sending it to the government's treasury.
Alfred Pigou, author of The Welfare of Economics, argues that the individual is the best judge of his/her welfare. I would simply add to that bluntly that others don't spend your money the way you would. I look - frequently in vain - for evidence that government spends our tax money wisely - the way that we would in the same thrifty, focused, careful manner that we would manage our own household ore personal finances. Furthermore, we live in a numbers-free zone in the public sector as there are no management accounts to interrogate the performance.
The world no longer operates in the collective exchange mode that was set up after the second World War, and which government largely still operates in. Digital technologies and the network-orientation enable peer to peer activity. Digital enablers abound; corporate management teams just need to get out of their corner offices to meet them. David and Goliath can figure out the deal that they need to do which brings huge prosperity to society without paying tolls to the government. Government increasingly is an out of date intermediary, losing its legitimacy fast.
Today, economics trumps politics. The goal is to create high-growth businesses with network effects throughout society. These will not leave people behind, but create new roles, new services, and a new common sense.
I met with the CEO of a £200 million market cap company here in London recently who showed me the technology platform which enables them to broadcast locally and nationally at the same time. It has become a powerful tool in the transformation of this business since he took over, and created a dominant position for this firm. I asked them where they got the technology. The CEO smiled and said, 'we had a 22 year guy from Leeds hanging out in the operations team who kept banging on about this, so we said, go build it'. The future is around the corner, and not where you may think it is. Your key to the digital future may be Digital David outside your firm, or that 22 year old down the hall. What is clear is that society is changing, and the winners are those who lean forward and embrace the change.