1. Individual Capitalism has come of age
When I founded First Tuesday, a network of entrepreneurs which many credit with igniting the Internet generation in the UK, in 1998, there was a niche group of digerati who came on the first Tuesday of the month to talk about building their Internet start-ups. We were a “digital island” of sorts. Today, I don't know a single person under 30 who wants to work for someone else. They view themselves as their own P&L, their own brand, and are initiated into business through programs like Dragon's Den and The Apprentice.
The rise of the serial entrepreneur, the micro entrepreneur, the young entrepreneur, the portfolio entrepreneur and the lifestyle entrepreneur has been unmissable over the past decade in the UK.
This trend has arisen due to “Individual Capitalism”, a form of business where the basic unit is the individual rather than the corporation. The Internet opens up opportunities in how people work – remotely or from home, from their phone, as a small firm looking much bigger than they are - so that this shift away from “Company Man” to “Individual Capitalist” has gained enormous momentum. The recession has created many Individual Capitalists in the form of freelance consultants, but even more are corporate refugees of their own choosing.
So while not all of us will make millions upon a tradesale of our firms to a multinational, and we may not call ourselves entrepreneurs, we are actually all becoming “Individual Capitalists.”
Those of us who have run our own firms understand the enormous pressure of keeping a team aligned, making payroll, keeping fixed costs low, staying ahead of the competition, and getting people to buy what we sell. All of society benefits from the work that we do to develop our businesses, create jobs and generate wealth. Many of us feel, however, that we go to ‘another country’ everyday when we go to work. The speed and intensity at which we must work, the values it requires to build trust in an organisation, the level of dedication and drive seem inconsistent with the rest of society. Others just “don’t get it”. We would love for the corporate titan who never has had to worry about cashflow in a personal way to walk in our shoes for just an hour; entrepreneurship is not for the fainthearted. If you open the newspaper on any day of the week, you’ll see that the media focuses on the FTSE 100 - old, established, "big business", and on governments who are actively defrauding the “little guy." The media don’t really start paying serious, regular attention to any emerging company until it has arrived in a big way.
And yet small does become big, and start-ups do change the world, in the process creating jobs, new industries, wealth and pride in our ourselves.
So the average company owner, the SME entrepreneur, the Individual Capitalist goes to work each day in a fictional place – let’s call it - “Entrepreneur Country”. He or she manages his firm from ‘near death experiences’ to ‘breakthrough moments’ and back again. There is no work-life balance, and the stress rips through their personal life pretty regularly. It’s not because they aren’t good business people. Business is a rough old game, and there’s no job security if you are the owner.
And yet business creates the wealth from which all of society operates, so an inspection of “Entrepreneur Country” might be worthwhile if we are to understand how to build more successful global leaders out of the UK.
What are the best practices of the UK’s more successful start-ups? What is it like to spend a day in “Entrepreneur Country”?
2. Reduce the size of government in order to reduce the tax burden on SME's
Because cash is king, effective business founders learn to keep fixed costs very low. They don't build infrastructure ahead of having recurring revenues. They keep the team on consultancy contracts, sometimes flaunting IR35 in order to keep the PAYE and National Insurance bill low. They learn to barter or to finagle for free just about everything. Don't hustle; don't survive.
So not surprisingly, the single biggest benefit that government could provide start-ups at the beginning of the entrepreneurial journey is to charge them less PAYE and National Insurance. not defer it - make it smaller. By shrinking the size of government overall, the “little guy” running his own business creating employment would thrive due to the lower tax burden. Last year in a government-led focus group in which I participated along with the CEO’s of leading UK start-ups, the high PAYE and NIC amounts to HMRC were frequently cited as one of the most debilitating factors in running a private company.
3. Challenge the Media to step out of their comfort zone
Leading entrepreneurs learn early to communicate their vision or fail. However, little of that vision gets captured by the media. There remains in society a view that small business is quaint but rarely moves the bar, or creates new FTSE 100 companies. In short, that the economic growth that will fuel the recovery won't really come out of the entrepreneur-led new businesses, but by existing large businesses being propped up and stumbling to a new day. Open any national newspaper, and count the number of articles on SME's or start-ups, and you'll have to look hard. If we want to build an ‘Entrepreneur Country’, then as consumers of media, we must demand that more coverage of the emerging giants is given to high-growth businesses which are creating new industries. One easy way to test this theory is to develop forums online where the entrepreneurs are given opportunities to be profiled, answer questions, and share their view of society and markets.
4. Treat the SME as your corner store
One of the most important ways that Britain can support its start-up ecosystem is to buy from the companies in it. For SME’s who sell to enterprises [instead of consumers], convincing corporate buyers to purchase from them and pay on time can be a major problem. I advised a tech start-up in December 2003 which was very nearly made bankrupt by the stalling process which it endured by an incumbent telco which had promised to become a customer. Just because a company doesn’t have a balance sheet with assets of £10 million, doesn’t mean it might not be solid. Good executives know how to manage the risk of working with start-ups – giving them a chance to bring transformational innovation into the corporate landscape. Make buying from SME's a part of your corporate vision.
5. Educate the young to expect success.
Leading entrepreneurs cite factors such as teachers who encouraged them to be everything they could be or learning environments where they were taught to think outside of the box early on in their lives as chief reasons why they became entrepreneurs.
At Ariadne Capital, I can tell within 10 minutes of speaking to an entrepreneur who has come to pitch whether or not they expect success. They exude confidence, not a nauseating sense of entitlement, and convey that they will achieve their goals whether or not you come along for the journey.
6. Privately backed Social Enterprise
Entrepreneurs are some of the most generous people I know. They “send the elevator down” to the next generation as the overwhelming majority remember that they have been crucially helped along their way by others before them. Provoke their generosity by giving tax incentives for their work. One of the leading IT entrepreneurs of the UK, Paul Barry-Walsh set up the Fredericks Foundation which is the leading micro-financeorganisation in the UK. They have given 600 loans to those who have fallen by the wayside whether through crime, drugs, disability or life choices. The Fredericks Foundation saves millions for the UK government because it moves individuals from a cost to society to taxable micro-entrepreneurship. Each of the Fredericks entrepreneurs then - by their example in their families and neighborhoods - sets examples of business transforming lives. As Barry-Walsh says, "pure and simple, business is the answer." Set people like Paul Barry-Walsh loose to find more ways to tackle social problems by facilitating his work and that of others like him.
Social enterprise is a hot area where many leading entrepreneurs are flocking whether it's Hoult's Yard in Newcastle, or DoTheGreenThing out of London, or Bono's Red led by Seb Bishop, the founder of Espotting, or Just Giving which is transforming charities. Not only do entrepreneurs know what to do to fix social problems, they do it.
7. Ecosystem Economics
There is a profound network orientation to business today. Companies that win know their place in the ecosystem in which they operate and crucially align the economics for the entire ecosystem. I first learned this in 2004 through Alastair Lukies, the CEO of Monitise, a global leader in mobile banking services based in the City of London. Years before the business was successful, his dogged determination to make the mobile banking world "work" for all parties involved - the customer, the bank, the mobile operator - was impressive. Simpay and other schemes failed because they had a bias or a dominant player in the ecosystem which wouldn't relinguish their market power.
One of the smarter examples of a government-funded organisation's involvement in building the innovation ecosystem is the way that the Technology Strategy Board operates. They have identified various social or business challenges where innovation is necessary such as a low carbon or digital economy. Their model is to organise an ecosystem approach to meeting the challenge by aligning start-ups and corporates to work closely to achieve success.
8. Small Government = Strong Individuals
A thriving "Entrepreneur Country" exists when small government begets strong individuals who are encouraged early on to understand they are the architects of their own destiny. We will gain hugely towards achieving an Entrepreneur Country if we tie the outcomes of people's actions most directly to the effort they put into architecting their lives. If the media then cover the achievement of the breakthrough moments in a more profound way, then the young learn that society does value risk-taking and achievement in new business and industries.
9. Britain can handle BIG
The United Kingdom is good at building frameworks for the next paradigm shift. Witness the on-going role of the Royal Society, or Tim Berners Lee's role with the world wide web, Jonathan Ive's iPod, Robin Saxby's breakthrough with the ARM microchip, Dr Wolfram's Wolfram Alpha, Charles Dunstone's empire in mobile phones, or game-changers in the financial services sector like Travelez, Zopa, Egg, Monitise and Wonga.
Part of the reason that the average 28 year old who is setting out to build his new venture thinks big is that he or she knows that Britain can do big. Indeed, it has been "doing big" throughout its history.
We owe it to those creators of the next big thing to suspend disbelief and negativity, to find our optimism every morning, and to don the cloak of 'early believer' and facilitator of their success in every way that we can.
We are fortunate indeed that there are people in society who are obsessed to bring the new to life, and choose to live abnormal lives in the doing of it.
Our response to their drive and hard work should be an embrace and a recognition that while they conduct the orchestra, we play the flute, horn and keyboards.
So I say it's actually very simple - Follow the Entrepreneur. He or she has the market insight, is the creator of value, is the Hero.
So let's refuse to participate in this recession, and internalise these nine points above which - I believe - will lead to understanding and living in Entrepreneur Country.
