Small Talk: Flawed, but scheme to help start-ups still has lots to offer

  • @davidprosserind

How many people have begun January by resolving to make 2013 the year they finally strike out alone and start their own business? Social market research invariably shows self-employment is hugely appealing to many people – over and above the increases we have seen in the past couple of years (one suspects many of these newly self-employed people have been forced into this status by the double-dip recession).

TV shows such as The Apprentice and Dragons' Den – daft though they can often be – have helped change attitudes towards entrepreneurialism. Where once the small businessman was likely to be seen as dodgy – think Del Boy – the associations are now much more positive. We applaud our James Dysons and (even) Alan Sugars. Entrepreneurialism is a spirit we wish to inculcate in our young people.

The Government is now embarking on a serious expansion of the Start-Up Loans scheme. Launched last year as a £30m initiative offering £2,500 loans to young people with viable business ideas, the scheme's funding is now being more than tripled, to £110m. At the same time, the age limit for the scheme is being raised from 24 to 30.

The announcement has not been universally welcomed – one prominent private-sector investor in start-ups complained that the scheme is dangerous because it wrongly suggests everyone is capable of running their own business. Many of the start-ups will prove to be disappointing failures, he warned.

That's a dismal attitude. For one thing, the cost of this scheme is so small that taxpayers would barely notice if not one loan was ever repaid. It seems reasonable, in any case, to assume that some of these businesses will be successful.

The more important point, however, is that failure is part of economic life – and that accepting the risk of not being successful is an important element of entrepreneurialism. No venture would ever get off the ground if those behind it were deterred by the risk of failure, for no new business is ever a sure thing. Anyway, people learn from their failures and should be encouraged to have another go.

That is not to say the Start-Up Loans scheme is without flaws. The biggest is that barely anyone seems to know about it. Despite the appointment of a high-profile chairman in Dragons' Den panellist James Caan, awareness is low. Schools and colleges have not yet got the message. Nor are people being referred to the scheme from conventional sources of lending such as the banks.

Another problem is the limited funding the scheme offers – £2,500 isn't going to get you very far. It would make sense to offer further rounds of funding to those who begin to prove their businesses can be successful.

Finally, there is the arbitrary age cap. Why deny millions of would-be entrepreneurs over the age of 30 access? Are we suggesting the ability to launch and run a business disappears on your 30th birthday? Rather than raising the age limit, the Government should have got rid of it altogether.

These, however, are complaints about the operation of the Start-Up Loans scheme, rather than the spirit underlying it. There is much to commend the initiative. For example, the mentoring services available through the delivery network set up to administer the scheme will give many of the participating businesses a much greater chance of success.

The message to all would-be entrepreneurs, irrespective of their age, is important too. It is that self-employment is a way of working that we want to positively promote in this country. This year really could be the one in which you start your own business.

Big data specialist to expand further

Big data specialist WANdisco is a veteran of the Small Talk column, having made its first appearance on these pages in the run-up to its IPO on the Alternative Investment Market last spring. Now the business has made it on to stockbroker Panmure Gordon's list of smaller companies to watch during 2013.

WANdisco is at the forefront of the big data revolution, developing new technology to make sense of vast amounts of information, and Panmure Gordon expects it to announce two important new products this year. The analyst George O'Connor says: "Founder David Richards has managed a nifty pivot from being a development tool software company with replication to becoming a platform company characterised by having a unique patent approved data replication technology serving a portfolio of applications."

The company's stock currently trades at 490p, but Panmure Gordon's target is 537p.

Rush for the AIM exit slows

The Alternative Investment Market continues to shrink, but the exodus of companies from the junior market is slowing, new research shows.

Just 100 left Aim last year, says the accountant UHY Hacker Young, the fewest departures for seven years, and a 14 per cent drop on 2011's total of 116 delistings.

There are now 1,095 companies on Aim, down from a peak of 1,694 in 2007. But last year's net decrease (including new joiners) was just 57, down from 71 during 2011. The number leaving because of financial stress – rather than, say, M&A – was down 36 per cent to 33 last year.

UHY Hacker Young said AIM had shed many of its weaker companies.

Small Business-Woman of the Week: Helen Tse, co-founder, Sweet Mandarin

We run a Chinese restaurant, Sweet Mandarin, in Manchester, but last year branched out into manufacturing. We've won contracts for our gluten-free sauces from Selfridges and Sainsbury's.

We'd built up quite a large client base of coeliac diners, and they kept wanting to take the sauces home. One customer offered to make us some labels, so we forced ourselves to find out everything we needed to know to move into manufacturing and retail. We've come a long way very quickly – we sold 20,000 bottles during our first month at Sainsbury's.

My great-grandfather made soy sauce in China, but was murdered in 1930. My grandmother, Lily, moved to Manchester and built up a restaurant during the tough post-war years. My mother Mabel worked in that business, and so did my sisters [including chef Lisa, pictured right] and I when we were young – but by the time we were teenagers, all of us moved away. Coming back to Manchester in 2004, we launched our own place.

Opening the Sweet Mandarin was hard, but nothing compared to Mabel and Lily's struggle when they came to Britain. Everything they had they built from sheer perseverance and toil, and everything we have has come from them.