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Wednesday 1 July 2009
Julie Meyer: A day in entrepreneur country
Individual capitalism has come of age
Back in 1998, when I founded First Tuesday – a network of entrepreneurs which many credit with igniting the internet generation in the UK – we were a small group of digerati who met on the first Tuesday of the month to talk about building internet start-ups. We were a ‘digital island’ of sorts.
Today in 2009, I don’t know a single person under 30 who wants to work for someone else. People of this generation see themselves as their own P&L, their own brand, and are familiar with business through programmes like Dragons’ 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 is due to the rise of what could be described as ‘Individual Capitalism’, a form of business where the basic unit is the individual rather than the corporation. The internet opens up opportunities for how people work – remotely or from home, from their phone, as a small firm looking much bigger than they are – and this shift away from ‘Corporation Man’ to ‘Individual Capitalist’ has gained enormous momentum. The recession has created many enforced Individual Capitalists in the form of freelance consultants, but many others are corporate refugees of their own choosing.
So while few of us will make millions from a trade sale of our firms to a multinational, and while we may not call ourselves entrepreneurs, we are actually all becoming ‘Individual Capitalists’.
Yet those of us who have run our own firms understand the enormous pressures of keeping a team aligned, meeting the 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 we do to develop our businesses, create jobs and generate wealth. Many of us feel, however, that we go to ‘another country’ each day 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. Other people just don’t get it. I 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, the old, established, big businesses, and on governments who are at best ignoring the little guy’. The media don’t really start paying serious, regular attention to any emerging company until it has reached big itself 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. It’s because 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 is it like to spend a day there? There are some obvious messages that arise out of a trip to ‘Entrepreneur Country’.
Reduce the size of government in order to reduce the tax burden on SMEs
Cash really is king: effective entrepreneurs quickly learn to keep fixed costs very low. They don’t build infrastructure ahead of having recurring revenues. They rely heavily on consultancy contracts. They learn to barter or to finagle for free just about everything. If you don’t hustle, you 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 just defer it – make it smaller. A lower tax burden would reduce the need to raise so much from small businesses. Last year in a government-led focus group in which I participated, along with the CEOs of leading UK start-ups, high PAYE and NIC payments to HMRC were frequently cited as one of the most debilitating factors in running a private company.
Challenge the media to step out of their comfort zone
Leading entrepreneurs learn early to communicate their vision. However, little of that vision gets captured by the media. There remains a view that small business is admirable but rarely raises 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 – those that are being propped up and stumbling on day to day. SMEs at best get a corner of the coverage in national newspapers. If we want to build an ‘Entrepreneur Country’, then as consumers of media we must demand that more coverage is given to high-growth businesses 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. Which newspaper will rise to the challenge?
Treat the SME as your corner store
One of the most important ways that Britain can support its start-up ecosystem is to buy more from the companies that populate it. For SMEs who sell to enterprises (rather than 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 it endured at the hands of 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 SMEs a part of your corporate vision.
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 originally early on in their lives, as key influences.
At Ariadne Capital, I can tell within ten minutes of speaking to an entrepreneur who has come to pitch whether or not they expect success. These people exude confidence, not a nauseating sense of entitlement, and convey that they will achieve their goals whatever you decide.
Back 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 of them remember that they have been helped 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-finance organisation in the UK. They have made 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 turns individuals from a cost to society in to taxable micro-entrepreneurs. 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.
Make ecosystem economics work
There is a profound network orientation in business today. Companies which succeed 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 competing schemes failed because they had a bias or a dominant player in the ecosystem which wouldn’t relinquish 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.
Remember, Britain can handle BIG
We will make huge strides towards creating ‘Entrepreneur Country’ if we tie the outcomes of people’s actions most directly to the efforts they put into 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.
The United Kingdom is good at building visions for the next paradigm shift. Witness the activities 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, Stephen Wolfram’s Wolfram|Alpha, Charles Dunstone’s mobile phones empire, 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 a new venture thinks big is that he or she knows that Britain can do big. Indeed, it has a proud history of doing so.
We owe it to those creators of the next big thing to suspend disbelief and negativity, to don the cloak of optimism every morning, and be the 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 it’s very simple. The entrepreneur, the creator of value, is the Hero.
Internalising these points takes us into ‘Entrepreneur Country’.
Julie Meyer is Chief Executive of Ariadne Capital
This essay is one of a collection of viewpoints which will be published to launch NESTA’s ‘Reboot Britain’ programme. Reboot Britain will explore the role new technologies and online networks can play in driving economic growth and radically changing our public services. The programme will begin with a one day event on 6th July which will look at the challenges we face as a country and how the combination of a new digital technologies and networked 'Digital Britons' can produce innovative solutions to tackle them. For more information please visit www.nesta.org.uk
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