Coronavirus: Here comes the startup chancellor
Startups are the economy’s ‘department for the future.’
Their job is to future-proof all the other sectors – from retail and banking through ecommerce to public services. They are vital to the UK’s post-Brexit, post-Covid-19 future.
They are also among its most vulnerable. Look up ‘start-up’ in the Cambridge Dictionary and the first example of a sentence using the word is: “Start-ups are very vulnerable in the business world.” The second example isn’t much more uplifting. It suggests a natural use of the word is: “Start-up costs.”
Never have these two examples been as true as they are today. Startups’ core customers have retrenched, themselves l, worried about their own survival. Besides a few London-based large funds, most larger investors are holding back investment, concerned either about their individual finances or the survival of their existing portfolios. Surveys have shown a collapse of nearly 50 per cent of investment with early stage (and B stage) particularly affected.
This matters to the UK and its post-Brexit future. The collapse of the UK’s startup ecosystem will not only destroy 6,000 jobs today but also crucially undermine companies expected to provide 50,000 + high wage jobs in less than five years in key areas like financial services, healthcare and retail.
It would be unfair to claim that every startup will succeed.
Many surely will – think of Transferwise, MoneySupermarket or Ocado – but most will fail. For the 1324 startups that have raised between £100k – £2m in the past two years, the future wreaks of uncertainty.
However, like Easyjet and other larger companies that were thriving prior to the crisis and yet have now sought help as the economy comes to a standstill, startups still deserve government support.
We do not need an intervention to save companies that might have failed. We need an intervention to save companies that would have succeeded. We need help to ensure that once the crisis subsides, the UK has the innovation muscle to succeed. When startups fail, the accumulated knowledge, expertise and advances benefits the next startup that is set up, or allows a larger firm to access IP or staff that supports their internal development.
If the UK’s startup ecosystem collapses, the country’s entire economy suffers as a result.
So today’s announcement from Chancellor Rishi Sunak that support is coming is not just welcome; it is the best thing to have happened to the digital economy in a decade.
Not since David Cameron embraced Silicon Roundabout and helped expedite the country’s digital race has there been such a fundamental show of confidence in the value of the UK’s startups. From their Zoom-filled rooms across the country, startup founders know they have been thrown a government-backed lifeline. By offering government support to early stage companies, provided that these companies can raise half of their capital requirement from the private sector, startups have been given a digital pick-me-up. Expediting R&D tax credits and getting money from Innovate U.K. out the door fast is critical too.
Now that the Chancellor has acted, startups will have a duty to repay the government – and ultimately the taxpayer. That means three things. First, they must be careful. I don’t know many founders who have not already trimmed costs, expecting at least 12-18 months of economic hardship to come; but if there is anyone out there who has not done so yet, the Government’s intervention should be your cue.
That said, care and responsibility does not preclude growth. Startups owe it to the public – who will have rescued many of them – to be strategic. This crisis could be the making of many startups, just as the recession before it was for many current household names.
As smaller and weaker rivals falter, be there to benefit. As larger firms struggle and turn inward, pitch to solve problems that only they could have solved before. If your roadmap looks hard, explore the byways and country roads that can take you forward. Pivot, change, adapt, be strategic. I have for example never seen the public sector as open to adopt new technologies as now – can your product find a public sector buyer? Can you help the NHS cope or support local authorities to manage?
Finally, with public money must come a public consciousness. People will pay more in taxes for years to come to pay for the Covid19 outlays. They have every right to expect that anyone taking government money – including startups – will not just do their darndest to spend any investment wisely but that they will operate in keeping with the highest of principles. Treat staff well, evaluate and understand the impact of your products, consider the environment and build a company that is as diverse as the customers you serve and the community you live in. In sum, ensure that you are building a business that supports not just shareholders, but the members of the community we are all part of.
Rishi Sunak today became the ‘startup Chancellor’; he invested public money and the government’s political capital to support the digital economy. He’s done it because he believes entrepreneurs will power our economic growth out of this crisis. Let’s now make sure that all of us in that community – startups and investors – repay him the confidence and the taxpayers who will eventually foot the bill by making post-Covid19 UK the best place to build, grow and export innovation.