APPG for Entrepreneurship Digest: September 2022

This month’s newsletter comes to you after significant changes to our government. The passing of the Queen has, of course, been felt throughout the nation.

Prime Minister Liz Truss has taken up residence in Downing Street. She will have a lot to think about, with inflation, an energy crisis, and war with Ukraine. But Truss’s campaign did not rely exclusively on solutions to immediate problems. Like many Prime Ministers before her, she has said that she wants to support British businesses and we will make sure to keep you up to date with them as they arise.

With all the news at the top, you may have missed the Centre for Entrepreneur’s report Incubation Nation. Three of their authors, Dr Christopher Haley, Timothy Barnes, and Matt Smith are advisers to the APPG. Unsurprisingly, the findings are interesting.

Incubators and accelerators are shown to be engines of growth. Around 5% of all new companies started have gone through some form of accelerator or incubator. Interestingly, the sector is moving away from general or regional support to sector-specific support, bringing together experts, for example, in FinTech or Sustainable Innovation.

Another interesting trend is that incubators and accelerators operate somewhere in the intersection between the private and public sectors. The pure equity-based model is now somewhat rare. Only about 7% are purely private organisations. Instead, many are backed by some form of government funding, philanthropic contribution, or university.

The report warns that policymakers should carefully consider the evidence when deciding which initiatives to support – not all accelerators are as successful as each other and as most receive public funding, they should make sure that the taxpayer is getting good value for money. In particular, they warn that small incubators in under-developed ecosystems are not able to give startups the support they need.

They recommend that policy makers, entrepreneurs, and people working in the industry should push for support-organisations to gather evidence for impact so that we are better able to determine which accelerators are adding value and which are not.

Additionally, they say that policymakers should urgently evaluate the provision of wet-labs for UK biotechs, and investigate whether anything more can be done to speed their construction or to simplify the transformation of other spaces into such facilities. Similarly, in my report for The Entrepreneurs Network Strong Foundations, also found that the lack of lab space was causing severe problems for the UK’s entrepreneurs.

Call for Evidence

Equity investment is essential to financing Britain’s high-growth startups. We are writing a report looking at targeted tax reliefs for equity investment, namely the Enterprise Investment Scheme (EIS), Seed Enterprise Investment Scheme (SEIS), and Venture Capital Trusts (VCTs).

This Call for Evidence will feed into the report. We are interested in knowing what works and what needs reform. You can find the questions here.

We are interested in hearing from entrepreneurs, investors, researchers, or anyone who is part of the ecosystem. There is no expectation that you answer all the questions – short responses focused on specific issues are often the most useful.

The closing date is 7th October.

Friends of the Network

Enterprise Nation is working on a piece of research called 'Mentoring Matters' which seeks to understand the benefits of mentoring for businesses and also for those that mentor. If you would like to help them gather data on the impact of mentoring, you can fill out their survey here.

And if you would like to be a business mentor through the government’s Help to Grow: Management Scheme you can sign up here.

In Parliament

Accelerators have been a topic of interest in parliament over this past month. Gavin Newlands, the SNP MP for Paisley and Renfrewshire, asked the then Minister for Defence Procurement, Jeremy Quin, if he thought that the RAF’s ambition to reach Net Zero should be supported with a defence and security accelerator. The minister responded that they were investing a lot of money into the area and would look into such initiatives.

In a later debate he said: “Underpinned by a ring fenced £6.6 billion commitment to defence research and development, we are determined to innovate effectively and at scale. In addition to the well-established Defence and Security Accelerator programme this summer, we are launching the Defence Technology Exploitation programme, geared to supporting small and medium-sized enterprises and their innovative role in defence.”

In a debate on Procurement in the House of Lords, Conservative peer Baroness Neville-Rolfe talked about how we need procurement to be more pro-SME, saying: “We have to find some way to help SMEs. The Minister mentioned the billions going to SMEs, but that is compared to the £300 billion opportunity. There is a huge opportunity to grow the SME and social enterprise sector in the procurement area and to do it in a way that represents value for money – I am coming from that angle as well.”

The new Leader of the House of Lords, Lord True, disagreed with many of the amendments being brought forwards by the Lords, because he felt that they increased the burdens on small businesses. He said: “The paradox is that seeking to include extraneous requirements, which this and other amendments in the group risk, could make it harder for small businesses to bid for public contracts. One cannot talk the small business game, which noble Lords did strongly and fairly, while adding compliance requirements that make things harder for small businesses and help larger organisations to corner the market.”