What British start-ups are still missing

This issue includes the new Spectator Money supplement, in which I hope you’ll find a bouquet of stimulating ideas. The cover piece by the enterprise campaigner Michael Hayman waxes lyrical on the important theme of investing in high-tech start-ups: important because it’s an exciting thing to do with the slice of savings on which you’re happy to take higher risks, but also because bold new businesses hold the key to future growth.

At a dinner hosted by Hayman last week, I met a selection of business founders and early-stage investors. The mood was one of optimism in what’s seen as an increasingly benign UK arena for start-ups, buzzing with world-class ideas and underpinned by programmes such as the Seed Enterprise Investment Scheme. But the impression I came away with was of a garden of British creativity that threatens to fall short of its full potential for lack of three kinds of fertiliser.

The first is education: our colleges don’t produce enough scientists and software kids, a gap that can only be filled by immigration — or by entrepreneurs moving to the US to tap the talent there. The second is finance: our venture capital pool is shallow, our private equity firms are rapacious, and our banks won’t touch start-ups. The third is ambition: to achieve scale, digital businesses need to tackle the whole of Europe as their target market — but few are both brave enough and sufficiently well capitalised.

Corporate cash

One way of overcoming problems of finance and market access, I learned, is through ‘corporate venturing’ — a concept which has had a mixed reputation in the UK since McDonald’s bought into Pret A Manger, and Innocent smoothies sold out to Coca-Cola. But we heard the example of Telefonica, the Spanish-based telecoms giant, which invests in many ventures in London through its Wayra ‘start-up accelerator’, offering the best of them access to Telefonica’s global networks.