The importance of small, high growth businesses to the UK economy
Thursday 6th March 2014, hosted at the London Stock Exchange.
Last week I went to the London Stock Exchange for one of the NEF’s premier speaker events. This was an evening talk on a Thursday after work, and given the venue and attendees, quite different from some of the previous talks I’ve been to.
The event was organised and put on by the NEF but the London Stock Exchange Group hosted us all and their CEO was one of the key speakers.
The format was a panel discussion around the importance of small high-growth businesses to the UK economy, followed by a question and answer session and then networking, food, and drinks.
Our illustrious panel was moderated by Katie Ledger, and consisted of;
- Xavier Rolet, CEO, London Stock Exchange Group
- Steve Pateman, Executive Director, Head of UK Banking, Santander
- Tim Barnes, Director, UCL Enterprise Operations and UCL Advances
The choice of panelists was brilliant, on one-hand you had the perspective and power of the London Stock Exchange and the wisdom of their CEO, on the other you had a very high profile and well informed banker, and in between you effectively had Tim Barnes, flying the flag for all start-ups and entrepreneurs in the UK. The dynamic was great and the discussion, which could quite easily have turned into a ‘banker-bashing session’, was well balanced and brilliantly steered by the moderator.
Xavier Rolet gave us some fantastic insight into his thoughts on the standings of UK start-ups, the community and culture within it, as compared to those of other countries, particularly the well talked about US. It was interesting to hear about the emergence and growth of the UK in terms of being a hotbed for successful start-ups and fund raising, but also how far behind we are in comparison to others. We’re making strong inroads towards catching up, but by our own track record, the number of UK based start-ups which have gone public in the last decade or two is tiny compared to in the US. There is also a somewhat concerning trend for successfully UK start-ups to simply sell out to larger US companies, and for the talent and value to be taken away from the UK market by this mechanism. The overwhelming hope of the speaker panel was that UK start-ups and founders would become less and less focused on exits to large overseas opportunities, and realise that it is now possible to become a global success without going to the US or elsewhere.
The other hot topic for discussion was financing of start ups, in particular the role that UK banks should or should not play.
It was proposed that in the UK there is a misplaced belief that banks should be doing more to aid early stage start-ups, through loans etc. and that they have a responsibility to do this.
As head of banking for Santander in the UK, Steve Pateman made his argument that debt financing via banks is not the right way to fund a start-up business, particularly not in the early stages. He reasoned that bank loans and other such means are not the right mechanism for funding start-ups, for both parties involved. For the banks, an early stage start-up is such an unknown and high risk that it is not an attractive or sensible prospect. And for the early stage start-up, servicing a bank loan and interest is not an easy or ideal way to go about things. Investment in exchange of equity, coming from VC’s, Angel Investors or similar; was proposed as the better solution. A lot of discussion went back and forth on this point, but general consensus from the other two panel members was that they agreed with Steve on this point. It was taken further though, to suggest that at later stages, once a start-up is established and proven to be successful or a viable prospect, then bank loans should definitely be made available to allow our start-ups to grow and scale successfully.