Being a European entrepreneur in the summer is a lonely occupation.
Being a European entrepreneur in the summer is a lonely occupation.
Most of Europe, from parliament to buyers, venture capital and schools, and sometimes entire Nordic countries take months off, yet small businesses can never sleep. Keeping on top of cash flow, funding and sales remains hot even when the British weather isn’t. You can’t leave a Muppet in charge and take too much time off, otherwise things could go bang – much like numerous holiday companies, who have folded just after cashing in everyone’s travellers’ cheques. Even my local pram shop in Notting Hill ceased trading a few days before delivering. How a pram shop in Conservative ‘meccaland’ can go bust in a baby boom I don’t know. Perhaps it reflects systemic risks in the economy, a new austerity Britain. More likely it shows the plain fact that banks are not loaning money to small businesses, or covering seasonal working capital needed to purchase goods.
Banks still do not understand small company borrowing needs. Our Moixa energy company spent most of last year failing to win any energy research grants. In the era of ‘McCavity’ Mandelson funding pots would be magically announced but prove hard to actually get hold of – disappearing as fast as a rotting quango or a political memoir from the bestseller list. However, suddenly we’ve actually won several, appearing like overdue buses from the last of the summer wine of European research budgets. We have a transformed future as euro-millionaire winners, able to catch up on our energy research and help the UKTI compete against our US colleagues. Only one small snag… grants pay quarterly in arrears, and winning so many together along with the usual match funding needs rather holes our working capital model. So now we have need of that great facility set up for this purpose – the ‘British High Street Bank’, or some of those financial introducers, manipulators, hedgers, persuaders in the city who like to move money around rather than risk trying to create it from scratch.
Our bank tells us they just can’t lend any money as overdraft or loan against contracted government R&D grants. No doubt because the government might go Greek after we’ve done the work, or maybe their original nice cuddly griffin has been replaced by an evil ‘Stewie’ Griffin off family guy. Other banks, even the green ones, typically want full personal mortgage security.
So welcome to the world of venture capital. Or at least the Isle of Wight of venture capital that is not currently on extended holiday. Sadly most of UK venture capital is fundamentally lost at sea, saddled with messed up portfolios of recession weary companies, or just acting as “vulture capital” picking off cash starved bargains. Even worse, we’re early stage – which should be a good thing, not saddled with debt and obligation, but naively optimistic, eager to play our growth business onto a global stage, flush with the added bonus of R&D cash grants, IPR and prototypes done, and full of hope for growth and the planet. We think we’ve nailed a significant future green technology, so everyone seems interested, but the frequent answer is a preference to wait until we’re a bit more desperate, hungrier, over mortgaged, or just need a larger amount sufficiently fat enough to extract a large enough commission or carry from. Many seem content to just keep or double their money, not bet on a UK growth business opportunity.
A friend of mine, Charles Armstrong, fed up with the local market, tried a crowd-funding route which successfully raised money recently for Trampoline Systems. The pure idea being that you extend beyond friends and family to find interested investors, the practical reality being that you can only connect with high net worth or sophisticated investors under UK FSA market rules – otherwise lots of glossy buildings in the city would be more empty and public market investors would be at risk of investing in something without understanding risks.
Thankfully it is these high net worth and sophisticated angel investors who are often the godsend of small businesses. These are not the ex buy to let property landlords, looking for another annuity to exploit. They are typically very high net worth individuals, who survived and landed on the right side of the last decade of growth and crunch, who can lend significant money at short notice, perhaps treated as a form of beer money, not so much looking for a good deal (i.e. discounted Dragons’ Den style culling or sport) but a good opportunity. One which if nurtured could actually become like their own successes, the sort of company that has kept Britain going and growing over the last century.
