99.3% of all private sector businesses in the UK are made up of small businesses, of which there are nearly 6m. But as the Federation of Small Businesses so worryingly recently summed up, “Small business confidence across the UK has collapsed in the face of unprecedented challenges created by the coronavirus crisis.” Also on the horizon: a possibly disorderly Brexit, which the OECD says could damage the UK’s economic recovery from Covid.
As the FT notes, that means that the UK will need to “invest heavily in digital infrastructure” and drive through reforms to raise productivity if it is to repair long-term economic damage. Clearly, ‘UK Plc’ will be unable to compete internationally if we can’t build and maintain a strong, stable entrepreneurial-driven SME sector, supported by new technologies, so as to drive innovation and success.
But there are also structural problems with making that happen that we’re probably only too familiar with, and which should have been dealt with a long time ago, to be honest. As the CBI has stated, growing UK businesses don’t lack strategy, ambition or talent; all too often, they’re not getting the advice and finance they need to take their business to the next level.
How do the entrepreneurs of tomorrow embrace new technologies to succeed?
Take AI (Artificial Intelligence). If I’m a US AI startup, I’m spoiled for choice on where to get financial help: the US government just announced a billion dollar fund for multidisciplinary AI and quantum computing research hubs; according to Statista, of all the $26.6bn invested in new AI startups last year, the majority, $16.5bn, went to American firms. And if I was a Chinese tech entrepreneur, I could draw on $70bn help this year, up from an estimated $12bn in 2017.
Rishi Sunak may be flashing the cash these days, but he’s putting his (our!) money into keeping the general economy going, not the tech sector. Yes, we have a great AI Sector Deal, but just look at the disparity: the government has earmarked it a budget of £0.95bn, supplemented with £1.7bn stemming from the Industrial Strategy Challenge Fund.
In any case, Whitehall tends to focus on slightly later stage startups that already have a proven market opportunity, so that support is limited in terms of supporting very early stage innovations, but on sheer money flow, America’s the Premiership on this scale of AI support; and we’re the Isthmian League.
Maybe I’m being too harsh. 2019 was actually a record year for private investment in UK tech, as it happens, hitting over £13bn, a figure up 44% over 2018, with fintech and AI being particular successes (the latter attracting a very healthy £3.2bn of City money). But the fact remains that we can see how much more investment is being put into the startup ecosystem in the US and China compared to the UK. Still, the question has to be, how do the entrepreneurs of tomorrow embrace new technologies to succeed?
You might not agree that they need new technologies. But for one thing, to quote the CBI once again, the most powerful routes to post-pandemic recovery centre on the UK investing in the industries of the future, from services and low-carbon innovation to tech and life sciences. And it turns out that AI is actually a ‘horizontal’ technology that can help many sorts of companies, from fintechs to retailers to developers of HR and educational software, and across all sorts of sizes, too–from SME to multinational, as they start to use data and advanced analytics to improve their products and services.
We have to be smarter than throwing money at everything and seeing what sticks
Essentially, if we could link up great new promising companies, especially in the technology area, with the established companies and grow an ecosystem, then good things will happen. From a UK Plc perspective, if we have great capability with AI and machine learning, we’d not only be driving the local AI startup ecosystem, it would be facilitating the wider startup ecosystem itself.
The UK doesn’t have billions to throw at this problem, as we’ve agreed. Actually, funding hasn’t dried up, but there was a definite pause in the early months of Lockdown when VCs wanted to make sure their existing portfolios were ok. Now, more pre-seed and seed startups are looking to crowdfund, which is fine, but not sustainable long-term. So we have to be smarter than throwing money at everything and seeing what sticks; we just don’t have the dollars or renminbi, and soon, access to EU science funding, to do it that way.
No, we have to be much more targeted at spotting the gems in the AI ecosystem and nurturing them as best as we can. We need to be leveraging the wealth of business expertise we have in the UK when it comes to setting up, running and scaling great businesses and be looking to connect experienced business advisors to mentor these great budding tech and non-tech entrepreneurs, to help them scale and grow the business. Another game-changer here: finding partner companies that can provide opportunities (use-cases and or raw data) for the startups to work on, providing market access and validation of the innovation being worked on by the startups.
How I am finding that eminently doable is that it’s what I do every day. I am working on building networks that means both tech and non-tech startup teams can find help and advice, both in terms of access to technology expertise but, increasingly, to sources of capital. The message has to be that tech is the key to our post-Pandemic and post-Transition Phase success–and by playing smart, we can unlock our competitive potential in ways that might actually be a lot more successful, long-term, than just spending our way there.