TODAY, Silicon Valley Bank releases Innovation Economy Outlook 2014, its annual global survey of more than 1,200 executives of fast-growth software, hardware, cleantech and healthcare companies. It offers food for thought for entrepreneurs, investors and policymakers. Thankfully, the main course is a feast of optimism, although challenges remain.
Many stereotypes are rooted in fact – some aren’t. The broad assumption in the entrepreneurial circles is that entrepreneurs across the Atlantic are more optimistic than those in the UK; this assumption may need revising. Significantly, 84 per cent of UK executives surveyed are planning to grow their workforce this year, compared to 76 per cent in the US.
This optimistic outlook is based on facts. Only 6 per cent of UK respondents were unsuccessful in raising capital in 2013, compared with 13 per cent in the US; while three-quarters of UK businesses met or beat 2013 revenue targets. No wonder eight in 10 UK executives think business conditions will continue to improve in 2014.
Many of the respondents expect this growth to be on the back of innovation: 37 per cent of UK respondents see offering new products or entering new markets as their greatest opportunity this year, with scaling operations a close second at 30 per cent.
THERE’S ROOM FOR IMPROVEMENT
For politicians with an appetite for reform, Innovation Economy also points to a couple of areas where there’s room for improvement.
Debt is seen by many people as something best avoided – at least until you want a mortgage. However, there are times an entrepreneur is better off taking on debt than giving away equity (and vice versa). Among revenue generating businesses, one third of US executives say they took on debt, compared with only 14 per cent of UK executives. This suggests that the British bias against growth through debt remains prevalent or access to debt finance in the UK remains too tight.
The biggest challenge for UK innovation economy executives, however, also afflicts other countries: access to talent. The two biggest challenges in 2014 are scaling operations and recruiting and managing talent. The report notes: “While the vast majority of businesses want to hire, virtually all executives have a difficult time finding people with the skills and experience they need.”
The challenge is acute: 94 per cent of UK respondents consider it extremely or somewhat challenging to find the talent they need to grow; US executives think the talent pool is equally shallow. In this context, the negative political rhetoric and prohibitive visa system for British entrepreneurs looking to access talent outside of the EU is worrying. If our relationship is as special as is regularly claimed, politicians in the US and UK would do well to prove it by making it easier for top talent to travel between the two countries. The wealth of nations isn’t solely built on trade and the free movement of capital and goods, but also the free movement of people.
Innovation Economy Outlook adds to the growing weight of evidence that there is worsening talent shortage in this country. London Tech Advocates (TLA) recently found that 43 per cent of its members stated that a talent shortage is the biggest obstacle to growth for London’s tech sector. According to Russ Shaw, founder of TLA: “A lack of skills and challenging immigration legislation is inhibiting growth in the capital and threatening London’s position as a global technology hub.”
We should celebrate all positive news for Britain’s entrepreneurs; however, we shouldn’t get complacent – particularly when what’s holding us back is so easily and widely identified.
Philip Salter is Director of The Entrepreneurs Network (TEN) and a London Tech advocate.