Transcript: angel investors' meeting
This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government
Prime Minister and Lord Young chair panel discussion at Downing Street with business angels, entrepreneurs and professional advisers.
The Prime Minister and Lord Young have chaired a panel discussion at Downing Street with business angels, entrepreneurs and professional advisers, to share views on issues affecting the angel investment sector and discuss how we can improve the conditions for new enterprise in the UK.
Read a transcript of the Prime Minister’s speech and Q&A:
Thank you David, thank you very much and a very warm welcome.
I just want to say a few brief remarks and then take a few questions and points and then I’m going to hand over to David Young who’s going to run this morning’s session. And I think it’s absolutely excellent that David Young is back in number 10 Downing Street with his own office and with direct access to me. Margaret Thatcher famously said that other people brought her problems and David Young brought her solutions and I’m happy to say that 30 years on nothing has changed. Most people bring me problems, he certainly brings me solutions. He has direct access, he’s totally plugged into the entrepreneur and small business network and what you tell him and what you ask him will come straight back to me.
Now, my three points this morning. Now first of all, I don’t want to sound like Lord Kitchener, but your country needs you, really needs you. I mean, we clearly have a challenge getting economic growth going in our country and we have a massive challenge rebalancing our economy and providing sustainable private sector jobs. Now, there’s a huge amount that big business will do and medium sized enterprises will do to provide that growth and jobs and there are some good signs there. But I really do believe it will be small business creation, new business creation that will drive jobs and success for the future. And I think this agenda is more important than ever when you look around the world and you see how businesses can go from an idea in someone’s brain, a practical bit of work in someone’s garage to a multi-billion pound business in just a few years. I think that is the exciting potential of what new businesses and business start-ups provide. So, the first thing is as far as I’m concerned the people in this room the people in this room are absolutely essential to Britain’s economic revival.
Second point is I hope that it’s recognised that the government is trying to do what it can to help Angels and business investment. The EIS scheme and the extension of it, allowing a million pounds to be invested each year, having the income tax advantages of it that we put in place, having the new seed funding arrangements as well. Basically, we’ve taken your ideas and we’ve put them straight into the budget. So, we’re keen that we do everything we can to publicise what’s already been done. And there’s one particular thing that I don’t think many people have noticed and that is our sort of one year Olympic offer if you like. Which is if you put, if you realise a capital gain after 1st April 2012 and you put that capital gain into a start-up business, you will not pay any tax on that gain: not this year, not next year, not ever. It’s a huge sort of one-off offer to make this the year of entrepreneurialism and enterprise and Business Angels. So, please hep up to publicise what’s already there.
Third point though, I recognise that the job of encouraging this sort of investment is never done so if you have specific ideas or proposals that would help to get this agenda really motoring, let us have those ideas. There are only a few week to go before the budget, but as I hope you’ve gathered with this government there is not just a dialogue between Number 10 and Number 11, but the Chancellor and the Prime Minister have a meeting every morning at 8.30 to plan the day, the week, the month and another meeting every afternoon. We work together as you do in business: chief executive and finance director. That’s how the government works. It’s taken quite a lot to get use to here in Number 10 and the Cabinet Office. They find it rather surprising, they didn’t understand why we’re not fighting, but it does mean that the budget is jointly written by the Prime Minister, the Chancellor and indeed the Deputy Prime Minister. It’s a much more collegiate process and that means that what you feed into us here can make a real difference.
Final point and then I’d like to take some points and questions, which is the term Angel. Which I think is a good term - it’s nice to be an Angel, isn’t it? But it really means something because it means you are sitting on the shoulders and standing behind the people that you’re helping. And you’re not just helping them with money, you’re helping them with advice. And I do think that’s going to be particularly important at this stage of the economic cycle where lots of people have dreams and ideas of new businesses and actually the rate of new business formation is very great. The new Enterprise Allowance Scheme or instance, where unemployed people are starting their own businesses is really being taken up across the country. But they will need the mentoring, they will need the Angel part as much as the money part. So, please do all you can to do even more of what you’re doing.
That was all I wanted to say. You’ve got a top team here who will all be introduced in a minute. We’ve got a treasury minister here. We’ve got the Science and Technology Minister here and David Young’s going to host the session. I just wanted to take five or 10 minutes to takes points, questions, problems and worries from you so I can hear direct. So, who wants to kick off? Sir? If you could say who you are.
Some of our Angels have asked me to raise the question, I’m sorry to raise it…
…so early in the morning, about the bank situation in this process. We started a trial with Lloyds Bank, I think with BBAA involvement as well to try to get the banks to be part of this process too. It’s still a huge problem to get an overdraft, just an overdraft you know, for these young entrepreneurs. And by young I don’t mean by age, jut new to the market. The banks need to look at innovating approaches in terms of asset lending. We’ve got a company who are working with Lloyds together with BBAA to provide banks with a simple solution to this. But you know, the Angels are putting their risk, but the businesses need commercial lending as well to get them started.
Yes, I completely - look, I think we have to go both through the banks and round the banks as it were. Through the banks because we should be expecting the banks at this stage of the cycle to be increasing their lending. That’s what the Merlin Agreement was about and actually they have increased and met the gross lending targets that we set. But we also need to have specific examples where they’re not doing that. If you have specific cases you know, take them to the Secretary of State for Wales, bring them to me and I will take them up with the banks. But as well as that - and I think David will talk about some of the innovative schemes we’ve been working with the banks through for instance the Regional Growth Fund where they’ve agreed to set up specific lending schemes. I think we also ought to be looking at other innovative ways to get finance to small firms. Obviously via Business Angels, but also I think there’s quite a lot of new work being done on line where actually businesses can raise money from small investors. So both through and round, but I totally take your point: the pressure on the banks has to continue. Madam?
I just want to make you aware that a bank - and I don’t know if you know Professor Yunus - this is microcredit all over the world…
I think we need them on the streets of Britain. And they’re looking to come into England with microcredit for the people on the streets. I just wanted to make you aware of that.
No, I’m a big fan of Professor Yunus, thank you very much. No… thank you very much. Yes, I’m a big fan of Professor Yunus. I mean, he started this work really in Bangladesh where he’s been empowering women entrepreneurs and women business leaders, but the idea of microcredit and particularly microcredit that avoids people using loan sharks and very high rates of interest I think is an excellent idea. So I’m all in favour of that and trying to work out - it is difficult how much you try to regulate this sector. There are those that argue if you over regulate it, you push people into the unregulated sector. So, it’s a difficult one for government. We’ll try to get it right. But thank you for that, I will read that. Next one.
Beer and Partners representative:
Beer and Partners, Business Angel Network. You mentioned about regulation and the new online investment opportunities to raise finance. I think the government has to be careful how much support it gives to these. It is a regulatory area. Many of the crowd funding opportunities are illegal at the moment and I think there needs to be a whole clear up of regulations. Almost separate regulations to the FSA for Business Angel Network.
Right, okay. Well, we’ve got the experts here. They’ll be addressing those issues. I just think that look… We have to learn the lessons of the crash where the shadow banking network as it was known did not behave responsibly and then a lot of it sort of disappeared and that left a big hole in the market. So, we have to be careful not to create new methods of finance that aren’t sustainable. But I think the internet does offer opportunities for people to raise finance in innovative and also lower cost ways. So, we shouldn’t be - we shouldn’t close our minds to what is possible. But the way we regulate it, obviously we have to get right.
British Bankers’ Association representative:
Chief Executive of the British Bankers’ Association. I bring you solutions not problems because amongst the things that we are running from the BBA is the Bankers as Finance campaign which all the major banks are engaged with. And today on the website, we launch a new tool, a new assistance for start-ups to give all start-ups and help to Angel investors, start-ups access to packages and to a whole range of finance and, along with the mentors that are there also free to business, I hope, Prime Minister, that we are seriously playing our part and that that will be of great assistance to the economy.
Excellent, thank you very much. Gentleman here and then I’m going to take one more, then I’ll disappear.
Pavegen Systems representative:
I’m an entrepreneur, founder and director of Pavegen Systems. We make paving slabs that generate energy from footsteps and we’ve gone through start up process and seed funding from friends and family and recently closed the quickest ever funding rounds for the London Business Angels. Now, we’re going through a stage where we’re going from an SME of five or 10 people through to a medium sized company and we’re experiencing problems with it’s hard to access bank finance. To be a medium based in London it’s really expensive to suddenly go from an incubator to a base here with expensive office rates and council rates and all these things, you know, we’re looking at 150k a year for our first office, which is a huge step. And also setting up things like PAYE, it’s a huge burden and even staff retention, because these guys are getting sucked away to the financial sector, some of my best engineers and I’m finding it really hard. So I’m just wondering what are your thoughts around helping medium sized or small to medium sized companies with that funding gap?
Well, first of all, congratulations on what you’re doing and to getting through the incubator stage. I think this has been a historic weakness in the UK. We’ve been quite good at the Angel finance, we’re very good when it’s time to float your business on AIM or FTSE; you’ll find all sorts of people rushing to your door to help you. It’s the bit in between that can sometimes go wrong. Fortunately, in this room there’ll be a lot of people who can help you. One of them, from the British Bankers’ Association, is sitting right in front of you, so I can leave you to fructify. But I think this is an area where we need to examine, you know, what other countries do, Germany and elsewhere, of trying to help businesses in their growth phase from sort of the five to the 50. I think that is a very good point.
I’m very struck in government we’ve got quite a lot of resources that we should be using to help. One of the things I launched recently is the idea of using government space for people like yourselves who want to start up a new business and I visited a really interesting innovative space right above the New Zealand High Commission. A couple of empty floors that are now being used for incubator units and people who want to set up a business at night, so it doesn’t get in the way of their daytime work. So a lot of innovative stuff we can do, but I think expanding businesses a lot of that is about bank finance, because that’s before you’re going to get to further funding rounds and I hope you’ll find some help here today.
One more at the back, gentleman there.
I used to run a venture firm called Quester and I’ve written a guide for entrepreneurs called Angels, Dragons and Vultures. I’m here today because I’m on the investment committee of the new excellent Angel CoFund and that and many other government initiatives give more money to small businesses. I think they’re excellent.
How are things going at the other end of the scale, so using government muscle to help small businesses grow further through procurement, perhaps encouraging large companies to do more business with them?
Well, I think there’s some good news and there’s some mixed news. I think the government is being quite creative - I just mentioned the thing about space for entrepreneurs and start ups who can’t afford office space where government’s got lots of space, so we should be opening up the floors of departments for that to take place.
I think the other area where government is being creative is the release of data. I hosted a meeting here the other day to award the best app for iPads and iPhones and what was interesting, I think about nine of the 10 contenders for that prize were using data for their app that the government had released. And normally we think about releasing data that’s good, that’s freedom of information, it’s about the quality of democracy. Well, of course it’s that, but it’s also about new businesses. These were businesses telling you which hospital had the shortest waiting list, what school had the best results, which street you were most likely to be mugged on, etc, etc. Government data and the release of government data is a massive driver for new businesses that mash up and use that data.
So I think those agendas are going quite well. The procurement agenda, the figures are improving. I don’t have the exact figures to hand, but there’s been an increase, I think, from something like six to 12% of the government contracts that go to small businesses, but I think we can do better. I think we’ve got to get rid of all the pre registration, have one simple kind of one click stop to register to sell to government. There’s a big agenda there. We have the advantage of having a Minister in the Cabinet Office in Francis Maude whose job it is to deliver that, so I think we can do a lot more.
But I think one of the purposes of today’s meeting is if you can think of other things that government should be doing to help with this agenda. And it’s as I say with the release of information, it’s not always the first thing you think of that makes the difference, because, you know, government has to recognise it’s a player in these markets and its acts can make a big difference.
Anyway, that’s all from me. Thank you very much indeed for coming. I’m going to hand over to David Young. I wish you luck with this session this morning. We’re taking this issue extremely seriously, but above all, please go on doing what you’re doing and do more of what you’re doing. Thank you very much indeed.