Start me up: Creating Britains entrepreneurial ecosystem

A Barclays report, written by The Economist Intelligence Unit

3 Foreword
4 Executive summary
5 The shifting ground of the labour market
8 Growth of innovation hotspots
9 The UKs emerging innovation hotspots
12 Case study
14 Entrepreneurial challenges and opportunities
17 Case study
22 Conclusion
23 About this report
Contents
2
This report was written by Anna Lawlor and edited
by Zoe Tabary and Monica Woodley.
3
Foreword
With a competitive global market and rising social challenges such as youth
unemployment and an ageing population, there exists an opportunity to create an
environment here in the UK that values and practices lifelong enterprise learning; one
that encourages direct ownership and responsibility to respond to these challenges.
Entrepreneurs are a huge source of economic growth,
innovation and job creation. And in the UK they represent
a diverse cluster of individuals. New businesses, ranging
from tech start-ups to manufacturers and retailers, are
pioneering new products and services. From Bristol to
Leeds, Cambridge to Glasgow, entrepreneurs are thriving.
But there is much more that can be done to support
their growth.
Stakeholders of the entrepreneurial ecosystem must
share a willingness to think critically and creatively about
solutions. Together we must provide access to nancial
capital and human capital, the right education and
skills, a competitive business environment and clear,
non-onerous regulation that does not needlessly burden
business models.
The economic potential of entrepreneurs is tremendous.
And unless this potential is properly harnessed and
budding entrepreneurs provided with the skills and
resources they need to build their ideas into successful
businesses, the UK economy will not ourish in future.
This report takes a closer look at the entrepreneurial
potential across the UK and presents the opportunity to
understand how it can be better supported. It is based on
primary research undertaken by The Economist Intelligence
Unit as well as a roundtable discussion conducted at
The Escalator in Whitechapel, London.
I would like to take this opportunity to thank all those
involved for their contribution to this report.
Antony Jenkins
Chief Executive
Barclays
4
An innovation ecosystem refers to the combination
of factors for innovation that function together in a
symbiotic relationship. The real-word application is the
environment within which entrepreneurs function as one
integral component. This has a knock-on effect on the
broader economy, which thrives off the vitality of
innovative entrepreneurs.
This Barclays report, written by The Economist Intelligence
Unit, looks at how to create an environment where
entrepreneurs can ourish in the UK, drawing on best
practices from other innovation ecosystems around the
world. Based on in-depth interviews of entrepreneurs and
other experts, substantial desk research and social data
mining, its key ndings are listed below.
Entrepreneurial communities extend beyond the
capital, London, and South East England
London accounts for the largest share of online activity
relating to discussions about innovation and
entrepreneurialism, with a 48% share of voice. However,
the next largest shares of voice come from Cambridge
(9.3%) and Manchester (6.9%), and there is a clear
northern corridor stretching from west to east (Liverpool to
York). Mike Wright, Professor of Entrepreneurship at
Imperial College London, explains: We looked at the notion
that theres a golden triangle in the South East for
entrepreneurship in terms of access to nance, but found
Entrepreneurial Britain is beginning to ourish as policy changes and increased
investment in the UKs innovation ecosystem take root.
Executive summary
that some successful university spin-offs were actually not
located in the South East but were, nevertheless, able to
attract nance from there. Thats one example of where
the ecosystem isnt quite as location-based as we might
admit, and may suggest that we need different mechanisms
to stimulate a more virtual ecosystem rather than a
physical location.
The labelling of innovation hotspots produces a
compound effect that fosters entrepreneurialism
This view rewards an interventionist approach across the
education system, start-up incubators and centres of
excellence, which empower and facilitate British people
of all demographics to full their entrepreneurial potential.
In so doing, it is argued, thriving sector hubs and the
publicity buzz that accompanies them broaden equal
access to entrepreneurial opportunity, wealth creation
and employment.
Entrepreneurs are made, not born
Entrepreneurialism is not an innate trait, but rather
something that can be fostered with the right mix of learned
skills, access to opportunities and condence, according to
experts interviewed for this report. Government and the
school system alone cannot create entrepreneurs, but they
can send signicant signals about entrepreneurship, that
failing well (taking calculated risks and learning from
failures) is key to success, and that starting a business is
a viable and respected career route.
Creating an environment where entrepreneurs can
thrive requires a co-ordinated strategy covering a
range of areas
Encouraging entrepreneurial hubs beyond traditional city
boundaries, strengthening ties between education systems
and the business community, removing demographic-
specic barriers to entrepreneurialism and better matching
the funding needs of entrepreneurs are some of the specic
priorities that policymakers, businesses and academia need
to address.
5
The shifting ground of the labour market
This evolution has increased regional inequalities, and one
of the consequences of the 2008 nancial crisis on the UK
economy is that young people (aged 18-24) have borne the
brunt of unemployment and have been the most affected
by underemployment.
Employment by sector Percentage of workforce in each industry
The UK has evolved from a manufacturing- and product-based economy into
a service-sector- and knowledge-based economy.
Source: Ofce for National Statistics
1
.

Source: Ofce for National Statistics
2
.
1&2
http://www.ons.gov.uk/ons/rel/census/2011-census-analysis/170-years-of-industry/sty-170-years-of-labour-market-change.html
1841 2011
6
The nancial crisis prompted increasing numbers of
employers to introduce zero-hours contracts, giving them
the exibility to employ casual labour as and when required,
with none of the responsibilities associated with hiring
employees. Young people are again the most vulnerable
to such employment practices.
Research from the University of Stirling found that while
national underemployment rose to 9.9% in 2012, for
16-24 year olds the rate was signicantly higher, at 30%
4
.
Some argue that this has led educated and technologically
procient young people to discover their entrepreneurial
air, pouring their efforts into start-up business ventures
and turning to non-traditional funding routes such as online
crowdfunding sites Kickstarter and Indiegogo. However,
while the volume of newly registered businesses is growing
and is often heralded as a sign of ourishing British
entrepreneurialism, they could simply be reecting an
increase in bedroom businesses (a colloquialism for
businesses starting out of the home, requiring little or no
start-up funding) and in the number of people repurposing
themselves as self-employed consultants as a result of
redundancy. Such changes in labour dynamics can skew
what appears to be promising data about the true extent of
the UKs entrepreneurial activity on economic productivity.
There is concern that business start-ups are too easily
categorised as being entrepreneurial even though
many compete on price and service rather than by
providing a unique offering in the marketplace. This
increases the challenges of addressing barriers to
innovative entrepreneurialism and identifying new
Source: Ofce for National Statistics cited in Parliament
3
.
Youth unemployment compared with working-age
unemployment
3
http://www.parliament.uk/business/publications/research/key-issues-for-the-new-parliament/economic-recovery/young-people-in-the-labour-market/
4
http://www.stir.ac.uk/news/news-archive/13/april/meet-the-underemployed/name-44068-en.html
and commercially viable solutions to problems
because, while they are frequently regarded as the
same, entrepreneurs and start-up businesses often face
very different challenges and operate very different
business models.
Some, such as Martha Lane Fox, a serial entrepreneur,
believe there is not the same risk appetite among British
entrepreneurs as there is in the US or the EU. This creates
its own problem in that the British like to think there is
a rich seam of entrepreneurialism in their country when
in fact, Ms Lane Fox argues, there are limited examples
of British start-ups that have gone on to become
internationally-renowned brands and have remained
British companies.
Will Hutton, Principal of Hertford College, Oxford University,
and Chair of the Big Innovation Centre, says that the lack
of a British innovation ecosystem is a principle deciency
in the UK economy. One of the longstanding areas of
weaknesses has been nancing and commercialising
new ideas. However, he says change is afoot; the current
government is at last speaking the language of innovation
ecosystems, introducing entrepreneurial programmes and
putting forth government funding to support them.
Is it enough? No. Is it following the trend towards open
7
innovation, sharing, relaxing of intellectual property law
that needs to take place? No. But it would be unfair and
wrong to say that nothing has happened.
Business births by UK region
Source: Ofce for National Statistics.
2009
2010
2011
2012
The UK is a world
leader in tax-
incentivised seed
and angel investing.
Doug Richard, Founder of School for Startups
Doug Richard, Founder of School for Startups and a serial
entrepreneur, says that the UK is a world leader in tax-
incentivised seed and angel investing. The Seed Enterprise
Investment Scheme (SEIS) has, he says, increased the
likelihood of angel investment for very-early-stage British
businesses by minimising the risk as much as possible
for the investor. I dont know of any other country that
has anything as close to aggressive as that [in using
tax incentives].
8
Such public labelling has a compound effect; the soft power
inherent in the (often government-backed) promotion of
areas as innovation hotspots creates a honey-pot effect,
which subsequently attracts venture capitalists, big
consultancy rms and other specialist organisations that
attend to the needs of growing rms in complex industries.
Such labelling may also become self-fullling in terms of
encouraging a location-specic culture of entrepreneurialism,
with their own success cases and role models, enticing
would-be entrepreneurs from safe salaried roles to university
spin-offs in order to instigate their start-up plan.
Detractors of location-specic hubs contend that while
promoting hotspots attracts resources, infrastructure and
esteem for the few, the many other cities and large towns
across the country are excluded, their success stories and
role models eclipsed. Arguably, the approach contributes
to more acute regional inequalities and deepens a
southern concentration of wealth, opportunity access
and employment.
Clive Holtham, Professor of Information Management and
Director of Cass Learning Laboratory at Cass Business
School, says: Im pretty sceptical about [the idea] that
we can get scientic and business innovation through
large sums of money going to a few people. Centres of
Whether it is Cambridges Silicon Fen, Londons Tech City or Oxfords business incubator
centres, labelling locations as hotspots for technological innovation has become commonplace.
Growth of innovation hotspots
Excellence, for example, are part of the huge amount of
rhetoric and fashion in high-level allocations of money,
which give the impression that theres a top-down solution.
Its an ecosystem, so you need all the components.
Regional funding from GrowthAccelerator
schemes
Top 10 sectors funded by GrowthAccelerator
schemes
Source: http://www.growthaccelerator.com/ Source: http://www.growthaccelerator.com/
North East
North East
East Midlands
East
London
4%
9%
8%
9%
16%
16%
11%
12%
15%
South East
South West
North West
West Midlands
9
In order of conversation size Share of geo-located innovation content online Pulsar, developed by UK-based company FACE, is a social
data intelligence platform that is reinventing social media
monitoring, customer service and enterprise collaboration.
It scoured 200,000 posts over three months to
March 16 2014, mapping the UK locations that had the
highest volumes of online conversations about the search
terms innovate, innovation, entrepreneur or start-up.
While fewer than 5% of social media users make their
location publicly available, the ndings are an indicator of
where online conversations about entrepreneurialism and
innovation are occurring, when users choose to share
their locations.
While London tops the list with 7,705 results, northern
cities are prevalent, with a clear corridor stretching from
west to east (Liverpool to York).
While not statistically signicant, the ndings caution against a narrow
conception of entrepreneurial communities thriving only in southern England.
Source: Pulsar.
While academic examination of Britains entrepreneurial community draws from hard, statistical
and often lagging data, social data (from publicly available social media conversations) provide
an alternative bottom-up perspective, taking the pulse of entrepreneurs what they actually
talk about and how they communicate with key stakeholders and each other.
The UKs emerging innovation hotspots
City Number of results
London 7,705
Manchester 426
Shefeld 202
Edinburgh 189
Liverpool 166
Glasgow 153
Oxford 152
Nottingham 147
Darlington 136
Leeds 132
Brighton 130
Birmingham 130
Bristol 127
Cambridge 107
Poynton 106
10
Locations of high-volume social conversations
about innovation
In order to extrapolate more comprehensive social data,
Pulsar applied a smart lter to all publicly available social
content on the Internet, irrespective of users set locations.
High-density urban areas and high-ranking universities are
both widely considered to be key factors inuencing the
emergence of an innovation ecosystem.
Clustering can bring positive productivity benets for
individual sectors, although the effect is nearly always
outweighed by the importance of being in a large urban
environment, the Manchester Independent Economic
Review stated in its 2009 report, The Case for
Agglomeration Economies
5
. The report went on to argue
that larger cities make it easier for different types of
workers and rms to nd each other, which chimes with
the view of Jaideep Prabhu, Jawaharlal Nehru Professor of
Business and Enterprise at the Judge Business School of
the University of Cambridge (England). He says that city
dwellers are at a greater advantage, particularly those
connected to universities, because there is a constantly
replenishing supply of diverse communities and young,
educated people with fresh ideas.
Mark Glover, Director of Business Planning at the
Technology Strategy Board, adds: Innovative people with
bright ideas are an important element of any localised
cluster. High-calibre universities are likely to attract and
train these people, and often have additional infrastructure
(such as science parks) to help commercialise ideas.
This is the case with Cambridge, Silicon Valley and
Stanford University.
By combining the UKs top ten universities
6
, top ten urban
cities (by population size)
7
, plus locations that Tech City
named as Cities to Watch for innovation
8
, 18 key locations
were added to Pulsars data lter: London, Birmingham,
Leeds, Edinburgh, Glasgow, Shefeld, Bradford, Liverpool,
Manchester, Bristol, Newcastle, Cambridge, Oxford,
Durham, Bath, Exeter, St Andrews and Warwick.
The Pulsar data nd that London still accounts for the
largest share of online activity (48%) relating to discussions
about innovation and entrepreneurialism. The next largest
share comes from Cambridge (9.3%), Manchester (6.9%)
and Oxford (5.9%).
The next largest cities by population after London
Birmingham, Leeds, Glasgow and Shefeld do not
have a corresponding share of voice. Rather, the social
conversations about innovation, entrepreneurs and start-ups
are happening in Cambridge, which is not a high-density
urban area and is situated in a region that has received just
9% of the governments GrowthAccelerator funding.
However, its world-renowned university (as with Oxford)
has become known for university-based technology
spin-offs. Cambridge University has a portfolio of 68
companies including ARM, the worlds leading
semiconductor intellectual property supplier, valued at
12bn
9
(US$20bn) which have raised over 800m in
further investment and grant funding, and together
generate an annual turnover of 170m
10
.
Manchesters proportion of the share of voice leapfrogs that
of larger cities, including neighbouring Leeds. Again, academia
appears signicant as Manchester Business School is the
second most highly-ranked for postgraduate entrepreneurship
courses in the UK
11
, behind University of Cambridges Judge
Business School. The city was also listed by Tech City as a
City to Watch
12
along with Birmingham, Bristol and
Newcastle and at the time of the data collection had just
announced that it had been awarded 1.5m in government
funding for a Social Enterprise Accelerator scheme.
5
http://www.manchester-review.org.uk/projects/view/?id=718
6
http://www.thecompleteuniversityguide.co.uk/league-tables/rankings
7
http://www.ukcities.co.uk/populations/
8
http://techcitynews.com/2014/02/27/the-battle-for-britains-next-tech-city/
Source: Pulsar. The remaining eight locations accounted for less than
2% of share of voice.
London 48%
Share of voice of the 18 selected cities in
topic-specic conversations
Cambridge 9.3%
Manchester 6.9%
Birmingham 4.9%
Leeds 3.1%
Bath 3%
Bristol 3.2%
Edinburgh 2.8%
Liverpool 2.7%
Oxford 5.9%
11
9
http://www.digitallook.com/companyresearch/10111/ARM_Holdings/
company_research.html
10
http://www.enterprise.cam.ac.uk/industry/portfolio-companies/
11
http://www.best-masters.com/ranking-master-entrepreneurship.html
12
http://techcitynews.com/2014/02/27/the-battle-for-britains-next-tech-city/
Source: Pulsar.
London Cambridge Oxford Manchester Birmingham
1 new new new new new
2 time university world business business
3 years time university time time
4 world world years people 2014
5 year year time world rms
6 help years work 2014 years
7 good technology people years people
8 technology home best united year
9 business good business Leeds free
10 university group research start work
This funding-related conversation vacuum could either
be considered cause for concern a sign that government
initiatives are not truly trickling down to the entrepreneurial
communities that they are designed to support or cause
for celebration, if social silence indicates that further
debate about funding options is unnecessary because
entrepreneurs are condent in their access to resources
and simply do not wish publicly to discuss their
nancing needs.
The social conversations within each location also reveal
the nuances of their specic ecosystems. While social
conversations mentioning London have a large share of
voice, the data show that the noise is crowding out any
nuances, highlighting each of the key topics as equally
connected to each other (see chart below). By contrast,
the Manchester data set identies an infrastructure for
supporting young entrepreneurs in fast-growing creative
elds such as game development.
City-to-city connections
In terms of evidence of locations participating in a
broader, national ecosystem, one might expect a high
level of referencing of other locations when discussing
innovation. This is true for London, which mentions
Cambridge, and for Cambridge and Birmingham, which
mention London, during online conversations about
innovation and entrepreneurialism. The highest volume
of location-referencing posts comes from Manchester
discussing Leeds in this context (it is the ninth most
mentioned keyword), which could reinforce the concept
of the northern corridor.
However, inter-connectedness between locations is lower
than expected and social conversations regarding Oxford
do not mention any other location. Oxford also produces
university-based spin-off companies, with a similar number
to Cambridge at 65, and currently valued at 40m, so it is
surprising not to see the data represent a more similar
social conversation pattern.
Content clusters from online conversations
Across all 18 locations, social networks are dominated by
conversations about technology, new techniques, social
innovation and, interestingly, Cambridge. Twitter as a
channel tends to be more London-centric, with a high
prevalence of start-up, business-centred conversations
involving innovation and entrepreneurialism. Universities
and related topics such as college admission courses,
studies, degree and prestigious university are all very
prevalent in these online conversations, but particularly
conspicuous is the absence of social discussions about
funding, crowdfunding, business loans, grants, investors, or
even tax breaks and government schemes for entrepreneurs.
Top 10 keywords mentioned by each location
12
As can be seen in the associated chart, large nodes
in the network universe indicate very active online
participants, with the Centre for Entrepreneurial
Learning (CfEL) Cambridge the most active during
the data period.
CfEL Cambridge is a not-for-prot organisation based
in Judge Business School, which provides courses for
undergraduate, postgraduate and non-academic
aspiring entrepreneurs designed to share best
practice, unlock entrepreneurial potential and plug-in
attendees to a network of CfEL Cambridge alumni,
mentors and facilitators
13
.
Virgin StartUp, a not-for-prot organisation that
promotes business nancing through its partners
(including Virgin Money) and then connects
start-ups with business mentors
14
, is the second-
largest inuencer in the data set. The third is
Interestingly, the Pulsar data nds that accelerator programmes and those providing
funding guidance and introductions to funding resources are key inuencers across
the social web.
Case study Accelerator programmes dominate
online conversation in the UK
13
http://www.cfel.jbs.cam.ac.uk/aboutus/index.html
14
http://www.virginstartup.org/about/what-we-do/
15
http://www.entrepreneurial-spark.com/the-accelerator.aspx
Inuencers network
Source: Pulsar. Includes smart ltered data.
Entrepreneurial Spark (ESparkUK), a business accelerator
in Glasgow, Edinburgh and Ayrshire that offers free ofce
space, IT and structured support for 18 months to high-
growth, early-stage businesses with an annual turnover of
less than 1m
15
.
This data indicates that sources of practical support
and funding provisions are integral to the online
conversation about high-growth businesses and
start-ups in the UK and a valuable social signal
guiding entrepreneurs to resources and role models.
13
London data set: inter-related key topics Connection in social conversations between Game
Design and other key topics development,
training and young entrepreneurs
In the bundle chart below, the prominence of this virtual
ecosystem linking the key categories of game design,
development, young entrepreneurs and training is
visible. This topic was sparked by Twitter engagement
related to the announcement of a Manchester-based game
design studio providing training in game design and
development for young entrepreneurs.
Today, the UK is the fth-largest video-game developer in the
world, with the sector contributing 947m to GDP in 2012,
employing more than 9,000 people in game development
and indirectly supporting almost 17,000 further jobs,
according to trade association, TIGA
16
. What the social data
does not show is that the young entrepreneurs to whom the
game developers are appealing are themselves promoting
innovation in this space. Engagement in social media
includes relatively passive actions such as forwarding
and liking content posted by others in this case, a
game design studio not necessarily commenting on
the post, although the content is being digested by its
intended audience.
A similar innovation ecosystem is evident in the Cambridge
data set, with the key topic co-founding group mentioned
in the same posts as pharmacology and prestigious
university. Top tweets during the period feature hot
Cambridge shares and content about the Cambridge
Satchel Company expanding into China. The Pulsar data
nds that technology is not as strongly linked to academia-
related topics as might be expected; instead technology
is mentioned in conjunction with social innovation, new
technique and world.
In the Manchester-related social conversations, the
governments announcement in January of a 300m tax
break for retail businesses around the UK appears to have
gained signicant traction in online conversations, as it is
featured in the data as a key topic. While this looks positive
on the surface, when the data is analysed it shows that this
topic of tax breaks is the result of digital publishing, rather
than social conversation; traditional news publications
reporting online and sharing news of the tax break across
their social media accounts.
Manchester data set: relationship between
300m tax break topic online
16
http://www.cbi.org.uk/about-the-cbi/business-voice/february-march-2014/creative-industries-gaming/
Source: Pulsar Source: Pulsar Source: Pulsar
college-admission courses
college ofcials
co-founding group
costly lab
pharmacology
studies
potential
social innovation
cambridge
degree
startup
technology
time
london
tech entrepreneurs
game design
leeds
dev
training
young entrepreneurs
bizitalk
liverpool
startup
business
manchester
entrepreneurs
300mtax break
retail rms
innovation
tech entrepreneurs
game design
leeds
dev
training
young entrepreneurs
bizitalk
liverpool
startup
business
manchester
entrepreneurs
300mtax break
uk
nhs technology
nhs boss
retail rms
cbe
innovation
14
Fostering tomorrows Generation Creative
Too often innovation is considered from a top-down
perspective and too rarely from a bottom-up, child-centric
solution for creating the UKs future generations of
entrepreneurs, say experts. Prof. Holtham claims that Britains
school system limits creative thinking because it does not
reward a diversity of approaches, which means that the
UK produces young people ill-equipped to become
tomorrows entrepreneurs.
Unless you address the education system, either within
schools and universities or subsequently in adult life, youre
never going to achieve a satisfactory level of innovation in
society, he explains.
The role of further education is equally important as higher
education in creating a UK entrepreneurial ecosystem. Gazelle
Colleges Group, which launched in January 2012, operates
entrepreneurial programmes within 22 colleges around
the UK, providing applied learning models and working
strategically with local enterprise partnerships, students and
employers to develop entrepreneurial capacity in those local
communities
17
. In higher education, the Peter Jones Enterprise
Academy
18
works with 31 regional colleges to provide
one-year practical learning by doing courses designed
to provide young people with the skills and condence to
think like an entrepreneur and potentially start a business.
To address the question of how best to power the UKs economy by empowering its
entrepreneurs, a host of eminent thinkers and doers in the eld of entrepreneurialism were
consulted. Here, they share what they perceive to be the biggest barriers prohibiting
innovative businesses from thriving in the UK, and set out proposed solutions.
Entrepreneurial challenges and opportunities
17
http://www.gazellecolleges.com/about-us
18
http://www.pjea.org.uk/about-us
Source: Rosan Bosch.
Telefonplan school in Stockholm, Sweden
15
Borrowing from the Latin root of education, Prof.
Holtham says that education at all levels in the UK needs
to draw out the intrinsic creativity of people, be that
creativity in conceiving an idea previously unimagined or
in generating an alternative approach to systems and
operations. To ourish, he says, the innovation process
needs all types of people, generally working together
in teams.
Jane Chen, Co-Founder of Embrace, believes that the types
of workshops undertaken in graduate and postgraduate
design and entrepreneurialism courses can easily be
adapted to and introduced at an earlier stage in the
education system, as well as within existing companies,
to help cultivate a creative approach. Such workshops are
based on an understanding that all brainstorming and
approaches are valid, with no judgement from any
participants made if an idea is outlandish or does not work.
Organisations such as Google have long advocated and
provided creative work environments for their staff in order
to assist work-based creativity. In the UK, companies such
as Mind Candy in London, Melbourne Server Hosting in
Manchester and Virgin Money in Edinburgh have followed
this trend
19
. This prompts the question of whether Britains
schools should consider introducing similar liberal and
design-led ideas, such as those embedded in Swedens
Telefonplan school, which emphasises both independent
and collaborative working. It is argued that traditional work
spaces from formal education through to the workplace
quash creativity and collaborative working, which is now
a prerequisite for a technology-enabled workforce and a
service-driven economy.
Prof. Holtham relies on the academic model of innovation
for courses at the Cass Business School, an ecological
Creative Problem-Solving (CPS) model in which the four
components Product, Process, People and Place
all positively interact with each other. He argues that
policymakers and business leaders attention is too
narrowly focused on product-based innovation or place-
specic entrepreneurs.
Eze Vidra, Head of Campus London and Google for
Entrepreneurs Europe, says there needs to be an alternative
education outside the formal education system, where the
need is biggest as there are no professors on tap and no
access to classroom facilities or resources. He points to
schemes such as Googles Campus for Moms
20
, which is
a baby-friendly eight-week start-up school, at the end of
which the participants pitch their business idea to course
leaders, guest entrepreneur speakers and venture capital
investors.

Demographic-specic barriers
According to the Womens Business Council
21
, the
entrepreneurial gender divide is robbing Britain of more
than 1m more entrepreneurs; total entrepreneurial activity
in 2012 (calculated as the proportion of the working-age
population either in the process of starting a business or
running a new business) was 11.6% for men compared
with 6.3% for women.
As Ms Lane Fox says: Women dont need special
treatment, they are not disadvantaged by anything other
than long-rooted cultural reasons, illustrated by claims
that men are neurologically hard-wired differently to
women, making them innately more entrepreneurial.
Examples of misogyny facing women in certain sectors,
including science, technology, engineering and
mathematics (STEM) are prolic. In such a culture it is
unsurprising that, statistically speaking, women do not
full the typical prole of an entrepreneur; this is a
consequence rather than an explanation.
Kathryn Parsons, Founder of Decoded, a technology
education business, says research on Decoded pupils
found that women are generally 30% less condent than
their male counterparts in believing they can master
coding. Childcare issues also provide a challenge to
professional women, who continue to be primary care
givers despite increases in exible parental leave. The pace
of technological change magnies any period away from
work, yet the benchmark for basic digital literacy in the
UK is frighteningly low, and the economy cannot afford
to exclude women from future digital business,
Ms Parsons adds.
It is not just women who face having entrepreneurship
institutionalised out of them, as Jill Huntley, Managing
Director for Corporate Citizenship at Accenture puts it,
but older people too. While the potential for engaging this
demographic in entrepreneurial activity is huge (there are
3.6m people in the UK aged 50-64 who are not
economically active), too often the focus is on fostering
young entrepreneurs.
Unless you address the education
system, either within schools
and universities or subsequently
in adult life, youre never going
to achieve a satisfactory level of
innovation in society.
Clive Holtham, Professor of Information Management and
Director of Cass Learning Laboratory, Cass Business School
16
Alastair Clegg is Chief Executive of The Princes Initiative
for Mature Enterprise (PRIME), which is the only national
organisation dedicated to providing over-50s with the
support to set up their own business. He explains that
while many people dream of starting a business in their
30s or 40s, they can be hindered by family and nancial
commitments in a way that over-50s are not.
There is enormous entrepreneurial zeal in this age group,
he says. What we do is give them condence and point
them in the right direction of what steps they need to take to
start a successful business, such as getting a business plan
in place or seeking advice from mentors. The over 50s tend
to have the skills so its more about demystifying the process
and giving them the right tools so they can get up and
running. Fear and a sense of risk-taking comes from not
understanding how something works or what to expect
areas that can be demystied through coaching and support.
Programmes that aim to dismantle the barriers affecting
specic demographics should be applauded, but Ms
Huntley urges corporations to facilitate change within their
organisation. Given the future of work and the structural
changes to the economy, in order to grow established
businesses there needs to be a better cultural pipeline of
innovation and entrepreneurship and some of that needs
to come from inside the company, she says.
We run a number of programmes internally to try and
open the innovation mindset and encourage employees to
bring ideas, and [for us to] provide mechanisms of funding
those and spinning them out if necessary, she adds.
The role of universities in seamlessly moving
entrepreneurs into the business environment
University spin-off companies are not new, but Mr Hutton
argues that British universities should shift away from their
extremely conservative view about intellectual property
rights and about how to divide any commercial gains
emanating from university spin-offs, to adopt what he
described as the MIT or Stanford model.
He says that the US benets from universities attracting
companies, which support emerging entrepreneurial
ventures by acting as a bridge from academia to business.
By linking the entrepreneurs with inuential alumni in a
mentoring and networking capacity (as was the case for
Embrace Innovations), universities are able to fast-track the
commercialisation of early-stage ideas.
Mr Hutton further suggests that promising university
projects could be funded by embedding grants into the
participants PhD or masters degree to fund their
development for a further one or two years, effectively
buying time to enable an innovative concept to be
developed to a commercial level on completion. Its very
hard in academic life simultaneously to be an entrepreneur
and have an academic career; the system is not structured
to help you do that. Universities are not as signicant as
they should be.
According to Prof. Wright, UK universities are already moving
away from the traditional approach of commercialising
entrepreneurial activity through licensing agreements and
equity stakes in spin-offs, and moving towards gaining from
indirect returns. He identies these as being the virtuous
cycle of successful alumni providing practical business
19
http://www.telegraph.co.uk/nance/jobs/9640237/
Top-10-coolest-ofces-in-UK.html?frame=2383634
20
http://googleblog.blogspot.co.uk/2013/07/campus-for-moms-
helping-women.html
21
http://womensbusinesscouncil.dcms.gov.uk/appendices/
support to entrepreneurial students, which makes alumni
more invested in the university and likely to donate nancially.
I think the US has been better at that than the UK but
were starting to see a connection between two areas in
universities that are quite separate: the development ofce,
which is trying to convince alumni to donate, and the
ofces that are trying to promote commercialisation,
Prof. Wright says. For example, the National Centre for
Entrepreneurship Education, based at Coventry University,
launched a programme called Make It Happen, which has
helped with the launch of 1,900 new businesses since 2009
by providing resources, tools and online mentoring for
graduates starting up a company.
David Gill, Managing Director of St Johns Innovation Centre
(owned by St Johns College, Cambridge), says that despite
some 20 years of policies to encourage universities to
provide a link with the business community so that
university-associated enterprises can ourish commercially,
this remains a missing piece in the majority of
[UK] universities.
Mr Gill advocates collaboration between universities and
hubs of entrepreneurial activity, such as innovation parks
where pioneering start-ups with the potential for high
growth are provided with exible and subsidised work
space and supported by ancillary services based in the
same place. He explains that gatekeepers who understand
the needs of both sides are vital, and encourages
university students to undertake work placements within
start-up businesses, so that they can share and apply their
knowledge in a business setting, while the start-up benets
from a students expertise at no cost.
17
Case study Turning a crisis into an opportunity: Embrace
which allowed them to consider the challenge of
regulating a neonates body temperature unburdened
by medical preconceptions.
She believes corporations would benet from bringing
that diversity of backgrounds and viewpoints into their
work and encouraging innovation-based corporate
spin-offs in the same way as universities do.
Ms Chen also advocates vertical integration of the
supply chain, such as manufacturing and sales, areas
that the team rst assumed could be outsourced to
third parties. Youre selling a brand new concept, which
doesnt plug into any existing sales infrastructure. We
tried to partner with third-party distributors and even
multinationals and that simply did not work. So, for
ground-breaking ideas, I think you need vertically to
integrate to some extent, she explains.
Consequently, Embrace has developed a small-scale
manufacturing, training and sales team, which Ms
Chen says not only gives Embrace end-to-end control
of its product, but also provides insights into the price
point, effective sales pitches, control over how its
product and brand is positioned in its market,
as well as product-specic feedback.
While improvements have been made to the UK
innovation ecosystem, it is still considered to be
some way behind in many areas compared with the
US. By contemplating the journey of a successful,
innovative enterprise that follows what will later
be discussed as the Stanford model, British
policymakers and business leaders can take heed
of, and even enhance, similar factors and practices
in order to strengthen the UK innovation ecosystem.
During her MBA at Stanford University, Jane Chen
and her peers on a multi-disciplinary entrepreneurial
design for extreme affordability class created the
worlds rst low-cost baby incubator, which costs
about 1% of the usual US$20,000. What started
as an academic challenge evolved into the award-
winning social business, Embrace Innovations,
which has distributed Embrace Warmers that
have reached over 60,000 hypothermic infants
in 11 developing countries around the world
23
.
Process: design-led innovation
Ms Chen asserts that the design process can be
taught and fostered across academic and business
elds, drawing on the creativity inherent in each
individual. That process is to understand the problem;
list the criteria required to address the problem; use
rapid low-resolution prototyping and iteration based
on trial and error; and to co-create with the end user,
not just in terms of receiving feedback but in order to
understand the ecosystem around something thats
going to make your product successful or not.
The Embrace Warmer uses an innovative wax incorporated
in a sleeping bag to regulate a babys temperature. It stays
warm without electricity, is safe and intuitive to use
a crucial factor given the high numbers of babies born
in remote rural areas, without access to hospital facilities,
meaning that family members need to be able to operate
the product themselves.
The entrepreneurial structure
Pulling together multi-disciplinary teams is also
important, Ms Chen says. The Embrace project
team originally comprised an electrical engineer,
an aerospace engineer, a computer scientist and
(in Ms Chens case) a public health professional,
Corporations would benet
from bringing a diversity of
backgrounds and viewpoints
into their work and encouraging
innovation-based corporate
spin-offs in the same way as
universities do.
Jane Chen, Co-Founder, Embrace
18
Ecosystem support for entrepreneurs
Stanford University played a critical role in
assisting Embrace, not least by facilitating
access to other inuential stakeholders
and funding opportunities. Embrace won
US$125,000 in seed funding from the
Stanford Business Plan Competition, and
Echoing Green Fellowship awards.
As a non-prot organisation, Embrace receives
contributions from foundations and individual
donors, as well as a small percentage of funding
from royalties on commercial sales of the infant
warmer to governments and private entities that
can afford a low-cost solution to neonatal
hypothermia. Both Stanford and Echoing Green
Fellowship additionally provide access to their
respective alumni and partners, which Ms Chen
considers to be crucial in Embraces success.
23
http://embraceglobal.org/who-we-are/mission-impact/
19
Could valuing intellectual property unlock
mainstream start-up lending?
Prof. Wright considers funding less of a barrier for
entrepreneurial start-ups because the initial costs for many
knowledge-based businesses are now low. However, Mr
Hutton advocates Britain creating its own market for
intellectual property, which he believes will create more
mainstream lending opportunities to start-ups that would
otherwise not qualify for such funding.
British businesses now invest more in intangible assets,
such as intellectual property, branding and design
investing 138bn on knowledge assets in 2011 than they
do in buildings, engines and machinery (90bn in 2011)
24
.
That such assets are currently unbankable, according to
the Intellectual Property Ofce
25
, provides a huge
opportunity for new nancial instruments to unlock this
latent value. In its recent report, Banking on IP: The role of
intellectual property and intangible assets in facilitating
business nance
26
, the Intellectual Property Ofce stated:
Balance sheets do not represent their value, and current
regulations actively work against consideration of IP
(intellectual property) as an asset class but the result is a
real and important disconnect between banking regulation
and practice and the UKs ambition for growth.
Mr Hutton explains: One of the interesting developments
in the US has been NCAB, a company that underwrites the
value of intellectual property, against which banks can lend.
This gives inventors and entrepreneurs some prot but also
gives bankers some comfort that even though nothing has
been commercialised, there is an idea behind the potential
commercial venture that has some intrinsic value.
As Chair of the Big Innovation Centre at The Work
Foundation, Mr Hutton supports the creation of a
government-backed national Innovation Bank, which would
draw together some of the UKs biggest companies, such
as GlaxoSmithKline and BAE Systems, with a university
consortium including Oxford, Cambridge and University
College London. The vision is that such an Innovation Bank
would develop insurance schemes to underwrite the value
of intangible assets, as well as mentoring UK businesses
and players in the nancial sector, including banks and
venture capitalists.


However, Mr Richard is critical of any move to foster a
market for intellectual property, encouraging nancial
institutions effectively to value concepts before any
commercially viable product or service has been produced.
Theyre taking a notion at one stage of a business with the
type of activity that happens at a different stage and saying:
if we realise the intellectual property and give it an asset
value, then [start-up businesses] could borrow against the
asset. Its not the lack of asset backing that stops them
from getting a loan at that stage of the business, its the
lack of serviceability on the loan, he says.
The future of seed-stage funding is social
While advocates of an IP valuation market believe this
could help start-ups gain funding at seed stage, Mr Richard
thinks this is unlikely because traditional bank loans hinge
on two questions: can you pay back the loan; and, if you
cant pay the loan back, what asset can be claimed in
its stead?
If the business is failing then the intellectual property may
have been proved in the marketplace to be of no value, he
says. At seed stage, the business is simply a concept, a
dream, a desire. Simply valuing IP does nothing to free
start-ups from reliance on investments from the three
Fs family, friends and fools because the concept is not
asset-backed.
Instead, he offers, social loans can provide a solution. They
are unsecured loans provided under very different lending
criteria to traditional loans (designed for start-ups) by
commercial nancial institutions and underwritten by the
government, with a low nominal interest rate of 6%.
Loan recipients are matched with a business mentor to
guide the deployment of the loan funding wisely and to
pass on real-life experience that the mentor has gained by
being a successful entrepreneur. The average loan size is
6,000 and School for Startups is the largest delivery
partner of the Start Up Loans scheme in the UK, through its
launcher programme, says Mr Richard. Social lending is
interesting because it preserves the entrepreneurs equity.
People think that a loan is worse somehow than the sale of
equity, but in truth the sale of equity is the most expensive
money youll ever spend, if you succeed, he adds.
Social lending is interesting because it
preserves the entrepreneurs equity. People
think that a loan is worse somehow than
the sale of equity, but in truth the sale of
equity is the most expensive money youll
ever spend, if you succeed.
Doug Richard, Founder, School for Startups
24
http://www.theguardian.com/business/2014/may/04/innovators-mcam-knowledge-underwriter-value-intangible-assets-intellectual-property
25
http://www.ipo.gov.uk/ipresearch-bankingip-sum-281013.pdf
26
http://www.ipo.gov.uk/ipresearch-bankingip-sum-281013.pdf
20
However, Mr Richard believes that the UK government
could be more innovative itself in its funding strategy for
entrepreneurs. Traditional loans, he says, do not t
start-ups because they typically have a volatile cashow
yet loans require regular repayments. Instead, countries
such as Colombia are creating custom nancial
instruments to suit the start-up, be that a stepped
acceleration in interest rate towards the end of the loan to
encourage quicker repayment sooner or a certain
percentage of the loan to be repaid depending on varying
revenue levels.
Mr Richard says such approaches defy traditional lending,
but lending to start-up business has never been part of the
traditional banking remit because it is deemed too risky.
That risky element of the market in developed economies
can be addressed, he explains, by borrowing and adapting
innovative approaches that work well in developing
countries where they seek to assist the unbanked (people
excluded from the banking sector).
Combating sell-out gazelle companies
The fact that UK technology start-ups being snapped up by
far larger US competitors on an acquisition bent is so
celebrated in the UK highlights ambition and scale
barriers that could be partially geographic, suggests Ms
Lane Fox. If youre born in the US then your home market
is immediately 300m people, which gives you a different
idea of scale and ambition compared with the UK, where
the home market is 60m people. To get access to real scale,
you have to go into Europe and thats harder, she says.
Start-up Loans: Key stats and demographics
Source: www.startuploans.co.uk
21
Mr Hutton agrees: The Americans have a single market.
The market in Europe is for marketing manufactured
goods, not in knowledge services, where all the action is.
That makes it very difcult for British entrepreneurs to pitch
their start-up capital with any chance of building a billion
dollar corporation, because the single market in which it
might do that doesnt exist.
At the heart of the Eurozone project is the concept of
borderless free-trade movement (of people and goods) but,
unlike in a domestic single market the size of the US, UK
companies face different legal and administrative
environments, different languages and cultural nuances on
the Continent, as well as the need to select a suitable
corporate structure for expansion whether to franchise,
partner or otherwise enter a less familiar marketplace.
Nicholas Davis, Director and Head of Europe at the World
Economic Forum, says: At the EU level theres a huge
amount of work still to be done to reduce fragmentation
and create a digital single market. This would allow
companies that start here in Britain to seamlessly access
500 million people rather than just 8 million in London,
for example.
Ms Lane Fox also says that European businesses tend to
have longevity and levity, which UK businesses lack,
suggesting theres a cultural point about that kind of
ambition and really not trying to get out of your business
before youve achieved scale.
Mr Hutton adds: Too many companies have to exit or sell
all their equity at the crucial juncture of 2m turnover.
[As entrepreneurs] they have no scope to grow unless
they sell out completely and that indicates a dysfunction
in the system.
Prof. Wright believes this dysfunction is compounded by
government policy, which is too narrowly focused on
measuring start-up volumes and using that as an
indicator of entrepreneurship in the UK, without also
focusing on whether the start-ups actually grow or create
wealth. I think theres probably not enough done after the
incentives to start up a business to help it to grow, he says.
There are a lot of problems there with policy; the growth
side [of businesses] is where the impact from innovative
entrepreneurship is really going to be.
There is also a case for greater promotion of alternative
funding and growth options, making it less attractive for
successful UK businesses to sel out to acquisitive (typically
foreign) competitors, which then benet from the UKs
cultivation of a business during its riskiest phase and draw
the future prot potential of the business away from the
UK economy.
22
As the UKs economy is weighted towards knowledge-
based enterprises, encouraging entrepreneurialism that
advances new approaches, processes and products that
can be both commercialised domestically and scaled up
to rival international peers is crucial to the future of the
UK economy. Without a well-functioning and optimally
supported entrepreneurial ecosystem, the UK risks
acting as a national start-up incubator supplying
foreign multinationals.
Experts interviewed in this report offer advice on how to
succeed in building a UK entrepreneurial ecosystem.
While sole traders, the self-employed and small and
medium-sized businesses make a considerable
contribution to the UK economy, greater care must
be taken to address the specic needs of each of
these groups and caution exercised so as not to allow
terminology to be used interchangeably to describe
businesses that are so diverse in terms of their
business model, risk appetite, scalability and capacity
for employment growth
While improvements to foster an innovation ecosystem in the UK have begun,
much more can and should be done.
Conclusion
Location-based hubs of entrepreneurial activity should
not be considered simply within city boundaries.
The social data included in this report make a case for
fostering entrepreneurial activity along the Liverpool-
to-York corridor rather than providing city-specic
support and ignoring the agglomeration. Support for
entrepreneurs in such agglomerations may need to be
indirect, such as providing enhanced transport
infrastructure and fostering support and business
networks that span the multiple cities and areas
connecting them
The social data indicate that sources of practical
support (such as accelerator programmes) and funding
provisions are integral to the online conversation about
high-growth businesses and start-ups in the UK.
Consequently, these inuencers can be used to amplify
the successes of British entrepreneurs and provide
awareness of role models to help cultivate a more
ambitious culture of entrepreneurialism to rival those
of the US and Europe
These inuencers should be used not only to signpost
entrepreneurs to resources, but should be considered
as long-term partners for entrepreneurs while they
grow their businesses from start-up phase through to
higher-scale maturity, complete with options for
expanding above the 2m turnover threshold
The ties between academia and the business
community must continue to be strengthened and
publicised so that a wider range of businesses can
benet, and less business-minded universities can be
encouraged to follow suit. Partnerships between alumni
and university enterprises, with the former mentoring
the latter on how to commercialise their projects is one
element, but broader integration into the local business
communities will ensure wider participation in a
knowledge economy. Given that universities are publicly
funded, a sharper push towards a wider non-academic
contribution to enterprise activity is needed
An innovative approach to nancial instruments that
are better able to match the funding needs and practical
constraints of entrepreneurs at the different stages
of their businesses lifecycles is required. Traditional
nancial institutions will be pivotal in providing this.
The government, which can wield tax and other nancial
incentives, also has a crucial role in reducing the barriers
that entrepreneurs come up against in getting funding
to commercialise their ideas, and the barriers that the
market faces in pricing risk around entrepreneurial
ventures. For start-ups, matching funding with
mentorship appears to be a good rst step, but more can
be done to match the risk and liability prole of
businesses at different stages. This should be
approached collaboratively from both a government
and nancial services standpoint to ensure a cohesive
funding strategy is adopted for the UK.
23
In addition to wide-ranging desk research and data from
Pulsar, a social data intelligence platform, this report is
based on qualitative interviews and a roundtable discussion
with experts. Our thanks go to the following for their
specic contribution.
Jane Chen, Co-Founder, Embrace
Alastair Clegg, Chief Executive, The Princes Initiative for
Mature Enterprise (PRIME)
Nicholas Davis, Director and Head of Europe, World
Economic Forum
David Gill, Managing Director, St Johns Innovation Centre,
St Johns College, University of Cambridge
Mark Glover, Director of Business Planning, Technology
Strategy Board
Clive Holtham, Professor of Information Management and
Director of Cass Learning Laboratory, Cass Business School
Jill Huntley, Managing Director, Corporate Citizenship,
Accenture
Barclays approached The Economist Intelligence Unit in February 2014 to
investigate how entrepreneurs in the UK are supported and the barriers that hinder
them, as well as wider trends that are shaping the UKs innovation ecosystem.
About this report
Will Hutton, Principal of Hertford College, University
of Oxford, and Chair of the Big Innovation Centre
Martha Lane Fox, Co-Founder, lastminute.com
Kathryn Parsons, Founder, Decoded
Jaideep Prabhu, Jawaharlal Nehru Professor of Business and
Enterprise, Judge Business School, University of Cambridge
Doug Richard, Founder, School for Startups
Eze Vidra, Head of Campus London and Google for
Entrepreneurs Europe
Mike Wright, Professor of Entrepreneurship,
Imperial College London
This report was written by Anna Lawlor and edited by
Zoe Tabary and Monica Woodley.
Barclays is a trading name of Barclays Bank PLC and its subsidiaries. Barclays Bank PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority (Financial Services Register No. 122702). Registered in England.
Registered number is 1026167 with registered ofce at 1 Churchill Place, London E14 5HP.
June 2014.
barclays.com/entrepreneurs