Entrepreneurial Britain

I have railed against the UK's inability to create an environment conducive for business start-ups before so I am happy to eat some words: over the last twelve months 395,327 new companies have registered at Companies House (source: electronic data publisher Bureau van Dijk). This is more than 1,000 a day. Over the last 25 years there has only been one year with more registrations - 2006-07, the height of the last boom. It is also three times the number at the equivalent time of the last recession. So what gives? Well, redundancy for one. The economy has shed nearly 2.5 million jobs since 2007 with termination packages funding new businesses. Second, the possibility of e-commerce or services driving many's ambition to have their own company. And for others: nothing concentrates the mind like walking the plank.

In the US, which faced a similar, massive, corporate downsizing in the 1980s, venture investment picked up the slack. Thanks to a number of public successes in venture-backed companies like DEC, Apple and Genetech, the Valley grew from a few dozen firms, including Bill's Centennial funds, to over 650 by the end of the 1980s, each searching for the next Big Thing. While the number of firms may have multiplied, the capital increased by only 11% from $28 billion to $31 billion (source: Andrew Pollack, NYT, 1989). The result: companies raising venture capital had to remain capital-efficient, not wasting a penny. This period set the stage for California's golden-era of venture capital from 1985 to 1995 when companies like Microsoft created billions of value; by 1996 we were heading into the the boom which, inevitably (sadly), resulted in hubris and the 2000 crash that Sand Hill Road still recovers from today -- many good MBAs who raised a fund in '99 or '00 will never work again. The numbers show it, to: in '94, venture investment equalled of .058% of GDP; in 2000, it was 1.087% or 19X '94 levels (yours truly jumped into the mix in '99).

Well, the point of my blog is this: corporate US was forced to modernise in the 1980s given the Japanese and other market pressures. Big Business rationalised via mergers and acquisitions and down-sizing creating America's "rust-belt" in the Northeastern and Mid-Atlantic states. It also freed up an enormous amount of baby-boomer talent still young in their careers: by 1982, unemployment was 10.8%. These dudes needed a spark and, thanks in large part to venture dollars, they started companies and unemployment fell. And fell. By Reagan's second term, America's jobless below 5.5%. Without California, the US would have looked like Germany. Or Japan today. Could the same process of rejuvenation somehow be happening in Britain today?

Madeleine: "Do hamsters always smell the same?"
Me: "Well, if a hamster sleeps in his own urine for a week he probably will smell different. If that's what you mean."
Madeleine: "I am going to clean Tommy's cage tomorrow."

Photo of Elizabeth Swann walking the plank from the WWW.