The turmoil in the financial markets is likely to enhance rather than destroy the UK’s start-up culture, according to several high-profile entrepreneurs.
Julie Meyer, chief executive of Ariadne Capital, a private equity firm, and
co-founder of networking club First Tuesday, noted that more successful businesses have been started in downturns than in bull markets.
“I’m much more interested in driving growth for the next cycle, than figuring out the people we can blame for this mess,” she said.
“I am convinced that it will be the entrepreneurs who will lead our way out.”
Her belief in the potential for new business creation was echoed by a number of other serial entrepreneurs.
Michael Jackson, former chairman of PartyGaming, said there is never a good time to start a new venture, but adversity often creates real opportunities.
“There is a tough environment out there, but if you are a small business you have some benefits,” he said.
“You can get office rental more easily and people are interested in you if you can provide cost savings.”
He noted that the Silicon Valley technology cluster can trace its roots to spending cutbacks by the US defence industry, when thousands of engineers used their redundancy payments to launch companies.
Jackson predicted that the demise of investment banks, such as Lehman Brothers, would release a “flood of talent”, many of whom will start up on their own.
“They won’t want to kick around in some company job in industry,” he said.
Paul Barry-Walsh, a serial entrepreneur, who now heads the Fredericks Foundation to help disadvantaged people start businesses, predicted that the financial crisis would work in favour of smaller operators.
“The demise of the huge investment banks will see the rise of a number
of smaller boutiques,” he said.
Small businesses are also more attractive places to work, Barry-Walsh argued. “In a big company nobody matters, but in a small company every person matters.”
Such predictions are in contrast to figures compiled by Barclays that point to the boom in business start-ups being over.
The number of start-ups has been running at about 420,000 a year for the past three years. However, Richard Roberts, head of small business research at Barclays, said that the figure would drop to about 360,000 this year.
At Warwick Business School, the student intake on the entrepreneurial finance course has increased from 60 to 104 this year. However, David Storey, director of Warwick’s centre for SMEs, predicted that
the current crisis would
be harsher than any he
has seen in the last four decades. “I cannot see that this level of uncertainty in terms of accessing finance can be good for any business – large or small,” he said.
“The scale exceeds anything in my working lifetime.”
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