WOODFORD AND OUR “APPALLINGLY BAD”START-UP PROBLEM

For decades government and agencies private and public have sought to promote business start-ups with grants, loans and any number of advice centres.

Yet our record in helping start-ups is under constant criticism.

Last week Neil Woodford (pictured), Britain’s leading investment guru, launched a blistering attack, accusing the UK’s funding system of being “appallingly bad” at helping start-ups reach their full potential.

It’s been a big issue in Scottish business, with many promising young firms failing to get finance for the next step up, or being sold to bigger firms.

And of the 40,000 plus businesses helped by the Start-Up Loans Company since its inception five years ago, 90 per cent of the support has gone to companies south of the Border – and just five per cent to Scottish start-ups.

Woodford, who heads up Woodford Investment Management, said, “We have been appallingly bad at giving those minnows the long-term capital they need”.

Long an advocate of taking a long-term approach to investing, he believes that where people do pile cash into the UK’s start-up scene they often require the money to be returned too quickly.

“The limited number of success stories here in the UK have generally sold out early.

“This comes back to the capital problem. These businesses that have been successful and may have reached a couple of hundred million market value, have been under pressure from their shareholders to sell out.

“That’s principally because of the time constraints on the kinds of capital that institutions have been able to provide to those businesses so they have been forced to sell out really and haven’t had the choice to stay domestic and access more capital to become the multi-billion dollar company they had the potential to come.”

Arguably the UK’s most successful tech firm, Arm Holdings, was sold to Japanese business giant Softbank in a £24 billion take-over this summer. The deal triggered concerns about a leading British company being bought by a foreign organisation, and concerns about potentially job losses in the UK.

In Scotland our problems seem to arise at a much earlier stage of development. The venture capital sector is relatively small here, reflecting concerns that there are just not sufficient businesses of scale to merit the big venture capital firms opening offices in Scotland.

And while the banks say they are back in business helping small firms and start-ups there is a lingering and strong suspicion that such help can be quickly – and ruinously – withdrawn at the first signs of trouble.

So where can start-up entrepreneurs go for initial help today?

A first stop may be the website mygov.scot which provides basic information on how and where to access public services across the board – including help for start-ups.

Another widely used starting point is Business Gateway. This runs a network of business support offices provided by local authorities. It provides online support, local workshops and events held throughout Scotland, advice to suit specific business and business information.

The quality of this support and advice can be variable – some local authorities provide good support, others less so and there seems little means by which to spread good practice, ideas and skills across the network. More info at http://www.bgateway.com/business-guides/first-steps.

Many may wish to consider the Start-Up Loans Company. It offers a government-backed personal loan available to individuals looking to start or grow a business in the UK.

With a fixed interest rate of just 6% per annum and the ability to borrow between £500 and £25,000, Start Up Loans offer an affordable source of finance to help new and early stage business owners bring their plans to life.

Since launch in 2011 it has helped more than 40,300 businesses and lent more than £239 million. Average size of loan is £5,924.

Start Up Loans are structured on a monthly repayment schedule, based on a loan repayment term of between one and five years.  Start Up Loan recipients are offered up to 12 months of mentoring support and access to a range of special business offers.

More info at https://www.startuploans.co.uk/delivery-partners-regions/scotland

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