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London Hots Up – and the Capital Keeps Flowing

Posted on Jun 26, 2014 by Sandy Finlayson  | Tags: startups, investment, tax relief  | 0 Comments

The following article in last week’s Economist really made me think - http://www.economist.com/news/britain/21604591-londons-creative-talents-have-unleashed-wave-innovative-technology-firms-jammin

It would appear that early stage technology companies in London managed to raise no less than $US 1.2 Billion last year and we have recently seen a number of successful IPOs which may justify all of the early stage investment activity. While we must all celebrate the great success of London, it must sooner or later become, at least to some extent, a victim of its own success and create opportunities for entrepreneurs in the regions.

It would appear that:-

• There is still a vast amount of money chasing early stage deals in London, sometimes at inflated prices for inferior projects. If the money is in London but entrepreneurs in the regions are struggling to raise capital, it is up to them to go and look for the money in London – remember, you have to go to the money, it will not come to you!

• With increasing pressure on space, finding decent premises at a sensible rent on a short-term contract is becoming more of a problem. This must create an opportunity for those regions which wish to develop an entrepreneurial eco-system, to provide premises and other back office services at a sensible price;

• Talent is becoming harder to find. It might just be possible to hire good people at lower prices in the regions; and

• As pointed out in another recent Economist article, there appears to have been a significant slowdown in the rate of acquisitions of UK companies by other UK companies. Big corporates are still sitting on enormous piles of cash and could do a huge amount to stimulate the entrepreneurial eco-system simply by making some well judged acquisitions and freeing up some investor cash to be deployed in the next generation of new businesses. There is quite simply no point in leaving “dead money” frozen in the banking system where it is doing no good to anyone.

For those of us in the regions, the key messages are:-

• The importance of the “cluster” effect and creating an effective entrepreneurial eco-system;

• Ensuring an adequate supply of appropriately qualified talent;

• Ensuring that appropriate premises are available on suitably flexible leasehold terms; and

• Perhaps most importantly of all, ensuring that there is an adequate supply of capital available on appropriate terms to finance the next generation of high growth companies.

To help us the Government has provided the most generous suite of tax reliefs for entrepreneurs and for investment in entrepreneurial companies available anywhere in the mainstream taxpaying world. It is up to us as entrepreneurs, investors and advisers to take full advantage of these benefits so that everyone benefits from the great wave of entrepreneurial energy which is spreading across the country.

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