Ohhhhhh dear: Monday evening saw a group from the Technology Strategy Board (TSB) come to TechHub in Old
Town Street with a £1m grant giveaway, fully expecting to have rose petals strewn in their path by hordes of grateful self-funded digital entrepreneurs (à la #StartupBritain launch). Unfortunately, they were not so much “egged on” as “rotten-egged on” by a crowd of digerati who can sniff a bad ‘un at a hundred paces. How did something so good go so badly wrong?
Firstly, in this TV age of Dragons Den and The Apprentice, everyone knows the anatomy of a bad pitch: the inability to make properly coherent points, not being on top of your brief, not really knowing your location or understanding your audience, responding to specific questions with the same over-general simplifications… and I’m sorry to say that checking these boxes was merely the start of the evening’s pain. For the audience, it was a lot like watching a slow-motion car crash: and it must have been close to torture for the other TSB people in the audience.
Secondly, it became increasingly clear as the presentation continued that they hadn’t thought through the implications of what they were proposing. The TSB’s “Tech City Launchpad 1” grant is designed to back sub-12-month explicitly collaborative projects (though they fudged the issues of who would own what, and what exactly was being funded) “between small, medium-sized enterprises and micro firms” (though they fudged the issue of how these are defined) in or around Silicon Roundabout (though they fudged the issue of exactly where qualifies) “to develop a digital product or service to proof-of-concept and/or a user-facing trial” (though… you get the idea). The problem with all this? The vast majority of Silicon Roundabout startups are self-funded single-digital-project vehicles, not R&D labs with ample spare capacity to try something new. Digital startups’ key challenges are (a) surviving while prototyping their existing single digital project, and (b) customer development in a vast, largely hostile online world, while (c) trying to build critical mass to gain [supposed] angel funding. So… where in this landscape does the TSB think starting an entirely new project explicitly in collaboration with an SME would fit? Where’s the ‘product/market fit’?
Thirdly, the whole application format they’ve chosen – 2 minute video pitch, followed by a traditional business pitch round for the best 20, with the best ten getting a promissory note and access to VC / angel workshops to help them build a full funding round – would seem sensible in the hands of (say) Dave McClure, but seems somewhat misplaced for the TSB. A bit like asking your granddad to judge a street dance competition, I have to say. Oh well.
Overall, the paradox here is that the TSB seems to have assumed that the community of digital startups is a vibrant, static body of micro firms that are already making money consistently, but who need funding in order to take it to the next level. The reality is that it’s a dynamic (i.e. fast churn) community of hot desking mayflies trying to bootstrap their small companies to the first level – nobody’s funded right now, that’s just the way it is. Really, the minute I heard them quote Wired magazine’s statistics on Silicon Roundabout I knew that they had inhaled the fumes of the Tech City mythology – that they had built their proposal on the back of an acutely Cameronesque (i.e. optimistically distorted) view, that High Growth Digital Startups Can Turn The UK Economy Around.
Though it was good to see David Willetts (the current Minister of State for Universities and Science) at the launch too, I can’t help wondering whether the TSB and indeed the Government are currently outreaching to the wrong people. As I said to him afterwards, we clearly have no shortage of entrepreneurs, no shortage of ideas: what we’re missing is active angels, and indeed any kind of culture of investment. In fact, I have to note that, despite his fabled ‘Two Brains’, Willetts did leave me wondering whether any of the Powers That Be grasp the gratingly sharp differentiation between VCs and angels (hint: VC funding typically has one or more extra zeroes on the end). Does the TSB already have much in the way of dialogue with UK angels? If so, did they think to run this proposal past any of them before launch? (I guess not).
In summary, then…
On the one hand, I have long thought that the TSB’s quaintly anachronistic view of the way external funding works has meant that their competitions have only been applicable to SMEs with (say) £1m+/year turnover – I suspect that checking past applicants’ profiles would quickly bear this out. So let me be at the front of the queue applauding the fact that – following the repeated prodding of Glenn Shoosmith, it would seem – the TSB has at long last constructed a funding scheme based not around private pre-funding (which rules out the vast majority of self-funded tech startups) but around a 12-month promissory note to gain external funding.
At the same time, however, there is often a vanishingly small distance between ‘pilot’ and ‘pivot’: and what the TSB presented on Monday night was most definitely a pilot scheme in need of some pivoting if it is to make a real impact. In the context of European funding rules, I fully understand that it is hard for a body such as the TSB to construct a grant that isn’t perceived as distorting some market in some way. But sometimes these kinds of constraints lead grant-making bodies to put together grant packages that are highly impractical (e.g. the way European FP7 grants implicitly insist on cross-border collaboration is good in an idealistic way, but horrible expensive to arrange and manage). Like this one. 😦