Who Is Responsible For Solving The Funding Gap Faced By Entrepreneurs?
In a joint Barclays and Oxford University debate examining the issues faced by entrepreneurs, Antony Jenkins, Barclays Group Chief Executive, challenged panellists and attendees to look beyond the traditional funding gap to help today’s entrepreneurs and small business owners develop and grow.
Delivering the keynote speech to 140 guests at the Oxford Union last week, Antony highlighted the key role Barclays has played in supporting entrepreneurship throughout the centuries and how that changed economy and society. But the rise of new innovative businesses operating in an increasingly digital and global market has meant that the traditional challenge of providing finance solutions for entrepreneurs, matching risk and reward, debt and equity funding, is more vital than ever before.
Entrepreneurship often struggles in Europe because of an aversion to risk. And so the real change here has to come from addressing the much more traditional challenge of matching risk and reward.
Antony Jenkins, Group Chief Executive
Antony said: “I don’t see a material gap in debt funding for small and medium sized enterprises. This might be unpopular and you may disagree but if there were a gap in the market for SME debt, we would fill it. I do see a gap for risk finance at all ages and stages. Entrepreneurship often struggles in Europe because of an aversion to risk. And so the real change here has to come from addressing the much more traditional challenge of matching risk and reward.”
Panel Chair, Professor Thomas Hellmann of Said Business School, University of Oxford, then kicked off the debate by asking panellists Julia Groves, CEO of social crowd funding platform Trillion Fund, Will Hutton, Principal of Hertford College, Oxford, and chair of the Big Innovation Centre, Jason Kingsley OBE, founder and CEO of Rebellion, and Rebecca McNeil, Managing Director of Business Lending at Barclays, whether there was a funding gap faced by entrepreneurs and if so, whether the UK government had the prime responsibility for solving it.
The panel broadly agreed that, contrary to the default position that ‘banks aren’t lending’, finance packages were accessible for SMEs, and the recent government-backed Business Growth Fund scheme, as well as tax credits, had improved the environment for smaller enterprises to flourish. But the panellists considered that there was an interdependence between access to equity and debt, identifying a lack of innovative ‘equity’ finance solutions for ‘gazelle’ businesses in the UK, and a lack of appetite to invest in high-tech fast growth firms, compared to less risk averse business cultures in countries such as the US and Germany. As a result too many such firms surrendered control earlier than their competitors.
The debate also covered the need to revisit the architecture, eco-systems and economic conditions required to nurture small businesses and, as importantly, how they scale up, along with the importance of exploring different funding options, including:
- Building partnerships between customers and suppliers rather than relying on venture capitalists
- Matching businesses looking to raise money with organisations looking to provide finance, noting progress made in crowd funding and the Big Innovation Centre’s Entrepreneurial Finance Hub
- Aligning the UK risk culture to that of the US, where 70% of funding is equity led
- Utilising future ISA funds
- A level global regulatory playing field
- A pro-business government and potential tax breaks.
One key noted point was that not every entrepreneur approached risk and debt in the same manner, and the impact of organic home-grown businesses should not be underestimated. In particular, in the UK, the traditional method of self-financing, reinvesting profits, and paying employees well, while seemingly mundane, could equally bring sustainable business growth over the long term.
At the end of the debate, the panel identified a number of potential solutions to close the funding gap and agreed the responsibility was one that needed to be shared, with greater collaboration across government, banks, successful entrepreneurs and investors. They resolved that tackling a risk averse investment culture was fundamental.