London is still a great place to be an entrepreneur - but growth opportunities are limited
According to a survey of 170 London-based entrepreneurs, carried out by legal firm and Smarta partner Mishcon de Reya and the London Chamber of Commerce and Industry, businesses based in the capital favour the city's existing reputation, connectivity, accessibility, professionals, networks and stability, and political and legal systems. But 36% of respondents rated growth and investment opportunities in London as 'poor' or 'very poor', with only 18% saying they were good - and just 2% saying they were very good.
That's despite the UK having the second biggest venture capital and private equity market in the world (the US is first). A possible explanation for this is that VC firms typically look to invest a minimum of £2m, which is much higher than most start-ups require or can promise return on investment on. But London businesses also criticised private equity and VC firms' low-risk approach to investments. Business angels are generally more risk-taking and make average investments of between £25,000 and £750,000, making them a more attractive option for small businesses, but as a funding option they received mixed reviews from the entrepreneurs - no doubt because the quality of support on offer from an angel (who invests as an individual) can vary so widely.
One in four of the entrepreneurs surveyed had turned to the bank to finance their businesses, while 62% had used self-financing or savings rather than taking on debt. Those surveyed felt positively about government funding initiatives such as the Entrepreneurs' Relief, Enterprise Investment Scheme and Enterprise Finance Guarantee scheme, but called for information on each to be better organised. (Grants and awards were typically used only alongside other types of finance.)
The entrepreneurs said they tend to use informal networks and contacts as their main source of advice on funding. The research found that funding support becomes more limited as a business matures, making it more difficult for those who want to accelerate growth. London businesses want more help from the government further down the line to help them grow.
Mishcon de Reya and the London Chamber of Commerce and Industry are calling on the government to better organise its funding information and support, and to make better provision for businesses further into their lifecycles.
Read The Entrepreneurship Report in full.