The Dispensary of Prosperity

The creative industries need to draw a line. A line around the jobs and businesses that the Government keeps saying are so important to the UK’s future. A line around the conditions for success that make the UK so strong in growing creative industries. A line that stops the short-sighted actions of a few people seeking a fast profit from undermining the basis for that success.

For the last six months a creative hub in Bath called The Dispensary has been my working home. It’s home to a dozen or so creative businesses from a three-man illustration/animation studio to a series of freelance designers, photographers and writers. It was set up by a thriving design agency, Radio, the owners of which are the brains behind The Dispensary. I love working there so much I blogged about it last month as the role model for other creative hubs.

Next week that all comes to an end. Suddenly. The building is being sold out from under the feet of the current tenants. At ten days’ notice. The owners spent months negotiating with the current tenants to buy the building and keep the creative hub. The owners were all set to accept the offer. Then a property developer suggested that he’d pay more. And suddenly the creative community was told it had ten days to vacate. The current tenants weren’t even given a chance to match the offer.

I don’t know the finer details of the sale of the building. And this is not a rant against property developers. The point is that a highly effective creative hub, providing a platform for the business success of up to a dozen businesses, is now being broken up. For all the fine words from Government and local council about supporting the creative industries in the UK, another small spark of growth is being extinguished. I don’t know whether the developer will be turning the building into luxury apartments (which is what I suspect) but what Bath, like so many cities in the UK, needs now is jobs, entrepreneurial activity, the basis for economic growth. Small businesses provide that growth and the creative sector is widely heralded as a UK success story.

This is my story. There are hundreds of identical stories across the UK at the moment. Of small, entrepreneurial businesses being thrown off track by short-term thinking. We’re not looking for public funding or subsidy. We’re not looking for special treatment. We’re looking for an understanding that if the UK is to grow out of recession we need to think about achieving a balance between jobs and property development. We need councils to fight for the kind of balanced city centres that people want to live and work in. We need the wider community to realise that creative industries generate exactly the kind of environment that makes commercial property development successful in many cases. After all, many cities are currently considering exactly how to catalyse the kind of creative hub that The Dispensary had already built, by itself, in Bath.

It’s probably too late to effect a different outcome for The Dispensary. But for Bath and dozens of other UK cities, I hope we can build up a debate about balancing the need for more housing with the need for small company growth. And the creative industries in particular need to stand up and be counted. We need to start drawing a line.

Innovationeering 2.0 (and other buzzwords)

Incubation is suddenly hot again; accelerators are gearing up and hubs are the centre of the action. In the last week alone Telefonica (owner of O2) has launched its Wayra incubator space in London, while Orange and Publicis have launched a £250m OP Ventures fund to provide early-stage (start-up) and late-stage funding for tech companies. These arrivistes join an already established incubator “sector” from the pioneer and darling YCombinator, now arriving in London to replicate their huge success in the Valley, to locally-born and highly successful Seedcamp.

It’s not hard to see why multi-national giants like Telefonica and Orange want their piece of the innovation pie. Facebook’s IPO is set to be amongst the largest of the decade, Apple’s the largest company in the world, Google is still generating billions in profit. Whether you’re doing so to make money or re-vitalise your own in-company thinking, providing support to new start-ups seems to tick all the boxes. It should bring in fresh new thinking, attract new talent and re-invigorate existing talent, add to your share price and beats concentrating on the knitting.

But will it work – either for the multi-nationals or even for the start-ups? I can find no evidence that hosting start-ups re-invigorates a company’s portfolio. And listen to the “graduates” of YCombinator (the companies that have successfully grown since being incubated there) and they’ll tell you that it’s the energy and excitement of the YC founders as well as the environment, connections and alumni that make it such a uniquely valuable platform for a new company. Contrast that to the dominant logic of most large companies and I’d certainly argue they’re anathema to the vibrant, agile thinking that marks out successful start-ups.

I have never worked for Telefonica or Orange. They may be different; they might be able to make this work. But they will be the exception if they do. Generally, great new companies in the modern era are born of single-minded determination to beat the odds, driven by founders who won’t go through the hoops of investment committees and Board approval procedures, who just get on with it anyway. They do it because they want to bear the risk and reap the rewards themselves, not mitigate the risks and share the credit.

I am currently working on my fourth start-up. Of the first three, two were very successful and one much less so. But all of them were born of plans hatched over the kitchen table, in the breathless excitement of a couple of pioneers thinking they could beat the big guys at their own game. None of them was hatched in an incubator. None of them used VC- (or angel-) funding. What that meant was that we were free to focus where we saw the opportunity; able to spend our time building the business instead of looking for investment; able to act in an agile way. We made plenty of mistakes, and perhaps with different advice we would have made fewer, but the mistakes often went on to help us be successful.

In between those start-ups I have worked for large companies. And I have never seen the start-up mentality of the adopted child be taken on by the parent. Even where everyone in the parent company wants a culture change, it’s asking too much of the start-up to be anything more than a catalyst.

So my experience tells me that the culture of the large parent and the small start-up are and will remain mutually exclusive.

It’s not that I want the huge ambition of Telefonica and Orange to fail. I would dearly like to be proved wrong on this, because I agree with the sentiments that lie behind the plan: “We have an entrepreneurial deficit in the EU,” said José María Álvarez-Pallete López, Telefonica’s chairman and CEO, as he unveiled their incubator plan: “It’s not part of the mindset. If we do nothing, all the talented people will emigrate to the US and innovation is not going to happen in Europe. If you look at the biggest listed technology companies in the world, none of them are based in Europe. It’s worrying.”

It is worrying. And the problem needs a variety of solutions. My first start-up was in the US in 1986 and my entrepreneurial ambitions have never looked back. I, for one, would advocate sending more of our budding entrepreneurs around the work to stimulate truly global thinking. And then adopting a variety of solutions to seeding innovation here in Europe. Yes, we need specialist incubators and we need Angel investors and even VCs who can spot opportunities. But more than anything we need entrepreneurs who refuse to conform, who are motivated by cocking a snook at the established way of large companies. So let’s not assume that large companies can attract those entrepreneurs to work for them Let’s just not put all our eggs in one incubator.

TOTs’ businesses are booming

In tough economic times, it’s the TOTs that Britain should be turning to for inspiration and business success. No, not one-year-old toddlers, but one-year-old businesses. In this case TOT stands for Twelve months old, Optimistic and Technologically-minded (no, I don’t like the acronym either, but I do sign up to the thinking).

Henley Business School research into the success of small businesses identified the TOT, a new breed of agile start-up rooted in tech, as having the potential to add at least £360 million to the UK economy in 2012. Henley surveyed 253 start-up business owners (11-16 months old) last October and found that over half of TOTs predict revenues up by 30% or more in the next year. With the average TOT employing four permanent staff, between 40,000 and 70,000 new jobs in 2012 could be created by TOTs.

Henley Business School’s Professor Dominic Swords says: “TOTs have made it through the teething phase and have a different mindset that will challenge traditional businesses. They see opportunities in challenges, showing the benefits of a positive attitude in winning market share and leading a growing business.”