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Rt. Hon. Peter Mandelson - Former Secretary of State for Trade and Industry (Jul 1998 - Dec 1998)British Venture Capital Association Annual Dinner |
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I am very grateful to Clive Sherling for his kind words of introduction. It is a great honour to be here tonight to share in your 15th anniversary celebrations. Like Clive, I believe that the UK venture capital industry has a lot to celebrate. Like him, I want to see the industry trumpeting its own successes. You should shout about them. Every good news story contributes in its own way to our crusade to improve attitudes to business in this country. It was good to hear Clive relay back to me my own concern to tackle the stigma associated with failure. As a man who I understand began his career in the receivership trade, Clive may know what I am talking about. We lack ambition in this country, and that?s partly because we are so afraid of failure and the social stigma it brings. Clive mentioned my trip to Silicon Valley. I was indeed very impressed by what I saw there and that?s what I want to dwell on this evening. A few days ago I was talking to John Chambers of the US Internet company CISCO, one of the Valley?s major players. CISCO is one of those success stories that show what a healthy and dynamic venture capital industry can do. Going from venture backed humble beginnings in 1991 to the third largest firm listed on NASDAQ - behind Microsoft and Intel - only six years later. John Chambers had clear views on what we needed to replicate the America?s success. He saw a real need for effective role models. Trail-blazing companies and individuals, preferably those that have made a lot of money! And role models need a flow of creative entrepreneurial people to follow them. People with management and marketing skills, able to predict, produce and package the goods and services that customers want to buy. We need a commercially aware university environment supporting commerce and producing graduates ready to be the next generation of entrepreneurs. And Government too has a role. It needs to create a risk taking pro-enterprise, entrepreneurial environment both within Government and business. And last but by no means least: we need a vibrant, dynamic venture capital sector ? not just to provide finance, but also to bring its expertise and network of contacts, playing an active role in supporting small businesses and start-ups. Tonight I want to focus on this last point: the role that venture capital can play in recreating the business environment that US firms enjoy here in the UK. In putting together my remarks to you, I?ve been bombarded with numbers. Some show that where venture capital is concerned we are way behind the game compared to the US. But others suggest the US only invests in twice as many start-ups as we do despite being seven times the size. As always, you can make the numbers show what you want. But let?s not lose sight of one thing. Our economy has not created a Silicon Valley here or indeed anything like it. We have our success stories and should not be coy about trumpeting them. Venture capital levels are higher than anywhere in Europe. Oxford, Cambridge, parts of Scotland and the M4 corridor are all showing healthy signs of development in the new and high-tech industries. But we need to do more, much more, to build on this. To seize the opportunities of the new digital age and rapid developments in technology. To help generate clusters of high growth potential, innovative and high-tech businesses, that will underpin British prosperity and jobs in the new Millennium. I think there are three key elements to this: First it is clear that we need to finance more of these innovative, high tech start ups and to see them grow into the dynamic, world beating companies of the future. Now I know that many of you will feel this is not your area as the majority of your current activity is in corporate restructuring - MBOs and MBIs - rather than in developing new early stage companies. Don't get me wrong. I welcome this focus on MBOs. Many of the best ideas and innovations arise within existing firms and are freed up by corporate restructuring. But your future success as an industry, and ours as a nation, must lie in developing new focus and new markets. In particular, in leveraging your expertise, your networks of contacts, your clout to support more new and innovative high-tech start ups. Second we need a revolution in our attitudes to risk and failure. Like Clive, I am particularly concerned that the pension funds and others may be overly cautious when it comes to venture capital and investing in innovative, early stage companies. Given the size of their portfolios, they only have to sneeze and you have enough money to finance hundreds of these new companies. I am sure that together we could persuade them to loosen the purse strings. My third point is that we must build institutional networks and partnerships to enable us all to work together to promote growth and enterprise. Our universities and our world class science base are engines of great creativity and innovation. But we need to see greater commercial pull through of ideas. We must translate scientific discovery into successful scientific enterprise and then into scientific profit. And, on the subject of more efficient institutions, we need to create more dynamic and innovative capital markets, hungry to service high tech and seed capital, to provide that vital exit route for venture capital. The US has NASDAQ whose track record speaks for itself. Here in London, the Stock Exchange and its AIM market have made a significant start towards creating the sorts of liquidity that we need to finance these new businesses. The single currency should help develop European equity markets. As should the Stock Exchange?s proposal to link up with 9 other European exchanges, which I very much welcome. But we are clearly still some way behind the States and I would like to see even greater dynamism in this part of the City. Role of Government The Government intends to play its part in creating a new enthusiasm for enterprise. A new culture which backs business success. A new national ambition. We have laid the foundations for macroeconomic stability which will ensure sustainable growth. And we are taking strides to improve the tax framework, building on the reforms we have already made to Capital Gains Tax, to create an environment which actively promotes enterprise. Amongst many other measures, we are looking closely at whether tax incentives for equity-based remuneration for key managers in smaller companies could be used to encourage entrepreneurial ambition. As Clive made clear in his opening remarks, this is an issue close to the BVCA?s heart. I hope I have left you in no doubt that we are listening to your concerns and, more importantly, acting on them. We are also looking at what action Government can take to fill the gaps that do still exist in the provision of finance to small businesses, such as through tax credits for R&D. It is clearly not Government?s job to become venture capitalists. But as my forthcoming White Paper on competitiveness will show, we can play a constructive role in the provision of seed finance to small scale, high tech start ups, particularly in the regions. The White Paper?s due out next month. By the way, I hope you?ll all invest in a copy. I don?t think you?ll be disappointed. Conclusion Financing new and high-tech firms is clearly a challenge for the wider financial services industry, not just the venture capital sector. But if we are to replicate the success of Silicon Valley in this country, you have a key role to play: - in providing more seed investment, for very early stage, very young high-tech start-ups; - in getting closer to developing technologies to understand the risks and to persuade other investors of their merits; - and in playing your part in creating a more enterprising, more dynamic British economy. At least that?s my view of where we need you to focus. I know you have equally strong views on what the Government should be doing. We need an open, constructive dialogue to ensure that we focus on your concerns. I want to hear your views, your concerns, your suggestions. We won?t always agree, I am sure, but you can rest assured that I will always be a strong voice for enterprise within Government. Because it is only through greater enterprise that we will create the networks of collaborating universities, businesses, professionals and venture capitalists that will underpin the jobs and wealth on which the prosperity of our nation will be founded in the future. That?s my vision. That?s the contribution I want to make in Government. And it?s great to meet tonight some of the people that I am excited to be doing business with. |
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Other speeches by Rt. Hon. Peter Mandelson - Former Secretary of State for Trade and Industry (Jul 1998 - Dec 1998)
(the following are available from the archive) |
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