I recently received a crowdfunding email that really brought home to me the reason why I’m so pleased to be involved in the 1000 Companies to Inspire Britain report. It was asking me to invest in a start-up company that is planning to expand, but what caught my eye was that the business had grown from a one-man start-up working from home to a team of 19.
This sort of grass-roots job creation is going to be essential to the UK’s recovery. The giants of the economy – the supermarkets, utilities companies and mobile phone operators – may give us a solid foundation, but as a respected market commentator once said, "Elephants don’t gallop".
The 1,000 companies we are highlighting in this book all have a lot more than 19 staff, but most of them will have started out as very small ventures. Take my own company, Octopus Investments – three of us came up with the idea in 2000, and now there are 250 of us.
The really encouraging thing is that there are thousands of small businesses, such as the one from my crowdfunding email, coming up behind us. You just have to think of the stories we hear these days about a neighbour who’s turned an eBay habit into a thriving business, or the teenagers developing apps and games worth millions in their bedrooms.
Of course, the internet and other new technologies are making businesses like this possible. But what’s really firing them up is the entrepreneurial spirit that is taking hold in Britain, which we at Octopus are lucky enough to see first hand. We have invested in companies like Zoopla, a property website that has helped transform the way Britons buy houses, and SwiftKey, a keyboard app which was set up by two friends who beavered away in their flats. Swiftkey now has 100 staff working on an app that will be on 100 million phones by the end of this year.
According to the Department for Business, Innovation and Skills, small and medium-sized companies already account for about 60 per cent of the country’s private sector workforce. And the 1,000 companies you can read about in this report are proof that this proportion can only get bigger.
Inspiring a new generation of businesses
The UK is riding a fresh wave of entrepreneurialism and is on the road to economic recovery. By Guy Myles, Co-founder and Managing Director, Octopus Investments
Please, sir. Is it too late to change the name of this book? This isn’t a serious suggestion, obviously. But I think it is good to make clear that the 1,000 companies we’re focusing on are already inspiring Britain – it’s not something we’re hoping will happen soon. These businesses are one of the main reasons the country is finally emerging from recession.
Octopus Investments, which I helped found in 2000, is on the list, and I’m incredibly pleased that anyone would think we might help inspire the country. I hope it’s true. What I know for sure, though, is that the country has been enjoying a new surge in entrepreneurialism for quite some time. The positive GDP figures for recent quarters are only just beginning to catch up with the evidence of recovery we’ve been seeing at Octopus for four or five years now.
Whether you put this down to the opportunities created by technology, a hunger for change created by the financial crisis or something as superficial as the Dragons’ Den factor, there is a palpable increase in the sense that people can turn ideas into successful businesses.
On a day-to-day basis, we see this is in the sheer numbers of entrepreneurs coming to us with business plans. It’s currently running at a rate of about 250 a month, more than ever before. Inevitably, we’ll only invest in a handful of these, but coming across so many ideas gives you a real sense of the entrepreneurial spirit behind initiatives such as Tech City in East London, where more than 1,300 new businesses have started up. There are also university innovation centres, not to mention workspaces and spare rooms up and down the land.
When disruption is a good thing
Octopus tends to start investing in businesses when they have moved beyond their initial start-up phase. While still described as early-stage companies, they will be up and running and looking to expand or move into new markets. They may already have started generating cash, and the management team will have proved itself and we’ll be confident that their ideas can succeed. We often say that what we’re looking for is businesses with the potential to ‘disrupt’ their markets – in other words, they can cause a stir and transform the landscape for their customers.
Another encouraging sign we’ve noticed is the ecosystem of support forming around new businesses and the increasing number of ways for investors to share in the growth opportunity. At one level there’s the crowdfunding phenomenon, with ordinary people investing small amounts. At the other end of the spectrum, you have the Government encouraging investment with the tax incentives available through Venture Capital Trusts, the Enterprise Investment Scheme and ISAs, which can now hold shares in AIM-listed companies.
Then there is a wide range of grants available for start-ups and a thriving community of angel investors and incubator programmes. And on top of all that, there are sources of specialist finance filling gaps left by the banks, while AIM is constantly gaining prominence as a market for raising new finance, either through new share offers or IPOs.
Looking to the future
Most of the 1,000 companies listed in this report will have already benefited from one or more of these funding sources. From a personal point of view, it’s brilliant to see more than a dozen businesses that we have invested in at Octopus, either through our Ventures team or as part of a fundraising on AIM, on the list. What’s more, I’d be willing to bet that if this report is compiled again in a few years’ time, there will be even more of our portfolio companies represented. Naturally, we’ll claim this as proof of our ability to spot great businesses. But really it will be a sign of today’s favourable environment for new businesses and the enormous energy and spirit that is inspiring companies such as Metrasens and YPlan.
If the powerful magnets in MRI scanners attract metal objects to them, there’s a risk of injury to patients or damage to the equipment. So Metrasens has developed a new safety system called Ferroguard that helps keep unwanted metal out of MRI rooms. The company also produces full-body scanners for prisons and security checkpoints. Metrasens manufactures its products in Britain and exports 80 per cent of its output.
The Ventures team at Octopus has helped Metrasens break into global markets, including the US, where it has established a key distribution partnership.
* Metrasens is not on the 1,000 companies list.
Region: West Midlands
Sector: Healthcare, Security
YPlan is a smartphone app that allows users to find and buy last-minute tickets for concerts, plays, films and other events. Unlike other services, YPlan can sell tickets just an hour or two before the event, so it’s great for venues with unsold tickets, as well as anyone planning a spontaneous night out.
YPlan took off after actor Stephen Fry tweeted about it, saying it was "A seriously good app… free and damned smart". It’s already on a fifth of the smartphones in London, with a New York version due soon.
* YPlan is not on the 1,000 companies list.
Region: Greater London