PROVEN STRATEGIC NAVIGATION

There has been a lot of talk on the Welsh Entrepreneur LinkedIn site about whether the Welsh Government investment in early-stage technology companies is enough. Not one for waiting for Government to see the light, I recently put this proposal to them. The Business Minister is yet to comment.

“50upstarts” – a Startup Programme for Wales

VISION

To create a complete startup ecosystem for ICT companies in South Wales managed by entrepreneurial business angels.
Assist, guide and fund 10 startups per year for 5 years to build a sustainable environment, based in the @Wales incubator, building 50 companies. Funded as a Public-Private Partnership. 

STRATEGY

10 Angels will commit to funding 10 startups each year for 5 years, mentoring them through their early growth. Matched funding, infrastructure and support cost will come from WG.   
Each ‘upstart’ will receive an investment of £100,000 and 12 months fully funded mentoring, free rent and support services (accounting and legal advice) for twelve months.   
The mentor will be a business angel with relevant domain experience and a proven entrepreneurial track record.

TACTICS

10 Angels to commit to put in £5,000 per startup 
= 10 x £5k = £50k each p.a
WG to match each startup investment =£50k   
Each startup receives £100k investment, 10 investments made per year
= £1 million invested each year.  
10 Angels = 10 x £50k x 5 years = £250k ea x 5 years

                       = £2,500k
WG to match    = £2,500k   

WG to pay 1 mentor for the first twelve months for each startup, only the 10 new companies that year       
                            = £20k x 10            = £200k p.a  
Cost of @Wales is believed to be £300k, to be paid by WG.  
Total cost to WG = £2,500k + 5x(£200k + £300k)                        

= £5,000k  

WG’s share to be as non-redeemable preference shares that make no profit, but are returned to the ‘investment pot’ for future years. The Investment pot will be managed by the ‘Upstart Trust’ for investment into companies beyond year 5.
 

OUTCOMES

50 Companies                       

650+ FTE’s                       

£100+ million Sales

Lets break this down and compare it to what WG are spending already.  

The £2m High Potential Starts project aims to support 50 business ventures, delivering a combined turnover of £36m and creating 480 jobs. Business Minister Edwina Hart said the new pilot would identify and support entrepreneurs and young businesses with high growth potential.  
http://www.walesonline.co.uk/business-in-wales/business-news/2012/01/13/pilot-project-backs-new-start-ups-with-the-potential-for-high-growth-91466-30112856/  

Well on that basis, my proposal looks expensive. However, the High Potential Startup programme is to be delivered by consultants and offers no funding to the companies, so will it deliver anything other than some mentoring and dissapointment?  

The £17m Business Start-Up Service could, according to Edwina Hart, create 6,500 jobs by establishing 690 new businesses each year  
Mrs Hart said the aim is to establish 690 new businesses with growth potential each year, creating around 2,190 jobs and helping 2,000 individuals to become self employed.  

http://www.investinsouthwales.com/news/2012/02/01/edwina-hart-awards-contracts-for-the-welsh-governments-17m-business-start-up-service/  

Well we can’t compete with the Minister on these amazing job creation numbers. Then again I heard her say the “Get Welsh Businesses Online” project would add a billion pounds to the Welsh economy so any of this is trivial in comparison.

David Hulston, March 2012