Once again the British summer has lived up to its hard earned stereotypes of wet weather, shattered dreams of the national football team and also of our leading tennis hope at Wimbledon getting within touching distance of the trophy.
But where the stereotypes have been reinforced we are reminded that every cloud does have a silver, or golden, lining as our Olympic glory broke through the gloom and shined on the nation.
Dark skies do unfortunately continue to hover over the economy. This time, courtesy of NESTA, which has presented further evidence of the UK’s unsatisfactory economic outlook. It highlighted the £24bn reduction in investment in UK innovation. But again there is a silver lining worth talking about.
This slow down in innovation investment on a macro scale presented to us by NESTA could be used as a further excuse to bemoan the UK economy. Alternatively, such news can be viewed in terms of the opportunities it presents – and fast-moving, innovative start-up companies are perfectly positioned to take this standpoint. Recession doesn’t always need to be the death knell of businesses. There are several reasons why the future is bright for small, adaptable, young companies.
1. Small companies can react quickly
For one thing, small companies can quickly react to change. It is almost in the DNA of the most successful entrepreneurs to accept that they need to be prepared to reposition products, radically adapt their business models and even be willing to pivot their entire business to meet a newly identified customer need.
2. Recession = corporate change = opportunity
What’s more, somewhat complacent large incumbents get shaken to the core when a global downturn of this severity occurs. This is the time when long term contracts get questioned and bosses demand significant reductions in costs or, in some cases, a radical overhaul of all their service providers as they are forced to accept the new realities of a changed economy and society.
When incumbent service providers are pushed out, the vacuum will be filled by those companies that are best able to quickly and effectively meet the new customer need – the innovative company should thrive.
3. Now is a good time to invest in innovation
The research from NESTA shows that investment in innovation has been neglected for years. If businesses don’t invest enough in their own innovation then it stands to reason that sooner or later they will be forced to either buy it in or face the consequences. Small business owners stand to make significant gains if they get the timing and positioning of their business right, and can benefit from acquisitive companies desperately catching up in the innovation race.
Recessions have historically generated the best venture capital returns. Bearing all the above factors in mind, combined with the paradigm technology shifts which are making it cheaper and easier to start and grow very valuable businesses in increasingly short periods of time, we can expect the next few years will generate some bumper returns for venture capital investors and the creation of world-changing businesses.
These turbulent times will forge for future, world beating companies. Be inspired by our home grown Olympians and go for gold.
George Whitehead is venture partner manager at