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Of course as these firms have grown, and some have grown substantially over the past 15 to 20 years, they have begun to look for means of finance other than relying on the banks, which fled the small-business sector with unseemly haste at the start of the financial crisis. New methods of finance have been developed, and a ‘business angel’ sector has appeared with many innovative ways of providing capital to growing companies.
But I get ahead of myself. When someone wants to start their own business, the thing they need, more even than money, is a mentor. The Prince’s Trust’s business start-up programme was pioneered 30 years ago using mentors, and we have recently taken up the idea in government and extended it. The Start-Up Loan programme will give anyone of any age who has a business idea, sufficient money to start working for themselves — and more importantly, a mentor who will be there for them during the difficult early days.
I have been a mentor on a number of occasions, but the one I’m most proud of was about eight years ago when I was on the council of the Prince’s Trust. At an incubator unit in Hackney I met a young man, Duane Jackson, who had had a very difficult time in care and left school at 16 with an indifferent education, but who was very good with computers. For some years he managed to look after himself but when he was 20 he ran short of money, was tempted and was caught trying to bring drugs into the country. Arrested in the United States but sentenced here, he had served his time when we first met and had recently been funded by the Prince’s Trust to start his first business.
I could see immediately that he had a very good idea. He had created a software programme for keeping financial accounts for small firms using the cloud. Of course it wasn’t called ‘the cloud’ then — that was still some years in the future — but he was keeping the accounts of some of the other tenants of the incubator unit on his server and leasing them the software. I was very taken with the concept, as well as with him, so I became his mentor, then a shareholder and finally his chairman. Today Duane is married with two children, runs a company employing more than 40 people and is very well established. I think I got more of a thrill with my time with this company than out of any of my own.
There are now mentors up and down the land engaged on similar journeys and I would recommend anybody, after an active business life, to become one. But there are also many other ways you can be part of this revolution. ‘Business angels’ are people who invest in small but growing businesses by taking a stake in the equity. There are angels who are passive investors and those who take a more active role, perhaps by going on the board or even spending some time with the company. At a time when those with cash find it extremely difficult to get any sort of return, investing in a new business can become attractive.
The government has done a great deal to encourage this and last year introduced a new programme called Seed EIS. It is possibly the most generous programme of its kind anywhere in the world. It is aimed at start-ups, and within certain limits you can charge the full cost of your investment against your income tax and in some circumstances your past capital gains taxes. With this most generous of tax allowances you can recover up to 76 per cent of your investment. Furthermore, when you sell your shares in the future they will be completely free of capital gains tax. Anyone interested in this sort of investment should consult their financial adviser — who could also introduce them to the Enterprise Investment Scheme, applicable to more established companies.
Wherever I go around the country I meet more and more young people working for themselves because they want to, not because they have to. I fully intend, when my time at No. 10 is up, to become a mentor again. As long as we have so many of our next generation deciding to work for themselves, and so many of the senior generation willing to volunteer to mentor them, the future of our economy is not in doubt.
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