How start-ups can be helped by established businesses – in finance and beyond

In the first of a series of blogs, James King, founder of venture capital firm Find Invest Grow, discusses how existing businesses can play a major role in supporting start-ups.

While the government is already making great strides in the way entrepreneurship is regarded and rewarded in the UK, more can be done to nurture start-ups and small businesses. If the UK is serious about getting its economy back on track, it needs to create the most fertile ground possible for people to start their own business, create jobs, and contribute to future wealth generation.

There are a number of ways the government and private sector can work together to achieve this. In this blog, I’ll look at the role established businesses have to play.

For start-up businesses, finance is the beginning and all too often the end of their journey. Support is available from a variety of sources but not necessarily the most obvious places.

Take existing businesses. These are an ideal source of investment for new ones. If there is a start-up that could help a business, or even challenge it, then it should invest and if suitable, incubate. It should help bring those skills to the market as when there are thriving, innovative start-ups in a sector everyone benefits. That entrepreneur could be the biggest boost a business ever had. Indeed, large corporates often look to start-ups’ innovations to keep their business on the cutting edge.

Investment does not simply have to be financial; offering simple things like desk space, mentoring and access to suppliers are extremely valuable for a company starting out. Large corporates have the distribution channels, logistics capabilities and global reach that start-ups can only dream of. 

For example, Google recently announced its support to help around 50 start-ups in green initiatives and energy related products. Indian consulting giant Infosys has signed up to mentor 16 of the UK’s emerging digital, wireless, and mobile software technology companies.

Even more recently, The New York Times has launched its own initiative, timeSpace. This incubator will bring media start-ups into the publication’s headquarters where they will work closely with The New York Times team and be provided with opportunities to secure investment.

In fact there is an emerging trend in which corporations invest in and mentor early-stage businesses as part of their CSR, underlined by the launch of the Big Issue’s corporate social venture challenge last month.

This is not just the preserve of larger firms. Smaller businesses have a role to play too and can offer a more rounded engagement to start-ups, providing the broadest possible exposure to different aspects of business from day one.

Where the government comes in is simple. Firms could be incentivised to help start-ups through, for example, increased relief on corporation tax or National Insurance Contributions (NIC). Existing businesses are natural partners to pioneering start-ups and this mutually beneficial partnership presents an exciting opportunity for idea and knowledge exchange.

With three UK universities in the world’s top ten, an unrivalled legal and economic infrastructure and a long history of innovation and invention, Britain could easily be the California of Europe, a hotbed of successful new businesses in the heart of the world’s biggest single market. To make sure this happens, existing businesses need to play their part.

In the next article, I will look at how extending the Enterprise Investment Scheme (EIS) and reducing National Insurance Contributions (NIC) for early-stage businesses could have a significant impact.

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Small Business Funding

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