back to article UK tech inventors defeated by cash drought

British technology is being crippled by a lack of venture funding, according to a leading UK entrepreneur who made his fortune in Silicon Valley. TiVo founder Mike Ramsay says a lack of cash is forcing inventors to lower their hopes and ambitions. Edinburgh-raised Ramsay, who invented the trailblazing TV hard disk recorder the …

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  1. Chris Coles

    Venture Capital has deep flaws and is not the solution needed.

    The United Kingdom lauds itself as the home of corporate finance. London, the financial capital of the world. But the UK is a feudal country and has deep roots in the maintenance of a social structure that has no need, or wish, to create a successful grass roots culture that would, inevitably, outshine the few at the top. As a result, the UK is not what one could describe as a free enterprise nation where the owner of the business manages the business. At grass roots, this cultural bias in now becoming very evident as the last dregs of the small manufacturing business sector is merged into larger corporate groups and the manufacturing employment is moved abroad to cheaper cost centres. No one with access to finance here in the UK has the slightest interest in the creation of a new manufacturing base for the nation. Not even the government.

    Why?

    I believe that as the decades rolled by after the Second World War, the appointed leaders of the nation, (apart from a few, in general, you only get right to the top via a public school education such as Eton in the UK), discovered they did not have any interest in leading what was a very strong, but deeply divided workforce in manufacturing industry. They did not have the stomach for it. Why should they have to deal with such forthright views and strong opinions? They decided that THEY did not have to. They decided, as a social group, to walk away from all the angst and so, instead of investing in new competitive industry which would have allowed those of us to create new businesses that did not hold elements of disruption, such as a strong union; they walked away from the whole idea. The war with the unions such as the mine workers and the print unions, totally reinforced their opinion that the whole idea of investment into industries that in turn provided high wages to a disruptive workforce was not a road they would continue to walk upon.

    The consequence was that the "City" took a new path, financing finance which was in turn allied to the realisation of the great gains that could be made, (without any great intellectual input), by trading in companies rather than the hard work needed over many generations to create new industry. As a group of individuals, they collectively turned their backs on the idea of the long term creation of new manufacturing industry.

    Modern Venture Capitalism came from the same mould, indeed, from the same collective group. VC's are not interested in the long term creation of new industry at the grass roots level. They refuse to invole themselves in the creation of small grass roots businesses and are only interested in a business they can sell on into the existing corporate structures in as short a timescale as possible. They overcame the problems in the past, (of lack of control over industry), by taking total control from the outset. Installing their own management, and insisting on their own view of the structure of the nation they would build around their own business plans. Freedom of the individual who creates new industry? Forget it! Free enterprise, where the owner of the business manages the business? "Don't make me laugh!" Manufacturing, where the local employer lifts the circumstances of their local community by introducing high wage employment? Forget that too! What you get instead is a new form of feudalism and the high wage economy is exported to another country to maximise "their" profit at the expense of the grass roots nation. I will bet my bottom dollar that every TVIO machine is made in the likes of China.

    If you want to improve your nation, do not follow down the VC road, it will only lead to more feudalism. The UK has a chance to learn from the past mistakes of the USA and should instead strike out for the shoreline defined by the founding fathers of the USA. For a free nation dominated by believers of freedom, free enterprise and high wage manufacturing. For a grass root economy not dominated by the idea of finance being the final arbiter of the nation’s freedom.

    Adam Smith in The Wealth of Nations wrote: “It will hereinafter appear that all jobs are created in proportion to the capital invested”. But what are jobs? History shows on the one hand that it is possible to create jobs that are slavery. Slavery could be seen, once, as a job created. But we rejected that route; it did not create a free society.

    On another hand, you can tax and the state creates jobs. We saw a lot of that during two world wars and today we see more again in the wars in the Middle East. All those ships, aircraft and tanks and their crews are tax jobs created by war and the consequential need for armaments. Again, after the great depression in the United States, imaginative statesmen took vast sums of tax for public works that in turn drove the economies out of slump. But these were just another form of tax job. As two city of London bankers once said to me, “The government creates jobs, not us”, and, today; we can again see a huge industry in government jobs. Jobs created with tax are not bad as jobs go, but they are not new tax income creating jobs. New jobs come from new invested capital.

    But you only have to look out the window of a railway carriage onto the desperately poor communities beside, for example, the Washington DC to New York railway line to see, clearly, that the Western world does not have enough capital invested in new, fresh jobs. Much of the United States is the same; grossly undercapitalised with nothing but poor mean living. Yes, go on, I dare you, look out of the window and see. Every American city has the same look about it once you get out of the centre. Many Americans endure poor mean living in grossly undercapitalised communities.

    Capital has a huge responsibility, not simply to make a profit, but much more so to do all it can to lift the lives of the rest of the people out of poverty. You can dream of utopia and live in a communist or a fascist society, or, again, dream of limitless power and live in a slave society murdering all dissent on your way to the top. Me, I choose a free society where I dream that I can walk freely about with as many as possible who are fully capitalised, and work in meaningful jobs where their efforts in turn both increase the tax income of the nation and ensure the lives around them are worthwhile and free.

    Power in the hands of the few without the rest of the nation being free is a meaningless aiming point for any nation. Capital has great responsibilities in a free society. Venture Capitalism has refused to accept that responsibility. Free Enterprise is the only worthwhile solution to the capitalisation of a nation and to achieve that, we need a free marketplace for capital, not a feudal one.

    Please, think about that?

    Chris Coles.

  2. Michael Wolff

    investors naturally follow the best return

    UK investors may be getting better and faster returns on venture capital than elsewhere. But that doesn't help me as a startup entrepreneur. I am finding it extremely difficult to find a relatively small amount of funding to launch a second generation social media venture. First generation ventures such as MySpace, LinkedIn and other, have attracted have attracted significant investments in the US. Several ventures in Europe have also successfully attracted capital such as Xing. But in the UK, nothing. A case of being in the wrong place at the right time!

    Michael Wolff

    CEO - ki work - www.ki-work.com

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