Most entrepreneurs would agree that the UK has not enjoyed all the perks of US hub Silicon Valley but Britain’s start-ups are soaring to record highs.
UK business schools are giving the nation’s growth engine a shot in the arm. Top schools – from Cambridge Judge to London Business School – are in a student start-up push.
Figures from Barclays Bank and the Business Growth Fund show more people are involved in start-ups year-on-year, as the number of active companies in the UK hit a record high of more than 3.1 million in December 2014 – up 3.7% from June. Business graduates are buying in.
“MBA students are keen to set up their own businesses once they have graduated,” says Julie Hodges, MBA program director at Durham University Business School. It allows them to applying their learning to innovation.
Ismail Ahmed, founder and CEO of online cash transfer business WorldRemit, is like many of his counterparts keen to promote London as a tech and financial services hub.
The London Business School graduate says: “There is an abundance of world-class talent in the city and the convenient time zone, which enables communication with Asia and the Americas in same working day, is an attractive factor.”
Valued at around $500 million, WorldRemit raised $100 million in funding this year from Technology Crossover Ventures, the San Francisco venture group that backed Facebook and Netflix. WorldRemit sprouted in LBS’ Entrepreneurship Summer School and it will not be the last to flourish on campus.
Schools are investing in developing start-up ecosystems to help ventures thrive. Manchester, Cass and Cambridge Business Schools all bring successful entrepreneurs into classrooms as teachers. Durham, Oxford and Warwick have all launched start-up incubators.
Cass in London has a fund that invests up to £10 million in alumni start-ups each year. Aston Business School works with US investment bank Goldman Sachs to create opportunities for students to access financing.
James Hickie, a lecturer in entrepreneurship at Manchester, says the rising profiles of successful entrepreneurs has helped interest surge. “There is a profound cultural shift taking place in terms of people’s understanding and attitudes towards entrepreneurship,” he says.
Working in start-ups is a challenge but business schools recognize the need to hone entrepreneurial cultures.
Maksim Belitski, lecturer in entrepreneurship at Henley Business School, says MBA students want to reinvent themselves as entrepreneurs: “They see it as a way to make more impact sooner.”
A government report by Lord Young, the former business minister, said the UK’s 130 business schools must act as “anchor institutions” to help grow local economies.
Start-ups are increasingly the priority. Henley runs events for students with the Berkshire Business Growth Hub, an entity that helps start-ups scale up, and with Spanish bank Santander.
But Andrew Bagshaw, MBA career manager at Lancaster University Management School, says the number of alumni starting a business immediately after the MBA had been increasing but has slowed.
He says: “Alumni seem to place business ownership as a goal for the less immediate future.”
However, there were big increases in start-ups in the telecommunications, food, property and pharmaceuticals sectors, Barclays says, while the tech industry – despite its hype – saw a 23% drop.
Still, Cambridge University has produced 14 companies – many of them high-tech – valued at more than $1 billion. Its fund laid the groundwork for an IPO for Horizon Discovery, a biotech start-up, which raised £68 million after listing last year.
London’s technology groups are thriving. New figures from London & Partners reveal that digital start-ups in the UK capital received $682 million in VC funding in the first three months of 2015, up 66% on last year – suggesting a new record.
Eileen Burbidge, partner at venture capital firm Passion Capital, says: “London is one of the most electrifying tech hubs in the world.” She adds that investors and start-ups are brought to the UK capital by access to talent and markets.
TransferWise has been one of the most successful. The fast-growing London fintech start-up, co-founded by an INSEAD MBA, raised $58 million from Andreessen Horowitz, the venture capital group that has backed Twitter and Airbnb.
Taavet Hinrikus, co-founder of TransferWise, says: “The city’s status as both a tech and financial hub means we've been able to grow the company from just my co-founder and I to a company of 250 employees, processing over £3 billion worth of customers’ money in four years.”
Ambarish Mitra, CEO and co-founder of Blippar, the augmented reality app maker that recently raised $45 million, says London is the perfect location for global growth.
Ambarish, a London School of Economics MSc management graduate, says: “The city has been a springboard for Blippar to open offices in six countries and grow threefold year-on-year since we started.”
But there remain challenges. Luke Johnson, a serial entrepreneur who chairs StartUp Britain – which aims to foster entrepreneurship – recently claimed the UK had overtaken the US on start-up closures. Student debt stymied potential founders, he said, among other factors.
However as Nick Badman, chairman of the Centre for Entrepreneurship at Cass, points out, there are start-up communities forming at business schools that can help founders unlock finance.
“We focus on providing money and connections to help people build real businesses,” he says.