Despite the massive challenges caused by the Covid-19 pandemic, it seems that entrepreneurship remains alive and well within the Welsh economy.
Take, for example, the Wales Start-Up Awards, which will be announcing its shortlist for 2020 next week. The annual competition to find the best new firms in Wales had over 540 entries from every part of the nation - the highest in its five year history - with 40 per cent of these submitted by women-owned start-ups.
More importantly, there were some incredible businesses across all industries from traditional sectors such as business to business services, food and drink and construction, to emerging new areas such as cyber, fintech and mobile technologies.
Recognising the achievements of these new businesses is critical as research shows time and time again that it is newer and smaller businesses that create most of the employment as we come out of a recession.
In contrast (and as we have seen over the last few days), it will be larger businesses that will shed tens of thousands of jobs as the economy comes under pressure.
Indeed, the importance of start-ups to the Welsh economy as we emerge out of the recession caused by the current pandemic was the reason why I wrote a letter to the First Minister in April highlighting the gaps in support for new businesses and urging him to use part of the Economic Resilience Fund to help those who sustain local economies
Whilst many will concerned that it took three months for Welsh Government to respond to this, it is to Mark Drakeford’s credit that he did actually listen to this plea for support.
As a result, a £5 million start-up grant scheme was launched last Monday which will provide a £2,500 bursary to up to 2,000 businesses that were established their businesses between 1 April 2019 and 1 March 2020.
Yes, it could have been more money and it could happened sooner, especially as it took the Welsh Government only a short time to set up the £100 million fund for the Development Bank of Wales amidst much fanfare at the speed of the response.
Whether this delay has resulted in firms closing their doors will probably never be known.
However, this financial intervention, however small, will certainly be welcomed by those who have started their businesses in the last 12 months and have, in all probability, been bootstrapping their finances to cope with the downturn in the market.
In contrast, those technology-based start-ups in Wales that were looking to support from the British Business Bank’s Futures Fund would have been disappointed with the recent announcement of its distribution.
To recap, this fund had £250m available to provide between £125,000 and £5m to UK-based companies with private investors at least matching this commitment.
To be eligible, a business must be an unlisted UK registered company that has previously raised at least £250,000 in equity investment from third party investors in the last five years.
For those of us involved with the Welsh tech sector, it was clear that it would not benefit fully as, according to the British Venture Capital Association, Wales has one of the lowest average investment from venture capital in the UK accounting for just 3.3% of all funding over the period 2016-2018 only 128 companies benefitting. In contrast, the ‘golden triangle’ of London, the South East of England and East of England attracted 73% of all venture capital over the same period with an average investment that is four times that given to Welsh tech firms.
Unfortunately, that prediction seems to have come true with only five Welsh firms out of 252 successful cases across the UK receiving a total of £2.9 million (or 1.2 per cent of the total). As expected, start-ups in London, East England and the South East of England received 78 per cent of the funding.
Of course, it could be argued that the majority of venture-backed firms are to be found in the more prosperous parts of the UK but this support should have been about ensuring that all of the regions and nations benefited equally from this fund.
That did not happen and if this had been applied proportionately, then Wales would have received an additional £9 million to support its tech industry and, more relevantly, could have potentially supported many more innovative start-ups that did not qualify for the current scheme.
Whilst I appreciate that the UK Government had to act quickly this time, any future funding programme for innovative firms as we come out of the recession must take into account the need to level up the economy across the nation and not just in London and surrounding regions.
If the UK Government and the British Business Bank continues to focus its funding on the richer parts of the nation and a capital city which is now one of the biggest magnets for venture capital globally, then there will not be a levelling up in supporting high growth start-ups across the UK and, as a result, the growth in prosperity will continue to be focused in one part of the country.
As the economy looks to recover, that is the old normal that we must avoid at all costs going forward.
Yet again, the Wales Start-Up awards have shown there are some incredible new businesses that could easily hold their own with those in London, East England or the South East of England if only they could get access to the funding that is necessary to supercharge their growth.
Certainly, it is time for our politicians to ensure that the publicly funded “British” Business Bank stops focusing on the easy option of providing venture funding London firms and to look down the M4 and ensure that the next major fund it develops will be on this side of the Severn Bridge and supports the work of the Development Bank of Wales in this area
Wales has the businesses – now give our firms the funding they need to succeed.