How to inspire a start-up nation

As 2021 draws to a close, it’s worth reflecting on all the ways in which the UK business landscape has changed in the last half-decade: getting to grips with Brexit, the post-COVID recovery and the environmental pledges made at November’s landmark United Nations COP26 conference.

The UK is in real need of new, innovative companies that can react quickly to the challenges heading its way. But recent evidence suggests the country may not be as up for it as we thought.

Despite early evidence of an entrepreneurial rush to the head during the pandemic, with a host of lockdown-inspired startups, there was a sharp fall in the number of individuals setting up new businesses in the last few months of 2020, compared to 2019, according to a definitive study by the Global Entrepreneurship Foundation (GEF). Paradoxically, the study also found more people than ever before thought starting a business would be a good career choice, but 53 per cent were prevented from doing so by fear of failure (an increase from the 46 per cent in 2019).

It’s not that recent events have made us all super-cautious. The confidence and emotional resilience needed to embark on an entrepreneurial career have been lacking for some time. An earlier, 2017 study by the same organisation among new graduates found a distinct lack of enthusiasm, with only 0.6 per cent of them having started their own business, compared to 8.7 per cent for the population at large.

As Brexit begins to have a more profound impact on the way the economy functions, a faltering pipeline of startup businesses could be a real issue at a time when Britain give one per cent of our group profits to organisations that we think have impact,” says Khosla, also CEO of OakNorth Bank. “How do you help people, who naturally won’t have the opportunities, get an opportunity to progress?”

That’s led OakNorth into partnership with Khosla and Perlman’s old university, the London School of Economics (LSE), on a ‘Mentorpreneurship Programme’ .

It’s run by LSE Generate, an initiative that’s been helping to build socially-minded businesses by offering a network of support and practical tools to would-be entrepreneurs since 2010. It boasts notable alumni including Allbirds, Lensational, and Disperse.io. And it’s just opened its first European hub in Lisbon.

The new Mentorpreneurship Programme encourages businesses to engage past, current and future student entrepreneurs in a ‘life-cycle of mentoring’. The hope is that the programme will be replicated across education to help address the transformations that the UK economy is facing, to prepare the workforce with the skills it will need more of, and break down misconceptions about who ‘qualifies’ to be an entrepreneur: in the GEF survey, four-fifths of the non-entrepreneurial population believed that those successful at starting a business came from an advantaged background. Ultimately, the programme to inspire a new generation of businesses that drive change in their communities.

Planting the innovation seed starts early. “That mindset of entrepreneurship doesn’t get embedded when you’re finishing university or finishing college,” says Khosla. “It probably happens much, much earlier on – in terms of your willingness to take risk, how you interact, how you collaborate.”

So, the Mentorpreneurship Programme

must learn to be more self-sufficient. It poses an important question: how do we most effectively drive entrepreneurship in the UK to increase competitiveness, particularly given the apparent apathy among graduate cohorts?

One company taking a proactive approach to tackling the problem is financial services provider OakNorth, which has been in the business of encouraging entrepreneurship since 2015. The white-label business credit analysis platform spun off its own business bank under the same brand, to cater to a group of SMEs that it defines as the ‘missing middle’ – those in need of serious investment but lacking the size to get conventional institutional investors excited.

OakNorth’s founders Rishi Khosla and Joel Perlman found themselves in just that situation when they were looking for funding to support a previous business in 2005. Despite it being profitable with good metrics, no high-street banks were willing to provide the finance they needed to expand.

This informed the founders’ next move in – launching a credit intelligence software suite designed to (affordably) assess the creditworthiness of companies in this tricky middle segment, and then a bank to help secure them the funding they so badly needed.

A sharp focus on entrepreneurship has served OakNorth Bank well: it achieved unicorn status in 2019 and was the first UK challengers to turn a profit in 2018. It remains one of the few to do so. Now, in the face of the seismic challenges facing the UK economy, there is a sense at OakNorth that the time has come to expand the scope of its work beyond finance and funding, to broader social initiatives.

“We made a pledge, several years ago, to

INSPIRE A HOW TO STARTUP NATION

A new partnership between business bank OakNorth and the London School of Economics hopes to encourage a new generation of founders through a ‘Mentorpreneurship Programme’ that breaks the norm, as the bank’s Rishi Khosla and LSE’s Laura-Jane Silverman explain

will reach into secondary and even primary schools, and out to segments of the population that might need additional encouragement to embrace the idea of starting a business.

“The idea is that, by the time students get to university, they don’t have those hang-ups around failure, and they’re better-equipped to survive what is a really difficult journey, and thrive,” says head of LSE Generate, Laura-Jane Silverman.

That mindset of entrepreneurship doesn’t get embedded when you’re finishing college. It probably happens much earlier in terms of your willingness to take risk, how you interact, how you collaborate

Rishi Khosla, OakNorth Bank

“Essentially, the message is that mentorship is not something that you just sprinkle over an entrepreneurship programme; it’s baked in from the beginning and embedded in the DNA.”

The need for this was evidenced in research carried out in 2020 by LSE and the Massachusetts Institute of Technology (MIT). It found that half of young people in the UK, aged 14-to-25, do not know a family member or friend who is a business owner, and the majority cannot name an entrepreneur who inspires them. But exposure to innovation and entrepreneurship at an early age can have lasting impacts. In Australia, Denmark, and the Netherlands, programmes targeted at students as young as 11 raised awareness of this potential career choice and helped develop the attitudes needed to pursue it.

But parachuting retired captains of industry into classrooms isn’t the best strategy. From Generate’s work, it became apparent that aspiring entrepreneurs want access to those not so far up the ladder from them, says Khosla.

“Someone who’s only two, three, four years ahead of you, and has gone down the path you want to take – maybe you’re a secondary school student who wants to get into a particular university, to read a particular subject. Just being able to have access to someone who’s done it, to understand that path, can be incredible.”

The Programme will be a key element in a new collaboration between Generate and the Girls’ Day School Trust, which is focussed on addressing the gender imbalance among successful founders. However, the wider mission extends beyond age and gender.

“Representation for us is really, really important,” says Silverman. “Students said if all they saw were 50-year-old white males running businesses, then they couldn’t imagine themselves being in that position. So, we make sure that every student is represented by alumni in the ecosystem.”

It’s not an entirely altruistic act on businesses’ part – a tick on a corporate social responsibility agenda. Underpinning all this is a firm belief that the process can benefit participants in both directions through reverse mentoring.

For Khosla, bringing young influencers into his own comparatively young organisation has been a source of inspiration; and it can fast-track innovation in those that have been operating in the same manner for years, too. Back in 2015, an initiative at Italian fashion house Gucci saw the formation of ‘shadow committees’ of younger employees, tasked with setting the 100-year-old business on a modern path. That helped inspire a more ecologically- conscious design philosophy. While that storyline might not have made the cut in director Ridley Scott’s current House Of Gucci, it apparently made a big impact on the company’s bottom line: one fashion commentator credits a 136 per cent spike in 2019 sales to the move.

Young people can have a lot of influence on a business because, quite often, they are the target audience, says Silverman.

“And students come into boardrooms and CEO offices with that confidence of youth and no hidden agenda,” she says. “NOVA University in Lisbon is already working with corporates that really need that injection of innovation. Students get placed with a corporate for a month, where they get to offer advice. And that can be a life-changing experience for them.”

Students said if all they saw were 50-year-old white males running businesses, then they couldn’t imagine themselves being in that position

Laura-Jane Silverman, LSE

The idea of a centuries-old educational institution collaborating with one of the UK’s newest banks to deliver such a seriously ambitious agenda would have been unthinkable just three years ago, says Silverman. But, in an era where the UK economy faces unprecedented change, it might be exactly the cultural norm-busting we require. As Khosla says: “We need to create a much more adaptable generation. One that says ‘I can make change, I’m comfortable with change, I can take risk’.”

Stepping up:

OakNorth and LSE are inspiring young people to become founders