The new budgetary year beckons - new plans, aspirations and objectives - but who looks back to what was said a year ago?

When the angels met last year at NESTA’s ‘Seed Summit’ for investors, their list of devilish details did not fall on entirely deaf ears. A government minister attended – not to speak but to listen – and NESTA, (the National Endowment for Science Technology and the Arts) clearly has clout when it comes to lobbying power.

The summit captured the views of investors from around the world – people willing to pump money into the UK and help create jobs and, unlike most of the finance casinos, people really interested in very small innovative start-up companies with potentially global impacts.

It was an important gathering - these angel investors from around the world were looking to put their own money into a host of UK start-up ventures with high hopes but uncertain prospects. Angel funding is one of the roots of economic growth and innovation. Ideas turn into employment, pennies become pounds, new businesses flourish and old businesses adapt or die.

So how did we do? What was the response to their 7-point manifesto? Like so many school reports the answer seems to be ‘could do better’ – and the policy tweaks spurred by this event illustrate how good ideas can so easily get ‘lost in translation’.

No government has a magic wand – the levers of power are crude and the scope for unintended consequences is vast. It’s a wonder that any government manages to achieve anything – more often a happy outcome is accidental good fortune – but this doesn’t curb the urge to try and make things better.

Of the angels’ seven key recommendations at the start of 2011 there were some clear successes, some disappointments and some that might perhaps be called ‘work in progress’.

Success ?

Investment incentives: Enterprise Investment (EIS) and Venture Capital Trust (VCTS) Schemes.

The angels were pushing on an open door: the 2011 budget changes delivered higher EIS tax relief on profits (30%) and higher levels for eligible investments – up from £1m to £10m. Alas the angels’ pleas for directing the investment attractions towards technology start-ups fell on deaf ears and the only tweak was a ban on VCT investment in future solar energy generation ventures.

R&D Tax credits

The angels concern last February was that an expected review might make things worse – so the budget in 2011, increasing the allowable deductions for R&D and the promise of more to come in 2012, should have been welcomed by investors in smaller companies.

Sad reality

Visas

Despite intense lobbying from business leaders the angels’ keen desire to see more talented people and MBA qualifiers enabled to stay and work in the UK fell foul of populist anti-immigration sentiment. The Introduction of an ‘exceptional talent’ category did little to compensate for the loss of previous Tier 1 definition and the notion of the importance of teams of talent working together rather than a focus on individuals was never going to make a slick Sun headline.

Procurement

The investing angels wanted to see a cultural revolution in public sector procurement – celebrating the achievement of good value – and more contracts going to SMEs by copying the mandated 25% rule of the USA. They may have gained a little comfort from EU initiatives (higher thresholds before the full process is needed) but in the UK the focus seemed to be more concerned with tweaking the timescales for complaints about process infringements. No joy here for reworking the balance between big business and the smaller innovators who can rarely afford the cost of compliance with gold-plated processes.

Employment law

Not unnaturally the angels pointed out that early stage start-up companies needed much greater flexibility in developing teams of really effective people and they wished to be free of worrying about tribunals for unfair dismissals – and it was no surprise that exceptions to basic employment rights were not forthcoming.

Work in progress ?

Equity Participation and Enterprise Management Incentives (EMI)

It’s running late but at last the UK government seems to be giving air-time to the angels’ plea for higher and wider levels of equity participation. The government’s recent enthusiasm for a ‘John Lewis’ economy seems however to fall short of real understanding of how these models work – and is unlikely to help angel investors who see the need to embrace start-up mentors as well as employees.  So this remains on the wish-list.

Broadband

What the investing angels said a year ago remains just as true today. “A much faster and bigger broadband infrastructure is needed across the country – this access to broadband is one of the reasons Scandinavia has produced so many interesting digital companies.”

Interestingly in their view of ‘appalling access’ the angels did not exempt London. The very recent rush to throw a little more taxpayers’ money at the major Telco’s to sort the problems of cities does perhaps suggest a gradually increasing awareness of the issues but it still falls way short of the commercially competitive initiatives in other major cities across Europe.

These were the views of investors from around the world – people willing to pump money into the UK. These are people willing to create jobs and, unlike most of the established banks and finance houses, people interested in very small innovative start-up companies with potentially global impact. People who understand urgency.

For students of programming and innovation here is a Multiple IF statement:

IF they come back again this year, IF they re-assembled to review progress, THEN what will have changed to encourage the angels to invest more in the UK?

__________________

Readers of this editorial also viewed 'DIY 2012' and 'A climate for Change'