Nothing ventured – nothing gained
22 February 2011
The best - and worst - of British, combined with the best of Embedded World, and there is no shortage of interest in this week’s newsletter.
Last week in my blog ‘A very British achievement’, I wrote about a fascinating product invented by the University of Sussex and being brought into commercial reality by Plessey Semiconductor. Apart from the interesting technology, it demonstrated several of the better aspects of British engineering and ingenuity – but does focussing on the few bright lights only highlight the dim underbelly of British engineering that lurks beneath?
Greg Spring of Polycomm wrote:
“I read with interest your article on the new electro static voltmeter and have two points to make.
Firstly, I run a British company with a world beating design of turbine, yet it took me seven years to raise the investment capital within the UK to get this project off the ground. That was seven years wasted raising the cash when that time should have been spent designing and marketing the product, which we're currently doing.
Investment capital in the UK is run by people with little or no real understanding of engineering and demand unrealistic returns and time scales for their investment. They are in the majority and there are all too few people running realistic investment capital programmes in the UK to support, and I mean really support, UK inventions and development.
We are fortunate to be with AEGF [Advantage Early Growth Fund], the only investment company we found with a realistic attitude towards UK engineering. Everyone else we encountered couldn't understand why our invention wouldn't earn millions within three years and therefore weren't interested.
And in a nut shell that is the problem with investment capital in the UK. Extreme short term thinking.
In Japan, they plan their R&D projects over 25 years which is one of the reasons why Japan has historically dominated the manufacturing world since the end of the second world war. Britain will never become the industrial power house it used to be because civil servants and accountants dominate the investment capital market and they have a fear of long term investments. And I do not exaggerate when I use the word 'fear' to describe their reaction to serious engineering projects.
In the nineteenth century, investment capital was dominated by businessmen and engineers, i.e. those that could really appreciate the advantages of processes and products, not just use them. So until this current crop of people are removed from office or are educated to understand the real life world they claim to support and promote, I am afraid Britain will continue to stagnate due to the strangle hold these people have on real entrepreneurs in our country.
My second point is that Britain all too often does not value the products it creates; a weakness that has all too often been exploited by the States and Japan. There are numerous historical examples of brilliant products created and designed in Britain, but developed and successfully marketed by a foreign power.
I really do hope Plessey will turn this quite remarkable new technology into a world beating family of new instruments, but I worry that Britain has a very poor record of achieving these goals on its own and in future we will read that Plessey has sold the licence to China or America as has happened before. If we really are serious about rebuilding Britain's engineering foundations, then we need to be much more aggressive and protective of our innovative companies and their products.
As a nation, we need to fund them properly to ensure they succeed and ensure that everyone in Britain benefits from home grown British ingenuity.
Most of all, I firmly believe that if we are to turn this country around we need a sea change in who runs the investment finance in this country, otherwise nothing will change and we will always be playing second fiddle to the States, Japan and now probably China.”
Kevin Caley, of the aforementioned AEGF, added his own views from the perspective of the venture capitalist.
“As an engineer turned venture capitalist (making over 350 early stage investments during the past 26 years) I have been astonished at the short-termism in the UK VC industry. Unfortunately it reflects the commercial and political pressures that come with the sources of funding. Politicians have a two to three year horizon because they (and voters) soon forget about new initiatives and maximising this year’s bonus drives the financial sector.
The only investors with a long-term horizon are pension funds but our regulatory system acts against their involvement in such high-risk investments.
I also think that it may be a national trait to look for a short term gain, based on a deep national pessimism that things will eventually go wrong or we will not be around to benefit if the investment takes too long to produce returns.
We at AEGF have invested in 61 very early stage businesses with high growth potential over about six years and already I have difficulty in explaining to investors why we haven’t found exits for most of them yet. The reality is that early stage high tech business will take between seven and 12 years to demonstrate their full potential and to expect anything less is unrealistic.
Unfortunately I have also become very pessimistic and cannot see any way of solving the problem.”
Thanks to both Glenn and Kevin for writing in with their thoughts. If anyone else would like to contribute on this subject, or any other featured in EPD, then please email me at the usual address.
On another matter, the majority of products and projects featured on this week’s newsletter are relevant to next week’s Embedded World exhibition that takes place in Nuremberg from 1 – 3 March 2011. This is one of those events that supports the theory that specialisation is good, and has gone from strength to strength, emerging as a focal point for the global embedded industry. It is ‘do-able’ in a day – just – and we will endeavour to bring you as much new information as possible through this newsletter for those that can’t make it.
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