‘Unlocking’ cash in wealthy companies balance sheets

Debates have spurred and calls for action have been made to help start-ups gain investment and know-how from cash-rich giants. The corporate venture scheme, which offered tax breaks to wealthy companies that backed smaller ventures, was scrapped four years ago.

However, business organisations have lobbied for its reinstatement, arguing that big companies sit on billions – a reported £488bn – that could be channelled into rising stars.

In September, some of Britain’s leading entrepreneurs and investors wrote to business secretary Vince Cable asking whether the tax incentive could be brought back. Investors including Sherry Coutu and Dale Murray backed its return. But Cable was unmoved.

The think tank, Johnson’s Centre for Entrepreneurs, leads a plea to George Osborne to use the Autumn statement on December 3 to “announce a consultation on how to incentivise large firms to unlock their balance sheets and invest in small and medium-sized companies.”

But big companies, banks and universities and other organisations are at least investing something. Programmes such as John Lewis’s JLab or Telefonica’s Wayra, which offers funding and office space for a 4% investment or for free respectively, as well as technical advice. Though more corporates seem to be interested in such schemes, they may not be doing enough.

Johnson said: “With cash in corporate balance sheets at an all-time high there is a strong case for reviewing how this wealth can be unlocked for the benefit of small-high growth companies. A government consultation on corporate venturing would identify options, including financial incentives, to achieve this goal.”

Murray, however, believes it is not about reinstating the old corporate venture scheme. “One has to recognise these are different beasts we are trying to match; there is often a divergence of alliance between corporates and entrepreneurs. At some point on the journey, entrepreneurs want to go different ways from the corporates”.

There are ways to get wealthy companies to unlock their balance sheets, believes Murray, “by developing their supply chain and filling it with thriving, ambitious entrepreneurial companies.” Murray also comments, “we need to understand whether tax incentives are what corporates want and whether that would drive the kind of behaviours we would want to see”.

Simon Devonshire, director of Wayra in Europe, knows exactly what a big corporate wants from a start-up. “Invariably, corporates need to innovate and start-ups need to scale-up. I believe they have the skills, knowledge and experience to help one another.”

For more information please see original article: The Sunday Times, Business Section, Small Business, p.10. Kiki Loizou.

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