Surfing the Long Wave Knowledge Entrepreneurship in Britain Charles Leadbeater and Kate Oakley Open access. Some rights reserved. As the publisher of this work, Demos has an open access policy which enables anyone to access our content electronically without charge. We want to encourage the circulation of our work as widely as possible without affecting the ownership of the copyright, which remains with the copyright holder. Users are welcome to download, save, perform or distribute this work electronically or in any other format, including in foreign language translation without written permission subject to the conditions set out in the Demos open access licence which you can read here. Please read and consider the full licence. 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The Demos circulation licence is adapted from the ‘attribution/no derivatives/non-commercial’ version of the Creative Commons licence. To find out more about Creative Commons licences go to www.creativecommons.org First published in 2001 by Demos The Mezzanine Elizabeth House Contents 39 York Road London SE1 7NQ © Demos 2001 All rights reserved Acknowledgements 7 ISBN 1 84180 045 7 1. Why entrepreneurship matters 9 Printed in Great Britain by Biddles Ltd Design by Lindsay Nash 2. The six stages of entrepreneurship 18 3. Entrepreneurial networks 29 4. Entrepreneurs and networks in action: computer games 42 5. Entrepreneurs and networks in action: animation 66 6. Knowledge entrepreneurship policies 81 Appendix: Main companies and entrepreneurs interviewed 99 Demos 5 This page is covered by the Demos open access licence. Some rights reserved. Full details of licence conditions are available at www.demos.co.uk/openaccess Acknowledgements This report has taken almost three years to produce. We originally expected to publish it in 1999, after conducting a series of interviews with entrepreneurs and profiling the clusters and networks in which they worked. In some respects we are lucky we did not meet our origi- nal deadline. Had we done so we would have presented no more than a snapshot of our entrep re n e u r s at a moment in their care e r. As it was, we have had the opportunity to trace them through an extraordinar- ily uncertain, even tumultuous time. Our research started in Spring 1998, well before the dot.com boom propelled a generation of young entrepreneurs into the limelight. For just over a year Ð early 1999 to the late spring of 2001 Ð it seemed as if entrepreneurs could build £1 billion businesses from scratch, armed with little more than a few good ideas. Since the onset of the dot.com crash, which started with the steep falls on the Nasdaq high-tech stock ma r k et in April 2001, a far more sober and cautious mood has descended upon financial markets, venture capitalists and many entrepreneurs. We have been able to trace a group of entrepreneurs through this upheaval. As a result we hope our findings will be both more interest- ing and more robust. We have a large number of people to thank for their help with this project, which began with conversations with Sir Douglas Hague of Templeton College Oxford, who gave us the idea to look at knowledge e n tre p re n e u rs. Ro ger Bake r, form e r ly of the Gat s by Charit a b l e Foundation, and Michael Pattison, its director, have been very under- standing when the project took longer than originally planned. At Demos Tom Bentley has summoned up more patience than anyone should have to and Lindsay Nash has edited the text and designed the rep o rt with her custom a r y prof essionalism. We should like to thank all the entre p re n e u rs who allowed us to inte rvi ew them, sometimes s ev e ral times. Between December 1999 and Fe b ru a ry 2001 Charles Leadbeater worked as an adviser to Atlas Venture, the venture capital fund, and learned an enormous amount about the funding and devel- opment of high growth entrepreneurial businesses. He would like to 6 Demos Demos 7 This page is covered by the Demos open access licence. Some rights reserved. Full details of licence conditions are available at www.demos.co.uk/openaccess Surfing the Long Wave thank Chris Spray and the sta f f at Atlas Ven t u r e for their help. We have le a r ned from many people, not least the entrep re n e u r s we inter vie wed as well as Pe ter Swann, David Teece, Charles Hill, John Gray and Fernando Flores. 8 Demos This page is covered by the Demos open access licence. Some rights reserved. Full details of licence conditions are available at www.demos.co.uk/openaccess 1. Why entrepreneurship matters This repo rt aims to explode some of the myths that cloud our under- standing of entrepreneurship, confuse our attitudes towards it and provide misleading guides for policies to promote it. Put very crudely, entrepreneurship is an activity in which a part- n e rship or team of people, combining diffe rent skills, identify an oppor tunity to create a new product or service and then mobilise the resources, both financial and human, to realise the idea. This report, based on interviews over the past three years with tens of Br itish entrepreneurs, makes three main claims about the role of entrepreneurship in modern society. Collaborative entrepreneurship Entrepreneurship is taking new forms: it is increasingly less individu- alistic and more collaborative. The traditional view is that an entrepreneur is either a struggling small businessman or a lone hero with the cha ri sm ati c qua l i ties to take ris k s and persuade othe r s to back their judgement: Anita Rod d i ck, Alan Sugar or Richard Branson, for example. Our research shows that this stereotype is increasingly misleading. While entrepreneurs are often be lone mavericks, entrepreneurshipis a far mo re structured, often team-based activity. Public policy should be less concerned with creating incentives for lone entrepreneurs and more concerned with promoting the conditions for successful entre- p re n e u rship as an act i vity. Entre p re n e u rship succeeds by pulling together the different skills and know-how needed to turn an idea into a business, product or service. Demos 9 This page is covered by the Demos open access licence. Some rights reserved. Full details of licence conditions are available at www.demos.co.uk/openaccess Surfing the Long Wave Why entrepreneurship matters Successful entrepreneurial organisations never depend on a single younger generation, as it is a reflection of the financial and individual: they are the creations of partnerships and teams of people economic calculations they make. who bring toge t her the tech n i cal, commercial, marketing and fin a nc i a l skills needed to turn an idea into a business. An individual entrep re n e u r The entrepreneurial society may ki ck off the process by identifying the opportunity. In some cases A widespread capacity for entrepreneurship is increasingly critical for the individual entrep r eneur can go on to lead the team. However often a successful modern society. the founder entrepreneur plays a critical role only at the start of what Entrepreneurship is traditionally seen as an important tool for job tu r ns out to be a very long process of en t rep re n e u r ship invol ving tria l , cre a tion, both thr ough the growt h of mic r o-businesses and self-emp l o y- error, learning and discovery. ment, and th rough the cre ation of h i g h - grow th new businesses. Several conclusions follow from this recognition that entrepreneur- Entrepreneurs are agents of change. By spotting new opportunities to ship is the pres e r ve of p a rt n e rships and teams rather than individuals. use re s o u rces more effe ct i v e ly, th ey help to shift the economy ’s resources from areas of low growth into areas of high growth. This is ● Ent repreneurs are highly individualistic. But to succeed they also why entrepreneurship is so vital to the flexibility and adaptability of have to be highly collaborative to pull together the other people open, market economies. However, the traditional focus on entrepre- they need to realise an idea. ne u r ship as a source of job crea tion is too narrow. It underest i m a tes the ● Founder entrepreneurs often spot an opportunity in a flash of economic significance of entrepreneurship and ignores its social and insight and move to exploit their ideas far more quickly than a cultural role.