Another method is for Zopa to set up a specific business loan stream so that users can specify details on the business.

I still see this working in tandem with the loan scheme. It isn’t (or shouldn’t) be an either/or. For example, the loan scheme pays for living expenses etc. for an entrepreneur while the micro-loan pays for an asset that the entrepreneur will use in the business.

Bureaucrats are bad a picking winners and so are investment professionals. The scheme removes human judgement and lets lots of potential business start.

Yes, many will fail and most that succeed will not go onto become Google or Dyson but that isn’t the point of the scheme. The point of the scheme is to allow as many as possible business to start to address a need that the entrepreneur feels is unmet whether this need is for a lawn mowing company in north Wales, a plumber in the Scottish Highlands or software company creating a new web service.

You are saying exactly the same thing, and you are correct that it is not confined to one sector of the economy.

It is important to understand that the quaternary is not a sector of the economy per se, it is a notional construct that transcends all economic sectors.

It is where innovation, largely technological and information driven, takes place. It is not confined to one particular sector of the economy, but it affects them all. It makes them more efficient, successful and in this case helps them compete globally.

For example, Dyson make vacuum cleaners, primarily a manufacturing (secondary sector) activity. Research and development, product innovation, brand development, web strategy and innovation in customer service software systems (quaternary / knowledge activities) make the company more efficient and globally competitive, benefiting our economy as their continued (international) success trickles down through many different associated businesses and services, and ultimately making the life of the cleaner better.

That is the salient point, and where I believe this funding should be directed.

Its purpose is not front-line regional development, which is currently funded and managed separately.

regards

angus

You can have all the knowledge creation you want but if it never is applied to real systems it doesn’t create economic value. The idea is to promote knowledge, innovation and development across the whole sector. Innovation happens at the edge, at the point of need. It rarely happens because someone in the quaternary sector has decided it is worthwhile.

Technology development is not something confined to one layer. In fact you can argue that very little applied innovation happens in the quaternary sector rather it happens where there is a need.

Value lies in creating great things, whether a good or a service. It has nothing to do with competing globally or locally. This may be technological or it could be shit hot customer service.

A knowledge economy is not dependent on one sector or the efforts of one sector. It lies in the application of knowledge across the economy. Primary research and development feeds that but it firmly falls within the application of knowledge across the economy.

Business already has to deduct student loan repayments from an employee’s salary. It is the same thing. It is a clerical procedure when paying the employee. It is a computer task and its not a burden. If it is a burden on the company to perform this clerical task as part of the process of paying a salary then that company has far more serious problems than clerical effort of making a deduction from a salary package.

Attractive is probably a poor choice of words. The idea is to create a psychological barrier that is a hurdle to filter applications.

If the loan is at average graduate salary from the outside it will look nicer (own work hours, no boss etc.) than getting a salaried job (work hours set by coy, boss etc.). By reducing below the average graduate salary the loan scheme forces graduates to evaluate whether the reduction in salary is worth it.

The point is to filter those who’s heart really isn’t in it.

Appreciate what you say, but feels a bit tail wagging dog to me…

Is this not loosely the difference between the tertiary and quaternary sectors?

Constructive Capitalism, as Haque calls it, is knowledge, innovation and technology driven and falls largely within the quaternary sector. I think that investment and development of skills within the quaternary sector would see us optimise our remaining secondary sector services keeping them competitive and also providing expertise and services that are in demand globally; not forgetting that we export little these days.

I agree that diversity is important, which is why I agree that it is myopic to focus on web technology. Innovation within manufacturing or engineering would be a good example, but even that is largely technology driven.

As Haque says the future of value creation lies in better ways to compete (globally) and fostering innovation. For Haque this was based on technological change.

My point really being that with globally competitive knowledge based economy comes robust, wider economy.

Still don’t get why it is the employers responsibility to administer employee student loan repayments though….would much rather be administering innovation!

angus

I think it wouldn’t hurt to support anyone with tertiary education but no work experience using the scheme. However, the amount would be capped at some nominal rate, say slightly below average graduate salary so it doesn’t become more attractive than a job.

Business listing is a good idea. If would be interesting to see if that would encourage people to support these new companies.

If anything the financial crisis has shown that relying on any one particular industry as a significant portion of the economy leaves a country heavily exposed to a down turn in that area.

We are shifting into what Umair Haque likes to refer to as an edge economy. That changes the dynamics in which smaller, interconnected business of all varieties are important. The concept of one particular area being dominate is unsustainable. Arguably, businesses such as plumbing, carpentry etc are as much knowledge-based service as Google. It is simple a different type of knowledge.

The idea of the scheme isn’t necessarily a seed investment but a seed loan with forgiving terms that isn’t tied to the success of the enterprise but the income of the individual. The loan is to be paid back through the tax system and imposes a burden on business but no more than student loans and would dovetail into the same system. In essence it wouldn’t be different from employing someone with a student loan.

Investment professionals don’t scale as someone over on Fred Wilson’s blog pointed out and unfortunately, there aren’t large numbers of good investment professionals around. That makes scaling the use of investment professionals difficult.

The point of the loan scheme is to address the very, very early stage needs of business. Essentially the first year (potential first 2 years). It isn’t about replacing angel, seed or venture funding. The aim is to get small business to the point of being able to take on private funding should that be suitable (as in the case of your coy) or be at a point that revenue can support the coy (as in the case of the lawn mowing coy).

The co-investment proposal comes in but I think at a later stage. It isn’t an either/or but the loan scheme will be faster to roll out and benefits a larger range of businesses.

Yes the risk is there but then at very early stage there is huge amount of risk. On balance the potential to create a boom in small business is worth the risk of loan losses. The use of the tax system to retrieve the loan I think will reduce the capital losses to an acceptable level.

Bear in mind that the idea is to give small business a fighting chance. The pay-off from salaries and taxes will outweigh losses (even with high defaults) over time.

General red tape is a problem faced by all business and citizens. It is a broad problem that should addressed in the light of reducing the cost of government on society.

With the decline in importance of the city and the finance sector within the economy, previously representing 11% of GDP in 2007, should we not be looking to invest in our knowledge economy and the creation of the requisite skills to drive that?

In my sector (back to the web myopic!) it surprises me that the (software) engineering skills required are still so narrowly taught in the UK, given we are aspiring to be Digital Britain. Surely it is a more attractive proposition for under-graduates if business is burgeoning in that sector on the strength of global demand, and ongoing investment in that sector?

Is this not our future in this increasingly connected world, and their economies?

I like your income-contingent loans idea. Although will it become my responsibility as an employer to administer repayments, like student loans? Government red tape will get us in the end…!

angus

I am, however, in the tech business and my start-up, pre-revenue requirements are different from starting a lawn mowing business. My development, scale-up and launch needs are significantly different. I do not think it is an either/or comparison between the two proposals. Many who have started small business with the aid of the Prince’s Trust will go a long with the suggestions above, but they would not work for someone trying to create a disrupt or nothing concept.

Public money for investment grants and loans have one function. First and foremost they are awarded to stimulate the economy and create jobs and wealth for the country/region. Currently they are not awarded to make the entrepreneur rich – that is a potential side effect. They do enable the entrepreneur to have access to funds they might not otherwise have.

There is a good reason why such grants should be targeted where the aim of the support is most needed.

The grant/loan suggested above is awarded in a way that is contingent on the entrepreneur becoming rich – and if they are “easy to get” – that may be based on self-delusion. Writing a custom business plan; scrutiny by someone whose wealth/job depends on picking winners; and competition for the finance has to be healthy part of the process.

However it is clear that a quick loan scheme which is underwritten by my future performance is needed. Getting a loan from a bank to cover cash flow, even when underwritten by a mortgage free house, has been like looking for hen’s teeth.

Every penny I earn gets re-invested in development, so being able to have access to a small loan fund I don’t have to jump through hoops for (read: spend weeks custom-writing business plans) would be a lifeline. I’m more than happy to pay the cash back, I just want be able to get on with the job of building and launching instead of constantly pitching.

One other suggestion I’d make, I’d like the loan fund linked to a website where anyone getting a loan can post up info on their newly-launched products themselves, categorized so users can decide for what they want to look at.