A common subject for discussion among both governments and investors is how to create the right environment to produce more entrepreneurs.  Last month, we saw Cameron launch ‘Tech City” in London. At about the same time, we had the NESTA report suggesting that Europe is less dynamic than the US, meaning it’s more difficult for new, innovative, companies to penetrate the established order.

Everybody knows that entrepreneurs like to think of new things and set up ventures to take them to market.  These early stage, high growth businesses are the main driver of economic growth. Despite this fact, there are very few places in the world that actually make it easy for an entrepreneur to start a company and go on to build it into a true global success story. This says to me that it is clearly very difficult to get the formula right.

To my mind, there are four main ingredients to create an ideal entrepreneurial environment:

Talent + Funding + Attitude + Government

Let’s take each one at a time:

Talent

Clearly, you need to have talented people to start and grow successful companies. This includes the talent and imagination to think of new ideas and better ways of doing things and also the talent to take on risk and turn those ideas into a successful business. I think some of this you are born with and is then further developed by working with other great entrepreneurs or by going ahead setting up a business and learning from the experience.

Funding

A NESTA report published earlier this year correctly points out that the future prosperity of the UK depends on its ability to foster and support high growth businesses. It is these high growth businesses and the entrepreneurs behind them that are best positioned to take advantage of new business models and emerging technologies and markets. But, for these entrepreneurs to be successful, they need an accessible pool of capital willing to back their vision and support them over the long term. When running MessageLabs, I experienced firsthand the critical role VC can play in accelerating growth trajectory – very often in tech you just don’t have time for organic growth.

In 2009, there were over 1,093 venture-backed companies in the UK employing over 40,000 people.  From contribution to employment figures, to supporting all innovation that attracts further growth and further investment – there is ample evidence that proves the positive impact of VC funding.

I welcome initiatives that make it easier for investors to back promising entrepreneurs and believe that the government/regulators should balance their priorities to ensure that VC and its related knock on benefits to the economy do not suffer due to policy.

In the last year, the government has made some positive moves to support VC in the UK, most notably the announcement of the UK Innovation Fund, and the awarding of two new Enterprise Capital Funds (ECF’s); these steps are aimed at helping the supply side and allocating much needed capital to high potential start-ups.