The recent report “Selling Less of the Family Silver” has provoked some interesting responses, particularly around the R&D tax model. Valerie Lynch, Chairman of and technology consultant for AND Technology Research, and an Industrial Collaborator at the University of Cambridge, has worked with many early stage companies and serial entrepreneurs and gives her perspective on why the government relies on R&D tax credits to support corporate innovation.
“Yes, companies do indeed often need to go to the US to scale and this is a well-trodden route. Its an option that we often promote to companies we consult with as the market and opportunities are so much bigger. Although beneficial to the entrepreneurs, this does of course mean that stakes in the business get taken overseas.
“I’ve reflected on this conundrum throughout my time in business. I have observed that the real difference just comes down to market size and my conclusion has been that the UK market size doesn’t support the level of funding required for knowledge-intensive technologies.
“So rather than ‘selling the silver’, maybe we are selling opportunity to take things to market. Further down the line, perhaps we are simply enabling exits for companies that can justify the purchase price with a business case formulated for those larger markets?
![Dr Valerie Lynch awarded life-time achievement award for her contribution to electronics [credit: Electronics Weekly]](https://www.rndtoday.co.uk/wp-content/uploads/2024/05/Valerie-Lynch-lifetime-achievement-award-feat.jpg "Dr Valerie Lynch awarded life-time achievement award for her contribution to electronics [credit: Electronics Weekly]")
“If, however, the UK is able to create new markets or support market growth activity, then maybe we’d get to keep some of this silver.
“I am still ‘over-asked’ as to why the UK seems unable to create new markets or grow them significantly, I have also put this question to government representatives, but I have been consistently informed that this type of support isn’t really possible – we haven’t in the past had the critical mass required. The US is of course the master at creating and growing markets, but then they have a huge marketplace to work with.
Question of size
“Sweat equity is a good way of drawing individuals into a new venture and that can of course be valued within the company. The problem that remains for the government is how to identify whether or not that value is capable of creating revenue in the future. How would they know that they are not simply supporting peoples’ hobbies?
“Again, the size of the US and the money around means that this need to differentiate is lower. It maybe that successive UK govts are more risk averse, but even if they are I think it is all related to scale.
SBRI grants need to show tangible benefit to UK.plc
“SBRI grants are great – I have been involved in successful securing three and partaking in more. They are tricky to get, as you have to show evidence of real tangible value back to the UK in terms of future revenues or other measures. For example, the outputs from one of the SBRI projects managed to show value through the collection of evidence, that was then used to facilitate a change in legislation. That’s the sort of thing they would look for.
R&D Tax Model is proportionate
“So, my thinking is that possibly the government supports the R&D tax model because this enables funding to be given in relation to market size and measured proportionally by the taxes collected.
“I do understand the issues faced by those starting up and doing consultancy in parallel – it’s what we all have to do in order to bootstrap our companies – but the point is I think that if you don’t strive to reach a point where you can pay yourself a salary from your own company (not just extract dividends) then how can you say you are able to create silver for the UK?
“I do think that companies need to be within the tax system to benefit from government support.”
