Why so much of our portfolio is American
Amtivo’s chief executive wrote in The Times this week that when the company launched a new service line, it commissioned search firms in both the UK and the US to build the senior team. The American team was in place and already selling inside two months; the British equivalent, she reckoned, would have taken nine, six of them notice periods. The business is now based in the US. We recognised the story.
Fourteen of the nineteen companies in our portfolio are American. There is a structural reason for that: we source most of our deals through two New York angel networks, New York Angels and HBS Alumni Angels of Greater New York, so the companies we see first are American companies. But that is a choice, not an accident, and after a couple of years looking closely at early-stage businesses on both sides of the Atlantic we would make it again. The Times piece puts its finger on part of the reason.
The first difference is who starts companies. In the United States a disproportionate share of the most capable people a university produces, the ones who could walk into a bank, a consultancy or a large technology firm, choose instead to build something. That is not because they are braver than their British counterparts. It is because the culture treats the attempt as the respectable choice. A twenty-eight-year-old who has founded and folded one company is, in Boston or Austin, a more interesting hire than one who spent the same years on a graduate scheme. In London the reverse is still, too often, true. When the best and brightest try to build their own businesses, the talent available to early-stage companies improves at every level, because the second and third employees come from the same pool.
The second difference is the one the Times piece is really about: how fast that pool moves. Amtivo’s experience was a senior team hired, set up and selling in under two months, helped by notice periods that are, in the author’s words, “shockingly short”. One of her new hires put it more bluntly: “when the spirit has moved on, it is better that the body does too.” Our experience matches. The US start-up labour market is not just bigger, it is more liquid: people move between early-stage companies as a matter of course, they treat equity as a serious part of compensation, and they arrive with pattern-recognition from previous start-ups that a company of ten people cannot teach. Several of our portfolio companies have hired a senior commercial or clinical lead in weeks, from people who had done the job before at a comparable stage. We have watched UK companies of similar quality take two or three times as long to fill the same role, and settle for less. Enterprise Britain’s survey of the country’s fastest-growing firms found three quarters of their leaders saying the slow movement of talent was holding back growth. We would have expected the number to be higher.
The third difference is the hardest to put a number on. Entrepreneurs are revered in the United States in a way they are not here. The Times piece notes that business in Britain is too often regarded with suspicion, as something workers need protecting from. In America the founder is the person everyone wants to help. That shows up in small things: a customer willing to take a call from a founder with no track record, a landlord who will sign a lease on a company six months old, a regulator who sees a start-up as a potential national asset rather than a compliance risk. The small things compound. A founder who is taken seriously from day one spends the first year building, not persuading people that he or she is allowed to. The angel networks we work with are part of that culture: hundreds of experienced operators who put their own money and their own time into first-time founders, as a matter of course.
None of this is a counsel of despair for the UK. Britain produces exceptional technical founders, its universities are among the best in the world, and some of the companies we most admire are British: Goldilock, which NCSC chose to manufacture and sell its SilentGlass device, is one of them. The author’s own prescription is the right one: the way to protect jobs is to have a lot of them, and the way to have a lot of them is to make it easy for new companies to hire. Until that changes, when the question is where early-stage capital will find the deepest talent, the fastest commercial traction and the fewest cultural headwinds, the honest answer is the United States, and a portfolio built on that answer looks the way ours does.
Read the Times piece: https://www.thetimes.com/article/e7b6721a-ddc9-4f78-ba6c-e370d1c313a2
Albion Trinity Capital invests in early-stage companies across healthcare, technology and business services. This article is for information only and is not an offer or solicitation of any investment.