Founders and VCs place emphasis on the UK’s ambition deficit

The young Brit has caught Flak because of an obvious lack of entrepreneurial drive, sparking a broader debate about whether the UK startup scene is facing a deficit of ambition.

It started when British business secretary Peter Kyle criticized British university students for not having the same interest in starting the same business as their American peers.

“In the UK, if you go to a group of undergraduate students, how big should the group be before you find someone who said they would choose to go to university? Kyle said at an event hosted by AI Chipmaker Nvidia in London.

“Entrepreneurism is simply not there – drive, vitality.”

He is not alone. The UK’s tech and startup scene is often seen as lacking the same strength and speed as its US and Chinese counterparts.

Some venture capitalists suggest that European founders should work hard and adopt a strict “996” work schedule that is notoriously in China’s high-tech companies.

However, stereotypes are not necessarily backed up by data. Almost 60% of young people in the UK were interested in starting their own business, according to a recent survey conducted by the Small Business Federation (FSB) and 2,079 simple businesses in the UK between the ages of 18 and 34.

But in reality, only 16% of people have actually made a leap into entrepreneurship, with most citing it as preventing the lack of formal business education.

“There is definitely a huge appetite for exploring entrepreneurship from a very young age,” Dama Satiansan, senior partner at Bethnal Green Ventures, told CNBC Make.

“It’s really hard to show ambition when the system is equipped against you. You don’t have the right supportive infrastructure to use your money and be motivated to aim really high.”

Bristol-based entrepreneur Tom Wallace Smith created the Under-30 Forbes 30 in Europe last year, and he said he feels entrepreneurial spirit is out of reach for most people in the UK

“From people’s public opinion, the whole track of Elon Musk or Jeff Bezos or Mark Zuckerberg feels very mythical to people. It’s completely out of reach of someone else.”

Wallace, who co-founded the fusion startup Astral Systems while earning his PhD in Nuclear Physics from the University of Bristol in 2021, said he didn’t know that entrepreneurship was a viable career path and was expected to become a big company or an academic.

He argued that while the UK does not lack successful entrepreneurs, the government and the media could “do a better job telling the founder’s story” and increase exposure to the startup environment.

Many people in the UK see entrepreneurship expressed through comedic reality television shows like Apprentice and Dragons’ Den, Wallace-Smith says, with a lack of role models. “It’s about teasing them, not defending them.”

In the FSB and simple business survey, 15% of young, current or aspiring entrepreneurs say they increase their confidence when they see others succeed, but more than a third received guidance or support from local entrepreneurs and businesses.

A venture capitalist and founder of the 20VC podcast, Harry Stevings has the instability surrounding entrepreneurship, which has been responsible for the doors of “risk-off” UK parents and has become an attractive career path.

Instead, Stebbings, the 996 week champion, said it appears that young people are aiming to work for companies like Goldman Sachs and McKinsey.

Wallace-Smith of Astral System said many UK entrepreneurs have not seen enough “direct incentives” to expand and grow in the UK, as opposed to the US.

“What’s left in the UK is crumpled with teeth like hooks and con artists, so I’m looking to succeed here because I care about this country to make sure I’m successful in the UK…it’s an outlier than the norm,” he said.

Atomico’s European Tech 2024 state has identified talent leaks to the US in at least 800 companies that may have been founded in Europe throughout the Atlantic.

They also found that established startups looking to expand past the seed funding stage tend to struggle to secure their investment. In fact, twice as many US companies (8.3%) have raised rounds of over $15 million compared to 4.1% in Europe.

Furthermore, half of European companies have coordinated to the US since 2015 to secure key investors.

While there is a risk appeal among UK entrepreneurs, it is not for investors, Satyanathan said that UK VCs don’t want to put their money at risk.

Damian Routley, chief operating officer of Venture Studio and Startup Accelerator Founders Factory, said the financial incentives to set up a company as a young person are “increasingly weaker.” Since the 2020 Covid-19 pandemic, tax credits for both entrepreneurs and investors have declined.

Lifetime allowance for Business Asset Disposal Relief (BADR) has been reduced from £10 million ($13.45 million) to £1 million, with Capital Gains Tax (CGT) tax rate rising, leaving founders with fewer payments when selling companies.

“This all means it’s difficult to take the plunge and start a business.

Meanwhile, while some early stage funding incentives are considered generous, they focus on investors, and many startups struggle to secure the capital they need to grow.

“It’s a structural issue and permeates it into becoming a cultural issue because if you have to struggle constantly, why do you choose to struggle on this entrepreneurial path?” Sathiansan added.

But it’s not all fate and darkness as the UK remains “Europe’s best startup hub.”

According to Venture Capital, the UK’s Private Equity & Venture Capital Association, £9 billion was invested in UK venture support companies in 2024, maintaining its position as the third largest VC market after the US and China.

A variety of incubators and accelerators are also set up to encourage young people to participate in the business. Alongside the Founders Factory, it includes SetSquared, UCL hatching sites and Techstars.

Additionally, 20VC Stebings recently launched a European equivalent of Thiel Fellowship. This is a program that offers $200,000 to young people under the age of 22 who want to build innovative startups. The US alumni program includes Vitalik Buterin, co-founder of Ethereum, billionaire Lucy Guo.

Supported by 128 founders of companies including Klarna, Mistral and Soundcloud, Stebbing’s Project Europe is a fund awarding 200,000 euros ($234,684) to select founders under the age of 25.

However, the British Lords’ Communications and Digital Committee warned earlier this year that the UK was at risk of becoming a “incubator economy.” The idea remains strong, and the ability to expand and grow remains weak.

“If we can’t settle the road to capital markets and encourage sovereign IP (intellectual property) to stay here, we risk losing a better structured administration to increase the likelihood of losing our best companies,” Routley said. “Ambition is there, but there are no few rangs on the ladder.”