Select Committee on European Union Minutes of Evidence

Memorandum from HSBC


  HSBC in the UK provides a range of services for technology-based, entrepreneurial businesses. These services are co-ordinated by the Innovation & Technology Unit and delivered mainly through a national network of Technology Banking Managers (TBMs), a list of which is attached at Annex A. HSBC recognises both the great potential which young technology businesses have to contribute to the economy and that such firms are often unusually challenging for advisers and providers of investment funding or financial services. This note outlines briefly HSBC's services for the sector and the experience of the specialist managers in HSBC of publicly sponsored schemes aimed at the early-stage, for-profit technology market.

  (a)  HSBC has introduced a number of services specifically for the technology market. The HSBC Chair of Innovation, established in December 1998 at Brunel University, is in itself an innovative form of collaboration between industry and academia. The chairholder, Professor Clive Butler, is an experienced engineer who now dedicates the majority of his time to projects connected with the small and medium-sized enterprise sector. Professor Butler appraises business plans, submitted via HSBC, from firms with innovative technology as the basis of a unique competitive advantage. Professor Butler is one of only 11 Business Fellows created by HEFCE in 2001 to recognise key individuals in higher education promoting knowledge transfer and work with industry.

  (b)  In view of the success of the Brunel relationship, HSBC entered into similar arrangements with the University of York in late 2001. The Chair Holder is Professor Tony Robards, who was awarded the OBE in 2002 for services to higher education. This second Chair of Innovation doubles our capacity both for conducting appraisals of business plans and for undertaking management training. Appraisals are currently being undertaken at the rate of 140-150 a year. Approximately three out of every five proposals reviewed by the universities are taken on as banking customers. Other companies are also taken on as customers, for instance existing businesses whose technology has been independently assessed by equity investors or whose products are already being sold.


  We consider that given the risk/reward ratio, technology-based firms are unsuitable for conventional debt finance until they at least generate revenues and preferably profits as well. However, we recognise that other sources of funding and advice may be more appropriate for technology firms at early stages. At both Brunel and York, we regularly run two-day, on-site training courses for managers in our branch network in understanding the issues confronting technology-based firms. The "Innovation Seminars" covers use of schemes such as SMART, TCS as the SFLGS, as well as benefiting from presentations by entrepreneurs and venture capital investors. More that 450 managers have been trained in this way since 1998.

  (a)  The HSBC Technology Banking Managers appreciate that finance—commercial or otherwise—benefits from a broad awareness of business issues on the part of entrepreneurs. The Technology Banking Managers are frequent participants at open days and training sessions for students and entrepreneurs at venues such as incubators, business schools and enterprise centres. Business plan competitions are sponsored with cash prizes and benefits in kind, such as participation on judging panels. Expert speakers are often provided for business breakfasts and similar entrepreneurship-orientated events. The level of basic financial awareness, including the differences between debt and equity, among intending entrepreneurs is often low.

  (b)  The TBM network is assisted by a small head office team, the Innovation & Technology Unit, responsible for national issues. This unit is a founder sponsor of a wide-range of events or organisations aimed at promoting entrepreneurship, including the Cambridge Enterprise, Conference, Oxford Venturefest and UK Business Incubation. It co-sponsored (with Universities UK and the Patent Office) a 100 page Guide to managing Intellectual Property, aimed at University Technology Licensing Offices, and hosted the launch of Universities UK's report on The University Culture of Enterprise. The unit has also organised seminars for universities wishing to learn best practice in commercialisation from the leading British practitioners. Other activities include detailed reports on technology funding in the US (2000), Israel (2002) and Germany (forthcoming), distributed free to universities, incubators and science parks.


  Set out below is an overview of the schemes to support technology firms most frequently encountered by the HSBC Technology Banking Managers. It does not purport to be a comprehensive list of all applicable schemes.
Name of Scheme Clarity of ObjectivesOverall Effectiveness
SMARTGood.Rated among the best. The larger grants (up to £450,000) are considered to set the right level of thoroughness at the technical level. More attention should be paid to the (lack of) management quality.
TCSIn practice the scheme is not widely understood. A highly-rated scheme insufficiently used or promoted, giving below average effectiveness. In need of relaunching.
SFLGSGood. The scheme is usually well understood by professional advisers, though many potential customers fail to take account of the restrictions. Since this scheme is intended to provide guarantees against loan criteria, its relevance for technology firms at the pre-profit stage is limited.
University Challenge FundsGood. Almost as highly rated as SMART, though proof of principle funding seen as not widely used.
Regional Venture Capital FundsObjectives well understood. Promotion of funds variable. Difficult to track down contact details of fund managers from public-sector websites.

  (a)  Several government schemes in recent years have materially improved the chances of entrepreneurs in technology-sectors progressing ideas through to patent protection and even proof of concept stage. Many of our customers nevertheless consider that obtaining "second round" risk capital (perhaps in the region of £2 million to £7 million) is becoming if anything more difficult. Many private sector venture funds have moved up market in terms of minimum investment threshold, and competition intensifies as an increasing number of good proposals make it through the early seed capital stages, thanks in part to schemes such as Regional Venture Capital Funds or University Challenge Funds.

  (b)  The main schemes in everyday use (such as SMART or TCS) are generally well regarded. However, even experienced managers in our network often do not find it easy to understand the overall "map" of government schemes, how each relates to the others and where to refer customers seeking to locate easily accessible information on each scheme. The simplification of the range of DTI schemes currently in hand is welcomed, as is the online directory now available through

  (c)  A relaunch of TCS would be welcomed. The scheme is considered to have numerous benefits (excellent for technology transfer, graduate training, university/industry cooperation) but is little known or understood other than by specialised advisers.

  (d)  HSBC has participated in UCF funding (eg through the ICENI Fund, based in Norwich). The future for University Challenge Funds is unclear. We understand that UCFs are intended to become self-sustaining over the medium-term, but this is unlikely in all bar a small number of cases given the relatively small size of most funds at the outset.

  (e)  Given the continuing "equity gap" at early stages, we welcome the consultation on developing US-style Small Business Investment Companies announced in the Budget on 9 April 2003.

  (f)  We welcome the numerous recent development in the provision of third stream funding to universities to encourage commercial activity as well as teaching and research. Spin-out companies should not be the main benchmark for appraising success in this area, since one of the most important forms of knowledge transfer undertaken by universities is the teaching of graduates to work in industry. Although considerable informal collaboration with industry takes place, our regular dialogue with universities suggest that for most academics the main path to professional advancement remains research and teaching.

14 April 2003

Annex A

Schedule of HSBC Technology Banking Managers

LocationManager AddressDirect Line
BasingstokeGraham Bourns, 8 London Street, Basingstoke, RG21 7NU 01256 726086
BirminghamJames Hunt, PO Box 68, 130 New Street, Birmingham, B2 4JU 0121 252 2714
BrightonEric Boon, 153 North Street, Brighton, BN1 1RE
01273 362012
CambridgeMark Shillito, 3rd Floor, Parker House, 46 Regent Street, Cambridge, CB2 1DL 01223 546632
CardiffAndy Button, 3rd Floor, 97 Bute Street, Cardiff, CF10 5NA 029 2035 1134
EdinburghScott Cowan, 76 Hanover Street, Edinburgh, EH2 1EL 0131 456 3265
GuildfordClive Martin, 165 High Street, Guildford, GU1 4EN01483 703603
LondonPeter Barham, West End Corporate Banking Centre, 83 Pall Mall, London, SW1Y 5EF 020 7599 3009
MaidstoneTim Bourner, 16 High Street, Maidstone, Kent, ME14 1HX 01622 706015
ManchesterBrendan Cafferty, 100 King Street, Manchester, M60 2HD0161 910 2281
MiddlesboroughPeter Harvey, 60 Albert Road, Middlesborough, TS1 1RS 01642 392068
Milton KeynesPaul Liddelow, 19 Midsummer Place, Milton Keynes, PO Box 1888, Coventry, CV3 2WN 01908 455322
NorwichCarl McNeice, 18 London Street, Norwich, Norfolk, NR2 1LG 01603 243275
NottinghamLindsay Angus, 12 Victoria Street, Nottingham, NG1 2FF 0115 980 2557
OxfordSteve Bateman, Chris Chipperfield, Midland House, Seacourt, West Way, Botley, Oxford, OX2 0PL 01865 444658

01865 444690

Slough/WindsorVal Axford, 128 High Street, Slough, SL1 1JF01753 232810
SouthamptonRoy Wood, 165 High Street, Southampton, SO14 2NI 023 8053 5062
YorkLisa Williams, 13 Parliament Street, York, YO1 1XS01904 884111

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