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
2. HSBC AND THE
(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
financecommercial or otherwisebenefits 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 Objectives||Overall Effectiveness
|SMART||Good.||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.
|TCS||In practice the scheme is not widely understood.
||A highly-rated scheme insufficiently used or promoted, giving below average effectiveness. In need of relaunching.
|SFLGS||Good. 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 Funds||Good.
||Almost as highly rated as SMART, though proof of principle funding seen as not widely used.
|Regional Venture Capital Funds||Objectives well understood.
||Promotion of funds variable. Difficult to track down contact details of fund managers from public-sector websites.
6. SUMMARY AND
(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 www.dyi.gov.uk.
(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
(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
Schedule of HSBC Technology Banking Managers
HSBC TECHNOLOGY BANKING MANAGERS
|Basingstoke||Graham Bourns, email@example.com
||8 London Street, Basingstoke, RG21 7NU
|Birmingham||James Hunt, firstname.lastname@example.org
||PO Box 68, 130 New Street, Birmingham, B2 4JU
||0121 252 2714|
|Brighton||Eric Boon, email@example.com
||153 North Street, Brighton, BN1 1RE|
|Cambridge||Mark Shillito, firstname.lastname@example.org
||3rd Floor, Parker House, 46 Regent Street, Cambridge, CB2 1DL
|Cardiff||Andy Button, email@example.com
||3rd Floor, 97 Bute Street, Cardiff, CF10 5NA
||029 2035 1134|
|Edinburgh||Scott Cowan, firstname.lastname@example.org
||76 Hanover Street, Edinburgh, EH2 1EL
||0131 456 3265|
|Guildford||Clive Martin, email@example.com
||165 High Street, Guildford, GU1 4EN||01483 703603
|London||Peter Barham, firstname.lastname@example.org
||West End Corporate Banking Centre, 83 Pall Mall, London, SW1Y 5EF
||020 7599 3009|
|Maidstone||Tim Bourner, email@example.com
||16 High Street, Maidstone, Kent, ME14 1HX
|Manchester||Brendan Cafferty, firstname.lastname@example.org
||100 King Street, Manchester, M60 2HD||0161 910 2281
|Middlesborough||Peter Harvey, email@example.com
||60 Albert Road, Middlesborough, TS1 1RS
|Milton Keynes||Paul Liddelow, firstname.lastname@example.org
||19 Midsummer Place, Milton Keynes, PO Box 1888, Coventry, CV3 2WN
|Norwich||Carl McNeice, email@example.com
||18 London Street, Norwich, Norfolk, NR2 1LG
|Nottingham||Lindsay Angus, firstname.lastname@example.org
||12 Victoria Street, Nottingham, NG1 2FF
||0115 980 2557|
|Oxford||Steve Bateman, email@example.com Chris Chipperfield, firstname.lastname@example.org
||Midland House, Seacourt, West Way, Botley, Oxford, OX2 0PL
|Slough/Windsor||Val Axford, email@example.com
||128 High Street, Slough, SL1 1JF||01753 232810
|Southampton||Roy Wood, firstname.lastname@example.org
||165 High Street, Southampton, SO14 2NI
||023 8053 5062|
|York||Lisa Williams, email@example.com
||13 Parliament Street, York, YO1 1XS||01904 884111