A Real Measure of UK Startup Success: Getting to the starting line
In my aborted PhD I came to appreciate how we measure a country's entrepreneurial performance. At the same time I could see policy makers make international comparisons of startup ecosystems (it helps you can usually find one indicator you’re in the top #10 for!). One key metric the UK always performed well on is company formation - how quickly you can start a limited liability company - it's a key metric in the Global Entrepreneurship Development Index (GEDI) I used to work on. The UK optimised brilliantly for this: you can register a company at Companies House for less than a round of drinks, and it’s so easy you could do it after drinking said round. Compared to other countries I’ve been involved in, like Austria, it’s a doddle.
But over time I’ve come to see first hand that the registration step is easy to do*, easy to measure and just the first of many steps companies need to go through to get going. The real question is: how quickly can someone access the resources they need to quit their day job and build something; How quickly and at what cost can they get to the start line? The answer to this question is iniquitous and being distorted by tax incentives.
*also very easy to get wrong by accident!
Beyond Registration: A Capital Reality
For most tech startups, university spinouts, and innovative ventures, you need capital before you have customers. While the best funding is always non-dilutive - customer revenue or grants - if you want to quit your day job, recruit co-founders, or give your team space to build and prove your idea’s value, you need money from somewhere.
If you're well-connected or a repeat founder, life is easier - tap your network or apply for grants you’ve - or people you know have- done before. If you’re unconnected and considering starting for the first time, there is no network. You have to go out and build one, research, join accelerators - and most of these people wouldn’t even think to look to government support and InnovateUK for a grant (hence the iniquity) let alone know how to apply successfully.
These issues compound. Those with no pre-built network or history in founding lack the experience to distinguish between good offers of investment and bad. What terms are acceptable at an early stage versus what might kill you down the line.
I’ve seen first time founders time and time again accept the first credible offer they get - without knowing what good looks like, being told that terms are ‘standard’ and shooting themselves in the foot without even knowing it. Often not taking money, being lean and bootstrapping is better than taking the wrong money with toxic structures, but without a network or experience, how are they to know?
These are often the people building transformative companies - getting off on the wrong, more costly, foot from day minus one! So what is the cost of getting started?**
** technically with only one foot as the other has been metaphorically shot off
The Current Cost of Getting Started
Right now, if you want to take on money from the network you’re building to sustain and scale your business - often these are the “three Fs” (Friends, Family, & Fools - usually Business Angels) then you should be thinking of an ‘SEIS’ round. This means that those close to helping you build success can put in money and not risk much capital as only ~20% of the investment is really at risk if you can use all the benefits. Unhelpfully family is excluded from this but that’s the least of EIS’s problems (though a necessary protection from abuse). The S in SEIS is a carrot to draw in expert individuals, Angels, that can transform the likelihood and scale of the success you’re aiming for.
If you’re ‘trusted’ - i.e. you’ve got people in your network ready to write cheques - great. You might get away with £2k from out-of-the-box services like Vestd or Seedlegals (starting at £1k plus other needed agreements). Though the application process will take you some time, likely you can start building up costs safe in the knowledge the money is coming in.
If you need to do a formal round where there is no history and documents are negotiated (usual even for serial entrepreneurs), how much might it cost at the top end for an unconnected first time entrepreneur? You’ll need;
Company formation
Term sheet negotiations with investors
New Articles of Association
Written resolutions and governance (e.g. Share Holders Agreement - SHA)
HMRC advance assurance applications
Plus other bits that emerge from having a data room, financial model etc.
All of which will require multiple rounds of legal review and represent a steep learning curve for a first time founder. Most unconnected founders fall into this latter category and set themselves up for an artificially difficult time.
Total cost: £10,000-£20,000 and 6-12 weeks of founder time.
I've personally seen founders use out-of-the-box solutions incorrectly, seeding errors that torpedo future rounds or accidentally violate SEIS eligibility. Even the "cheap" options often require expensive legal review to avoid catastrophic mistakes. The stakes are too high for DIY approaches - something too many first time entrepreneurs learn the hard way.
Compare this to Silicon Valley: download a SAFE template, fill in the blanks, close funding in days. Legal cost: under £1,000. No drama***.
*** That’s the headline. The reality can be that the above documentation still stacks up as side letters, with the complexity moving elsewhere. That is commercial or market complexity not regulatory complexity - the regulations add little to no drama, time or cost. What happens in the UK is the other way round.
The Equity Problem We've Created
Startup funding should provide equal access to opportunity. The more barriers you create to getting to the starting line, the less equal the system becomes; The more individual schemes that have to be applied for (e.g. grants) the harder it is to ensure it’s applied equally.
Anyone wanting to start a scalable, innovative business should be able to access the same resources regardless of their personal networks or family wealth. That means reducing the cost and complexity of accessing initial capital.
The Energy Equation
Entrepreneurs tackle challenges that look impossible from the outside - that's what makes them entrepreneurs. But you only have so much energy for genuinely hard problems.
Why should the government be creating artificial barriers rather than removing them?
Every hour spent navigating tax compliance is an hour not spent building products. Every £10,000 in legal fees is £10,000 not invested in R&D or hiring. Every week waiting for HMRC approval is momentum lost to international competitors.
What Equal Access Really Means
Startup ecosystem success isn't measured by how many companies register, but by how quickly anyone - regardless of connections or background - can access the resources they need to pursue ambitious ideas.
The measure should be: "How long from brilliant idea to commercialised founder?"
At the moment it feels like: Connected entrepreneurs, days to weeks. And for everyone else: months, if ever.
If you’re unconnected then you have to be a standard deviation or two better to break through.
This isn't just unfair - it's economically wasteful. We're systematically excluding the very people who might build the most transformative companies because they can't navigate our complex legal, tax, grant and regulatory funding infrastructure.
The Path Forward
The solutions aren't complicated:
Standardised SAFE templates with automatic SEIS qualification on conversion
Pre-approved legal documents that eliminate most professional service costs
Digital-first processes that work at startup speed, not government speed
Here’s a thought: What if InnovateUK's remit expanded beyond funding specific innovators to actually removing systematic barriers to innovation? The have a billion pound budget. Use a tiny fraction to work with the government, HMRC, and the legal and investor community to create and maintain standardised documentation that works seamlessly with (S)EIS. Make these free, professional, and well maintained.
It’s not picking winners or running more competitions. It’s building infrastructure - the boring, ongoing, essential work of making sure anyone can get to the starting line. InnovateUK could monitor the ecosystem, identify where founders are burning time, money or getting caught out by artificial barriers and systematically remove them. When lawyers can charge £20k for documents that could be standardised, that’s not efficient - it’s a failure blocking innovation.
Reduce the cost of getting to the starting line from £20,000 to under £1,000 for everyone, and from 10 weeks to 10 days. Measure it; Make this a key performance indicator for UK startup policy - not just company registrations, but time and cost to first funding or first revenue.
Someone should fix (S)EIS, think systematically about how the UK supports innovative startups and, as discussed in this post, reduce the self-induced foot shooting created by these often tweaked and rarely tended systems (I think we’ve shot three feet now…).
The goal isn't just supporting more startups - it's ensuring that startup success depends on the quality of ideas and execution, not on personal networks and family wealth.
That's when we'll know our ecosystem is genuinely world-class: when brilliant ideas can find capital as easily as they can find incorporation.