Sharing Success
Autonomy founder Dr Mike Lynch on Britain's evolution to becoming one of the most attractive countries in Europe to found a successful tech company and why it must continue to maintain its position on the world tech stage.
I am sometimes asked whether I had ever been tempted to found Autonomy in Cambridge, Massachusetts rather than Cambridge, England? In fact, I am very proud of having started a company here, but it also turned out to be a great decision. The talent pool and creativity in Britain is second to none and Cambridge in particular turns out some of the best computer science and mathematics graduates in the world. But yes, there were some practical difficulties to overcome.
Back then, setting up a high-tech company in Britain was much like I imagine climbing mount Everest to be: an uphill grind, with limited oxygen, nobody to throw you a rope when things get tough and the peak, well, tantalizingly out of reach and just barely discernible through a heavy mist.
When I set up Autonomy, the landscape was very different from today. Access to capital was extremely limited: we were just two men and a dog, and the idea of angel investment in the form of Aunt Mildred giving you £5,000 hadn't really taken hold here like it had in Silicon Valley. In many ways, it still hasn't. What helped us back then, was our drive to prove our idea – and we got lucky. A man in a pub backed us with £2,000. Today, there is a much clearer route to early funding.
Economic growth in this country depends on maintaining the ability to foster innovation and nurture companies at critical stages of their development. In order to do so, we have to make changes in the way we legislate business. Britain today is one of the most attractive countries in Europe, thanks to a panoply of measures designed to ease the path to setting up and growing a business.
This government has expanded the Enterprise Investment Scheme and created a Seed Enterprise Investment Scheme, smoothing the path and incentivizing those who put their money in early-stage fast-growth companies. New tax credits for research and development and a corporation tax rate of 22% (the lowest in the G20) make Britain a good place to set up a company.
And the latest initiative for employers to offer employees shares in the company should be welcomed. Don't get me wrong, I would be the first person to rush to the barricades in defense of hard-won worker's rights and I do think that the basic principles are right. However, we run the risk of the pendulum having swung too far and we are so concerned with protecting workers that business has become paralyzed.
But it isn't only legislation that has stood in the way of progress in Britain. Employers have to shoulder some of the blame as well as it is their reticence to allow employees to share in the success of a company and reward hard work appropriately that has led to a polarization of society. It is to our shame that there are few companies that follow the very successful partnership model that John Lewis offers. I am not advocating a move to collectivization but the unwillingness to spread the wealth is, ultimately, bad for business.
And thus, I welcome measures like this one that give employees an opportunity to be part of the success of a company, from its inception. I have seen first hand that people work harder (are productive), are happier at work (gain job satisfaction) and are more motivated if they have a stake in the company. The controversy around Osborne's plan lies in the conditions that the shares come with: in exchange for up to £50,000 of tax-free shares, an employee must give up statutory redundancy, right to flexible working and time off for training, and double the time they have to say whether they are returning from maternity leave. This does not open the door to a return to Victorian sweatshops. These conditions, which are actually voluntary on the part of the employer who can offer flexible working if he wishes, will actually take some of the fear out of hiring people. And our economy needs job creation.
Any executive will tell you that recruiting good people is one of the key factors to success for a company. Surround yourself by a good team, the lore goes, and you can bask in reflected glory. But no matter how good you are at identifying talent, you sometimes get a bad apple. For a big company with a sophisticated HR department, removing that bad apple from the team is a painful, but do-able process. For a small company, with scant in-house resources, removing an underperforming employee is a complex job, so much so that small companies have been reticent to hire – and are particularly unlikely to take a gamble on an inexperienced young person whose CV is slightly different – and thus the impasse in job creation. This measure should take some of the sting out of the firing process, should the need arise. Let's face it, nobody hires to fire. The reason you offer somebody a job is because you need their particular skillset for a particular function.
Ownership is, in my experience, a source of immense pride and I don't think there is a single employee of Autonomy who doesn't point to its $11bn valuation and say to him or herself "I helped do that." Giving people the opportunity to have a sense of ownership and investment is a great thing. This is one way to achieve that. Our economy has to return to that ethos where together we drive Britain forward by having a shared ownership in its success.