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In this Insights In Focus episode, we discuss the obstacles and incentives to SME investment.


Philippa Lamb 


  • Simon Gray, Head of Business, ICAEW
  • Adam Lauffer, Deputy CEO, Doddle
  • Tanuvi Ethunandan, founder and CEO, Data Duopoly
  • Ciaran Burke, co-founder and COO, Swoop


Philippa Lamb: Hello and welcome to the Insights In Focus podcast. I’m Philippa Lamb. This time we’re discussing the obstacles and incentives to SME investment. In recent years, a string of crises and ongoing economic uncertainty has dampened investment across the board. ONS figures tell us that business investment remains lower than pre-pandemic levels, and in fact fell 0.2% in the last quarter of 2022. And when it comes to SMEs, there are particular issues influencing their ability and willingness to invest. While staffing challenges continue to pressure productivity, the March Budget did attempt a shot in the arm by announcing three years’ capital expensing, but questions remain over whether SMEs can access the finance they need to make their investment plans a reality. To untangle some of these issues and chart routes forward I’m joined by Simon Gray, Head of Business at ICAEW, and three tech company leaders: Adam Lauffer, Deputy CEO of Doddle, Tanuvi Ethunandan, CEO of Data Duopoly, who’s joining us remotely from Cornwall, and Ciaran Burke, CEO of Swoop. Hello, everyone. Simon, can you do a bit of scene setting for us? As I said, ONS tells us business investment is actually falling. What’s holding it back?

Simon Gray: Well, I think there’s a few things. If we talk about business investment, generally, a lot of it is sector specific. If you’re in a particularly challenging sector, perhaps a consumer-facing sector, it’s more difficult to secure investment. Certainty is a big challenge, we had mini-Budget last year. Businesses, while they have a bit more certainty, they want to see more certainty before they will commit to long-term decisions. And I think access to finance is a big issue as well, there are squeezed margins and a challenging environment generally for business.

PL: But we’ve been talking about the need to raise productivity for years, haven’t we? And capital expenditure, it’s got to play a part in that?

SG: Absolutely. But in terms of capital expenditure, you have to be able to secure the funding to do it. And you have to have a long-term vision as to where you’re going to get to. And we’ve seen a huge amount of instability in terms of the economy, lots of challenges that haven’t necessarily been anticipated. And I think businesses are nervous, and they’re nervous to spend. Business knows that business needs to invest to secure long-term growth.

PL: So, your sense generally is the actual capacity to access financing? It’s still very sector specific.

SG: It’s challenging dependent on sector. I think your traditional routes to finance, traditional bank lending, there’s perhaps more caution. Of course, interest rates have gone up so it’s more expensive for smaller businesses. And what I do hear from members in businesses that are consumer facing – so perhaps retail, hospitality – it’s more difficult because it’s potentially more risky.

PL: Let’s hear from our guests. They all run relatively young SMEs, they’re all familiar with the difficulties of financing their ambitions. Adam, I think yours is the oldest business at the table. Tell us a bit about Doddle – what you do, how you see your financial growth, where you are now.

Adam Lauffer: Doddle is a B2B software business. We license our technology products to logistics businesses globally, providing solutions in the spaces around the delivery and receipt of e-commerce orders and the return of those orders.

PL: And this is first mile, last mile?

AL: First and last mile, exactly. When we launched the business originally, we operated in the same space, but we were delivering an entirely different business model. The business was launched as a joint venture to build and roll out a UK national network of pick-up and drop-off locations, and the Network Rail relationship allowed us to access retail locations at the busiest train stations around the country.

PL: So, you were teamed up with Network Rail, and then four years later, you had to pivot.

AL: Four years into our journey, we pivoted the business. We had been approached by then by a number of the retailers who offered our locations to their customers for those services. And they were asking whether they could white label the technology platform that underpinned our service to run effectively with their own customers and their own product through their own real estate networks and their own store infrastructure. For us, that was a real lightbulb moment, because what we realized is actually the value might well be the underlying technology that we’d built originally as an internal operating platform. And by doing so, our borders of imagination were no longer confined to the UK. Even if it was relevant in the UK, one of the most evolved e-commerce markets in the world, why couldn’t you take this and roll that opportunity out globally? The way it’s happened over the last four or five years since we made the pivot, it’s almost been easier for us to do business overseas, where the rest of the world looks back at the UK to see what’s happening from an e-commerce and a particularly e-commerce logistics perspective. And I think having had that pedigree in the UK market gives us a foot through the door, an additional credibility when we’re speaking to businesses overseas.

PL: How have you financed it?

AL: When we launched the joint venture between Network Rail and Sir Lloyd Dorfman – who’s a UK ultra-high-net worth entrepreneur who founded the Travelex business, which is a retail bureau de change business – when they founded the business, they agreed to fund the rollout of this physical network of PUDO locations up to a certain amount of money. As we started to move through our plans to pivot the business, Sir Lloyd acquired the shares of Network Rail. And since then we’ve effectively operated as a privately owned, very nimble company backed by a single individual.

PL: Interesting. Tanuvi, your company Data Duopoly, it’s much more of a youngster, isn’t it? Can you give us a bit of a snapshot of what you do and your financing journey so far?

Tanuvi Ethunandan: I founded the business about three years ago, and Data Duopoly connects spaces, places and people together using data and AI. What that means is we’ve all seen what Waze did with crowdsourced location data for the automobile sector, and we’re doing the very same for footfall and places. So, we started off live, actually in an incubator based out in Cornwall that was EU funded, where it took individuals who were motivated and had the skill-sets to set up a business. And during that time, I saw a problem in the tourism and leisure industry, where people understood how many people were in the site through ticket sales, but they didn’t understand how people were moving around the venue. We’ve all been there where we’ve seen staff members standing there with clickers. And I just thought, there’s got to be a better way to do it. Surely there’s a way to capture that data and also provide people with real-time information. And that’s where Data Duopoly was born.

had the phenomenal opportunity to undertake a proof of concept with the Eden Project, where we were able to show how about 33% of people moved location as a direct result of us sending personalised notifications. From our data we understood that between 12 and 1pm the campaign was very busy. So we could send [messages] to people to say if you come a little bit later you could get a half-price coffee, or equally, why don’t you go to the restaurant, which has an upspend for the venue, which is great. But it also gives a much richer experience for the visitor and they get a monetary incentive.

And on the back of that we managed to secure work with the National Trust in close partnership, where we worked with three World Heritage mining sites. So we financed that through the incubator, we had a little bit of support, but it was all completely manual, and it was time we started growing our team. We were very successful in a pre-seed round of just shy of a quarter of a million pounds – that closed in Q1 2021. And we had support from the European Space Agency, which was incredible, and that was for our use of downstream satellite data. The premise was we map venues using satellite data, that’s how we capture that data.

Going forward, a little thing called the COVID pandemic hit that industry we were operating in, and very understandably venues had to close their doors. And although data about footfall was more important than ever, innovation budgets were cut. At the same time, we were speaking to high streets, and we were speaking to councils, and they were having a huge problem about how do we rejuvenate the high street? How do we make it exciting? So, we pivoted and adapted what we had to the sector, and we’re thrilled to be launching in Falmouth, which is a multi-award-winning town centre, really to promote what’s going on, showcase the fantastic experiences on the high street and capture that footfall data.

And one thing that we’ve found really exciting and encouraging on our journey to date is the amount of support that we’ve had. But yes, we are now undertaking our next step, we’re launching on a seed round. So that’s our next stage of growth, as we’re also having very exciting conversations working with operators in the transport sector, how to integrate our technology. But as a short summary, that’s where we are to date.

PL: Have you got a date for that seed round, Tanuvi?

TE: Yes, we’re just launching it at the moment and we’re hoping to close this year Q2. But as with everything, that’s an ambition, so we’ll see how we get there.

PL: Ciaran, same question to you. Tell us about Swoop and how you financed it so far.

Ciaran Burke: Swoop is a financing platform in its own right, so there are two sides of the spectrum to chat through. We help small businesses access finance. For us, it’s all about looking at the whole of market, so we’ll look from lending investment and grants – we initially started out in the UK and Ireland but that proposition isn’t unique to any country. Small businesses are the backbone to most things, employing the most people, adding the most in GDP, so we’re now able to serve the European, North American and Australian markets. Ourselves as a business, we’re a bit of a case study of our own platform.

To kick things off, there’s a lovely scheme in the UK called the Startup Loan Scheme. As a new business within the first three years of trading, you can get up to £25,000 per director, with a flat interest rate of 6%, interest-free over six months. It’s a pretty good deal. So, we got one of them. We also then went to Enterprise Ireland. They’re the largest private investor in European businesses and they help give you early-stage capital, but you have to match fund that. We got €300,000 from them. Then we used a scheme in the UK called the Seed Enterprise Investment Scheme where you can raise off private individuals, and they get a kickback from a tax perspective. So ,if I give you £10,000 under SEIS, I can get £5,000 back from HMRC, essentially. Excellent scheme. They’ve just updated rules – as a business, traditionally you could take £150,000, and under SEIS you can take £250,000. So we took the £150,000 and got some more angel investment, paired that with the Enterprise Ireland, and that led us to get operational and kick things off.

We started the business in about May 2018, so it’ll be five next month. So, we got that and started building the website, and it was getting a bit of traffic, showing product market fit. From there, we looked at the grants competition ecosystem, and we saw the regulator competition market authority. We were trying to do more and open banking, and Nesta, an innovation news agency in the UK, were wanting people to do more in the space, so we thought that really suited our proposition, so we entered that. We won that, which was great in that we got some funding through it, but it also got some great connections in the banking sector. We then also entered a competition called the Banking Competition Remedies Fund, and we were a winner of that. It was again, a grant-based competition. And then most recently, we did a Series A about 15 or 16 months ago, through some of the original funders within Swoop, and brought in two or three new venture capital funds as well.

So, it’s a real amalgamation of different pots of money and sources, but it’s got us to where we are today.

PL: The way you reel it off, you’ve had a fantastic hit rate with raising money. I’m interested to know where the expertise to make that happen came from. You had it under the roof, did you, already?

CB: Well, I suppose the genesis of Swoop was coming from the pain point of understanding business owners’ frustration of like, I need cash to get this thing running and things don’t always go smoothly. So we needed to think of all these things, and my co-founder, Andrea, a lot of what she was doing was everyday working with business owners. She was initially working for McLaren, the Formula 1 team, and they have a huge amount of spin-out companies that are so capital intensive, they just gobble cash. The banks aren’t going to be just giving them landings, she had to think about equity and grants. So she was really starting to see okay, there’s so many different pots here. But the business owner is never going to understand how to go, where to go, how to find all this information. And my background was I had launched Hive UK, which is a marketplace platform for creatives. I came from the platform perspective of, oh, actually, there’s loads of data sources we can connect to up here like banking, accountancy software, Companies House in the UK is a wonderful API. We can gather all that information up, help the SME understand what their financial position is, and then start to unpick all these different options out there. Because the big challenge is just awareness and education a lot of the time. Simon is absolutely right, this is a really tough time for a lot of businesses in sectors like retail and construction, because banks aren’t looking so favourably at them, so they have to work a bit harder.

PL: Do you find with your clients that it’s still very sector specific?

CB: It can be but there are solutions for those sectors, it’s just a bit harder for them. Because traditionally, you’d always walk down the street – there’s my bank, my local bank manager, it’s there. But the strategy of the big banks is not to give that one-to-one relationship with a business owner any more. Their strategy is one-to-500 or one-to-1,000 and serve those larger assets or bigger ends. So, all of a sudden, that doesn’t exist, so where do they go? Well, they can come to platforms like us, but they might not know us, so they’ll go to their accountant, and their accountant needs to get educated or they need to educate themselves.

But the good news is, if you are in retail, yes, your bank isn’t going to say, ‘Oh, come on in, let’s give you a load of money’ sadly. But you’ve got loads of assets in your business that you can start to use where there’s a whole alternative finance stream. So, every time someone taps your credit card terminal or buys something online, that’s an asset that you can use as leverage to get finance, and there’s lots of other financiers out there that aren’t high street banks to give you that. Or you might have a seasonal business as a retailer, so you might get need to get all your orders in the summer to make hay when it comes to Christmas sales or Black Friday, or whatever it might be. There are businesses that will fund those seasonal cycles. But it’s just that little bit challenging for those people in those industries that traditionally had to just pick up the phone to the bank manager, they now need to get educated and look and see what’s within their business, and how it’s set up. What you will find, on a positive note, is often there are instruments out there to connect up so that those businesses can get that funding that they need to grow.

PL: As you say, it’s a steep learning curve, isn’t it for most start-ups with financial literacy?

CB: Massive, and most of these small businesses don’t have that many employees but they’re having to do all this themselves while also trying to keep the thing ticking over. Also, you don’t go through a financing course to set up a small business, you often do it out of passion and love for what you do. So if someone’s thrown a P&I or balance sheet in front of you, you’re like, this is double Dutch to me, what do you want me to do with it? So just making them aware of that and letting them feel comfortable in the numbers gives a better sense of freedom. So that’s a lot of where we started our business from, and that’s why we want to exist. It’s like, let us share in the problem and hopefully help you find a solution.

PL: Tanuvi, I think you’re an accountant, aren’t you? So presumably this was less of an issue for you?

TE: I started off life as an auditor. But to echo what Ciaran said, it’s a whole new world when you set up your own new business, and getting the access to information is certainly quite difficult. I think we were really well supported because we went through a non-traditional route going through an incubator, so we had that help and support and guidance. But without that, it would have been quite hard. It’s making those connections, being aware that the European Space Agency has fantastic opportunities to fund technology streams that use space assets, or equally that Innovate UK has a number of grants, or even tapping into the fact that when you innovate as a business you can claim back R&D tax credits, which is such an important thing in any start-up’s cash flow future.

PL: Adam, what was your learning process on this?

AL: I think a bit like Ciaran said, there’s so many options out there, and it’s almost impossible to have a grasp of the breadth of the options. In my experience with Doddle, the joint venture was coming together at the time that I was introduced to the opportunity. So in that sense we’ve never really had to go and fundraise outside of those two initial investors.

PL: But if you had to now, would you know how to set about it?

AL: I would, because of my background as a qualified accountant that spent six or seven years working in M&A. But again, my experience is what it would take to go out and raise that money from institutional investors – venture capital, private equity. We’ve looked at times at grants to see what’s out there. You can spend a lot of hours Googling different grants and trying to understand what the grants are for, who they’re applicable for.

PL: And the hit rate’s low, isn’t it?

AL: It’s very low, and there’s quite a big hurdle to actually apply for the grants. So, to even get comfortable with the idea that it’s worth spending time – on top of the five hours of time you’ve just spent on Google – actually pursuing it is very difficult. Accelerators, incubators, of course, I know what they are, I know of a couple. But again, if you’re looking to launch an idea and having to try and find the right one for you, that’s a time commitment in itself.

PL: Simon, are regulatory issues fettering this even more?

SG: I think, as a small business owner you’ve got a lot of things you need to consider. Ciaran mentioned that the investment landscape is complex, and who do you go to, where do you get that advice? Then you have the regulatory type environments, and there’s lots of regulation. And regulation, don’t get me wrong, is a good thing. But when it becomes a burden on smaller businesses, you’ve got to consider that. Ciaran made the point that in a smaller business, you’re trying to run your business, you’ve got to look at your investments, where you’re going to get your investment from, then you’ve got to look at regulation. And this is all just distracting you from necessarily running your business on a day-to-day basis. In a previous life to ICAEW, I ran my own business, and I’ve experienced this personally, where you don’t have the hours in the day to be able to do this. So, there is increasingly more regulation out there. I think it is a concern for businesses, particularly smaller businesses who don’t have the resources internally necessarily to be able to address the regulation.

PL: What did you make of the March Budget? And how helpful or indeed, otherwise, did you think it was on this issue?

SG: I think there were some good things in there. I talk to our members on a regular basis. We were kind of expecting something on investment. For three years capital expensing has generally been well received, some of the things around childcare and easing people getting back into work, because skills and access to talent has been a big challenge for businesses. The thing businesses really need is an environment of stability. That’s what businesses want. One of our members said to me that it doesn’t matter what the legislation is, or what the changes are, we just want them to stick around for a while so we can actually put some resource into understanding them and addressing them. But if things change too frequently, you’re constantly reacting to stuff instead of running your business, which is what you want to do.

PL: And of course, we’re looking at a general election next year.

SG: Yes, I think we are, aren’t we? I’m not quite sure when.

PL: No, I don’t think anyone knows when.

SG: I think that’s part of the challenge, isn’t it? Because if we run on the political cycle, you’re always looking to the next election. But what the long-term trajectory needs to be for businesses in terms of growth and productivity, that runs on a much longer-term cycle.

PL: Tanuvi, going back to the Budget, I think you said you’re not keen on the on the changes to the way R&D tax credits work.

TE: One thing that certainly as a start-up, and I think many fellow SMEs will probably echo this, is that the R&D tax rates really incentivise innovation, and taking that risk on something that might pay off in the future, but as a result, it could cost quite a lot of money in capital intensive. So one thing we’ve certainly done as a tech firm is invest in development and that building up of a product roadmap. In the Budget, that R&D tax credit scheme has become less favourable for SMEs. I think one thing to note on that is it’s not going to have a massive impact immediately, no one’s going to be cutting jobs. But what it will do is potentially make future growth plans less ambitious. It will certainly impact cash flows in the future, where previously you were expecting so much back in the next year’s tax cycle, but now you might be taking a less risky approach, which I think could stifle innovation. And I think our colleagues in life sciences will be most particularly affected in this.

PL: And what’s the feeling in the room about that? Would you agree?

CB: Completely. There was some slight concession on the last Budget though. It’s hard to keep up because we’ve had so many. One of the tweaks, one of the more harsh R&D rules, was you weren’t able to recoup anything on your investment if it wasn’t happening within the UK. So, for a lot of SMEs, because you’re budgeting, you normally will have some sort of website or technical expenditure, a lot of the time you’re locked to offshore with that. You ain’t getting any of that cash back, basically, that was the message. However, in the in the last Budget, they have extended the period in which you can, so for the next 12 months if you are expanding and investing in new technology and processes, and doing it outside the UK, you can still recoup some of that, which was a positive. But I completely echo Tanuvi’s sentiments in that it’s not the immediate thing of ‘oh, I’m going to change completely what I’m doing’, it’s stifling that ambition, which is kind of sad to see.

AL: For us, it’s not a sea change, what we’re doing, but because of the points that you’ve just made, it’s absolutely how we do it. We’ve worked with an outsourced development partner based in Eastern Europe for the last five or six years, they essentially become part of your team. So, on an individual basis and a way of working basis, they are a fully integrated mechanism in the Doddle machine. To replace them with someone different and something different would be hugely disruptive, there’d be a very long ramp-up time just to get someone else to get as familiar with our technology, our processes day-in, day-out around building the products and the platform. So that is a major consideration for us, because that’s a big chunk of our investment in R&D. You have to be able to quantify the amount you invest, that’s always the easiest bit for us, because those people are just doing product development, whereas the rest of our staff in the UK are mixed across a number of things, there’s project management and management things they do. So, then it’s even more overhead to unpick all of that in order to make the R&D claim.

But it’s also the backdrop against which that change is happening. You’ve got an unbelievably competitive recruitment sector in the technology space in the UK, salaries are at an all-time high. People are probably hoping that the impact of all of the layoffs being announced, particularly across big tech, would soften some of that, but then you’ve got inflation coming in the other direction, which is keeping those salaries where they are. So you’re not able to get the money back on your outsourced development, you’re going to get less of the money back that you’re investing on UK R&D, going from 33% to 18%. And at a time when you’re being encouraged to employ people in the UK in a crazy environment of wage inflation, it really is a perfect storm in that regard. And then the knockout punch of all of that is it’s harder then from a visa point of view to hire people coming into the UK internationally. We actually don’t embark on it because of the overhead required to do it. If we get applicants for jobs who require visa sponsorship at the moment it’s easier for us to say no.

PL: So it’s a problem, isn’t it on bringing the right talent in?

AL: Totally.

CB: The overhead is actually working your way through the website.

AL: Like the grants.

CB: I think the visa one is even worse. I’ve personally done it on it’s just like, I don’t even know where I am on this website, it doesn’t tell you what’s happened. It’s a real challenge.

PL: Simon, we’ve touched on broader economic factors at play here. But what would you like to see to make SME financing easier to secure?

SG: Simplicity, more certainty longer term, which I mentioned before. Ciaran’s talked about that education piece and that signposting, people on this on this podcast today have talked about the complexity of trying to navigate various funding streams and various other things. I think simplicity, clarity, education.

PL: Okay, I’m going to go around the room for a wish list, Tanuvi, what would you like?

TE: I think I’ve got to echo those thoughts. But really, I think there needs to be a marked support for the sector and understanding that we do live in economic turbulence at this moment, more so than ever before. And that consistency is so important for businesses. So, anything to support and encourage innovation, I think is good for business and also good for the economy as a whole.

PL: Adam.

AL: I think it’s very easy to get all doom and gloom, and some of the recent changes are definitely negative. But the UK remains a phenomenal place to launch and grow a business. It’s not all bad news, I would say. I think platforms like Swoop sound like they’re going to play a huge part. From what we’re discussing is it sounds like platforms like that, that bring together all of the available options in one place and pull together in a way that makes those journeys of discovery really intuitive and easy to understand, platforms like that sound like they’ll play a huge part for me.

PL: Ciaran, what you want from government?

CB: I think it’s thinking about the areas that need their impact most. To echo Adam’s sentiment, at the early nascent stage, there’s loads of great schemes in the UK to get your business up and running. Start-up loan schemes, SEIS, EIS, that sort of stuff is absolutely fantastic. And if you’re a brilliant, established high-growth business, every bank in the land is going to want to lend to you. So it’s thinking about the not-so-sexy sectors that are doing big things in terms of adding jobs consistently in there. So how do you support that ecosystem? You saw a lot during COVID with CBILS and bounce back loans, and they were very effective in getting billions out to it. So it’s thinking about how can we support a credit-based system that’s targeting these non-sexy sectors where we will sit in behind either a high street bank or alternative lender to give them more confidence to give credit to these types of businesses? I think if they were to look for inspiration, there’s a there’s a scheme called the SBA lending scheme in the US that does this very effectively at a sector level. So, I think there are other schemes out there, but if I was in the government’s shoes, I’d be looking at that non-sexy bit that I can consistently give credit available to businesses that are doing okay, but banks aren’t quite giving them the yes right now. So, it’s incentivizing them a little bit more by maybe taking a bit of the risk on the government’s shoulders.

PL: Simon, just to wrap this up, SME voices are key here, aren’t they? How do they get them heard?

SG: We talk to members on a on a weekly basis. I talk to members across a multitude of different sectors for our communities, our community advisory groups or business committees. And getting their voices to us, we feed into consultations, we have dialogue with government, we have a division within ICAEW reputation and influence. We’re in the conversation. And that’s one of the ways to do it. SMEs have their own networks as well. That’s another way to do it, just raising their voices. We know SMEs are important, we know SMEs are the backbone of the economy.

PL: And you want to hear from them.

SG: Yes, absolutely.

PL: I think that feels like a neat place to wrap it up. Simon, Adam, Tanuvi, Ciaran, thank you very much indeed for being with us, we really appreciate it. The next Insights podcast will be with you in early May. As always, we’ll be hearing from experts across ICAEW about the latest developments affecting the work of chartered accountants. Join us for that. Thanks for being with us for this episode, and remember to rate, review, share and subscribe to the series on your chosen podcast app.