What does the future hold for the UK’s young entrepreneurs?

What does the future hold for some of the UK’s most vulnerable young entrepreneurs in this current climate of economic uncertainty? We caught up with Dirk Bischof, CEO of Hatch, to hear his thoughts.

Hatch are one of the UK’s leading community enterprise charities tackling social inequality. They are working with YBI as part of our Covid-19 Rapid Response and Recovery Programme supported by Google.org.

 What have the past few months felt like for young entrepreneurs in the UK?

It’s been a really tough couple of months, especially for brick-and-mortar businesses like climbing centres, pubs and restaurants. Some of them switched to doing things online, but not to the extent that might sustain them as a company. The government’s furlough scheme has been critical for most small businesses, though some were also able to apply for grants from their local authority and business loans.

How important do you think Hatch’s work is at the moment?

I think the work we’re doing at the moment is critical. If you’re walking in the dark, and you don’t have a map, it’s bad enough. If you have a map, but no torch, it’s equally as bad. What we’re trying to do is to give young entrepreneurs a map and a torch, so they can at least figure out where they are going. We’ve had so much positive feedback from young people who have been matched with a mentor, a financial coach or a legal expert to help them navigate this uncharted terrain.

“What we’re trying to do is to give young entrepreneurs a map and a torch, so they can at least figure out where they are going”

The million-dollar question: what do you think the future is for SMEs now?

It’s so difficult to say, because nobody knows what’s going to happen. Around 99.5% of the UK economy consists of small to medium-sized businesses, so the future of the UK economy depends on how much the government will invest in supporting them, including young people. If they don’t, and there’s a second wave, then the next 6-12 months are going to be extremely ugly. 

How has the crisis impacted black and minority ethnic entrepreneurs in particular?

Founders from a minority ethnic background have gone into this crisis with less money than non-BAME founders. 70% of UK SMEs have less than three months of cash in the bank account. That’s already very little, but 70% of BAME-owned businesses have less than one month. So you see an even bleaker picture emerge, and it’s replicated across the regions. Black South-West Network, based in Bristol, found that 90% of all BAME business owners who responded to their survey had already lost a significant amount of income from the crisis.

What’s the situation like for entrepreneurs who are refugees?

It’s a similar picture. As a refugee business owner, you’re already affected by a lack of funding and a harder time raising funds compared to your white British counterparts. The Entrepreneurial Refugee Organisation (TERN), one of Hatch’s long-standing partners, ran a survey polling 113 refugee business owners. 73% of reported a reduction in their personal income, and 53% no longer have enough money to cover their basic needs.

Dirk Bischof, CEO of Hatch

What is needed to support vulnerable young entrepreneurs through the crisis?

What’s really needed are long-term, strategic funds to address these issues. I’m talking about 3-5 year funding partnerships, involving government, corporate partners and trust and foundation partners. The mountain we have to climb is so big that we can only do this together. Hatch want to level the playing field for underserved, underrepresented and often underestimated founders. That’s why we’re launching our first impact investment fund in 2020, providing vital capital to these founders. We also shared some of the funding with our smaller partners, to help them get young BAME and refugee entrepreneurs the support and information they need.

“We want to level the playing field for underserved, underrepresented and often underestimated founders”

 How is Hatch supporting young entrepreneurs through the YBI Covid-19 response programme funded by Google.org? 

We provide online resource pages where entrepreneurs can download funding guides, remote working guides and other materials, and we offer legal clinics via our pro-bono law firms. We run events and webinars on topics like financial planning, fundraising in a crisis and more. We also match mentors with young entrepreneurs to provide them with financial coaching, business coaching, advice on adapting their products and services, and scenario planning. We’ve never worked with so many people in such a short space of time. Normally, we would mentor 60-80 founders annually. We’ve worked with 60-80 founders in the last three months.

 Can you give some examples of businesses that have successfully adapted to the new landscape? 

There’s a great social enterprise in London called BikeWorks. They used to take unloved, unwanted bikes, fix them up and sell them. When Covid-19 hit, their shop closed almost immediately, but they pivoted really quickly. They hired cycle couriers to deliver food and medicine to vulnerable households, and I think they’ve now done 10,000 deliveries. Another example is Southwark Gymnastics. As soon as their sites were closed, they started working on a fitness app. They now have a strong online presence and an online curriculum. Companies have adapted in different ways – some have changed their original model to help the community, and others have digitised their existing services.

“You can only learn if you’re uncomfortable – you don’t learn much if you’re too comfortable with business as usual”

 Do you think that being forced to adapt in this way will have a long-lasting impact on businesses? 

Yes. At Hatch we have a very strong focus on what we call the ‘lean start-up model.’ The idea is to design something, test it, then redesign and test again in an eternal cycle. During lockdown, a lot of people were pushed into this experimentation mode. Then many of them scaled up their models, programmes, services, and products. I think this has been a good thing! You can only learn if you’re uncomfortable – you don’t learn much if you’re too comfortable with business as usual. 
 
Learn more about Hatch’s work at www.hatchenterprise.org