Startup fever

FOR all those exasperated people who can never find anything in their own homes, Simon Lyons has the answer. The 24-year-old entrepreneur has come up with Geco Hub—a square of flexible rubber circles between which can be squeezed keys, biros and other things that tend to go astray (see picture). He hopes the first one will be manufactured next May, and is now working on a device to open recalcitrant packaging.

More and more Britons are starting businesses. According to StartUp Britain, a website that uses data from Companies House, 526,000 new outfits were registered last year, up from 484,000 the previous year and 441,000 in 2011. This year the number has already passed 400,000, so last year’s record should be broken easily.

It has never been so cheap to set up a business, points out Emma Jones of Enterprise Nation, a small-business support company. Many people get going from home, with few overheads. They need only to construct a good website to get their products into the market. And the would-be entrepreneur has a plethora of other sources besides the often unhelpful banks from which to raise cash, such as crowdfunding and peer-to-peer lending. Mr Lyons raised the £25,000 ($41,000) he needed to tool up a Taiwanese factory in just three weeks through crowdfunding. He got 339 backers, who have pre-ordered enough units to make production viable.

Yet a canker lurks in these rosy statistics—the large number of people who have become self-employed not out of choice but through necessity. Mr Lyons has the skills perhaps to build a big, prosperous company. Equally, however, there has been a rise in the number of “sole traders” in the British economy—those taxi-drivers, gardeners and plumbers who have set up on their own to offer their services to others.

Trade unions argue that such people may well have been laid off by large companies, or may have been contracted out to save on employment costs. They are “necessity entrepreneurs”, people forced into working for themselves, rather than “opportunity entrepreneurs” like Mr Lyons. Critics argue that the vast army of sole traders, making up over 60% of private-sector businesses, lack the ambition to create expanding firms, and thus do little to boost national output.

One think-tank, the Social Market Foundation, argues that Sweden, for example, has proportionally 50% more “high-value entrepreneurs”—the sort who actually create wealth—than Britain does. It thinks the government could do more to help highly educated and motivated folk to start businesses, through measures such as requiring bosses to allow more flexible working hours so that people can start up companies while they are still in full-time employment.

Yet distinctions between different breeds of entrepreneur can seem arbitrary. Niamh Barker started up the Travelwrap Company only a few years ago, yet she now has a turnover of about £350,000. She employs only one person directly, but uses five or so sole traders for her accounts and other services, thus keeping her costs down. Her parents-in-law help out too, wrapping up the cashmere scarves to send around the world.