Dom Hallas - Executive Director at the Startup Coalition, on what the UK needs to do for startups

0:00Hello Dom, how are you doing? Hi Dom. Hey, good, thank you. How are you guys? Very good. You hearing us okay? Is everything good? Yeah, I can hear. All good. Amazing. It's great to have you here. Thank you so much for joining us. Thanks for having me. Appreciate it. It is our absolute pleasure. So to kick off, can you just give like a quick introduction into who you are and the Startup Coalition more broadly? yeah sure so i'm dom hallis i've run the startup coalition for eight years now and the startup coalition's a lobby group here in the uk spending all of our time trying to fix startup policy for the ecosystem so right from super early you know companies being built with one man and his dog or whatever right up to the folks that are listing and the big names that that you guys have on an awful lot of the time and what does that mean in practice it means talking to politicians and policymakers as well as the E-K-System folks on three main kind of buckets of things.

0:54One is talent, so immigration skills, getting people into companies basically. Second is capital, so how do we make sure that these guys have the investment they need to build amazing businesses and then the third is the kind of regulatory environment, so either making sure the policy doesn't balls it all up or frankly sometimes unlocks it. That's really really cool. I think The big one that has been talked about a lot over the last days is immigration, right, with Trump's order to add this kind of massive fee on H-1B visas. What are your thoughts here and how can Europe slash the UK make the best and the most of this kind of shift in the US?

1:39Yeah, I mean, it's a huge opportunity, right? One of the weird things about policy is that actually, you know, it's like the old joke of like, you know, how are you going to outrun the bear? You know, I don't have to outrun the bear. I just have to outrun you. And the truth is actually there's a big opportunity for the UK and for the wider European ecosystems in having functional immigration policy that makes sense on a day to day basis in a world where things, you know, it's like, is it a hundred thousand dollars a year? maybe oh no actually no it's a hundred thousand dollars one fee uh oh no he definitely didn't say that even though he said it next to the president in the oval office like you know like it's complete chaos right and i think that um you know one of the weird things about immigration policy in particular is that for the most part if you look at the detail of immigration policy for the kind of companies that we work with and the folks you have on the program like the truth is it's pretty generous in in most of europe like in the uk in particular like if you want to hire an amazing programmer, like you can do that for the most part.

2:38You know, software engineering is like a highly skilled profession and most countries are delighted to have those people. The challenge has actually been in sort of two things. One is making sure the bureaucracy of the system, so the faff of getting a visa out of the British Home Office, for example, which is a complete nightmare, functions effectively and, you know, like isn't a massive barrier. And the second is making sure that people know there's an opportunity there with great companies building amazing things which is really what they they care about the most and i think that you know on the former that's kind of our job to fix and we have to go in and plug away at the the british government and you know other folks in their national governments try and improve that um but the latter actually in many ways this is why the opportunity is now is because it's for the first time in a long time you have a lot of amazing talent that's looking at where they are today whether they're in u.s companies or based in the u.s for other companies and saying maybe this isn't the place for me and maybe i've got an opportunity somewhere else so hopefully that open eyes to these new opportunities and the amazing companies that are being built here yeah and so but what should we do or the uk do to advertise that as much as possible what do you think will push people in that direction in in a moment like this yes so i think it's two things right the first is it's kind of very directly signaling that that we care and we want people here right and so actually you had uh the chancellor rachel reeves was was opening the new Revolut HQ and Canary Wharf yesterday um I think sort of made a really clear point that like whilst the U.S.

4:05is shutting down these visa routes we want to open them up more um and I think that's like a really good sort of signal it's not like a change in policy or anything it's like literally very literally the the top politicians in the country saying we actually want great people here so that's the first thing so it's like a marketing PR thing yeah exactly you know like sort of banging our own drum and especially in Britain like we've been we're pretty crap at that right To be honest, like, we're very good at saying how terrible things are, but actually it's pretty decent here. You know, we should be telling that story.

4:32That's one. It's very humble. And then the other side of it is just the ability to kind of how do we then make it as easy as possible in policy terms and do the things that we think are important. So we sent a letter to the Home Secretary, Shibana, in the UK yesterday with a few recommendations, like, you know, mostly sort of doing two things. One is kind of cleaning up the bureaucracy in the system for these people who are now likely to move and, you know, kind of making short term moves that signal that we definitely want them here, whether that's kind of limiting the bureaucracy, providing specific support for the kind of people who apply now, maybe even reducing the fees for a short period of time.

5:08So there's some stuff on that. And then there's how do you make it more attractive in the long run to come and work as an amazing tech talent here in the UK? And so on that side, it was what can we do on stock option reform to make the offers that companies will be making more generous than they would have been because we're able to make tweaks to the tax system in the UK? And I'm sure that the European countries were very reasonably looking at the same thing. And that's where the opportunity lies, right? super cool um and do you think like you just said like there's a third bucket like make it as attractive in the long run what are the gaps on the employee stock options incentives and so on yeah so so i mean there's obviously a bit there's two things first of all it's a smorgasbord across the continent and so it depends on exactly exactly how it works in different places and some are some are better than others i mean in the uk specifically that we have a thing called the mi and the enterprise management incentive, which is a really great scheme for early stage employees to be heavily incentivized to go and work in innovative companies.

6:10It basically gives you tax benefits if you're an earlier stage employee. But that hasn't been updated for a long time. So like when it was first set out, companies were scaling much more slowly. So it's limits on the timeframe that it can work towards. But also, frankly, the amount of money that was needed to build an amazing company was more limited. And so we're trying to get the limits of that pushed up at the budget this year in November, so probably in almost exactly two months time. And we're hopeful we've had some really productive conversations with the British government about sort of pushing up the ceilings on that to reflect probably what it takes now to be building a company, because what we don't want is, you know, all companies are busting through the asset limits or the employee limits of those very rapidly now in a way they weren't in the past, meaning that actually, you know, employee number, you know, 35 won't get the kind of generous options that we would want when actually we want to make it as generous as possible for as many as possible to be able to attract the right talent yeah and like when you use a ceiling of any sort especially on the employee count then there's like an incentive okay let's like stay under this number even though it's not what's the best thing for the business and that's again not what the uk wants here right they want rapidly growing companies that can grow and that can push gdp and so on um totally and i I mean, so the employee limit at the moment on the scheme is a problem.

7:30But actually, the bigger problem is what they call the asset cap. But it's basically how much money the company has raised. So at the moment, that's set at kind of$30 million. And now, like, back in the day, like,$30 million might have been a reasonable point. But yeah, it's, you know, nowadays, that's, you're completely in a difficult part. The reality is, like, how do we make sure that, you know, we're effectively competing and making sure that, you know, the people who are having to build and compete globally with especially American companies that are raising megatons of capital and deep tech.

7:56It's like they're going to bust straight through that. So let's make sure that they don't have to. And you sounded optimistic that there's going to be some changes in the next budget. Can I ask how receptive has this current government been to, I don't know, your policy suggestions and the wider tech community? Yeah, I think so. I always start from the point of view that one of the weird things about kind of tech startups and especially working on policy for tech startups is no politician comes into office and says you know who i'm really going to screw it's like those guys working really hard to build amazing tech startups escapes right as in like that is not you know that is not the incentive and the starting point for any of these people and so we have like really you know we've had really constructive conversations with the british government and if you look at over the past 15 years quite frankly we were set up in 2010 as an organization and the the kind of micro interventions for the tech community in all of that time this the policy that is specifically focused on on sort of the startups the scale-ups has actually been pretty good and that same has been true in the past year if you look at the budget the challenge is that there's then almost the thing that's considered kind of startup policy in a in a bucket and then there's like macro economic policy that's like a completely different question and and that you know obviously impacts and crosses over the same thing, but you can get screwed in that side of it, right?

9:15So I think the budget last year in the UK is a really good example where there was some really good stuff in it for the startup community, like significantly more R &D funding, a lot of things that we really like. The problem is if capital gains is gonna go up loads because the government needs to find money because they're in a difficult position from a fiscal perspective, then founders are getting screwed, right? Let's be frank. And so I think it's that ability to understand and hopefully kind of tie together for policymakers this idea that, you know, you can't distinguish between the two, right?

9:46As in, it's great you've got these little pockets of money over here for entrepreneurs. But the truth is, if the tax environment doesn't work, if, you know, you decide immigration policy needs to be too harsh for some political reason, like, this isn't going to work. It has to be a holistic approach. And I think, you know, it's going to be a difficult fiscal environment for the government in the UK in two months' time for the budget. everyone knows that i think it's on pretty much on the front page of the papers every day right now um but we're hopeful based on the conversations that we've had and like i was in funnily enough seeing i saw the chancellor last week and and like she does understand what what founders need and cares about it deeply and so you know fingers crossed like it's always it's always difficult ride but we'll see what we get yeah but it's like you can't just say i don't want to screw the entrepreneurs i'm neutral but i need to like prioritize them because they're the ones who in five to ten years are going to carry a lot of the economy um and so it's like not it's not about being malicious but it's about being actively actively pushing that helpful beneficial yeah yeah no i think that's totally right and like again i think i always come back to this idea of one of the things that's changed the most in my time in in working in kind of tech policy is is you're seeing more and more people in governments not just in the uk but but elsewhere that actually have a much deeper understanding both of the ecosystem and therefore of exactly that right which is like you know you look at matt clifford who did a lot of work as the ai advisor to the prime minister over the past year right now the chancellor has an entrepreneurship advisor alex to pledge who's a sort of multiple time founder and used to sit on our board you know so you're starting to see people who have a much deeper understanding of this the new ai minister in the uk a guy called kanishka orion was a vc by background and and you're getting a lot more of that kind of that inflow of tech talent to politics whether because they've sort of done stuff before and they're getting into it a bit more and obviously if people understand this stuff a bit better like by definition they a care about it more but b hopefully have a a deeper sense of why it matters um i think it's always you know i'm always fundamentally sympathetic uh to to politicians partially because i spend so much time talking to them and and partially because i don't think any of us on this call would want to spend our time doing what they're doing, quite frankly.

11:59And so we kind of have to be honest about, like, these are genuinely difficult trade-offs to make. But as you say, like, from our perspective, it's not a question of, you know, or either or, or can you just make it work? It's, frankly, you're not going to have the economy that we need in 10 years if these companies aren't able to succeed. So how do we make sure we're doing everything we possibly can to make sure they are? Yeah. Are you seeing a lot of data? And like, Like, do you do any research or analysis around, like, are we already seeing less companies go to the U.S.? Are we seeing it still increasing?

12:32Or what's, like, the thing you would measure to see whether U.K. startups are succeeding and staying in the U.K.? Yeah, it's a really interesting question. I mean, the thing that we're seeing a lot in the U.K., and this is, frankly, more anecdotal than data, But like it is this model that's been much more effectively leveraged by Israeli companies for a long time, which is what you have is you have product and tech being built in Europe and sales and go to market being built in the States. And like and I think this is really interesting and I think it poses a lot of interesting questions, not just for the ecosystem, but for policymakers.

13:06So, you know, you have this situation where actually potentially a lot of the high value jobs and sort of value accrual can still exist in Europe. But ultimately, people will naturally want to go and sell into the biggest market possible. That's what it is to build a global business. Right. And the challenge, I think. So, you know, I think that's fundamentally a good thing. And we're seeing that that happen more and more. the risk i think from a kind of european perspective and a uk perspective in particular is that the sort of that increasingly you're seeing people move earlier and earlier and i think that actually you know if we're able the sort of success metric would be that people are building that product and tech in in the uk and in europe as a whole and hopefully expanding across european markets but then also expanding globally um and that you know that for us is a win the challenge is that increasingly if you think about the kind of exit stage of a business um european you know stock exchanges aren't particularly competitive um as people consistently discuss endlessly and actually what does it mean to retain value in european markets in the long run in a world where we don't have competitive stock exchange where you're not likely to list here um and we have to think a little bit more deeply about what the kind of best way for you know entrepreneurs to give back is um and so i think that like that's in many ways a new question it's not something that we've had posed before and so we start you know as kind of the uk that's had very successful stock exchange for a very long time needs to think about it for the first time and politicians and others are starting to grapple with that but but i think that actually the the sort of future looks still very bright so yeah i mean i think you touched on a key point there with the IPO market because you want the capital that is generated from these companies to then also flow back into the local ecosystem.

14:55And one big issue is like kind of that there's not enough liquidity in the European system because they're all so siloed. But then capital markets are like a thing of national pride. So nobody wants to like give theirs up and all do it in Brussels or all do it in london do you have thoughts on how to grapple with that issue yeah so so i think i kind of see it as a it's actually a bigger challenge even than that like where what we have in the uk at least you know one of the big issues that we've been working on for a long time is is pension fund reform to try and unlock some of the institutional capital for venture and i know again this is a europe-wide problem but it's a uk problem in particular and i see these two things are linked right fundamentally also a german problem by the way but but but what's fascinating to me is it's the same underlying problem that then then when we talk about public exchanges it's the same challenge right what we have is a small c conservative financial institutions that are unwilling or unable to understand the kind of businesses that we're talking about here and it flows then throughout that that journey and in my mind i think that actually if we're able to encourage you know a much deeper understanding and frankly deeper investment into you know the venture landscape in general at earlier stage through the lp structures like what you'll probably see is a deeper understanding further up the market as well, because frankly, then institutional investors will be incentivized to have a much deeper understanding further up the stack.

16:19Like, and I think there's sort of, so there's a kind of natural part of that there. The one thing I would also say, you know, and this is almost to your point about the kind of self-interest nation by nation on some of the kind of listings questions, is one of the things that really could potentially change this is AI, where actually, paradoxically, one of the reasons why, you know, governments, national governments care so deeply about their national exchange is because it's not simply the sort of prestige of having an exchange, although that definitely matters. And, you know, everyone knows that.

16:49But if you look at, for example, the London Stock Exchange Group, I think about 8 % of their business is the exchange. The reality is it's a data business with a stock exchange attached, right? Like, and so we kind of have to be realistic about what that really means today but what does matter to national governments is all the stuff that then sits around the the financial services infrastructure that provides exchange so it's you know what what do the banking structures look like what do legal structures look like and now as a services-based economy in the uk you know i was giving a talk at a sort of big name law firm a couple months ago and i said they were they were asking about this and i said you guys can't see the wood for the trees the main problem for your business is ai it's not going to be the decline of the bund and stock exchange right And I think the reality is there is going to be a natural shift because of that, regardless of whether or not these guys are ready, that I think then will hopefully make policymakers think a little bit differently about that kind of national vision, precisely because this is going to change anyway.

17:43So how do we make it change for the better as opposed to the worse? Yeah, that would be the dream. Yeah. Lawmakers understand the threat of AI. Yeah, yeah. yeah well well and this is the thing what's interesting to me is and i say this is like i go and speak to politicians every single day and the truth is i think there's a much deeper understanding that like i say politicians are in a similar place to the public whereas if you ask them that they will understand that this is going to be a major thing and they understand that they should be ready but they're not yet and necessarily all of them at least in the place where they're able kind of mentally to cope with the concept that they're going to have to do something about Right.

18:20Do you know what I mean? As in what I would characterize as the ostrich phase. Yeah. At least like, and in truth, get them out of that. Right. Yeah, totally. I mean, at least in mainland Europe, there's still like a narrative of like, yeah, but on the infrastructure side of things, on the model side, like we can't catch up anyway anymore. And if that's like, if that's like even in the industry, the thought process, like how, how should you have policy catch up with no we will be cutting edge too and we will take this seriously yeah it's interesting like i think so i've always treated my job as as much about you obviously we've got to articulate on behalf of the ecosystem but it's to help translate between those two worlds because i think policymakers have a certain set of levers available to them at the end of the day like you know they're not they're not magicians like we have to be clear they can't make an economy go up or down that's not how these things work and like i think one of challenges sometimes is that actually helping them understand that you know when we talk about succeeding in ai it's not one big lever that says ai that they just pull right actually it's like this is a big a really sort of deep and granular market and success in ai for you know medium-sized european country is not the same as what success looks like for the united states right so if you look at the way the us is thinking about this at the moment which is we want to have at least a stake in every single part of the stack right from bare metal right up to you know the app letter right um and that's not going to be successful you know any european nation like what success will look like is understanding where and you know where is possible to succeed in the different parts of the stack and supporting companies to do that and so creating an environment that does so um but it requires almost people to accept what what they can do and what they can't do and you know not to your point about national pride some of this stuff is you know deciding something's better just because we have a you know a british flag on it isn't the point right as in actually it's like how do we make sure that that we understand what we're really trying to achieve here and then in a world where you're seeing for example in ai policy much more interventionist approaches to public policy and you've seen in the past and you know the american government investing in intel for strategic reasons and all this sort of stuff what does it look like to to be strategic about the role government can play in some of that um but but politicians need to need to be educated and what the opportunities are and what the risks are before before we kind of get there and i'm not sure i'm not sure we've done a great job of that to be fair i think we probably need to do a better job yeah it's interesting there's a there's a big piece about education before we kind of make our list of demands almost but like you know we're kind of we're out of time i wanted to ask one final question um we had andreas klinger from eu inc on last week one of the questions that you know they're doing a lot of great work on building that sort of pan-european entity one of the questions that we asked him was like, what is number one on your list that you would like the government to implement?

21:12So I guess from your perspective, either in the budget or across policy more broadly, you could pick one thing that the UK government would do or implement tomorrow. What would it be? Yes. So the biggest thing is, is more capital in the market, right? And I mean, pension funds is the obvious place to start with this, like in the UK context. So it's how do we make sure that we're actually delivering on the voluntary commitments that a bunch of pension and friends have made in the UK through the Mansion House Compact. And I think that that, you know, if we're talking about a scale of difference between capital deployment here and in the US that is, you know, massive, even, you know, per capita massive.

21:48And so I think in reality, if we're able to move the needle on that, I think you increase the ambition level of companies hugely. I think you give, you know, people a genuine opportunity to succeed in competing globally. And crucially, you make sure that it's not just American pension funds that benefit from the success of european companies it's you know my my mom right and her pension fund and frankly like in the long run not just for the success of the ecosystem but for the kind of political buy-in and the concept that european politicians should bluntly give a shit about our companies like the ability to have like the wider society succeed from the uplift that our companies will build is is going to be absolutely critical so that's i think the the single thing that would be the most impactful.

22:33Amazing. Let's get it done. More capital into the markets. Thank you for working on this and pushing these things forward. Yeah, yeah. No, it's amazing. With such empathy for the lawmakers because I think the tech side can sometimes be very pessimistic towards the government. And I think it's really great that you're sitting between the two. Yeah, yeah. Especially in the UK, it's like nonstop, especially, you know, I spend a lot of my time on LinkedIn, but it's nonstop. Bashing. bashing the UK government. And it doesn't matter what side you're on, what side the government's on. It's just like always they're doing a terrible job.

23:09So it's, yeah, it's not an easy job you've got, I can imagine. But Dom, thank you so much for joining us. Thank you, Dom. No, thanks very much for having me. Appreciate it. Cheers, guys.