He tells the audience that it’s a "great pleasure to be here with you". He also notes that it’s a "sign of the times", praising the CBI and Richard Lambert for being so involved in this issue of economic downturn. Cohen says it "wouldn’t have happened thirty years ago".
Cohen says when he started his business a couple of decades ago, "the world looked a dark shade of black". But then, over the years, he realised that whenever there is a change in the economic cycle, there is opportunity.
He says: "The world divides at that moment of change – those on the defensive… and those who are on the attack who are keen to increase their market share and set up businesses to take advantage of a changed situation."
It’s probably prudent to tell you at this point (if you’re not already aware), that Cohen is also the author of a book called The Second Bounce of the Ball, which discusses turning risk into opportunity.
Cohen now talks about venture capitalists, recounting a story involving a fellow VC taking his child to school. The child was interviewed by the head master and asked ‘what does your father do’. The child replied: ‘He’s an adventure copulist.’
(cue laughter from the audience.)
Cohen says: "That was the level of understanding about the professional financiers who have made entrepreneurship, have helped make entrepreneurship a professional activity here in Britain."
He notes that £10bn is being invested in the UK by private equity and 10 per cent of that is going to start-up and early stage businesses.
But not only have VCs helped foster an entrepreneurial society, banks, pension funds and even stock exchanges that focus on growth companies have also played an important role.
He says there have been half a dozen companies that have made it from start-up to be among the top companies in the world (Microsoft et al).
"If you consider that, you understand the importance of stock exchanges," Cohen argues.
However, he takes the opportunity to note that in Europe, only one company has made it that far – Nokia.
"The entrepreneurial system that exists in the UK is considerably stronger than it was thirty years ago but we’ve failed to pick up the challenge in technology. We have to try, through the CBI and other organisations, to emphasise over the next several years that we missed out completely on first technological revolution."
Cohen also adds another word of caution. "There’s still a huge amount to be done. The government has to understand the situation of entrepreneurship is fragile," he says, adding that if that changes within government could lead Britain to "slide right back to a position where security is prized" over risk. Where getting a good job and staying in the largest company is what people want to achieve over becoming their own boss.
Cohen now turns his attentions to the current economic downturn, which he describes as "very serious".
He continues: "It does not arise from a cyclical downturn in economic activity. It arises from an exaggerated move of the financial system in the direction of credit."
"We’ve lived through periods of unusually low interest rates and unusual quantity of credit on easier terms than before."
Cohen comments that banks today fear lending to each other, which is why the London Interbank Offer Rate is so high. "There is a very high level of financial risk and we haven’t seen the end of it," he adds.
Here’s a big prediction from Cohen: "We’re a third of the way through the financial crisis."
And now some advice for the entrepreneurs who have gathered at the summit today: "You’ve got to make sure you’ve got enough runway ahead of you so that you can take off if that’s the position you’re in or, if you can, take advantage of the demise of some of your competitors."
Cohen says at Apax, they used to "sit around and say ‘look at this company, what would happen if credit was taken away from it’ ". He warns that credit being taken away could mean a medium-term loan coming to an end and not being refinanced. "The problem is your suppliers and your customers are suffering at the same time and everything becomes concentrated on your effort to preserve cash flow and fund your operations so you don’t go out of business or suffer."
Cohen advises business men and women to "put yourself in a position where you can look forward".
"That creates challenges and also creates opportunities."
He says some organisations saw the troubles coming earlier and have put themselves in a position where their lines of finance are more secure, they’ve begun to cut costs or postpone capital expenditure projects. "They may sell off assets that are surplus to their requirements," Cohen adds.
They do this in order to give themselves the length of runway that they need, if they are a new firm, in order to take off.
He says there’s "nothing worse than running out of money when your product is beginning to make headway".
Some more good news, now. Cohen says there are always new sources of finance. "Distressed assets abound in downturns," he tells us, "and there are always new sources of capital. They might come through private equity funds.
"There is more finance around today than in any recession I’ve seen before."
He recalls: "In 1991, I thought if only the private equity industry was more powerful. You’d be able to soften the impact of recession – that’s the situation we’re in now."
"In this recession I think you will see the private equity industry rescuing industry that in other downturns might have gone bust."
Cohen now talks about "powerful trends". Even if we do go into recession, that doesn’t mean there are no opportunities for growth industries like renewable energy or technologies such as the internet.
He discusses the investments being made my private equity funds – money is being poured into software and media, for example. "If you can spot one of these trends and be sure of your position in the market… and seek to take advantage of it, a recession is not particularly harmful to your objectives. You should still be able to raise the credit and you should still be able to grow your business."
Cohen continues: "Just because we’re hitting a very difficult recession with ramifications that go much further than any of us have seen… despite that, there are opportunities. If you can manage to put yourself in a position to take advantage of them… you will be in a stronger position."
Impact of market forces on those who are less fortunate Time, now, to talk about social entrepreneurship, which Cohen says is "one of the powerful trends".
He pays tribute to the achievements of entrepreneur Karen Derby – a single mother of three. "There are opportunities in social entrepreneurship that may be relevant to some of you," he says.
Ultimately, Cohen says he believes the "entrepreneurial system is much better off" than it was decades ago.
He urges the audience to "go for the second bounce of the ball".
"Turns in the cycle create opportunities and there are very powerful trends you can take advantage of."
Finally, he says: "Bear in mind social entrepreneurship as you develop your own careers and businesses."
Sage advice, indeed.
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