Sunak says “be comfortable with failure” – here’s what he doesn’t understand

In his talk with Elon Musk last month, Rishi Sunak suggested that Brits should be more willing to give up regular pay and get “comfortable with failure” in order to take the risk of starting their own ventures. However, this sentiment is not reflective of the economic reality that many aspiring entrepreneurs find themselves in.

Sunak isn’t wrong that there’s an underlying problem: the UK produces startlingly few entrepreneurs, with relatively few British startups scaling up compared to other leading economies. The startup rate in the UK is just 5.2%, compared to 10.7% in the US.

Speaking with Musk, Sunak suggested this was down to a uniquely British lack of entrepreneurial spirit. But, are there deeper factors at play?

Competing as an outlier

Over three quarters of UK startup founders come from the most advantaged socio-economic groups. When the few founders Britain does produce come from such a narrow set of backgrounds, it’s no wonder we struggle to compete on the global stage. 

Looking back at my own journey as an entrepreneur, I now regard myself as an outlier. Coming from a single-parent background in a small Yorkshire town, I founded my tech startup, Zero Gravity, from the confines of my childhood bedroom with the last £200 of my student loan.

I was only able to start my business because I moved back in with my family after university, and did some side hustles along the way before Zero Gravity got to a point where I was able to pay myself a salary.

Not able to rely on friends and family funding, I was forced to build a network from scratch. Eventually, I was able to raise £4m from Europe’s leading tech investors to scale Zero Gravity to become one of Europe’s leading tech-for-good companies.

Statistically speaking, my journey is an outlier. But it also highlights the paradox at the heart of entrepreneurship in 21st century Britain. In some ways, it’s never been easier to start a business. In the past, starting a business meant needing a lot of cash, a physical space and materials for your operations.

It’s never been riskier to fail

Thanks to the internet, social media, and AI, it’s possible to start a business from your bedroom with very little money, just like I did. With the right skills, you can turn an idea into a digital product that reaches thousands of people. 

But conversely, it’s also never been riskier to start a business. Our parents and grandparents could rely on the world getting better, and being richer than their parents before them. Now, things look much less certain. Median incomes in the UK haven’t grown since the early 2000s, and the future is less certain than ever for young entrepreneurs wanting to take a risk, having lived through a once in a generation pandemic that put many small businesses on life-support, and now a cost-of-living crisis. 

Most families are just about managing to get by, with people spending less, saving less, and borrowing more during the current cost of living crisis. Nearly 40% of Brits end the month with no money left in the bank, with a quarter of UK households regularly running out of money for essentials.

Not having any savings to fall back on exacerbates the risk of starting a business and can make the leap into entrepreneurship akin to playing Russian Roulette with your financial security.

Risk tolerance is easier for the wealthy

This is not to say there shouldn’t be risk when starting a business. In fact, risk is what entrepreneurship is all about. However, how open people are to taking risks – their level of ‘risk tolerance’ – is directly related to their finances.

Those from more affluent backgrounds can absorb the impact of a failed venture, as they often have access to personal funds and safety nets that allow them to take risks without fearing for their basic survival. But, for many aspirational entrepreneurs from lower-income families, failure can mean financial destitution, and even homelessness. 

Indeed, those from wealthy backgrounds are usually quite good at reducing the risk of starting a business. Rather than investing personal funds, many raise ‘friends and family funding’ to get their venture off the ground. This means they don’t soak up all the risk themselves; they spread the risk through their network.

The diversification this creates reduces the risk for all the entrepreneurs in their network. It allows the wealthy to manage their risk far more easily than those without access to outside funding are able.

Removing the risk of failure

So what’s the solution? It’s not as simple as just saying people should be “comfortable with failure”. The best way to actually get people to be comfortable with failure is to remove the risk of failure being catastrophic, and create a future where people’s basic livelihoods are secure enough that they can pursue riskier opportunities. 

For this to be a reality, the UK needs to solve its growth and productivity problem.

Silicon Valley’s success is due to a virtuous circle of high growth, new business creation, and massive success stories. But in the UK, we’re trapped in a vicious circle. Low growth, stagnating incomes, and sky-high taxes are disincentivising people from starting new ventures, and creating a culture where it’s seen as unwise to start a business.

This means that few people from normal backgrounds end up starting and scaling a business. Across the nation as a whole, this creates a culture which is antithetical to entrepreneurship. 

The truth is, the UK has gotten too comfortable with economic malaise, with a generation of young people from low-opportunity areas being left behind.

For British innovation to flourish, we need to drive economic growth across the entire country with a radical agenda for levelling up, investing in young people, and reducing the tax burden on normal people.

Only then will aspiring entrepreneurs from all backgrounds be able to get comfortable with failure and take the risks required to grow an incredible business of their own.

Joe Seddon

Joe Seddon is the 26-year-old Founder & CEO of Zero Gravity, a mission-driven startup that powers talented students from low-opportunity backgrounds into top universities and careers. Joe is one of Europe’s leading social entrepreneurs, having been recognised in the Forbes 30 Under 30 list, named Leader of the Year at Natwest’s SE100 Awards, and honoured in the King’s 2023 Birthday Honours List.

Zero Gravity