What Elon Musk's 'PayPal Mafia' network can teach the North about levelling up: Tim Mills
However, despite near universal agreement on its merits, the reality of levelling up has failed to meet the rhetoric.
Levelling up — Boris Johnson’s flagship policy from 2019 — set out to reduce the economic imbalances between different regions across the UK. While the fundamental intent still holds promise, successive governments have failed, with a few exceptions, to show results from their commitments to support high-growth businesses outside of London. London-based companies scooped over 80 per cent of all venture capital funding in 2022.
With a change of government possible within the next year, the future of levelling up is uncertain. But Yorkshire and Humber will play a crucial role in the success of whatever comes next. With its rich industrial history, the region has all the tools and expertise to generate the businesses of the future.
It is certainly not easy and levelling up is only the latest in a long line of similar policies – such as regional development agencies from the Tony Blair era – to struggle to make a genuine impact. But during times of political and economic uncertainty, unexpected reversals of key policies such as the cancellation of HS2 mean we probably need to explore alternative solutions for ensuring strong economic growth throughout the UK.
ACF Investors, the venture capital fund I run, recently participated in a £4.6 million funding round into Wayland Additive, a developer of metal 3D printing technology based in Huddersfield. Wayland is delivering world-leading technology that for the first time enables the reliable printing of specialist metal components that span replacement knee joints to parts for nuclear fusion reactors and is one of a number of soaring business successes across the region. We have also backed other startups in the region such as Adventoris, another Huddersfield resident, with innovative software which has created a cloud supply chain tool that connects suppliers around the world directly to their customers.
But to enhance the ability of other great companies to emerge, perhaps it is time for a rethink of how we support our business hubs outside of London. One area I have always believed holds great potential is leveraging the power of networks.
Yorkshire is already leading the way with companies such as Wayland that have strong links to the region’s exceptional industrial base. You see it in other parts of the country, too, with centres of expertise from cleantech in Devon to e-commerce in Manchester.
By leaning on the deep, sector-specific skills of people in a region, it is possible to ensure private sector funding and government support (in whichever form) is channelled into the businesses that have the greatest chance of succeeding and contributing to the economy.
The role of networks in supporting early-stage investment is often overlooked. But the evidence of their power is barely hidden from sight. There are extraordinary examples of networks breeding success across the globe, such as the so-called “PayPal Mafia” — a group of former PayPal employees who have gone on to found numerous technology companies. This group includes luminaries like Elon Musk (CEO of Tesla, Space X), Peter Thiel (Palantir), Reid Hoffman (LinkedIn), Steve Chen (Co-founder of YouTube) and Russel Simmons (Co-founder of Yelp) among others.
Of course, we’ve also seen it work closer to home too, when the garment trade in Leeds boomed, Manchester became a ‘Cottonopolis’ or Sheffield the Steel City, it was the overlapping network of businesses and founders that built world leading expertise and drove outsized success.
Deep networks like these take time to develop and are built on a combination of strong and loose personal connections, combined with a willingness to take risks. They cannot be conjured into existence by a bureaucrat, but they can be helped. They are also vital engines for growth because they contain all the essential elements for industry-wide transformation - such as being able to exchange valuable information, trade expertise, find key employees, access new customers and build trust.
While the PayPal mafia is exceptional, the impact of networks stretches everywhere, and there are huge opportunities in the UK to grow specialised businesses through strong network connections.
Success here is not about simply funnelling money into the regions outside the South to encourage the creation of tech hubs. It's about harnessing one of the most effective catalysts for growth—the power of existing networks - and amplifying that impact.
Whilst the term ‘Levelling Up’ may be slipping from the headlines, the drive of innovators and their backers in the UK’s regions is only beginning to flourish.
Tim Mills is Managing Partner at ACF Investors