by Nevil Shute
At the end of 1930, therefore, the airship staff at Howden was dispersed and we all got the sack. I made an attempt to sell ourselves as a design unit of a dozen men to a well known American concern, without success; airship experience was at a discount in those days. It was a troublesome time for me to be out of a job, because I had got myself engaged to be married during the summer while I was somewhat tied up with other occupations of less importance. Frances Heaton was a young doctor at that time on the staff of the York Hospital, and I must say she took the loss of my job remarkably well, as she has taken all the succeeding crises in our lives.
A senior technician in an industry that suddenly evaporates to nothing finds himself in an unusual position. Although I was still a young man I had become a big frog in a little puddle, too big a frog to be easily absorbed back in to the aeroplane industry as it was in those days. After the responsibilities that I had been carrying I should not have relished the return to a drawing office on half the salary I had been earning; I had grown too accustomed to making quick decisions and seeing them carried out. Moreover, I had very definite ideas about the design of aeroplanes. My piloting experience was meagre in hours of flying time for it had all been carried out at my own expense, but it included the experience of flying practically every type of small personal aircraft in use in England at that date; no new type ever came to Sherburn-in-Elmet aerodrome but I had a go on it if it was humanly possible to do so.
In these circumstances I decided that before seeking another job I would try my hand at starting a small aeroplane manufacturing company of my own. I was well placed to do this, in some ways. When Wallis went to Vickers Aviation to work on the design of geodetic aeroplanes we had attracted a very senior designer from de Havillands, Mr. Hessell Tiltman, to take charge of the drawing office and act as chief designer. He knew little of airships when he came to us early in 1930 but he was a great artist on the drawing board; the aeroplanes produced to his designs were both beautiful and efficient. I went into conference with Tiltman and found that he was game to try it with me. We had a nucleus of drawing office staff and foremen with good aeroplane experience who had confidence in us and who wanted to go on working with us; as a technical unit to build aeroplanes we had a good deal on our side. The thing we hadn’t got was any money.
In those days the capital required to start an aeroplane manufacturing company was not large, judged by modern standards. In 1930 the demand for small two and three-seater aeroplanes for personal and club flying was brisk all over the world. These units were small in value, and since wooden construction was still the rule no very great numbers had to be produced to manufacture at a profit; the cost of jigs and tools for a given design was small by modern standards. A capital of thirty thousand pounds would have been reasonable for such a business in those days and would have justified a start with a good prospect of success, while fifty thousand pounds might well have made the venture fairly safe, given good management and technical competence. As the swift years went by the capital required for profitable operation doubled and redoubled every year as aeroplanes grew larger and as wooden aircraft ceased to sell and had to be replaced by metal construction, but in 1930 forty thousand pounds seemed reasonable capital for such an enterprise.
Our first job, therefore, was to consider the design of a small two or three-seater aeroplane that would represent an advance on anything then flying or that we had heard projected. With Tiltman’s design genius and my own knowledge we were well fitted to draw up a good specification and to produce an attractive drawing; the design that we produced was never built, though if it had been I would say that it would be flying still. It was a very attractive little high wing monoplane with a de Havilland Gipsy motor, seating the pilot in front of a two seater side by side cockpit for passengers, a novel arrangement that permitted a most versatile range of uses for the machine. That drawing, and our own reputation, were the basis upon which we had to seek forty thousand pounds of risk capital.
Much has been written in recent years about the provision of risk capital for industry, but few of the authors who pronounce so learnedly upon this subject have ever had the job of looking for the stuff. Men who start businesses upon a shoe string and battle through to success are frequently reluctant to recall and publicise their early disappointments and rebuffs, or if they have the will they may not have the knack of writing. There seems to be a tendency in England nowadays to consider that risk capital for new companies can be conjured up by civil servants and economists waving a sort of magic wand over the bankers. In my experience nothing could be further from the truth. Risk capital is gambling money such as might be staked upon a horse race, and if I tell the story now of how we started Airspeed Ltd it is in the hope that other young men starting other businesses may benefit from our perplexities and heartbreaks.
At that time, in the autumn of 1930, I was living permanently in the St. Leonards Club in York, a pleasant little club opposite the theatre which was frequented by the leading business and professional men in the city. One of the leading members was a Mr. A. E. Hewitt. Hewitt was a very able commercial solicitor with a great sense of humour, a wise counsellor and a firm friend in every adversity. He would have moved to London to a wider sphere of action if a troublesome ailment had not forced him to restrict his activities; as it was, he was a director of a number of local companies where his knowledge of commercial law and his sane judgment made his advice of value.
Somewhat diffidently, I took my idea for a new company to Hewitt and found, rather to my own surprise, that he took the proposition quite seriously. It must be remembered that in those days aviation was booming, but up till that time there had not been very many investment opportunities in it. R.100 had been built within twenty miles of York and was generally considered to have been a great success, so that we started off with a good local reputation. The depression in America had not affected England very much at the time of our first talks and we were not to know how difficult it would become to find capital for a new enterprise in the succeeding months and years. At that time, in Hewitt’s view, it seemed a fairly easy matter to find forty thousand pounds of risk capital for such a venture as the one that we proposed.
Hewitt had a brother-in-law in the Royal Air Force who was the youngest Group Captain in the service and who was to rise to high command in the second war. He sent me down to Wittering, where this young man was in command of the Central Flying School, and he sent me there for two reasons. In the first place, no doubt, he wanted an assurance from his knowledgeable relative that we were people of good repute in the aircraft industry and that our proposals were technically sound. In the second place, he knew that the young Group Captain was still uncertain of his future in the Royal Air Force, and he thought shrewdly that his relative might well appreciate the chance of an investment at the inception of a new aircraft company with a view to a seat upon the Board on his retirement from the service. From our point of view, of course, no director could have been more welcome than this young senior officer with such exceptional knowledge of the requirements of the Royal Air Force.
At Wittering I succeeded in satisfying this very keen critic that our proposals were sound and that we were capable of doing what we set out to do. It was agreed that if the company came into being Hewitt would have a seat upon the Board and would hold it for his relative until he had decided whether he wanted to retire from the Royal Air Force or not. This all seemed very satisfactory, for in view of our ignorance of company affairs Hewitt would add great strength to the venture.
In the meantime Tiltman had made contact with Sir Alan Cobham. We were both known to Cobham, but he knew Tiltman better and had, quite rightly, the highest opinion of his design ability. Sir Alan was at a transition point of his career in 1930. His energy and his adventurous spirit had enabled him to carry out a number of pioneering flights about the world during the years after the war, which had brought him a great reputation and a knighthood but not much else. Unwilling to remain
merely a pilot all his life, he was at that time considering various business ventures, one of which was to engage the greater part of his attention in the next few years. That was his very successful aerial circus, National Aviation Day Ltd, which was to have considerable impact upon our affairs. A toe in the manufacturing side of the industry was not an unwelcome idea to Cobham, and after a meeting with Hewitt he accepted the idea of an investment and a seat upon the Board of the infant company.
The next step was to produce the first of a series of draft prospectuses, and in this I was, of course, coached by Hewitt. A prospectus is a full statement of the affairs of the proposed company, with details of the previous careers of the directors, details of the auditors, the bankers, and solicitors, an account of why the company is being formed, what it proposes to do, and what profits it can reasonably expect to make. It ends up with an invitation to the public to subscribe for whatever class of shares is being offered, and discloses any share dealings or offers to other persons, especially to the directors. It is issued in the name of the directors, who certify that it is a full and complete statement of the company’s affairs.
The important point about a prospectus is that it has to be an honest document. The directors of a private or public limited company have little to fear if the enterprise fails, provided they have been honest and truthful and have done their best; their personal liability in such a case, I think, is limited to about ten pounds. If there has been dishonesty or deceit, then the managing director, or the whole Board if it can be shown that they have been involved, may well go to prison for a considerable number of years. I shall have occasion to return to this point later on.
With Cobham and Hewitt energetically behind us, the venture was now beginning to achieve some momentum. It is necessary for those who wish to start a new company to have some money of their own, if only to pay the preliminary expenses; I had about a thousand pounds and Tiltman had rather less. Greatly daring, we now took an office at a rent of fifteen shillings a week in a building near the market in York, and here Tiltman set up a drawing board and a desk and commenced the design of the small monoplane. A name had to be given to the new company, of course; we considered a dozen alternatives and finally decided upon Airspeed Ltd as being short, euphonious, and indicative of what we wanted to do.
One of the first men that I approached to take an investment interest in Airspeed Ltd was Lord Grimthorpe. could not have approached a better man. At that time Lord Grimthorpe was a relatively young man and a large landowner in the East Riding of Yorkshire; he was Master of the local hounds and hunted twice a week in season; he was a keen performer on the Cresta Run, a pilot and the owner of a private aeroplane, and chairman of a large firm of motor car agents in London. It is fashionable today to disparage the part that the titled aristocracy can play in industry; I can only say that my experience is otherwise. Lord Grimthorpe became the first chairman of Airspeed Ltd and supported the company throughout its early financial difficulties to an extent which would have been a heavy burden to the wealthiest of men. Without his support initially I do not think the company could have started; without his continuous financial support in the years that followed it would certainly have come to grief.
Years later I was told by one of his close friends why he did this. At a time about a year after the company began operations when he was becoming very deeply involved, his friend asked him why he did not cut his loss and get out of so unprofitable a speculation. His reply was that the business interested him and he thought it would do well in the end. As regards the money side of it, he said that he realised the likelihood that he might lose the whole of his investment. The money was, however, being wholly spent in wages in his district of Yorkshire, where there was then a great deal of unemployment. In times of depression he felt it to be his duty to hazard his money in an effort to create employment in his part of the country; if finally the money was lost he would take satisfaction from the fact that through his agency nearly a hundred working men had had employment through the years of the depression.
From what I have heard of the preliminary struggles of small businesses during the early years of the present century I do not think that Lord Grimthorpe was exceptional in the altruistic view he took of his investment in our company. I think his conduct could be paralleled in many other little companies with many other wealthy chairmen. I have no doubt that the inheritance of great fortunes has led in the past to much money being spent frivolously and foolishly and in a way which irritates less fortunate men, but it has also led to much money being spent generously and wisely for the benefit of the same men. If Lord Grimthorpe was one of a long line of wealthy men who helped pre-war British industry to come into being he was also one of the last, because death duties and high taxation have now so reduced the resources of these people that they can no longer function as they used to.
When a small company is initiated and commences operations on risk capital, capital which may well all be lost if the venture proves unsuccessful, very special qualities are demanded of the chairman. He must be one with the investors, which means that he himself must hold a considerable block of shares in the company. This money he must personally be prepared to lose if things go badly, which means that he must himself be of a speculative turn of mind. He must be bold and adventurous and capable of quick decisions in matters of policy, because at that stage a policy of caution may be fatal. I can imagine no worse chairman for a company in its difficult early days than a banker.
The qualities that I have outlined are precisely those which are developed by leisured people in the hunting field and on the Cresta Run, who in between these activities breed racehorses and bet on them. Other sports, such as amateur yacht racing, produce the same qualities no doubt, but all of them demand a fairly leisured life. I do not know of any working career that produces these qualities; they are not found developed to the same extent in politicians or in civil servants or in those who work on salary for any boss. I think that by excessive taxation in the higher brackets the British people have destroyed a class of chairmen for small companies without whom much industry in Britain could hardly have come in to being, and without whom fresh industry in England is unlikely to be initiated again. A man’s views, I say again, are coloured by his own experience. I shall have something to say about the source of risk capital a little later on, but here and now I say that if the risk capital were available it would be difficult in modern conditions in England to find chairmen with the qualities needed to administer it to the best advantage.
The Board of Directors of Airspeed Ltd was now taking shape; in the draft prospectus of this time the tentative board consisted of Lord Grimthorpe, Sir Alan Cobham, Hewitt, Tiltman, and myself. In Yorkshire circles that was a strong team, and in ordinary times there would have been little difficulty in finding money to back it. Times were not ordinary, however. The depression in America had been going for well over a year and its repercussions in England were serious; unemployment was mounting daily, trade was falling, and everywhere investors were reducing their commitments, pulling in their horns.
I now learned that there is only one way in which to find risk capital, and that is to go round asking people to invest. There is no royal road to risk capital, no tap that can be turned on by any bank, no agent who will serve a useful purpose. The man who believes in the company and wants to see it started must take the draft prospectus in his hand and go around to people that he thinks have money, generally total strangers and tough guys in business matters, and try to talk them into putting money into the new company. In 1931 one had to talk quite hard.
I had a friend in York whose unhappy business was to try to sell Rolls Royce motor cars in that time of depression; I think he had a worse job than I had, but not much. The rebuffs that we both got were of much the same quality. My own routine was to go as inexpensively as possible to some city in the north of England, say Newcastle or Leeds, and go into conference with a local stockbroker, who would give me nam
es and details of wealthy people in the district who would be likely to invest in such a company as ours. The depression was hardly realised in England at that time even by the stockbrokers; it was something new that had developed after eighty years of industrial prosperity and free investment. It was regarded as something very temporary that would quickly pass; if things were difficult today, in three months’ time investment would be flowing easily again.
Sometimes the stockbroker would make an appointment for me to see the client; at other times he would say cautiously that perhaps I had better approach him myself. This meant an uphill telephone conversation with a worried, short tempered man to try to induce him to see me in order that I might sell him something that he didn’t want to buy. There was nobody to teach me this part of the job, and I soon learned by experience to write off prospects of this sort. It was very soon apparent that if Airspeed Ltd got started at all it would start with tenuous capital, which meant that the risk of the investment would be much increased. Unless the investors could afford to lose their money if the venture failed, unless they were in the mood to risk their money on the chance of big profits if the venture should succeed, it would be better not to get them into it even though this should mean that Airspeed Ltd would never start. Even in those days I sensed the intolerable situation that would be created for the management if shareholders were induced to subscribe on any pretence that the venture was a safe one. What we wanted was a crowd of cheerful gamblers as our shareholders.