Four ideas from Silicon Valley on creating scale from Britain’s startups

 
Tom Welsh
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UK STARTUPS don’t lack enthusiasm (over 440,000 have been founded in 2013 so far), but Britain lags behind the US in the number that reach scale. This is an economically important issue. A report by the Goldman Sachs 10,000 Small Businesses UK programme found that just 1 per cent of all firms – high-growth small businesses, on the OECD definition – created 23 per cent of all new jobs between 1998 and 2010.

Silicon Valley, meanwhile, remains the lodestar against which UK efforts are inevitably judged. While Boulder, Colorado reportedly has a higher density of young growth businesses, Twitter’s IPO is just the latest example of Silicon Valley’s continued vibrancy. Stanford’s Balaji S Srinivasan recently called for the Valley to secede from a US that has become “the Microsoft of Nations” – obsolete and old.

Translating this stardust to Britain is the challenge Silicon Valley Comes to the UK (SVC2UK) has taken upon itself. Last week, the organisation held its latest annual event. It brings investors and entrepreneurs from the US to meet UK startups deemed able to reach at least £100m in revenue in the next three to five years. This year’s UK line-up included taxi app Hailo and peer-to-peer platform Zopa, and the idea is give them the advice to help them scale up. Sherry Coutu, co-chair of SVC2UK, thinks we focus too much on startups. “That’s just the ideas stage.” So what can UK firms learn about scale? Here are four ideas.

EMBEDDED NETWORKS
First, embedding yourself in the right networks early can have lasting benefits. A report by SVC2UK last year noted that networks are increasingly important as startups scale. “They become the source of customers, suppliers, partners, employees, and investors.” Britain doesn’t lack successful clusters. In the 15 years to 2012, Cambridge produced 11 billion-dollar tech companies, and 15 with over $100m in revenue. “Locating a successful cluster is no magic bullet. But it certainly provides the company with additional resources and options that support the scaling up of a high-potential company,” said the report.

Secondly, these networks should be scoured for vital mentorship. Coutu says the UK has no dearth of “amazing ideas. But it does lack people with the experience of scaling up companies.” While every startup feels unique to its founders, “the challenges it will experience in scaling up are likely to be common across companies that have grown rapidly,” says the report. Serial entrepreneurs willing to share their time do exist. The challenge is tapping into the global network of VC money and experience that can allow startups adapt to scale. Silicon Valley excels at this.

SCALEABLE IDEAS
Thirdly (and prosaically), you can’t reach scale without building systems that will allow you to function as you grow. This includes technical infrastructure, the collection of data and analytics, but also the rules and norms within the company that allow teams to work effectively.

But none of this matters unless you’ve chosen a big enough problem to solve. “The foremost barrier to scale is lack of demand,” said the SVC2UK report. And some think the scaleable businesses of the future will be seeking to solve the problems of the developing world – not the developed.

This is where there may be good news for Britain. Coutu thinks that in three industries – education tech, health tech, and financial tech – the UK is better placed than the US to thrive. In each, creating cheap products or services that draw on internet connectivity will have huge demand in emerging markets.

There are already exciting developments. Swansea-based Cellnovo has designed a mobile-connected smart pump for diabetics that monitors their blood and automatically dispenses insulin. There is now an education technology incubator in Tech City. Wonga’s real-time credit analytics is credited with being years ahead of competitors in the field. So while there is much to learn from Silicon Valley about scaling up, not everything is going its way.

Tom Welsh is business features editor at City A.M. @TWWelsh