The last five years have seen an unprecedented growth in the number of new, registered companies and we have now surpassed the rate at which even the United States produces startups.
This is terrific progress, but when these businesses grow and try to move to the next stage – be that taking on more employees, opening in new locations or looking to export for the first time – the same support and infrastructure they enjoyed as a startup does not exist.
We need to do more to help our startups to become scale-ups.
The ‘scale-up gap’, defines the difference between what the UK business environment enables ambitious entrepreneurs to grasp, and what is ultimately in sight for UK businesses. We need to close that gap.
It’s a big prize at stake. Research and analysis conducted by Deloitte and Nesta for the 2014 Scale-Up Report found that up to 150,000 jobs could be created if startups reached their potential size by 2034, which would also contribute £225bn towards UK GDP. And, even more beneficially for the UK, the economic rewards would be spread equally throughout the country.
Further research – undertaken with the help of industry sectors, academics, business leaders, entrepreneurs and policy makers – suggested growing companies have specific requirements for capital, management, skills and organisational processes.
Most scale-ups are facing similar issues as they seek to reach the next level, from Shoreditch-based software suppliers to Scottish oil and gas service providers, and from Midlands retailers to Northern manufacturers.
They have trouble finding and attracting new employees with the skills and experience they need. They struggle to build their internal leadership capability; a scale-up is a different management challenge to a small entrepreneurial start-up. It doesn’t have to require a new team, but will usually require new skills.
We recently surveyed chief executives from 163 businesses with teams growing at a rate of 20 per cent per annum. Over two thirds (69 per cent) said they would be able to grow their company faster if it were easier to find mentoring professional support schemes nearby that were effective.
Aspiring scale-ups must also meet the challenge of finding new customers, at home and abroad. They need to be able to access the right combination of finance in a timely and efficient way. And they need a broader business infrastructure that understands their specific needs.
I heard just one recent example of these challenges through the young chief executive of a fast growing software company. As an ambitious start-up with a great idea, abundant energy and plenty of confidence the business had easily secured a couple of desks in a high-profile London incubator and some angel funding.
As the first successes came, the business moved from incubator to accelerator, winning awards and gaining a media profile along the way. Today the company employs over 40 people, and next year they want to double in size.
However, the chief executive is concerned as to office space options and the need for leadership band-width. The company is still less than five years old and revenues are fast growing but the need for continued broad-based support to aid expansion remains as vital as ever.
There is so much that we can do to help these companies: We can join together as stakeholders, in the private sector, but also the leaders of LEPs, city mayors, regional business organisations, universities and schools; any effort is good, but co-ordinated collaboration at a local level is by far the best.
With research, analysis and discussion, we can invest and support the best initiatives and programmes to help our scale-ups achieve their potential, and to help more start-ups bridge the scale-up gap.
Larger corporates can also play their part in procurement programmes and education on how to be best equipped to pitch to win key contracts and become a key supplier.
Ambition is the vital ingredient to starting up a business, and no economy can grow without it. We are fortunate in the UK to have so many capable entrepreneurs disrupting all sectors and fuelling innovation. But to really capitalise on this pool of innovation we need to ensure we create an environment to support businesses from startup, right through to scale.