The Evidence Gap: public and private sector organisations identify, target and evaluate their support to scale-up companies
-
The latest Sunday Times BDO Profit Track 100 ranks the top 100 private UK companies by profit growth; this year’s group achieved average annual profit growth of 82 per cent over a three-year period.
While London and south-east England remain the dominant regions for their head office bases, more than half are located outside south-east England. Indeed, eight of the top ten are headquartered away from the capital. Nearly two out of three are still majority-owned by their leaders, while 13 are majority-owned by private equity firms. This year, more than 25 per cent of the companies in the table are in building-related sectors.
Their contribution to the UK economy is significant. Cumulatively, their total profits have risen from £300m to £1.5bn over three years. They have added 25,000 jobs and support the direct employment of more than 65,000 people. They are also highly productive; average profits per employee are £23,543. This, the Sunday Times notes, is up from the average profit per employee of £14,843 in 2011 - a rise of 59 per cent.
This is a key message: effective scale-up businesses are critical for improving UK productivity.
-
Elsewhere, it was fascinating to come across these two analyses of the obstacles facing scale-ups in the wider European economy.
-
In this French Government paper , the “capacity of young, productive and innovative American firms to grow rapidly and undergo fast renewal” is identified as a key reason for the productivity and competitiveness gap between Europe and the US. “Having young firms that are able to grow rapidly is therefore important for an economy’s productivity, employment rate and propensity to innovate.”
-
In Sweden, the entrepreneur and founder of Spotify Daniel Ek has written an open letter to the Swedish government. In it, he identifies three key areas that require change in order to foster fast-growth new companies: availability of rented housing for young professionals, a greater commitment to education in programming and coding, and reform to the tax rules governing stock options. There’s a useful English summary of his arguments here.
The Skills Gap: Improve the ecosystem so scale-ups can find employees to hire who have the skills they need
- The importance of learning coding has deservedly risen high up the educational and political agenda, but in this provocative article by Azeem Azhar in the FT, it’s argued that children and parents need to go much further than basic coding by learning “computational thinking” - in other words, how to approach a problem and figure out how best to solve it given environmental and contextual constraints.
- There are 55 University Technical Colleges (UTCs) in the UK at present. There’s a great article about the UTC in Media City Salford, which is currently the only one that specialises in a creative and digital curriculum.
The Leadership Capacity gap: building their leadership capability
There are several must-read articles for every scale-up business leader this week about organisational size and structure.
-
First, there is the interview with Reid Hoffman in HBR on “blitzscaling” - the science and art of rapidly building out a company to serve a large and usually global market, with the goal of becoming the first mover at scale.
“There are three kinds of scale,” he observes. “People naturally focus on two of them: growing your revenues and growing your customer base. And of course, if you don’t get those right, then nothing else matters. But very few businesses can succeed on those fronts without also scaling the organisation. An organisation’s size and its ability to execute determine whether it can capture customers and revenue.”
There are many striking insights from this interview about the organisational challenges that come with scaling at exceptional speed. Do read it.
The Access to Markets Gap: Accessing customers in other markets / home market
The Finance Gap: Accessing the right combination of finance
- Innovate UK is to invest £561m in innovation over the next 12 months and take what it describes as “a more focused and efficient approach to supporting innovative UK companies.”
-
It has established four sector groups: emerging and enabling technologies; health and life sciences; infrastructure systems; and manufacturing and materials. There will be two broad funding competitions covering each sector group per year, and two open competitions for applications from any sector or technology area. Innovate UK promises other programmes and competitions in partnership with other government organisations.
-
Two very different funds were also announced this week.
A new $500m Accel Partners fund will focus on Europe and Israeli tech companies. It was great to read Accel partner Harry Nelis quoted in the FT , saying “we are looking for the answer if Europe can produce a $10bn outcome.” London, he continues in the same interview, “is arguably the best place on earth to build a fintech business because not only is the technology there, but the talent is there.”
In Scotland, Petra Wetzel launched West Women a £100,000 fund for female entrepreneurs in the Scottish food and drink sector. “I’m getting fed up being the only woman in the room, or the token female speaker at business events,” she says. “West Women will help other female-led businesses grow and develop their operations throughout Scotland.”
-
The UK’s “vibrant and innovative market” for all forms of crowdfunding is clearly set out in the Alternative Finance Maturity Index which studies the current state of crowdfunding across the EU. “The UK’s comparative maturity is building the confidence of participants on both the demand and supply side,” notes the report.
-
Santander UK and online lender Kabbage (in which Santander is an investor) have announced that they will team up to provide UK small businesses with faster access to debt finance. According to the FT, the aim is to “speed up the underwriting process so businesses can potentially access working capital of up to £100,000 online on the same day.” Here is the press statement
-
It was really fantastic to see last month’s launch of the "Become an angel" campaign which aims to inspire and train the UK to become a nation of angel investors. At present, there are estimated to be 18,000 angel investors in the UK and the campaign aims to increase this number to 23,000.
The Infrastructure Gap: Navigating Infrastructure
-
There were some valuable perspectives on the property market (in London, in particular) and how the real estate industry must adapt to meet the needs of scaling businesses. Jamie Hopkins, CEO of Workspace, notes that “access to business-class connected services, intelligent wifi and a secure, super-fast and resilient network” is the “most significant requirement” for fast-growth companies.
- However, rising rents in east London are creating challenges, notes this article in The Guardian. The increase in the number of flexible and affordable co-working spaces does mean more options for scale-up businesses but, as Reshma Sohoni of Seedcamp says, “it is tough to find space that is flexible for them to grow and do it fast. Getting multiple floors of office space within east London - that’s a very big challenge.”
Happy Scaling!
Sherry Coutu CBE
If you know others who might like to receive “This week in scale-ups”, either forward this newsletter to them or let them know that they can subscribe on the scale-up report website which is located at this url ---> http://www.scaleupreport.org
|