International evidence is clear. A small number of high-growth firms are vital to driving job growth and overall economic growth and productivity in the longer term. In the UK we are very good at creating start-ups and have many exciting innovative companies, but growing and scaling those companies is proving more difficult. This isn’t just a UK phenomenon however, but a challenge facing nations globally.
Government support for R&D and innovation traditionally starts from a focus on building business and academic links and ensuring the industrial sector can exploit the science base and then moves on and evolves to supporting university spin-outs and then to start-ups. There has to date been little focus on ensuring start-ups are supported on their journey to grow and scale and to help those businesses overcome the barriers they face. Helping businesses on that journey to ensure they maximise their potential is becoming much more important.
What is a scale-up business?
If a small number of high-growth firms are driving job and economic growth and have the potential to scale then how are such businesses defined? The most commonly used definition is the OECD definition of high growth firms – growth greater than 20% per annum over a three-year period and with ten or more employees. In the UK the Scale-Up Institute has identified 11,500 such companies meeting that definition from all parts of the economy. The question then comes as to how many of those companies can significantly scale beyond the 20% level of growth?
The challenges faced by scale-up companies
The Scale-up Report on the UK Economic Growth, sets out the common ‘growing pains’ that are experienced by scale-up companies in the different phases of their lifecycle. The view is often that finance is one of the key “sticking points” of the scale-up process, but in fact that often isn’t the case. The report identifies the five key challenges as
- recruiting people with the skills and ambition required for technical and business roles
- developing business leaders with the ability to manage rapid growth
- selling to large companies and government, entering new markets and gaining regulatory approval for new products
- attracting appropriate growth capital
- accessing research and development facilities and finding suitable premises
Gearing up the Enterprise Europe Network can help
As part of the Enterprise Europe Network, we are looking at how the Network can play a greater role in addressing the challenges businesses face and helping them to grow and scale. I have been chairing the Enterprise Europe Network Working Group on services for Scale-up business with the aim to ensure the Network is better equipped to support such businesses in future. It was pleasing to see one of the main recommendations of the Working Group, to have dedicated ‘Scale-up Advisors’ with the knowledge, experience and connections to help a business innovate significantly scale, was accepted by the European Commission and formed part of the recently announced ‘Start-up and Scale-up Initiative’.
The subject of getting more businesses to scale is increasing in importance and is likely to feature much more strongly as part of the Enterprise Europe Network in future. We are currently pulling together a bid to submit to the European Commission to pilot how best to support scale-up businesses and hope that if it is successful that we can put in place some exciting new ways of supporting businesses to grow and scale.