By Jules Coleman, acting CEO and co-founder of Hassle.com
Jules looks at how the UK can help start-ups build on their potential and scale up to the next level.
British business is presently treading a fruitful path. Financial figures from the US reveal that the UK economy – with 2.6% GDP growth in 2014 to the US’s 2.4% – is now the fastest growing amongst developed nations.
A key driver for this growth is the rise of the UK tech sector and the explosion of start-ups that power it – known collectively as the digital economy. The digital economy is expected to contribute £12 billion to the nation by 2024 and no equivalent sector in the G20 is growing as rapidly.
Yet for all the good news, we need to keep our eyes on the horizon. How can we guarantee that the start-ups helping deliver prosperity aren’t just a flash in the pan?
Struggling to bridge the scale-up gap
Compared to the situation for many of our cousins on the continent, it’s relatively straightforward to kick off a company here in Blighty – a fantastic plus for tech firms who need to be able to move quickly and with agility.
However, according to a 2014 report from Sherry Coutu, CBE, the UK trails behind the US and many other major economies in scaling up its firms.
The report defines a scale-up as: “…an enterprise with average annualised growth in employees or turnover greater than 20% per annum over a three year period…”
Coutu’s estimates that a one per cent boost to the number of companies in the scale-up population could drive 238,000 jobs and contribute £38 billion in three years. It’s clear then that a key component of the UK’s continued growth is bridging this ‘scale-up gap’.
A little bit of money, but a lot more talent
The most obvious disparity between the US and UK tech scenes is finance. Whilst the finance gap has been closing a little in recent times, there’s no doubt the overreliance of UK start-ups on the US or Asia for capital needs to be addressed. Whilst funding of this kind allows brilliant people to get ideas off the ground, it also means the fruits of success flow back overseas and not directly into the UK economy.
Making matters particularly pressing for the UK tech sector is the pressure of needing to scale quickly. In a digital world, ideas no longer slowly spread across borders, but can be copied and cloned globally almost instantaneously.
Fear of losing market share can result in companies overplaying their hand and trying to expand when they simply don’t have the organisation, processes and technology in place to cope.
We must build an eco-system where government, business and UK venture capitalists work together to increase not just the funds available, but also access to experienced leadership to help start-ups through this initial immaturity. VCs in the US are very good at devoting both manpower and capital to the start-ups they support and this is something we need to see replicated more formally and more widely in the UK.
Such mentoring must be encouraged because finding and harnessing the skills of experienced leaders is an even greater challenge than sourcing funding. The UK tech scene is full of creative talent but very short on experience when it comes to leadership that can scale a company up to the next level.
Playing the long and short game
In the short term the Government needs to make it easier for experienced overseas workers to come to the UK. Calls for ‘start-up visas’ to allow people with the right skill-sets to work in the UK without incurring a lengthy bureaucratic process are increasingly coming to the fore and should be listened to.
As noted above, another strong play is to nurture links between older, experienced business people and starts-ups. Formal mentoring partnerships where expertise and advice is offered to those needing a guiding hand can be a huge benefit and partnerships between the public and private sector to develop these should be further encouraged.
This isn’t a purely altruistic act either. A stronger economy benefits all and a thriving tech sector in particular will only enrich traditional industries too by providing better infrastructure and services.
Coutu’s scale-up report also calls for a more proactive role in public policy, with city leaders meeting each month with regional scale-ups to discuss needs, share data and offer assistance. This is a fantastic idea that can really help the tech start-up sector access a wealth of ideas and resources and implant themselves as a key part of regional business communities.
But ultimately there needs to be a long-term play too. To fill this talent gap down the road we need to see more young people viewing entrepreneurship as a valid career path when at school or university.
More light should be shone on alternative career paths for young students and schools and universities should help to ensure that young people have the skills and initiative needed to work in these sectors.
Future positions of leadership can then be filled by home-grown talent and the reliance on winning a global ‘brain-drain’ battle is removed.
Planting the seeds of success
Despite a number of areas where the UK can improve, our start-ups can take heart from how open to business the country is at present.
But to avoid the recent growth in the UK digital economy becoming just a bubble it’s vital we put a system in place that enables as many start-ups as possible to scale up to the next level and continue to create jobs, income and opportunity.
Government, education authorities, traditional industry, start-ups and investors need to function as a single ecosystem, rather than fragmented parts of a larger whole, to maximise resources, finance and talent.
There is no doubt that the UK is, once again, starting to bloom. But Britannia needs to ensure it has the readied the ground to allow her digital children to flourish.
