How have the UK’s tech scale-ups been faring during these uncertain times? Before we put some flesh on the bones of any answer, let’s rewind the tape. Scaleups are of course the ones that get through - the fledged organisations that may have a future!
When we talk of startups we immediately think of a newly formed company: young entrepreneurs, big ideas and innovative products to disrupt established markets. The Office of National Statistics (ONS) states that there were 19,465 new startups registered in the 'information and communication' sector in 2020 – that’s 1 new tech startup every 30 minutes!
But starting a new tech business isn’t easy and there are widely shared statistics on startup failure rates in the UK. Notably:
- 60 % of new businesses will go-under within three years (Telegraph, 2019)
- 20% of new businesses will close their doors within just 12 months (Telegraph, 2019)
During 2020 the added difficulties arising from Covid, Lockdowns and Brexit led to 273 startup companies filing for administration, liquidation or dissolution in September 2020 alone, the highest monthly figure in 10 years.
Startup to Scaleup
So, what next for the tech startups that make it beyond the first few years and move on to the next phase of company growth?
The official scaleup definition is sourced from the OECD and is a company which ‘has an average annualized return of at least 20% in the past 3 years (in staff numbers or turnover) with at least 10 employees in the beginning of the period.’
However, there are other definitions based on turnover, employee numbers or funding, as it is difficult to identify official scaleups from Companies House data. There are also companies that may be growing unusually quickly but don’t have enough trading history (3 years) to be assessed against the OECD definition.
More broadly, the definition of a scaleup is a company that is in a distinct phase of growth and has moved into the execution phase of a business model.
Why are Scaleups so Important?
In its 2020 annual report, the Scaleup Institute reported that there are 33,860 scaleup companies (from 2018 data). The Scaleups continue to be the most innovative and international of our SME community, generating a total turnover of £1 trillion – 50% of the total contribution by all UK SMEs and 54% more productive.
The Beauhurst annual Scaleup Index uses a verified list of 7474 scaleups (from a list of 59k that has been cleansed to remove acquired companies and charities etc). This year the Beauhurst Scaleup Index highlighted that:
£5.32b was invested into visible scaleups in 2019. There were 20 deals worth more than £50m accounting for £3.82b (72%) of the total invested amount
BGF remains the top investor in visible scaleups with 124 investments since 2011
The total number of female founded visible scaleups has doubled in a year
52% of scaleups have at least one female c-suite member, up from 48% in 2019
The Barriers to Scaling a Company
There are many challenges to scaling a tech business. One of the barriers to growth is recruiting talented, motivated people who are interested in what you are doing. RWA has a deep understanding of how hiring at this stage is critical to the success of the business.