At the launch of London Tech Week 2018, Mayor of London Sadiq Khan announced that London “is home to some of the best entrepreneurs and tech companies developing the latest cutting-edge technologies.”
The Prime Minister also announced that tech firms will be investing over £2 billion into UK tech companies, with this likely to increase to £5 billion in the next five years. With the close proximity of start-ups and corporate businesses, London is marking itself as a hub for tech scale-ups.
What Is The Difference Between Scale-ups And Startups?
A start-up operates at the innovative, pivotable stage of a tech business. This is the vital experimental stage where a business finds it’s unique place in the market. It is agile enough at this stage to tailor their offering to find the perfect product-market fit. Experimentation is vital up to a point, but if a high-tech business is to survive long-term it is important that it transitions to a scalable business model. Due to the small size of a start-up, it is in a position to take all the risks of a new business, such as market research, product development and finding an audience. A scale-up is the next stage of business development as its product has market validation and has proven its economic stability.
Why Are Scale-ups Good For The Economy?
According to Sherry Coutu CBE, principal author of The Scale-Up Report, which defines a scale-up as:
“an enterprise with average annualised growth in employees or turnover greater than 20% per annum over a 3 year period, and with more than 10 employees at the beginning of the observation period”
Scale-up is an economic development strategy based on the fact that good jobs are created when firms grow, not when they start. Investing in scale-ups can have more short-term and long-term benefits than any other stage of the development strategy. The report describes the long-term benefits of scale-ups to a nation’s economy in terms of job creation, economic growth and productivity. Scale-ups are seen as the real generators of jobs, taxes and wealth within an economy. Helping firms to grow enables the spread of prosperity throughout society.
How Do Scale-ups Spread Innovation?
Scale-ups foster a sustainable, long-term environment of steady growth by addressing the challenge of unemployment by driving innovation and strengthening value chains. Well-known corporate businesses can stay competitive by building partnerships and networks beyond their usual boundaries. The relationship between an ‘anchor customer’ and a scale-up can be mutually beneficial; the agility and pivotal nature of aspiring scale-ups can bring innovation to bigger brands with a wider market share. This relationship has the potential to boost productivity and competitiveness.
How do Scale-ups Manage Risk?
The Bakery offers ‘Open Innovation Programme’ an opportunity for ‘anchor customers’ and start-ups to collaborate and foster their mutually beneficial relationship. Corporates and entrepreneurs work together to realize new opportunities, supercharging the growth of the start-up with the expertise and market knowledge of the bigger corporate organisations. As most corporates are risk-averse, this relationship is an opportunity for the larger entity to learn how to incentivise and manage the inherent risk of innovative start-ups. Not allowing for potential failure is no longer an option for bigger corporations if they want to innovate and grow in an increasingly technological world.
Streetbees: A Start-up Moving to Scale-up
Streetbees is a growing start-up business that gathers real-time information by using the power of AI and geolocation technology in order to help brands get real insights into how people actually buy and use products. Streetbees has trebled in size over the last 3 years and expects to see a doubling of their growth rate over the next 12 months. Attracting the right talent has been the biggest challenge for the business. The support of an ‘anchor partner’ would help immensely as it would give strengthen the recognition of the new brand as it is growing. Streetbees see the collaboration as co-creation where both parties help to shape the future growth of the company. It seems London is on course to becoming the epi-centre of scale-up in Europe. As the tech economy within the UK continues to grow, scale-up development is also strong and looks set to continue to grow. In 2017 there were 4,200 scale-ups across Europe, within the UK itself that number reaches 1,550, with 78% of those scale-ups consisting of small businesses. Small businesses are an essential part of the UK economy, harnessing relationships with scale-ups and fostering their growth will help all stakeholders to learn from each other and build even more commercial opportunities for the benefit of the economy as a whole. Enabling the leap from start-up to scale-up is an opportunity to create a generation of businesses for the future.