It’s Scale Up Month at TechSPARK and we couldn’t think of anyone better to share an introduction to all things scale ups than the resident Scaleup Lead at Rocketmakers, Briony Phillips. We asked Briony to give us a few key facts to help everyone better understand this relatively new terminology.
What is a scaleup? Where can I find one? Why are they so important? These are all questions that I’m asked on a regular basis having spent a few years digging into the challenges faced by scaleup companies in the West of England. So let’s start at the beginning with a few introductory facts...
The noun ‘scaleup’ is still relatively new. It was first coined in the Scaleup Manifesto presented to the Government in recognition of the need to improve our standing and become the best place in the world to scale a business, as well as to start one. As wikipedia records, in March 2014 Sherry Coutu was commissioned by BIS [department for Business, Innovation and Skills] to produce 'The Scale Up Report on UK Economic Growth', an independent report to recommend actions the UK needed to take to ensure it is the leading economy in the world for generations to come.
What is a Scaleup?
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, most organisations providing services to scaleup companies will use their own definition, as the limitations of Companies House data make it very difficult to identify official scaleups. Often organisations will select participants for scaleup programmes based on turnover level or employee numbers or on the amount of funding they are seeking.
So we end up with a couple of categories of scaleup - those that are identified through official data sources and who also meet the threshold to submit full accounts to companies house (£10m turnover or 50 employees) and are therefore ‘visible’ scaleups and those that don’t meet the threshold so can’t be identified. We also have companies that may be growing unusually quickly and don’t have enough trading history (3 years) to be assessed against the OECD definition.
Why do they matter?
Scale ups are one sub category of SMEs and some would say, one of the most important subcategories. In their 2020 annual report, the Scaleup Institute reported that the latest available data (from 2018) tells us that there are 33,860 scaleup companies. The Scaleups continue to be the most innovative and international of our SME community, generating a total turnover of £1 trillion – a 50% of the total contribution by all UK SMEs and are 54% more productive than their peers.
This illustration from the 2020 Scaleup Annual Review sums the situation up pretty well:
Where can you find them?
Scaleup companies can be found across the UK and across sectors but they are not so easy to spot in the wild due to the data and definition challenges described above. The simplest source of information is the Beauhurst annual Scaleup Index which crunches data on the community and shares a verified list of 7474 scaleups once the list of 59k has been cleansed (removing acquired companies and charities amongst others). This year Beauhurst 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.
There’s lots more interesting insights in the full report which you can access here!
You can also find some data on scale ups on The Scale Up Generator, a website that charts the work I have done in trying to understand and overcome the barriers faced by scaling companies in our region of the West of England.
- You may like: 5 common challenges to scaling up
Main Image Credit: Lydia Cockcroft