Creating new connections help scale-up our economic intelligence
Nov 14, 2019 / Blog
As a baby’s brain grows, it learns. Every move, every sight and every sound he or she picks up creates another neural connection and the child grows and develops with each new experience. For us to grow as a nation follows a similar principle. Creating new networks and new connections does not just benefit the businesses involved but also add to our collective health and economic development. It is amongst scale-up companies that we find our national brain food.
Scaling companies are increasingly being included as components of local and national strategies
Leveraging our brain power
So, are we growing, as a scaling nation? Short answer – yes. In fact, we might be having somewhat of a growth spurt. We visited Birmingham last month with The ScaleUp Institute for a table top discussion on what was missing from the region. We discovered there that scaling companies are increasingly being included as components of local and national strategies. Why? Because their success does not just spell good news for the companies involved, the connective effect stretches far further.
It is amongst scale-up companies that we find our national brain food.
Good news in the national scale-up conversation means great news for companies and organisations in local areas, too. For example, when more scale-ups grow, we find that the universities benefit, not only financially but as new areas of research and development come to the fore, as such the talent pool increases, benefitting other businesses and services, meanwhile the city attracts more investment and complementary services grow in parallel.
As a nation we develop a bigger, more developed brain, giving us our voice on the global stage.
Of the £1.9trn turnover created by Britain’s 5.7 million SMEs, £1.3trn was down to scale-up companies
Starting up the local scale-up effect
Britain is ranked third in the world for its support of start-up companies, but this falls to 13th for scale-up companies. Follow-on funding for innovative and successful scaling companies is just as readily available in this country as it is in, for example, the US. But as funding rounds progress, the amount of money available to companies in the US far outpaces us. We still have further to go in making the most of our talents and being less risk averse.
Nevertheless, it’s still quite literally big business. The ScaleUp Institute’s Annual Review yesterday reported that, of the £1.9trn turnover created by Britain’s 5.7 million SMEs, £1.3trn was down to the 36,510 scale-up companies found nationwide. One in five have a turnover exceeding £10m.
Indeed, since 2013, the total number of scale-ups in 2017 had risen by 35%. Compare that with GDP growth in the same time, which rose by 9%.
Finally ,scale-up companies are exemplary innovators, exporters and employers.
Birmingham City Council was the fourth largest local government buyer from visible scale-ups in the entire country.
In the Midlands alone, 985 scale-ups created a total turnover of £12.7 billion in 2017. As such the knock-on effect of this scale-up influence on Birmingham city’s infrastructure and productivity is no small thing.
As it happens, in 2018 Birmingham City Council was the fourth largest local government buyer from visible scale-ups in the entire country.
So, with all that in mind, how do we help scale-ups thrive to the benefit of the wider nation? Just like a growing brain, we need to create the new connections – new neural pathways that bolster, not hinder, our shared economic intelligence.
During our discussions with Birmingham-based businesses, we established that the barriers to growth that local scale-ups typically encounter all revolve around lacking access key connections. Top of the list of gripes were a lack of access to talent, to markets and UK-wide customers, access to leadership development programmes, and access to infrastructure for growth.
On that note, the ScaleUp Institute along with various other organisations are currently trying to drive change by creating better access to HMRC data, the express intent being that we build this economic intelligence.
Dial-up the solutions we know have an impact
The power of the network
So, where are the local access points? How well is the regional network connected?
Local connections through visible peer-to-peer networks are important to regional scale-up companies as is access to advisers. We’ve discovered just how much ourselves through the finnCap Ambition Nation campaign.
Smart investment brings knowledge, skills and customer and market connections with it
There also appears to be an absence of a strong Angel Investor network that can add valuable advice as well as smart investment – is this because it doesn’t exist or the fact that it is not visible? Our feedback from Birmingham seems that the latter is more true.
Smart investment brings knowledge, skills and customer and market connections with it. In the spirit of our current paradigm of more personalised product offerings and approaches, financial providers can do more to work more closely with local communities, in order to provide tailored solutions for local scale-ups. Business consultants such as Inventya are good regional connectors providing end to end business support for SMEs in finance, funding, research and partnerships.
Tailored solutions in the context of creating better connections in funding seem to revolve around de-risking growth for entrepreneurs. Knowledge of funding options is itself a barrier here – for instance the relative benefits of going down the debt or equity-based pathways and which is best for your business. Moreover, tailoring could involve consolidating solutions – using blends of funding, for example.
Leveraging what works
Rather than reinvent the wheel here it would be better to be smart about the networks we tap into – dial-up the solutions we know have an impact.
Create the local networks first that, in turn, are allowed to create the national connections that matter
Take Innovate UK, for instance. Innovate UK is the UK's innovation agency, which works with people, companies and partner organisations to find and drive the science and technology innovations that will grow the UK economy. It determines which science and technology developments will drive future economic growth, meets UK innovators with great ideas, funds the strongest opportunities and, crucially, connects innovators with the right partners they need to launch, build and grow successful businesses.
Since 2007, Innovate UK has invested over £1.5 billion in innovation, matched by a further £1.5 billion in partner and business funding. This has helped more than 5,000 innovative companies in projects and was estimated to add £7.5 billion to the UK economy and create 35,000 extra new jobs.
Or take the ELITE programme from the LSE Group. ELITE is a platform helping the most ambitious private companies to scale up, structure for the next stages of growth and access capital. It provides structured training through an 18-month programme to give scale-up leaders the insights and tools to act strategically about their growth and investment.
ELITE companies have raised in excess of £3bn in the UK alone.
Undoubtedly the skill, knowledge and investment to grow business across the UK is there. The challenge still remains as to how to connect all these networks so that they are visible to the entrepreneur and therefore, is it time for a different perspective on communication to this audience?
We must create the local networks first, leverage the existing network creators that are generating success, and create the access to talent and funding that, in turn, are allowed to create the national connections that matter.
It’s started in earnest, but only now are we seeing how our national neural pathways are starting to work together, cleverly. We’re not getting baby brain here, we’re getting smarter.