Scaleup Nation: The Rise Of Scaleup Businesses In The UK

The phenomenal increase of scaleups in recent years has seen the UK make great advances in support of high-growth businesses. In light of this, John Duckworth, Managing Director at Instant Offices, delves into the rapid growth of a Scaleup Nation and what the key factors are to help SMEs step up to the next stage of development.

Scaleup Index reports that the number of visible scaleups in the UK has increased by more than 500 scaling businesses since 2017 and that the sector “added billions of pounds to the economy and is responsible for hundreds of thousands of jobs.”

According to the 2018 Scaleup Index, Leeds, Birmingham, and Manchester have the highest concentration of scaleups outside of London, and 2017 saw a record level of investment into these ventures at almost £2.75bn. Tech Nation reports that investment in UK scaleup digital tech firms grew 61% in 2018, ranking the UK fourth after the US, China, and India.

Supporting High-Growth Firms

No different from a ‘high-growth firm’, a scaleup is a relatively new term used to describe the link between starting and growing a business. Typically, a scaleup will have an average annualized return of at least 20% in the past three years, with at least ten employees at the beginning of those three years. These companies have generally already proven themselves viable, as opposed to startups, which are still in the process of establishing themselves.

According to a report by the Scaleup Institute, two core challenges for scaleups include access to markets, including overseas customers, and talent acquisition.

It’s All About The Location

The decision to locate a business in a specific area is often a very significant moment for a scaleup business, as it can define a brand and its ability to attract and retain the best talent.
Often, due to cost restrictions, startups and scaleups choose locations situated far from central or ‘glamorous’ parts of town. This can make attracting talent in the initial growth period very difficult, and also dissuade clients from making regular visits.

Growth In Scaleups Supported By The Flex Market

Interestingly, the biggest growth area of the London flex market over the last two years has been the demand for 20+ desk inquiries, which has increased by 45% year on year since 2016. This size of the requirement is typically representative of corporate demand, particularly scaleup firms looking to evolve beyond the startup phase of growth.

Several flexible workspace providers have started offering products better tailored to this new type of demand, helping firms adapt and grow into custom office space without the initial investment headaches and challenges associated with renting workspace.

By 2020 and beyond, this is a trend that is expected to continue into, with increasing demand from scaleups and corporates seeking alternatives to traditional office space. The flex market is adapting to the way work is changing, driving a wider appetite for the flexibility, agility and utilization needs embodied by scaleups.

Getting The Tech Right

Having reliable and robust systems in place that allow a company the ability to expand or “scale up” is crucial. Robust IT systems are incredibly important to any business and are a vital consideration as processes become more complex, and speed is required.

Fortunately, the rise of cloud-based platforms and new tech means the tech problems that many small companies might historically have struggled with are no longer a key concern.

A Scaleup Economy

Much has been made of the need to encourage entrepreneurialism in the UK, and various governments have tried to claim the victory of having recognized the startup economy. But the reality is that not enough in the past was done to foster the development of these companies.

Finding the right space, the best talent, and proximity to clients, are all vital requirements for the scaleup.

Three Key Factors To Scaling up

Perfect The Basics

It’s essential to get the fundamentals right before attempting to scale. Ensure all resources can scale and perfect basic processes before introducing new ones.

Focus On Agility

Speed and agility are critical to any growth strategy, and to juggle the peaks and lows it’s essential to be able to grab opportunities fast. Many scaleups supplement core office space with flexible and coworking spaces on short leases to sample new markets and increase headcount when needed.

Hire Multi-Skilled Talent

With automation becoming the norm across most businesses, hiring multi-skilled talent is crucial to success. Hiring innovative and creative people is an invaluable investment for long-term growth.

A 2018 report found that AI is expected to generate 7.2m jobs in the UK, outstripping those that will be lost as a result of automation.

Scaleups are driving growth and helping to strengthen the UK economy, so it’s important to shift focus to these dynamic companies as their numbers continue to grow.

 

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