Renowned entrepreneur and investor Sherry Coutu today urged the UK government to do more to help “scale-up” tech companies and not just startups if the UK is to avoid falling behind in the global race for growth and productivity.
Coutu, a respected investor who got behind the likes of LoveFilm and LinkedIn in their early days, was commissioned by industry and government to assess the impact that companies with more than 10 staff and an average annualised growth in employees or turnover of more than 20 percent over three years can have on the UK economy.
There are currently nearly 9,000 scale-ups in the UK, three-quarters of which are outside London. But many of the UK's most promising scale-up companies, such as DeepMind and TweetDeck, sell out to larger organisations before reaching their full potential.
In her report, titled The Scale-up Manifesto, Coutu argues that government should be doing more to support firms with £100 million in revenue as opposed to someone who has just pitched on Dragon's Den.
She claims that boosting the scale-up economy by just one percent over the next three years could create 238,000 new jobs and add £38 billion of value to the British economy.
“The responsibility to become ‘a scale-up nation’ – to create an environment (ecosystem) where a greater number of companies reach global scale – rests with all of us who have an interest in supporting economic growth,” wrote Coutu in the report.
“Getting our ecosystem to produce a greater number of scale-ups is more ambitious and challenging than producing a greater number of startups or celebrating entrepreneurs.”
The startup scene that grew out of East London’s Shoreditch caught the eye of prime minister David Cameron four years ago, leading him to set up the Tech City UK quango in a bid to support them.
But Coutu’s report, which was commissioned by the government's Information Economy Council, includes a 12-point plan to shift the focus onto scale-ups and help the UK to grow tech giants like Google, Facebook and Apple in the US.
Critics of the UK tech ecosystem have cited a lack of venture capital and ambition as factors holding back UK tech firms from turning into billion dollar firms but Coutu rejects this. Instead, she believes that the UK needs to adopt some tried and tested methods from other countries.
Drawing on data from 20 countries, the paper makes the case for urgent reforms, including fast-track visas to let scale-ups hire the best talent within two weeks; making real-time company data publicly available so scale-ups can be identified; better training and support for leaders within these companies; and reallocating 50 percent of the public money spent on entrepreneurship towards scale-ups.
Coutu would also like to make it easier for scale-ups operating at home and overseas; a boost to the investment ecosystem within the UK to ensure these firms are not forced to look to the US or Asia for financing; and development on “pain points” like broadband.
Further, the report suggests that a minister should be “made responsible for reversing the scale-up gap by 2025” and calls for a task force to be appointed that reports to the prime minister on progress every November for the next five years.
Antony Walker, deputy CEO at techUK, said: “The significance of these scale-ups for economic growth couldn't be simpler. In a world of relentless technological innovation and digital disruption, the only way to stay ahead of the game is to ensure you create more high-value jobs than you lose and you continually raise your productivity. The key metric for successful economies over the next 20 years won't be how many new companies they can create, but how many of those companies they can get to scale.
"So Sherry Coutu is calling for a significant pivot in the UK's industrial policy. Whilst promoting entrepreneurship and start-ups is clearly important it won't be enough in itself to ensure economic growth. Similar effort now needs to be paid to help more successful growing companies reach scale more quickly and to ensure that where possible, those companies choose to stay and grow from here in the UK.”
Coutu presented her report at an event held at Bloomberg's London headquarters today.