Start-up is all abuzz, but what about scale-up?

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Yesterday I attended the Industrial Strategy Green Paper 2017 presentation by the Secretary of State for Business, Energy and Industrial Strategy, The Rt. Hon. Greg Clark.

The Minister proposed 10 pillars to building the modern industrial strategy, of particular relevance to me is supporting business to start and grow. The Minister also stressed the importance of SMEs and driving growth across the country, as well as upgrading infrastructure (particularly topical on the day of Storm Doris), transferring skills, research and knowledge into development & commercial success.

One thing he mentioned which particularly resonated with me was the barriers to scale up in the “start-up” world.  Personally, I feel the UK offers one of the easiest environments in the world to start up. To begin with, social “safety net” such as the NHS and strong legal frameworks make the risk barrier for individuals much lower from the outset, which many of us take for granted completely. This cannot be said for other countries such as China and Iran (both have extremely vibrant start-up scenes and attract huge amount of investor attention). If you are inclined to start up a business, there is a wealth of support networks in the UK to make you feel encouraged – a little bit of research and initiative will suffice to get you the relevant information, service providers, motivational speaker events, online and offline communities.  Even funding is actually quite ample in the UK if you look to the right places. Start-up loans and grants in the UK compare favourably internationally. Tax incentives, in particular the Seed Enterprise Investment Scheme and Enterprise Investment Scheme (SEIS/EIS) are second to none.  In the words of one angel investor: “With the SEIS/EIS that is quite unique in the UK, if you cannot get funded here for your start-up, it really isn’t anyone else’s fault – your proposition is flawed.”

Having spent over a year in the UK start-up scene, one thing I have observed time and again, and have felt myself, is that once you pass the initial hurdle of getting started, the landscape changes quite dramatically.  Suddenly the veneer of free barista coffee infused trendy co-working space with hipster dress code peels off, and in any case loses its former glamour, as you fight tooth and nail to break down the scale-up wall.  The challenges become real and threatening, many “inspirational” speakers sound sketchy about the “middle bit” where hard work actually have to be done, and most support networks seem lacking real substance by ways of opening doors.  You find that the mentors and advisers you really need are inaccessible or cost a lot of money, there are more businesses and organizations interested in profiting from start-ups like yours they seem to have the cleverer business model, and user acquisition and distribution costs can be significantly higher in the UK than elsewhere. You wish someone would have told you all this before you started – you would have been more rigorous in your thinking, done your figures and projections in a more sombre way, and spent your initial funds more wisely.

While the UK is excellent for starting up, it is more challenging for scaling up:  some conditions are intrinsic to the UK economy – labour and skills cost more here, material and production costs are higher here, some things seem to happen slower here. At this juncture, the competitive edge from places such as China and Singapore really stand out.

The Minister’s Green Paper recognizes “while we rank third for start-ups, we rank only 13th for the number of businesses that scale up successfully”. Some key factors he pointed to include access to later-stage finances, qualified management and high quality strategies, and the need for supporting moderate growth as well as high growth ambitions.

I personally feel that we also need to have more candid conversations and build practical support networks for scale-up businesses. These should be ingrained at the industry level.  Because a “real” start-up should move out of the start-up scene as soon as possible to tackle scale-up challenges, and be immersed and supported in the specific sector it is trying to be a part of.  This can be a daunting prospect, as often the “industry scene” can treat a newcomer as a threat or as inconsequential.

I have seen many entrepreneurs just “hanging out” in the buzz and cosiness of the UK start-up scene, until money runs dry and an idea is consigned as “learning experience”.  This may be fine for lifestyle “wantrepreneurs”, but for people who genuinely want to create businesses and fulfil ambitions it can be a misleading façade.

I have myself felt the temptation to “tinker” my product endlessly while going to start-up talks and events because they are so much more readily available. But now I make a point to spend most of my time out in the real world trying to break down real walls. I will look to a new ecosystem of support for that empowering feeling once more.

 

UK Seed Enterprise Investment Scheme / Enterprise Investment Scheme (SEIS/EIS)

Find out & have your say about the UK Industrial Strategy Green Paper 2017

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