The Current State of Scaleup Businesses in the UK
Scaleup businesses have been big drivers for the economy in the UK. In recent years they’ve been creating innovation and boosting the job market more than any other type of SME.
While the pandemic has caused challenges for many companies, scaleups have faced particular difficulty in accessing the funding required to take their business to the next level.
This isn’t only an issue for the scaleups themselves, but also for the job market and the country. The innovations and opportunities created by scaleups are needed more than ever.
A few savvy startups and scaleups have been making waves during the turbulent times of the pandemic, as they rose to meet needs created by the unique set of circumstances.
Tech and software have been obvious dominators. As we’ve seen with Zoom, teleworking and communications went from optional to essential with the WFH (working from home) crowd. The ‘crowd’ being nearly everyone all of a sudden.
However, this wasn’t the only scaleup sector to do well, healthcare technology, and food logistics were big winners too.
Some of the big UK scaleup winners of 2020 were:
Hopin – an online events platform. Online experiences have blossomed during lockdowns.
Deliveroo – food delivery logistics. Restaurants were out and takeaways were in during the pandemic and Deliveroo was in the perfect position to do a massive scaleup.
Revolut – digital bank. Even banks weren’t deemed safe. More digital and more convenient banking has been a trend building over a few years.
Babylon Health – Online medical consultations platform. Online appointments, therapy and more have become a new market in the pandemic.
Darktrace – cybersecurity. One big fallout from the WFH crowd is the greater cybersecurity risks.
Scaleups and Device Leasing
Scaleups continue to require support in order to further our economy and better our way of life.
One big hurdle for ambitious scaleups is putting tech hardware in their employees’ hands to deliver good results.
This is one of those crucial, unavoidable elements in most scaleup companies, if you want to be successful in improving your offering to your target market. Unfortunately, it is also a huge outgoing drain on funds.
Hardsoft has developed a range of device leasing solutions that are ideal for scaleups to help control costs while accessing modern, high performing devices.
If you’re about to take your startup and transform it into a scaleup, you’ll likely be aware of the plethora of tactics and terminology involved.
However, since scaleups and startups are driven by innovation, anyone can find themselves becoming the next big entrepreneur. Therefore, it helps to know the language of your new culture and environment in order to access the resources you need.
Scaleup Business Terminology Basics
Scaleup – Most lay people think of this as any business that is growing, if they know its meaning at all. However, a true scaleup has to demonstrate significant growth over a certain period to be genuinely classified as a scaleup and catch the eye of investors.
The OECD (Organisation for Economic Co-operation and Development) defines a scaleup as a business that grows its staff or turnover by 20% year on year over three years (a bare minimum of two) and had at least 10 employees at the start of the observation. This is proof of high growth and potential.
These are the companies that can create a lot of jobs. Scaleups that meet the 20% threshold or exceed it in terms of turnover are highly coveted.
Startup – This is not just any small business as some people think. A startup is a privately created company by an entrepreneur using a business model that is highly scalable.
They have large potential and a projected solid market to expand into with the possibility for large profit. Essentially, they are a scaleup before it scales. A startup will be earlier in its development and possibly not producing profit yet.
Venture capitalist – A type of investor for scaleups and startups. They are private equity investors providing capital to promising companies in exchange for an equity stake.
This investment is commonly financial, however, it can take other forms as well, such as equipment. The other benefits of venture capitalists are that they often bring more than simply capital to the table.
In addition to funding, they can help scaleups network and provide knowledge and experience to develop the business further. VCs often focus on investing in a particular sector, but not always. They operate on comprehension of the high-risk / high-reward world that comes with investing in scaleups and startups.
Angel investor – There’s commonly much confusion between what makes an Angel Investor and what makes a Venture Capitalist. Angel investors tend to be highly wealthy individuals who are investing their own money into a promising startup or scaleup.
A Venture Capitalist tends to be an employee of a Venture Capitalist firm who is investing other people’s money, held in a fund, into new promising companies.
However, a VC could be an individual too, yet the invested funds still tend to not be their own money, but rather money from investment companies, large companies, and pension funds.
Angel investors are accredited individual investors with a networth of usual $1 million minimum.
IPO – Initial Public Offering. After series C funding, a scaleup will often reach the point of IPO (initial public offering). This is when a business offers shares for public sale on the stock market for the first time.
Scaleup Funding Cycles Terminology
Bootstrapping – Using personal finances as funding for the company. An entrepreneur is bootstrapping if they use their own money to kickstart the business rather than taking external investment.
Crowdfunding – Funding raised via many small investments from a large group of people, usually facilitated by specialist, online platforms e.g. Kickstarter. The benefits include creating interest and buzz around your company within the target audience while raising funds, so you start on the marketing early.
Funding cycles – The various phases of raising capital that startups and scaleups must go through to have sufficient finances to develop each stage of their business. This could be funding for market research, planning, product development, the launch, hiring staff, then scaling and expanding the target audience.
Pre seed funding – One of the very earliest rounds of funding for startups. Pre-seed is usually preinstitutional. It is usually for low amounts under $150k. It will often go into market research to see if the business plan is viable and making plans to start a company.
Seed Round – The next round of funding after pre-seed. The startup will be very young still at this stage. There might be several rounds of seed funding needed to start the company properly. This is when employees start to be hired and development kicks off.
Series A funding – Series A funding is one of the biggest financial injections for a startup. It allows the company to realise its plans.
Once series A is acquired most startups will look to officially launch their product or service. The first revenue is likely to be seen after this funding stage, though most will be preprofit still.
Prior to series A funding, a company is definitely still a startup. This is when a business must show on paper that it has a promising plan with potential for big revenue.
Series B funding – This is what a business requires to go from startup to scaleup. Having achieved your series A funding, you’re then ready to start scaling. Having acquired series B funding, companies will expand their staff and hope to grow their audience. After this injection of funds, investors will expect to see the business producing profits.
If you’ve already acquired your series A funding and are currently pitching for your series B, then this is an ideal time to see how Hardsoft leasing solutions can help your finances stretch further. Our DaaS solution is one of several leasing options that are perfect for those businesses looking to rapidly add scale.
Series C funding – This is for businesses looking to scale even further. After this stage, the company may be sold or it’s time for their IPO. That proof of 20% year on year growth will be incredibly important at this stage to show investors the company was worth their interest.
Jargon Busting for Future Scaleup Owners
Unicorn company – A new, privately owned company valued at over a billion dollars. Transferwise in the UK is a unicorn.
Recently the industry has introduced terms like Decacorns or even Hectocorns to categorise truly impressive startups.
A decacorn is a new startup valued at over $10billion and a Hectacorn is valued at over $100 billion. To get an idea of companies like this think Facebook and Google, which were both valued in these ranges before their IPO.
Futurecorn company – Highly valued new, privately owned companies that could be reasonably predicted to become unicorns in the near future because of their rapid upward trajectory.
Zombie company – A startup or scaleup whose growth has stagnated. They are still turning over enough to survive but investors are unlikely to see returns.
10x – A marketing expression for increasing or having increased value several times over. Marketing jargon instead of saying the lengthier ‘increased by 10-fold, or 10 times or by 1000%. Can also apply to 5x and other numbers but 10x is most common.
Proof of concept – The successful demonstration of a business concept. The presentation of gathered evidence that the company will be a success when launched.
Growth hacking – A marketing discipline designed around startups and scaleups that is a mix of digital marketing, business development, and customer acquisition strategy.
Exit – When a scaleup or startup company ceases to be an independent and privately owned entity because it is bought or merged with another. Alternatively, it ceases to be a privately owned venture because it becomes publicly tradable.
Disrupt – A term you’ll have seen thrown around far too often in marketing spaces. In scaleups, it means to radically innovate in a market sector creating new unforeseen demand, or radically shifting a particular sector through innovative ideas or approach.