Report finds Scots firms still scaling the heights

The Scottish National Investment Bank (SNIB) and the Scaleup Institute partnered recently to publish a state of the nation report in relation to Scotland as a base for scaling businesses.

So, what is a scaleup anyway? The OECD defines scaleups as companies that are achieving average annual growth of 20 per cent or more in turnover and/or employees over three years, with at least 10 employees at the beginning of the observation period.

As an observer, I have been lucky to advise a number of companies in this category, with online travel site Skyscanner being a notable example from a few years’ back and, to reference a more recent client, Troon-headquartered CCL Logistics & Technology.

Writing for this column a couple of weeks’ back, CCL’s Founder and CEO Callum Bastock remarked that, “As your business grows at speed, the only constant becomes change, which you have no option but to embrace.”

Nick Freer is the founding director of corporate communications agency the Freer Consultancy

Coming back to the SNIB-Scaleup Institute ‘Scaling Up Scotland’ report, we are reminded of the importance of scaleups as a key driver of growth and productivity. According to the report, scaleups accounted for just 0.52 per cent of the total number of Scottish SMEs in 2021, but generated one third of the total SME turnover, contributing £36 billion to the Scottish economy.

In terms of quantum, there were over 1,700 scaleups operating in Scotland in 2021, with an average turnover of approximately £20 million, while geographically around 60 per cent of scaleups were to be found in the central belt. In 2021, a clear majority of Scottish scaleups were business-to-business enterprises (70 per cent), while roughly half of our scaleups were operating internationally.

As rocket ships require fuel, scaleups need funding, and while the investment ecosystem in Scotland is strong for early-stage investment, there is a gap for investment in scaling businesses. The Scaleup Institute’s estimate for the funding gap is quite alarming - estimated at anything up to £1.5 billion.

42 per cent of scaling businesses are over 20 years old, so we know that both startups and more established businesses can scale, and in fairly equal measure.

In terms of ecosystem support, there are well documented initiatives in place that should help to move the dial - including the ScaleupScotland2.0 programme, a partnership between The Hunter Foundation and SNIB to support high-growth companies, and CodeBase-run Techscaler, the Scottish Government’s £42 million programme to support the growth of tech startups across Scotland.

Chris Wilson, a former senior banking executive now leading advisory firm Opto Advisory, works with executive teams to build strategic transformation plans to help organisations continue to grow. Many of Wilson’s clients have been on the scaleup journey, including Broker Insights, The Tartan Blanket Co, and Candleshack.

So, what does Wilson think scaleups need to focus on most, and are there areas they neglect to their detriment?

“As they get to scale, of course having the right leadership team, strategy and capital to grow are critical, however scaleups also need to consciously capture what has made them a success so far - their purpose”, says Wilson, “and while they may need to think and act differently as they grow, they must not lose the ’secret sauce’ that makes them special.”

Nick Freer is the founding director of strategic communications agency the Freer Consultancy