When you enter the tech world, you soon become exposed to a whole new range of terminology used within the tech ecosystem. From the basics like startup and venture capital, to terms like bootstrapping and MVP – you might even be wondering what the term tech company actually means.
Scaleup is one such term that is becoming more and more important. While startup culture is still a world of innovation, ideas and exciting tech talent, scaleup companies are the ones you’re actually more likely to have heard of.
Companies on Tech Nation’s most recent Upscale programme included Funding Options, Olio and OpenRent, while alumni from the programme’s first three years include Monzo and Bulb.
So what exactly is a Scaleup?
Put simply, scaleup is a distinct phase of company growth. It’s a company that has achieved a lot, had some impressive success and is ready to take it to the next level.
If a company is raising investment to fund their growth, they will generally move into scaleup territory when they have been through their first rounds of funding, and reached the Series A stage or similar.
A company that is growing by plowing their profits back into the company, a method known as ‘bootstrapping’, will typically reach the scaleup stage when they achieve around 500k revenue.
So, a scaleup is basically a high-growth company. The OECD defines high growth as a company that has achieved growth of 20% or more in either employment or turnover year on year for at least two years, and have a minimum employee count of 10 at the start of the observation period.
Having grown to a certain size, a scaleup is ready to use their proven success to scale and grow their company significantly. The scaleup phase is typically the quickest and most significant stage of growth, and one that can bring the most challenges.
For this reason, it is vital for scaleups to have the right level of support and the right network to work through and overcome whatever issues they face during this important business phase.
While it is common knowledge that startups require a lot of support and advice, a common misconception about the scaleup is that, due to their impressive level of success and increased exposure, they know it all and don’t need any help.
There are many brilliant local and national resources for startups to find help, but once a company reaches that critical point of scaling they might find their support options become more limited.
For this reason, accessing a peer-to-peer support network is critical for companies at the scaleup stage. Connecting with people who are experiencing the same challenges is invaluable; it not only makes business sense, but it also can be a much-needed source of emotional support and reassurance for high-achieving founders and executives during a period of massive change.
What’s the difference between a startup and a scaleup?
Aside from different stages of funding, there are other distinct characteristics that differentiate a startup from a scaleup. It makes sense to be aware of these, as it’s a good indicator of tackling the question: When does a startup turn into a scaleup?
As discussed before, the major difference between a startup and a scaleup is the confidence surrounding return on investment (ROI). Once a startup graduates to its scaleup phase, the experimentation period has been scaled back and the company have worked out what works for them and what makes them profitable. This factor makes scaleups a much more attractive offer from an investment point of view. The method has been tried, tested and the company has proved that it works. The high growth and reduced risk from surviving market tests make them sought after from investor, and employees looking to join the next big thing.
This leads us to the next major difference: A startup company might have a higher tendency to try and explore new methods of making things work; they will take risks along their journey to finding out what works best for them. They don’t have much to lose.
Scaleups are more able to mitigate and reduce risks. These companies know what works, and while they still work fast and innovate quickly, the risks they take are more calculated.
The other important differences between a startup and a scaleup is the difference in the inner workings of the company. Whereas a startup will tend to have a spread of staff that can perform various roles and wear different hats in the workplace, scaleups tend to have a more focused workforce with concentrated specialisms, afforded by a bigger headcount. Scaleups also tend to have a more formal hiring and onboarding process, whereas startups are more likely to have a ‘hit the ground running’ culture for their new starters.
Scaleups will be thinking about embedding more robust processes such as: a clearly articulated vision and mission statement, people processes such as progression frameworks and cultivating a long-lasting positive company culture.
When do startups need to scale up?
There is no prescribed time for a startup to transition into a scaleup, it will be different for every company. Some startups might even find themselves in the middle of the scaleup process before they even know it has begun.
For this reason, it’s important to prepare accordingly. James Silver’s book ‘Upscale’ is the perfect reading for anybody running their own startup tech company who sees scaling up in their future. Silver uses the words and wisdom of some of the UK’s leading tech entrepreneurs to dig in to the most pressing, practical and painful issues founders face during this vital stage of growth.
What is a scaleup growth programme?
A scaleup growth programme is a programme specifically designed to support and assist a high-growth company during an extremely important part of their journey. A period of such high-growth can cause a lot of stress for founders and employees, so having advice and support at this stage is invaluable. Tech Nation run a series of scaleup growth programmes, including Upscale and sector-specific programmes for companies in Fintech, Cyber Security and Artificial Intelligence.
Upscale is Tech Nation’s programme for the UK’s leading scaleups. We know that scaling your company can be a serious challenge, and the Upscale programme partners with industry experts to uncover the secrets of scaling, from increasing headcount and opening an international office, to creating an invincible company culture. If your company is growing fast and has big ambitions, then this programme could be for you.
Sinead Daly, our Upscale Programme Lead, told us: “Scaling is one of the trickiest and most painful points in a company’s growth. It’s at this inflection point where very few succeed. Scale too fast, and end up outgrowing capacity, or too slowly, and risk losing momentum. It can also be an extremely lonely journey. That’s why we’ve designed a programme that not only navigates some of the biggest functional scaling challenges, but also provides an intimate peer-peer network to support individual growth. And we don’t just provide this for founders, but their senior leaders too.”
Alumni of the Upscale programme include Bloom & Wild and Seedrs, so the prestige is high and the possibilities even higher. The programme plays host to the unicorns of tomorrow and offers scaleup founders and their leadership teams access to a valuable network of founders and peer support which they can use to share, solve and predict some of the biggest barriers scaling companies face at this critical inflection point of the journey.
Companies on the Upscale programme get access to a rich programme of events which tackle topics such as finding talent and others directly related to their growth journeys. Discuss hot topics and shared issues, as well as receiving ongoing support from Tech Nation.
Sector specific scaleup programmes offer more focused advice and support, tackling topics that are unique to particular sectors. Tech Nation have focused on some of the most prominent sectors in the UK, including Fintech – where the UK remains a global leader, and Cyber and Applied AI – areas the UK government have pledged a significant amount of investment over the next few years. As these sectors continue to grow, it is important that they have access to advice, networks and support. Scaleup growth programmes deliver that.
What scaleup support is available?
As Tech Nation is built around the championing the thriving digital sector across the UK, the first criteria for our growth programmes is that you must be a tech company based in the UK, with their headquarters in the UK.
For our three sector-specific programmes (Fintech, Cyber and Applied AI), companies must be between Seed stage and Series A, or turning over max £1.5m if bootstrapped and, obviously, be a business with a relevance to whatever programme they want to join. For Fintech, companies can be either B2B or B2C fintech firms, but consultancies are excluded. For Applied AI, your company must have AI at its core value proposition and take into account ethical considerations. Markers of strong growth will also be taken into consideration in the judging process.
For our flagship mid-stage programme Upscale – the criteria is as follows: Your company must be growing fast. While ‘fast’ might be relative to every company, a good marker to go by is approximately 20% month-on-month.
Your company should also be looking to significantly increase headcount, perhaps even doubling in size in the near future. A scaling company usually has a headcount of about 20 – 60.
If your company is VC backed you should have raised a Series A round, or if revenue focused, generating between £1.5m and £5m.
Another factor is your intention to expand your customer base or market share. You may be looking ahead to the next year and be in the planning stages of significantly building your rate of customer acquisition or market penetration.
Another factor on the table could be plans for substantial national or international growth. Perhaps you intend to open an international office or make your first overseas hire. If you expanded internationally quite early on in your journey, then perhaps you are looking to move into your third or fourth overseas territory.
If you’re growing fast, and interested in joining one of our scaling programmes, sign up to our newsletter for details on applications.