Startup general interest

Scale-ups are the difference between growth and recession

By March 1, 2016 No Comments

I was at a Draper Esprit investor presentation this morning and CEO Simon Cook quoted Xavier Rolet, CEO of the London Stock Exchange from his recently published report on 1,000 companies to inspire Britain:

We want particularly to shine a light on the companies variously identified as ‘gazelles’, ‘the vital 6%’ or ‘scale-ups,’ which have a remarkably disproportionate impact on UK national economic output. As the CBI recently confirmed, 3,000 scale-up medium-sized businesses contributed £59bn to the UK economy between 2010 and 2013, effectively making the crucial difference between recession and recovery. To put it another way, just a 1% increase in the number of high-growth businesses would create 230,000 new jobs and add £38bn or 2% to UK GDP.

Put another way, the work we are all doing building and investing in high growth companies has a massive positive impact on the UK. That’s the lives of millions of people.

Similarly, later in the report Sherry Coutu says:

100% of the net new jobs in the US and European economies derive from companies that are less than five years old

This is not a new theme, but it is new information, and I love it. It adds another layer of purpose to what we do.

That said, the data is still a little confusing. The idea that startups make a big difference to economies has been around for maybe ten years now and the statistics and data have got much better in the last two or three, so things are definitely improving. However, when Rolet says that a 1% increase in the number of high growth businesses would create 230,000 new jobs and add £38bn to UK GDP that seems at odds with the CBI data about 3,000 companies contributing £59bn to the economy from 2010-2013. I guess that the 1% must be of a much higher number than 3,000 – otherwise 30 companies need to create an average of 8k jobs each, which sounds like a lot to me. Facebook only has around 13,000.