The UK may be a small country, but it is a global leader in technology entrepreneurship. Venture capitalists, crucial to the startup ecosystem, poured $13.2 billion into British tech companies in 2019, according to Tech Nation, placing the UK behind only America and China when it incomes to investment in home-grown upstarts. Despite the coronavirus pandemic, this grew to $15 billion last year, while the UK also eclipses the rest of Europe in the number of unicorn companies with valuations of at least $1 billion.
Its revered status as an incubator of some of the world’s most exciting startups can be largely attributed to the UK’s leading position in the burgeoning fintech sector, which enjoys the biggest chunk of venture capital investment and is where companies are growing fastest. Indeed, the top three startups in Dun & Bradstreet’s inaugural Accelerate50, which recognises the UK’s top 50 high-growth tech firms, are fintechs.
The lessons learnt by these companies and the entrepreneurs that lead them lend unique insight into what will define the fast-growth tech winners in the years ahead, and how to scale up effectively during periods of speedy expansion. That begins with something quite simple: experiencing what the customer’s problems are, according to Myles Stephenson, co-founder and chief executive of Modulr, a payments-as-a-service API (application programming interface) platform whose three-year CAGR growth of 430.39 per cent placed it second in the Accelerate50.
“The fast-growth tech winners of the future will be businesses that can identify with customer painpoints, create a unique solution and then pull together all the different parts around technology, talent, funding and customer journey,” says Stephenson. “There has been lots of good startup activity, but the real scale-up part is often lacking. The winners will have the ability to scale, and that is both the challenge and opportunity.”
Some of the elements of scaling up successfully are out of a startup’s control as they rely on an accommodating regulatory environment, such as ensuring the best access to funding or, in the case of fintechs, beneficial partnerships with incumbent banks. The biggest challenge with fast-growth tech also requires a degree of government support, but equally a lot of work from startup leadership teams, and that is access to talent.
The winners will have the ability to scale, and that is both the challenge and opportunity
Nearly three-quarters of tech employers experience skills shortages, according to research by Totaljobs and Robert Walters. On the policy side, the influential Kalifa Review of UK Fintech recently recommended the government should create a new visa stream to enhance access to global talent. However, companies also have to make themselves more attractive to talent, as well as trying to understand, sooner rather than later, the team, people and skills they will need not just now but years into the future.
“You need to invest early in future capability and over-hire for skills, otherwise you rapidly run out of runway,” says Stephenson. “You also then need to be able to find and access the talent able to span those changes quickly enough to support your growth.
“When a company is growing fast, somebody’s role today is very different to how it will be in just a few years. Will they even want to do that role? Finding people who can span that change in the business is really quite difficult. We try to look for people who have been on the journey before and experienced that change and development of an organisation. But it’s a very competitive market across all the disciplines of business.”
Looking beyond the capital
The top-placed company in D&B’s Accelerate50, Atom Bank, which has experienced enormous three-year CAGR growth of 838 per cent, has found a workaround to the talent challenge that it hopes others will follow: basing itself outside London and the southeast. London may be the most prominent tech startup hub beyond Silicon Valley, but the challenger bank believes there is value in looking elsewhere in the UK.
“We’re proud to come from a small university town in the northeast. I hope there’s a message there that this can be done wherever because there are huge cost advantages and most importantly people advantages, when you leave the London and southeast bubble,” says Edward Twiddy, Atom’s chief customer officer, who also wants to see more societal solutions from startups.
“Uber is admirable in many ways, but how many billion pounds have been spent transforming taxis? I hope we see more tech startups building solutions that transform us as a society, including community engagement, the environment and education, and they’re rewarded in both societal and monetary value.”
Pavel Matveev, co-founder and co-chief executive of crypto payment platform Wirex, concurs on the importance of good recruitment. His own experience of building a company that has recorded three-year CAGR growth of 426.33 per cent, placing Wirex third in the Accelerate50, sees him reaching for his learnings on culture when sharing advice with other leaders.
“Growing a team at pace is very difficult,” he says. “With so many new people coming in you need to ensure they are not only qualified for the role but also share your vision, which means you need to know how to communicate that vision. Focusing on culture is important to any scaling exercise. If you don’t, it will be the first thing to disappear and you’ll end up with lots of people who don’t share the same values and goals as a team.”
However, what Matveev believes most passionately will define the fast-growth tech winners of the future is a sustainable business model. The relentless striving for “growth”, judged by rapid increases in user numbers at the expense of nearly every other business success metric, has resulted in a tech ecosystem with a high rate of failure. Matveev hopes the impact of the COVID-19 crisis will help end the long-prevailing, warped view that if a tech startup isn’t losing millions of pounds a year, it’s doing something wrong.
“Pre-COVID, and still to a certain degree now, as long as your user numbers were growing fast, you could get funding from venture capitalists,” he says. “Companies would raise lots of money, with lots of media attention and happy customers, but all the while burning hundreds of millions of pounds and unable to monetise the client base. We have to get used to looking beyond just one year of success. Thankfully, it’s starting to change now.”
Forget the unicorns; it’s diversified, sustainable business models and an ability to attract the best talent in good time that will separate future success from failure.
For more information and to see the full list of winners of Dun & Bradstreet’s inaugural Accelerate50, please visit the awards hub
