Scaleup ecosystem in the United Kingdom | European Scaleup Monitor 2021

4 January 2022

The European scaleup climate is recovering from major setbacks over the past two years. This was one of the conclusions from our latest edition of the European Scaleup Monitor. The monitor dives into the drivers of the European scaleup climate with experts from the field. Dr. Keivan Aghasi, research associate from the Judge Business School, Cambridge University  explains how startups in the UK can grow into a scaleup. How does the UK manage to be one of the top dogs in the European scaleup landscape? Where does the capital come from and why is the UK leading in Europe in total value of investment? Find out in this expert insight article from the European Scaleup Monitor 2021 below and find the full report here.

Looking at the scaleup ecosystem in the UK, one may notice that most scaleups are regionally concentrated in specific clusters. The golden triangle, an area surrounded by Cambridge, Oxford, and London, hosts the most scaleups in the UK ecosystem. The Scottish corridor of Edinburgh and Glasgow comes in second, Manchester greater area and Birmingham follow closely. What makes these regions fertile for scaleups is related to the availability of all three forms of capital: financial, human, and social. These regions provide the physical affordance of these three capitals to promising startups—no wonder why all these clusters have multiple airports in the vicinity to allow the inflow of capital from abroad. Also, the proper railway infrastructure allows mobility within these clusters; it takes only 40 minutes to commute from Cambridge to Kings Cross, central London.

Scaleups constantly require fresh blood to supply their organizations with the right skills to support their growth. Universities and higher education institutes in these clusters provide world-class education in the various fields of STEM combined with business and management education provides the alchemy for promising scaleups to hire the right talents. Moreover, these universities’ strong network of local and international alumni provides leverage in these clusters to keep the ball rolling and connect their former graduates turned into business owners, entrepreneurs, and investors with new graduates looking for new opportunities. Such interactions help these new graduates to overcome their liability of newness and boost their social capital and equally assist the alumni in finding new talents for their businesses.  

Finally, these clusters host financial intermediaries to supply the promising startups with the right capital balance to finance their scaleup journeys. Scaleups are likely to leverage financing from a wide range of external sources, and these clusters have actively attracted financial capital providers from equity and debt markets. Local investors turned into business angels in each of these clusters play an ambassadorial role to bring venture capital and private equity firms to the region to invest in their portfolio firms. Other financing methods such as trade credit, peer-to-peer lending, and invoice financing are best practices that most promising startups adopt thanks to the interaction with their peers in various support programmes offered by accelerators, incubators, and co-working spaces backed by local governments, banks, and universities in these clusters.

The cohort-based peer supports mingled with mentorship improve the financial literacy of many of these startups to design a robust strategy for financing their scaleup transformation. London in the golden triangle is a case in point. It has been well-positioned as the financial hub facilitating the transatlantic transactions between the US and Europe; no wonder it became the leading fintech capital of the European continent, hosting specialized support programmes for startups disrupting the financial services space. Moreover, the plethora of financial service advisors, investment arms, and financial brokers in credit and debt markets make London the Meca for many startups seeking financial capital both in the credit or debt market.  

Find the full European Scaleup Monitor of 2021 here.

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