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Scaleup North East

Colin BellNorth East Local Enterprise Partnership, Business Growth Director

July 2017

The North East Growth Hub is focused on the delivery of the North East Strategic Economic Plan (SEP). The ambition of the SEP is to create more and better jobs for the North East’s economy.

The North East Growth Hub has a clear focus to create an ecosystem that enables more businesses to scale and to increase the density of scaleup businesses by 50% by 2024 within the North East LEP area.

This report outlines why the North East Growth Hub will focus on increasing the density of scaleup businesses, the dynamics of the North East’s scaleup population and how we will use the North East Growth Hub to execute our plan.

Please note however that our plan doesn’t represent the finished article, we are still learning, we will continuously strive to innovate and do things better. This plan represents the start rather than the end of our journey.

We look forward to working with the Department for Business, Energy and Industrial Strategy (BEIS), the Scaleup Taskforce, ScaleUp Institute, our lead delivery partner RTC North Limited and the wider business support ecosystem to deliver economic and productivity growth to the benefit of all in the North East LEP area.

Contact details:

Introduction 01

03 04

The North East Strategic Economic Plan

Scaleup North East guiding principles

Engaging with scaleups

Page 01

Page 05 Page 06

02The North East scaleup landscape

Page 02

05Scaleup North East: The Growth Hub scaleup programme

Page 09

06Growth through Mentoring and Non-Executive Directors

Page 15

Colin Bell North East Local Enterprise Partnership, Business Growth Director

Email: [email protected] Mobile: 07909 516 422

Scaleup North East No. 01 The North East Strategic Economic Plan Page 01

No. 01 The North East Strategic Economic Plan (SEP)

The North East SEP provides an industrial strategy for the North East. It sets out a blueprint for intervention and investment to ensure the North East delivers more for the UK economy and for all who live, learn and do business here.

A refreshed SEP was published in January 2017. It identified that the North East faces a widening productivity gap with the rest of the UK.

Although not epidemic, the productivity gap demands a sharp focus as we need to ensure that it is narrowed. This is fundamental when we consider that the UK as a whole faces a productivity challenge and is about to embark on a period of significant change as we prepare to leave the European Union.

How will a focus on scaleup drive productivity growth and the creation of more and better jobs?

High Growth Small Business Report 2015 data (highgrowthsmallbusiness.co.uk) highlighted that in the North East LEP area 420 high growth small businesses (HGSBs) employing 15,500 people with a combined turnover of £1.8billion generated approximately 33% of GVA growth during 2014. That’s less than 1% of the business population generating 1/3rd of economic growth. It’s estimated that 25% more high growth small businesses in 2015 would have created 2,786 additional jobs and £130 million in additional GVA.

Recognising the contribution such businesses make, and could make, to the North East

economy, the business growth and access to finance pillar of our SEP therefore has the clear goal of:

Creating an ecosystem that enables more businesses to scale and to increase the density of scaleup businesses in the North East by 50% by 2024, creating 6,000 additional jobs.

To achieve this goal, the SEP focuses on the following areas, which will be delivered via the North East Growth Hub:

• Inspiring leaders: Responding to requests from business leaders for support and advice from their peers, the North East Growth Hub will encourage and facilitate peer mentoring and introduction.

• Access to the finance required to grow and scale: The North East Growth Hub will develop new and existing partnerships that provide impartial and objective access to finance.

• Encourage the adoption of digital technology: The North East Growth Hub will work with partners to deliver a programme of support aimed at encouraging the adoption of digital technology.

• Support business growth in our areas of opportunity: Scaleup North East will work with areas of opportunity development groups to identify and target business growth support at areas of need. Areas of opportunity are:

• Tech North East – driving a digital surge.

• Making the North East’s future – Automotive and medicines advanced manufacturing.

• Health Quest North East – Innovation in health and life science.

• Energy North East – Excellence in subsea, offshore and energy technologies.

• Building trade flows: The North East Growth Hub will create an intelligent business support offer, working with the Department for International Trade (DIT) to remove actual and perceived barriers to trading outside the UK.

Making it happen

Our lead partner, RTC North Limited (RTC North), has an enviable track record in delivering transformational and innovation services to scaleup businesses. RTC North is in the process securing a package of revenue-based business support to be funded by the European Regional Development Fund (ERDF) and a capital grant scheme funded via the North East Local Growth Fund (LGF). Although this package will not deliver the full scope of services presented in this plan, it will establish a high quality core on which RTC North and the North East Growth Hub can build.

The remainder of this report explains the rationale behind and the detail of our scaleup plan.

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Scaleup North East No. 02 The North East scaleup landscape Page 02

No. 02 The North East scaleup landscape

Based on High Growth Small Business Report (2015) data (highgrowthsmallbusiness.co.uk) it is estimated that in 2014 the North East had 420 high growth small businesses. Figure 1 shows the sector spread of these businesses. Although there is a good spread across sectors it is important to note the concentration in both construction and manufacturing as these are two sectors that are often susceptible to economy shocks.

The dynamics and sector spread of the North East’s scaleup population when coupled with the uncertainty associated with the UK leaving the European Union suggests that the Growth Hub should focus attention, at least in part, on building greater levels of business resilience within the North East’s scaleup population.

2014 2016

420total

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Scaleups

Stopped scaling

10%

25%

65%

Scaleup performance over time

Of particular interest is what has happened to this population of scaleups over time.

Figure 2 illustrates that between 2014 and 2016, only 25% of our scaleups continued to grow. 10% were wound up and 65% either stopped growing or reduced in size.

Why do so many scaleups stop scaling?

Research conducted by Daunfeldt, Halvarsson and Mihaescu (2015) goes some way to explaining our scaleup population dynamics.

They identify that high growth businesses typically demonstrate:

• Low profits prior to the growth period

• Growth from a weak financial position

• High growth companies don’t hold characteristics that would normally be associated with longer term growth.

They go on to conclude that profit rather than turnover growth is important when predicting future growth and raise the question, “How do we avoid ‘one hit wonders’ who are unlikely to sustain growth in subsequent periods?”

In addition, the Economic Research Council’s UK Local Growth Dashboard analysis of the North East LEP area demonstrates that:

• The number of North East start-ups scaling beyond £1+ million in three years lags the UK average.

• The number of North East scaleup survivors with a turnover of between £1 and 2 million and which scale beyond £3 million in three years also lags the UK average.

These trends are backed up by the anecdotal evidence, gathered through round table discussions, that suggests that it takes a great amount of energy, time, sacrifice, money and exposure to risk to grow a business to £1 to £2 million. Once a business has grown to this extent, it is generally considered as being successful.

As cash balances begin to build, the business can increasingly fund a good livelihood for its founder. Why then should the founder risk a comfortable livelihood in pursuit of what can seem an elusive next stage of growth?

These findings suggest that our approach must therefore focus on capturing hearts and minds and helping founders to realise the benefits of targeting that next stage of growth whilst providing them with the confidence and support necessary to succeed.

Figure 2: Scaleup dynamics over timeFigure 1: Sector spread of North East scaleups.

Note: 5% of scaleup businesses are estimated to be social enterprises. Less than 10% of scaleups are within the areas of opportunity identified in the North East SEP.

Scaleup North East No. 02 The North East scaleup landscape Page 03

Local scaleup business density

Figure 3 illustrates the density of scaleup businesses as a percentage of the North East LEP area’s total business population by local authority area.

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0-928%

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Perhaps unsurprisingly, Figure 3 suggests that scaleup density tends to be concentrated in the North East’s urban core. Northumberland shows the lowest density. This is likely to be associated with the rural nature Northumberland’s economy. This demonstrates the need to focus our efforts in such a way to ensure that we increase density across the entire North East LEP area.

This trend is largely reflected at a sub-regional level, as illustrated in Figure 5 that shows the number of people employed in scaleup businesses by local authority area.

Northumberland demonstrates a higher density of smaller scaleup businesses with 0-9 employees. This fact is reflective of the economy’s rural nature. Sunderland demonstrates a higher density of larger scaleup businesses which is reflective of the area’s manufacturing supply chain. The Growth Hub model therefore needs to adapt and flex to cater for local differences.

North East scaleup by numbers employed

Approximately half of the North East scaleup base is within the 10-49 employee range, with 28% having less than 10 employees and 19% having between 50 and 249 employees. Only 2% have over 250 employees.

The Growth Hub’s core target market is the 10-49 employee bracket with support being optimised to help this group of businesses to develop the mindset and business model required to move beyond 50 employees.

Figure 5: Scaleup by % people employed in North East LEP local authority areas

Figure 4: Percentage of scaleups in the North East LEP area by numbers employed

Figure 3: Scaleup density in North East LEP local authority areas

Employee numbers

Local authority area 0-9 10-49 50-49 250+

County Durham 28.8% 51.3% 20.0% 0.0%

Gateshead 27.5% 45.1% 23.5% 3.9%

Newcastle 23.3% 53.3% 21.1% 2.2%

North Tyneside 30.4% 55.4% 14.3% 0.0%

Northumberland 36.4% 50.0% 13.6% 0.0%

South Tyneside 20.0% 65.0% 15.0% 0.0%

Sunderland 31.6% 36.8% 23.7% 7.9%

Scaleup density by turnover

Figure 6 illustrates the percentage of the North East LEP area’s scaleup businesses by turnover. It clearly demonstrates that the majority of our scaleups fall within the £1 million and £4.9 million turnover band. Naturally we would like to see a higher density of scaleups in the higher turnover brackets.

When also considering employee number density, the Growth Hub’s prime target market is businesses with between 10 to 49 employees and that turnover between £1 and 4.9 million. We will target these businesses with a view of supporting them to reach their next level of growth.

£1–4.9m73%

£10–14.9m 7%£15m+ 3%

£0–1m 2%

£5–9.9m15%

What drives scaleup performance?

The Enterprise Research Centre’s ‘Unlocking UK Productivity: Internationalisation and Innovation of SMEs’ (2015) report highlighted the key firm level factors that drive productivity in the UK’s economy. It showed that:

• Internationalisation drives productivity, with the Department for International Trade identifying that

exporters are three times more likely to grow and three times more likely to introduce a new product or service into a market.

• Innovation is a key driver of productivity delivering 51% of productivity growth.

• Innovative businesses are 7% more likely to export.

In addition, Google and Deloitte’s report ‘Small business, big technology: How the Cloud enables rapid growth in SMBs’ (2014) evidences that digitally-enabled businesses grow 26% faster than those that are not.

Internationalisation, innovation and digital adoption are all characteristics that the Growth Hub recognises as fundamental in successful scaleup businesses and reinforces the relationship between growing regional productivity and a focus on scaleup. This leads to the following questions:

• Why are scaleups more likely to internationalise, innovate and adopt digital technology?

• What makes them different to the vast majority of other businesses?

• What is it about the business’s mind set that makes them different?

The Business Growth Service-commissioned ‘Mindset of High Growth’ report (McNeil, Antcliff, Baines and Carter, 2015) outlines the key elements of high growth as being:

• Market expertise

• Business vision

• Active decision making

• Growth drive

• Sales drive

• Innovation drive.

Embedding a high growth mindset consistent with the above attributes is therefore a key focus of our approach.

Figure 6: Percentage of North East scaleup density by turnover band

Scaleup North East No. 02 The North East scaleup landscape

Scaleup North East No. 03 Scaleup North East guiding principles Page 05

No. 03 Scaleup North East guiding principles

Building on the North East LEP’s analysis of our scaleup population, the ScaleUp Institute’s ScaleUp Report and its broader work including their LEP-focused scaleup workshops facilitated by Professor Dan Isenberg, the North East Growth Hub has developed the ‘6C Scaleup Development Model’.

This model provides a framework on which we are developing the Scaleup North East programme, detailed below.

Scaleup mindset and scaleup business models

Everything is focused on embedding scalable mindsets in people and business models.

Cash

Generating the profitability, working capital and investment

required to grow.

Capability

Recruiting, retaining and developing the business’s leadership, culture and

‘A grade’ talent required to scale.

Connectivity

Connecting scaleups to the expertise and resources required to execute

their vision and scaleup plan.

Customers

Deliver a superior value proposition in a business model that will drive

the acquisition, growth and retention of the ‘right type’ of customer.

Capacity

Developing the scalable infrastructure and replicable

processes, systems and supply chains required to consistently

deliver a superior value proposition to more and more customers.

Convening

Scaleups are more successful when they exist in an ecosystem that connects them with other scaleups from whom they can

learn from and with.

Figure 7: The 6C Scaleup Model (North East Growth Hub)

No. 04 Engaging with scaleups Page 06

No. 04 Engaging with scaleups

To grow the rate of scaleup businesses in the North East we need to create a movement that enthuses the region, causing people to adopt a scaleup mindset.

We will do this by identifying ordinary people who have done the extraordinary and use their stories and influence to provide others with the inspiration and self-confidence to do the same.

But this isn’t just about telling stories. It is about enabling more peer-to-peer interactions and providing access to the people who have been there and lived life at the helm of a scaleup. We will draw on the power of the crowd to spread the scaleup bug and in doing so we will draw on the North East’s biggest asset, its people, its community and their passion for the North East and willingness to give something back.

Identifying scaleups

If we don’t know who we want to target with the scaleup mindset then it will be difficult to spread the scaleup bug. We need to identify businesses with scaleup potential. This is perhaps the biggest challenge we face. There is no one dataset or profiling tool that provides a golden bullet. The identification of scaleup potential businesses requires a multi-layered approach and the adoption of technology.

Our approach will therefore focus on the development of rich data that helps to develop a deep insight into the North East’s scaleup actual and ‘potential’ population and will consist of the following elements:

• Growth scoring: We will actively monitor up to 5,000 North East businesses that have been identified as having a high growth potential score. We will work with data analytics and artificial intelligence providers (such as Synoptica or Beauhurst) to monitor each business and apply monthly growth scores. This will result in the creation of a scaleup league table that uses real time data (such as awards and contracts won, key appointments, investments, positive press articles etc.) to augment public data sources (e.g. data from Companies House). Purchasing costs are to be confirmed.

• Engagement scoring: As well as a growth score, we will apply an engagement score to individual businesses. We will use technology to capture and understand how (and if) the digital Growth Hub is interacting with the scaleup businesses. This could be by identifying whether scaleups are engaging with content on the Growth Hub, its social media channels, if they have attended events, or engaged in previous or current programmes.

• Public and private data sources: To develop a deeper understanding of the North East’s scaleup population we will aim to build on the HMRC pilot and Scaleup Task Force developments (e.g. with Sage UK Limited and True Potential LLP) to identify additional businesses with scaleup potential and work with them to send targeted messages. As part of this work we will aim to understand if partner data can be applied to our growth scoring without compromising data protection and privacy laws.

• Capacity building in the ecosystem to spot scaleup potential: If we want intermediaries and partners to identify businesses with scaleup potential then we need to be in a position to articulate clearly what characteristics a business with scaleup potential tends to have. We will develop a segmentation model that we will use to communicate scaleup potential and train partners and intermediaries to implement this model to enable them to understand the scalability of businesses.

Creating awareness

To spread the epidemic we need to help more businesses to make the connection between scaleup performance, their business, themselves and their future. We need to help them to realise that with the right mindset and business model, it is possible to achieve scaleup levels of performance. During the ScaleUp Institute programme, Professor Dan Isenberg said ‘if growth happens and no one knows about it then the impact is less’. Hence a big part of our approach is to find and tell the huge numbers of stories that reinforce that ordinary people can achieve extraordinary things. More specifically we will spread awareness through:

• The media: We will continue to develop our relationships with the media and will continue our media partnership with BDaily, an online publisher of business news. BDaily have positioned the scaleup agenda as central to their content strategy and are committed to publishing a stream of scaleup related content including stories and roundtable discussion.

Scaleup North East

articles from thought leaders and scaleup businesses. Scaleup leaders will talk about the practical tools, tips, mindset and business models that have helped them to scale their business. Content will continue to be shared via social media, the Growth Hub newsletter and via paid advertising channels. The utilisation of technology (e.g. Canddi or Hubspot) will allow the Growth Hub to identify and profile who is interacting with the digital platform and what content they are interacting with. This will contribute towards the business’s engagement score identified above.

Developing interest

Once scaleup and/or scaleup potential businesses have been identified and awareness of high growth opportunities has been raised, then it will be essential to develop a greater level of interest in the Growth Hub’s scaleup programme. Although each communication carried out during the awareness-raising phase will carry a call to action we believe that scaleup businesses need to experience both the challenge and support that the service can offer. We will therefore connect businesses with other scaleups through the service with whom they can form strong, long -term and supportive relationships and will be able to provoke their thoughts as to what’s possible. We will therefore deliver the following elements:

• Growth Hub Live events: We will deliver four high-profile events per year. Featuring a renowned thought leader as a keynote speaker, events will aim to provoke thought, deliver a powerful experience and provide participants with the practical tools and techniques required to scale their business. Events will be targeted and only available to businesses that pass qualifying criteria.

• Sub regional and smart specialisation round table dinner: We will deliver sub-regional and sector-based round table events. Participants will be selected on an invite-only basis and will be selected based on their ‘growth score’. Each participant will receive a personal invitation from the North East LEP Chair, Andrew Hodgson, who will host the dinner, congratulating them on their success to date, emphasising their importance to the region and advising that, as Chair of the LEP, he would like to better understand the issues and opportunities that the business faces and investigate how the region and the North East LEP can best support their continued success.

• Scaleup account managers: Subject to funding, we anticipate having up to six scaleup account managers operational in the North East. Account managers will be highly credible and will have direct experience of significantly scaling a business. We know that the quality and credibility of the account managers is fundamental to the success of this service. As well as being scaleup experts, account managers will also be well-versed in solution selling and whilst not adopting a hard-sales approach they will be directly involved in engaging and on-boarding businesses on to the programme. Typically tactics will include:

• Intermediary relationships: Account managers will develop strong personal relationships with intermediaries such as banks, investors, solicitors and accountants as well as the wider business community. Credible and trusted partners and intermediaries will refer clients to the as a means of adding value.

• Scaleup conference and awards: During 2017/18 we have continued to work with the Entrepreneurs’ Forum to identify and encourage their members, of which there are more than 300, to scale. This year, the Entrepreneurs’ Forum launched the Scaleup Leaders’ Academy and tuned their events programme to cover subjects linked to the scale up agenda. The Entrepreneurs’ Forum Awards 2017 featured for the first time a scaleup award. This award has been effective in attracting applicants who have achieved tremendous scaleup performance yet were relatively unknown. The Entrepreneurs’ Forum has also hosted the ScaleUp Institute on two occasions with presentations to members from both Sherry Coutu and Irene Graham, and has hosted one of the Institute’s board meetings.

• Scaleup Summit: Following the success of Newcastle Start-up Week, organiser Paul Lancaster has agreed, with Growth Hub support, to hold an annual Scaleup summit which will celebrate the success of the region’s scaleup scene. The first summit will take place in November 2017.

• Scaleup Champions: Membership of the North East LEP’s Business Growth Board includes eight prominent entrepreneurs, two of whom sit on the main LEP board, who will act as scaleup champions and actively spread the scaleup message by seeking businesses that demonstrate scaleup potential, speaking at events, and working their networks. Critically they will also help to educate intermediaries on how to spot scaleup potential and how working with the Growth Hub can add value to the intermediary’s work with business clients.

• Growth Hub content: Framed around the 6C model, the Growth Hub will continue to develop and to share scaleup-related

No. 04 Engaging with scaleupsScaleup North East

• Presentations: Account managers will be trained in how to pitch and effectively communicate the Growth Hub’s value proposition. This won’t be a download of features but rather an experiential and interactive demonstration of the benefits that the service can deliver. Typically presentations will be delivered at meetings, seminars, conferences and exhibitions, such as local business forums and business clubs.

• Business support partners: Liaising with the Department for International Trade’s advisor teams to identify relevant businesses and networking with other business support organisations and programmes are important elements. Networking will include working with relevant sector groups and networks such as Design Network North, North East Automotive Alliance, North East Process Industry Cluster, Northern Offshore Federation Energy etc.

• Telephone triage: Due to the need to effectively segment scaleup from non-scaleup potential businesses, the Growth Hub will appoint a high calibre telephone adviser (subject to funding) who will have the ability to hold intelligent, challenging, probing yet friendly and professional conversations with businesses as to assessing their scaleup potential. The advisor will be trained in closing the phone call and securing an appointment with an account manager.

Creating a strong sense of desire

The Growth Hub’s scaleup programme needs to be seen as different from what’s existed before. It needs to break away from the stigma associated with previous publically funded support services.

The value proposition needs to be high and something that businesses aspire to be associated with. The quality of the service is therefore paramount and cannot be outputs driven (such as the number of businesses engaged). This would only lead to a race to the bottom.

Rather, the Growth Hub must focus on delivering a high quality experience that mirrors the values that we associate with scaleup businesses (innovative; great systems and technology; hiring, recruiting, developing talent; proactive culture; high levels of energy etc.).

We will deliver this value proposition through:

• Hiring and developing talent: They will come at a cost but the service must be delivered by high quality people who have a high degree of drive to deliver a measurable difference and credibility within the target market.

• Relational and not transactional: A key element of the value proposition is that account managers will aim to form a long-term partnership with the scaleup, as long as they continue to scale and show potential. This is about supporting their long-term success and economic potential (up until the point in which the account manager is no longer needed) rather than providing a quick ‘shot in the arm’. When other growing businesses learn that some scaleups have a specialist account manager (that they rate highly) it’s likely that they will want one too, especially if they perceive that they are slightly out of reach.

• Being part of the scaleup crowd: Participants on the scaleup programme will be an exclusive group of businesses. Through retaining the high quality of

participants, it will make access to the programme something that others aspire to be part of. Of particular importance will be the perceived value in learning from and with a group of ‘elite business people’ and being part of the scaleup alumni

• Quality of experts/mentors/products and services: Third party products and services must be designed for a scaleup audience. They must be innovative, cutting edge and capable of supporting rapid growth. We will explore how best to work with the ScaleUp Institute to identify and badge such services. This could be a ‘Scaleup Approved’ kite mark backed up by a Trip Advisor-style rating system that pushes suppliers into special measures should they not consistently deliver the required impact.

• Increase the value seen in being a scaleup: We will seek to work with the ScaleUp Institute to support their work in growing the perceived value of being or being associated with a scaleup. This may involve enhanced procurement opportunities or better ability to attract talent. This will contribute to the programme’s value proposition as businesses will increasingly want to be seen as being part of the scaleup club.

No. 04 Engaging with scaleupsScaleup North East

Scaleup North East No. 05 Scaleup North East: The North East Growth Hub scaleup programme Page 09

No. 05 Scaleup North East: The North East Growth Hub scaleup programme

This section focuses on the development of the North East Growth Hub’s core scaleup programme, which will be funded via ERDF, LGF and private sector contributions. These funds combine to create a £7 million programme that will operate between 1st January 2018 and 31st December 2020 (subject to funding agreements). The programme is being developed in partnership with the lead applicant RTC North. We will continue to innovate, develop and to build on this core proposition.

The North East Growth Hub will offer two customer journeys:

1. Scaleup or scaleup potential businesses will receive high intensity support via the Growth Hub’s Scaleup North East programme.

2. Those who do not demonstrate scaleup potential will receive online and/or telephone diagnosis and signposting support.

Scaleup customer journey

In order to tackle the scaleup challenge the North East must focus on growing the density of scaleup businesses in the North East by:

• Enabling more businesses with scaleup potential to achieve scaleup levels of growth.

• Supporting existing scaleup businesses to continue scaling, with a particular focus on supporting more businesses to scale past £3 million turnover.

The approach of Scaleup North East is therefore focused on delivering strands of activity that target these specific challenges whilst remaining flexible to specific business needs:

Strand A: Turning scaleup potential into scaleup performance We will build on best practice approaches (such as the Goldman Sachs 10,000 Small Businesses programme) that enable businesses with scaleup potential to achieve scaleup performance. This strand will be focused primarily on businesses that achieved a turnover in excess of £500k in the last year and that have the potential to grow turnover and/or profits at a rate of 20% over a three year period. Should a business with a turnover of greater £250k but less than £500K demonstrate significant potential then consideration will be given to their application to join the programme.

Strand B: Enabling existing scaleups to continue to grow We will focus on businesses which are existing scaleups but which require support to continue scaling. Strand B will place a particular emphasis on working with businesses with an annual turnover of £1 to £2 million to support them to scale beyond £3 million turnover per annum.

Strand C: Executing the plan This strand is focused on supporting businesses that have developed a robust and compelling scaleup plan (via Strand A or Strand B) and are committed to delivering that plan. This approach has been developed in collaboration with the North East LEP’s Business Growth Board which includes the following business leaders:

• Mark Thompson – Chair and Managing Partner, Ryder Architecture and member of the North East LEP Board

• John Barnett – Operations Director, Calsonic Kansei (Nissan UK’s largest supplier)

• Gillian Marshall – Chief Executive Officer, The Entrepreneurs’ Forum

• Ryan Maughan – Managing Director, AVID Technology Group Limited

• Paul McEldon – Chief Executive Officer, The North East Business and Innovation Centre

• Jacqui Miller – Charlton MBE - Board Director, Miller International Limited

• Ammar Mirza CBE – Entrepreneur and SME member of the North East LEP board

• Sandra Thompson – Managing Partner, Ernst and Young

• Neil Warwick – Business Development Partner, Square One Law LLP.

Scaleup North East has also been developed with the support of the ScaleUp Institute and Goldman Sachs. It reflects and builds on best practice from proven models such as the Goldman Sachs 10,000 Small Businesses programme and the Danish Growth Houses. This input and our analysis and experience of delivering high growth programmes has led to the following six principles:

1. Transformational not transactional: The central focus is on embedding the scaleup mindset and business models that will

lead to transformational change and longer term growth.

2. ‘Embed and spread’ a high growth mind-set: Spread the scaleup mentality and provide others with the inspiration and confidence to scale their business through creating a movement and community that people feel compelled to join.

3. People learn best from doing, with their peers and when they are having fun: Delivering an inspirational, high energy, thought provoking, and cutting edge programme surrounded by people with enthusiasm, energy and a scaleup mindset.

4. Scaleup potential can be developed into scaleup performance: The programme will grow the confidence of talented people who have great ideas and the potential to do great things through providing the right levels of challenge and support.

5. Business centred not process centred: Delivering a programme that is delivered by genuinely impartial people whose sole goal and passion is to support and enable businesses to scaleup.

6. If we develop great leaders then we’ve cracked it: Great leaders cultivate great people, develop great strategies, and have the skills to enthuse and inspire people to get behind and deliver their plan.

Detailed programme description

The programme will be delivered via RTC North through a combination of ERDF revenue and LGF capital funding. It will form the core of the North East Growth Hub’s scaleup service on which we will build and develop.

Scaleup or scaleup potential?

No Yes

Medium & High Intensity

Low Intensity

Telephone Signposting

NBSH

www.noreast growthhub.

co.uk

Account management

6Cs

Figure 8: Initial scaleup customer journey

STRAND A Turning scaleup potential into scaleup performance

Strand A will identify, engage and unleash the potential of businesses which demonstrate scaleup characteristics but which are yet to achieve scaleup levels of performance.

A1: Detailed diagnostic to identify scaleup potential

Following the pre-screening phase and the eligibility check, a light touch diagnostic tool will be used to identify whether a business has the potential to embark on the scaleup journey.

In addition to financial data, trading history and future plans, the account manager carrying out the diagnostic will look at the desire and ambition of the business to grow, and its ability to overcome barriers and mitigate risk.

The motivation and mindset of the leadership team is critical at this stage. The result of the diagnostic will enable the account manager to develop an action plan for the provision of targeted support to enable the business to take the next step in its growth journey.

The account manager will be dedicated to the business for the duration of its journey to scaleup readiness (Strand A2).

A2: Provision of scaleup readiness support

This strand of activity aims specifically to prepare businesses for the scaleup journey by helping them become ‘scaleup ready’.

This includes addressing the barriers that start-ups or early growth businesses face when it comes to realising their growth potential, as well as access to finance. Working closely with partners such as the British Business Bank, North East Finance and the North East Fund, universities and their business schools and other key stakeholders, the account manager will draw up a plan of action and match the business with appropriate sources of support, either delivered by the project partners (one-to-one, one-to-many or via events and workshops). Further in-depth support will be provided to suitable businesses through the provision of grants (procured in accordance with ERDF requirements) to part finance both consultancy projects and capital investment programmes. The type of support will include, but not be limited to:

Commitment to grow - team and leadership development

The 2014 Scale Up Report cited leadership attitude/mindset as one of the most important factors in the ability to scale up a business. Leading a scaleup requires additional leadership capability; the ability to inspire, direct, support, empower and enable others.

Support will include:

• Identifying key players

• Developing individuals

• Embedding new ideas

• Succession planning.

Strategy development and business model development:

Scaleup is not a ‘one-size-fits-all’ business strategy because different industries require different approaches to overcome the challenge of reaching more customers while controlling costs. Interventions will help businesses manage the risk and uncertainty involved in the scaleup process.

This has the potential to reduce risks for commercial investors, especially for smaller firms where there are greater barriers to growth. Support may be provided in the following areas:

• Developing a credible business plan

• Legal, regulatory issues, contracts, procurement

• Innovation management

• Business model development

• Sales and marketing

• Finding new customers in the UK and overseas.

Scaleup North East No. 05 Scaleup North East: The North East Growth Hub scaleup programme

How it works… Following an initial application and scaleup diagnostic (see Strand A) conducted by a scaleup account manager, scaleup potential leaders will be invited to join the programme.

Spread over 12 months, the Scaleup Leaders’ Academy will help high-growth business owners prepare to scaleup their companies more rapidly through a mix of:

• Inspirational / role model-led events

• Peer learning workshops

• Scaleup coaching

• Peer-to-peer mentoring support.

Thought provoking and interactive workshops will be delivered by scaleup experts who have a track record in scaling businesses beyond £3 million annual turnover and will cover the following topics:

• Developing a high-growth mindset

• Improving leadership capability

• Enhancing sales and business development

• Accessing and managing the right finance for your business

• Recruiting, retaining and developing staff

• More impactful branding and marketing.

In between the workshops, delegates will work with their scaleup coach to develop and implement their 30 day scaleup plan. Breaking their plan into 30 day chunks helps to develop and reinforce momentum.

It is important that peers hold one another to account and support one another to overcome challenges. At the start of each session, participants will inform the group of their progress.

The Academy will help participants to raise their growth aspiration and prepare to scale up their business by understanding what their scaleup journey will involve, the challenges ahead and some of the tools that they could use to help them on their way.

The Academy will help participants to identify what their organisation needs to grow quickly, what must change and how they can do this by developing an actionable plan that will help them to cope with the changes that high growth will bring to them and their company.

Businesses will be supported to connect to the resources and experience required to scale. Each participant will be provided a scaleup account manager who will periodically ‘check-in’ to support them to connect with the knowledge, expertise and resources required to implement their scaleup plan available via Strand C of this programme.

Access to scale-up finance

Many businesses either never get to the growth stage because they don’t have the initial financing, or their business flounders as they run out of cash while expanding.

This element of the programme will look at the current financial state of the business and explore options for growth finance.

Support will include:

• Identification of finance requirements

• Matching requirements with appropriate finance

• Highlighting the potential risks involved as well as the benefits

• Support through the application process

• Providing an alternative output for ‘disappointed’ clients and signposting them to other sources of support.

A3: Introducing the Scaleup Leaders Academy

During 2017 we have worked with the Entrepreneurs’ Forum to develop and pilot the Scaleup Leaders Academy. The Academy will be ‘scaled up’ as part of the scaleup programme.

The Scaleup Leaders Academy2017 is a high impact blended learning programme that through a structured combination of themed peer learning workshops, inspirational seminars and coaching provides participants with the tools, techniques, insight, networks and peer relationships needed to scale their business. The Academy will turn scaleup potential into scaleup performance.

Page 11Scaleup North East No. 05 Scaleup North East: The North East Growth Hub scaleup programme

STRAND B Enabling existing scaleups to continue to grow

Strand B focuses on the pool of small and medium-sized businesses that have already been identified as having embarked on the scaleup journey. This includes businesses that are still on the scaleup journey but are facing significant barriers to further growth, as well as businesses where their growth trajectory has stalled. For most businesses, achieving real and sustainable growth means successfully scaling up operations while remaining profitable. This is no easy task as, in most cases, scaling up involves far more than simply boosting sales. It requires that a business takes on more staff, acquires new skills, expands its infrastructure, increases production capacity and ensures that it has the financial reach to see it through a new growth phase.

Detailed diagnostic and scaleup action plan

Structured around the 6C scaleup framework, a scaleup account manager will be allocated to participating businesses and will work with them to conduct a scaleup diagnostic when it will consider the scalability of the business. The diagnostic and action plan will focus on the following elements.

• Scaleup mindset and scaleup business models: The starting position will be to understand the business’s vision, goals and expansion plans. The account manager will work with the business to explore the how scalable the business model is in its current form and if the businesses mindset and culture is conducive to driving longer-term scaleup performance.

• Customers: The diagnostic will explore how well that business acquires, grows, and retains the ‘right type’ of customer. In developing the scaleup action plan, the account manager will work with the business to explore how differentiated they are from

their competition and how they can deliver a superior value proposition. In addition, the account manager will work with the business to identify growth markets and supply chains, new product or services, and opportunities for diversification both domestically and internationally.

• Cash: The account manager will benchmark the business’s performance against key financial ratios and help them to explore financial performance in terms of liquidity, productivity, profitability and ability to invest in growth. This may help in identifying quick wins in which the business’s working capital could be improved (e.g. reducing debtor days) and identifying opportunities to improve profit margins. This exercise will also allow the account manager to diagnose the level of financial competence that exists within the business. Following the financial benchmark and against the backdrop of the business’s scaleup plans, the account manager will work with the business to identify investment requirements. This will include working with the business to understand their level of understanding and experience of raising finance.

• Capability: The account manager will explore how capable the business’s people are of delivering the scaleup plan, investigating how the business goes about recruiting, retaining and developing the leadership, culture and technical talent required to achieve scale. Most importantly, the diagnostic will explore the strength of the business’s managerial and leadership talent and its ability to deliver scaleup performance. The diagnostic will start the process of identifying the steps to be taken to overcome common barriers to accessing the technical and business skills needed

to develop new products and services, navigate new markets and develop business structures. The diagnostic will also explore how adaptable the businesses culture is to cope with rapid growth and react quickly to changing demands.

• Capacity: In order to grow, businesses need to develop scalable infrastructure and replicable processes, systems and supply chains. This is often highly reliant on the effective adoption of digital technologies. The account manager will therefore explore how well processes, systems and infrastructure support the business model and control the consistent delivery of the businesses value proposition. The account manager will also work with the business’s to understand practical issues such as difficulties in moving to new premises, opening new production or warehousing facilities, and investing in new facilities and equipment for carrying out research and development for new products and services.

• Convening: Scaleup businesses are more successful when they exist in an ecosystem that connects them with other scaleups as this leads to the flow of untraded dependencies and knowledge which is critical to the formation of clusters. The account manager will therefore explore the extent to which the business connects and convenes with peers and businesses from within the ecosystems to which they operate. They will identify opportunities for the business to make connections with other businesses which can support their scaleup performance. This may be through introduction to formal structures, member organisations, cluster/sector organisations, businesses from other LEP areas’ growth hub scaleup communities or private sector initiatives such as Vistage or the Academy of Chief Executives. The account

manager will also offer a tailored programme of masterclasses and Growth Hub Live events for the business to attend, providing the opportunity for them to regularly meet up with the other businesses involved in Scaleup North East.

• Connectivity: Connectivity is concerned with how connected the business is to the sources of expertise and resources required to achieve their vision. The account manager will explore the extent to which the business is connected with professional service firms and finance providers and how well informed they are when making purchasing decisions. The account manager will explore the extent of the business’s knowledge of the support available via the North East Growth Hub’s Provider Network. A critical role for the account manager is therefore to support the development of a more informed consumer of business support, resulting in the business being connected with the best people and organisations to support the implementation of their action plan.

• Scaleup action plan: The scaleup action plan will document the business’s scaleup vision, goals and strategy. Through the diagnostic process, the account manager will have identified where the business must improve, change and develop in order to implement the plan and deliver scaleup levels of performance. They will work with the business to develop and identify solutions that will support the delivery of the scaleup action plan which may be delivered as a component of Strand C or by connecting the business with peers, private sector partners or members of the North East Growth Hub’s Provider Network.


STRAND C Executing the plan

As a result of Strands A and B, participants will have developed their scaleup action plan and those that demonstrate a commitment to its implementation will be provided incentivised access to the knowledge, expertise and resources required to scale their business. We will aim to work with the Scaleup Taskforce and ScaleUp Institute to develop a mechanism of identifying and badging products and services as ’scaleup ready’ (i.e. they have been developed with scaleups in mind and to support scaleup levels of growth). In addition we will seek to develop a ‘Trip Advisor’-style rating system as a means of driving quality standards upwards.

C1: Provision of scaleup interventions

One-to-one interventions

Some coaching will be provided by account managers in the fields highlighted above but where internal expertise does not exist, quality-assured external advisors will be engaged either as part of the core delivery or via the revenue and capital grants programmes.

One-to-many interventions:

• Workshops: A series of high quality workshops will be delivered. These will consist of a combination of presentations, roundtable discussions and panel sessions, and will involve contributors from relevant support organisations and private sector experts (IP lawyers, international business consultants, HR specialists, VC fund managers and so on). Workshops

will provide opportunities for one-to-one discussions with individual clients and a platform for the recruitment of new participants in the programme.

• Masterclasses: Structured around the 6C framework and through the use of ‘live case studies’, the masterclasses will focus on how scaleups think about business differently about their business and how they develop and deliver a superior value proposition. The masterclasses will allow businesses to test drive tools and techniques that will help them to spread a scaleup mindset across their business and implement a scalable business model.

Online tools and resources

As a means of supporting the implementation of action plans and allowing for more flexible and accessible learning we will use a variety of online tools including:

• Webinars and YouTube tutorials based on the workshop content

• E-learning: Web platform to support self-guided learning

• ‘Growth-Query Boomerang’ self-help service where stakeholders answer questions and solve problems experienced by their peers.

Scaleup Bootcamp two day programme

Bringing all elements of the workshop programme together, the Scaleup Bootcamp is an interactive experience, offering high growth businesses the opportunity to boost business skills and take their business to the

next level. Supported by industry mentors, the two day programme reflects real journeys that businesses make to achieve new growth. With an inbuilt mentoring programme (see Growth through Mentoring, chapter 6), investment pitch opportunities and post-bootcamp support, the focus is to provide the core knowledge and skills needed to give individuals the confidence to take their business to the next level.

Scaleup community

Peer-to-peer learning across industry leads to increased competitiveness. We will work with the ScaleUp Institute and other partners, including the Innovation Supernetwork and its network of strategic partners, including universities, business schools, industry bodies, associations and the private sector to build peer-to-peer business networks specifically for fast-growing firms. Typical activity will include:

• Inter-corporate trading and business or procurement opportunities

• Business-to-business (one-to-one) mentoring between businesses of different sizes, types and sectors

• Best practice exchange

• Peer-to-peer learning

• Step up to growth breakfast sessions bringing scaleup and potential scaleup businesses together on a monthly basis to discuss key themes

• Peer-to-Peer mentoring, (see Growth through Mentoring, Section 6) shared learning and collaboration programme.

C2: Grant funding for scaleups

Strand C also adds value to the programme by making grants available for intensive consultancy projects and for capital investment programmes and via both ERDF and LGF sources.

Consultancy projects

Funding will be targeted directly at businesses bringing forward high-value, bespoke projects designed to significantly improve their ability to scale or continue to scale. The principle mechanism will be the allocation of grants (averaging £4K) to businesses towards the cost of bringing in intensive (quality–assured) specialist expertise. Grants will be backed up by project management and mentoring support. Businesses will be required to contribute 60% of the total project cost.

Capital grants programme

If, as a result of any of the above interventions, it is identified that increased growth can be achieved through capital investment then eligible, participating businesses will be able to access the Scaleup North East capital grants programme which may include things like:

• Moving to new premises

• Expanding production facilities

• Developing quality management systems

• Process optimisation


• Adoption of digital technology

• Entering new markets or new supply chains.

Timescale and targets

Scaleup North East will be delivered in the North East LEP area between 1 January 2018 and 31 December 2020. It will be delivered by RTC North and the North East LEP.

Scaleup North East will provide:

• 675 businesses with scaleup support

• 360 businesses with revenue grants and 67 businesses with capital grants.

This will lead to the creation of 1350 new jobs in the business supported.

Page 14Scaleup North East

Impact | Increased sales | profit | jobs

Scaleup Potential

Develop/define scaleup vision, goals, strategy

Scaleup Action plan Implementation Standard C

Scaleup Action plan

Committed to scaleup?

YES

Standard AScaleup Leaders Academy

Standard BStrategic account management

master classes | boot camp

YES

1,000

675

367

Existing scaleup

nort

heas

tgro

wth

hub.

com

YES

NO

NO

On-going account management

Access to capital funding

Access to scaleup experts

Access to the Growth Hub provider network

Engagement | Scaleup ambassadors

Figure9: Detailed Scaleup North East customer journey

No. 05 Scaleup North East: The North East Growth Hub scaleup programme

Scaleup North East No. 06 Growth through Mentoring and the Experience Bank Page 15

No. 06 Growth through Mentoring and the Experience Bank

We passionately believe that above all else, scaleup businesses respect the thoughts of their peers. They want to speak and to learn from people who have been through what they are going through and who have, in all likelihood, already solved the problems that they face. During 2017/18 the Growth Hub has been developing the Growth through Mentoring programme and the Experience Bank.

Both of these services will be intrinsically linked to but will sit outside of the ERDF-funded element of the scaleup programme. Both Growth through Mentoring and the Experience Bank are driven by quality and impact. It should be noted however that they are only part of the solution and that they need to function within the wider scaleup ecosystem. We will continue to develop these initiatives, building on their success with a view of intensifying their delivery during 2018/19.

Growth through Mentoring:

The aim of Growth through Mentoring is to support more businesses to break the £3 million annual turnover barrier.

The service matches mentees who run a business with a minimum turnover of £500k and have scaleup potential with a mentor who has scaled a business beyond £3 million.

To date the programme has attracted a group of high quality mentors who have begun to develop as a network. It is of paramount importance that the quality of mentors is not compromised as we move forward.

We are extremely proud of what we have achieved to date and see Growth through Mentoring as becoming an increasingly important part of the North East’s scaleup ecosystem.

The Experience Bank

A good Non-Executive Director can help make better business decisions, overcome challenges and open doors. Therefore, the Experience Bank has been created in partnership with accountants UNW LLP and Square One Law LLP to bring together skilled Non-Executive Directors with entrepreneurs and business owners in all sectors.

Launching in September 2017, the Experience Bank will work closely with fund managers and investors and will match businesses with selected Non-Executive Directors. It will be a place where people go to learn from each other and access talent and experience.

Whether early stage or established and growing, the Experience Bank will help businesses gain access to relevant and vetted Non-Executive Directors with a track record of supporting business owners.

[email protected]

northeastlep.co.uk

uk.linkedin.com/company/north-east-lep

@northeastlep

0191 338 7420

1 St James Gate, Newcastle upon Tyne, NE1 4AD

northeastgrowthhub.co.uk

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