• Policies that take into consideration what motivates entrepreneurs to grow should sit alongside policies which focus on the supply of talent, markets and finance
• While investment is one issue, there are other, non-financial barriers to growth including low awareness of existing finance options
• Only a fraction of European entrepreneurs (est. 2%) likely to overcome key hurdles to scaling — and there is still a big gap with the US when it comes to scaleups

According to new research from Nesta, supported by the ScaleUp Institute, one key lever to closing Europe’s ‘scaleup gap’ could be creating a more responsive policy landscape based on entrepreneurs' perceptions of growth and awareness of finance and support options.

Europe has a thriving startup ecosystem, boasting more startups per capita than the US, however it has struggled to convert this same success to scaleups. Based on a review of different data sources, the report highlights that only an estimated two per cent of European entrepreneurs are likely to overcome key hurdles necessary to scaling — a stumbling block which has contributed to the so-called ‘scaleup gap’.

While there remains a need to improve the supply of talent, markets and finance, this report highlights the need to develop novel approaches such as increasing awareness of finance options — particularly equity.

Dr Christopher Haley, Head of Startup and New Technology Research at Nesta, said, “There are many initiatives that offer support for growing businesses, but entrepreneurs in Europe often aren’t aware of them or are unsure of their relevance or applicability to their growth stage. For example, in the UK, four out of ten scaleup leaders wouldn't categorise the support available to them as being relevant.”

“We know entrepreneurs who lack awareness of these options are less likely to pursue growth and seek external finance — especially equity finance — which could explain why only a small number of entrepreneurs turn to alternative forms of financing.

“One of the policy interventions we are recommending focuses on improving awareness of and access to resources for growth. Importantly, we are not calling for governments to spend more on the creation of new resources, but to improve the evaluation and communication of existing initiatives.”

Irene Graham, CEO of ScaleUp Institute said, “The scaleup gap in Europe is still alive and well, which could hinder our shared global economic outlook and opportunities if left unaddressed.”

“We know from our previous research that scaleups are the growth champions of SMEs contributing substantially to job creation, exports and wealth of local economies. Closing the scaleup gap in all countries across Europe has the potential to deliver broad economic uplift.”

“We need to make sure that we properly segment services towards our scaling businesses and the needs of our high growth entrepreneurs. Governments, corporates and investors should do all they can to align resources to our scaling and high potential growth firms. We need to make it much easier for scaling leaders to access the services they need; be aware of the finance options available as well as the benefits of growth capital and raise awareness of these options.”

ENDS

For more information contact Elle Wolfhagen in Nesta’s press office on 07765 770 867, [email protected]

More information, including a full version of the report, is available on the Nesta website.

Notes to editors:

About Nesta

Nesta is an innovation foundation. For us, innovation means turning bold ideas into reality and changing lives for the better. We use our expertise, skills and funding in areas where there are big challenges facing society. We've spent over 20 years working out the best ways to make change happen through research and experimenting, and we've applied that to our work in innovation policy, health, education, government innovation and the creative economy and arts. Nesta is based in the UK and supported by a financial endowment. We work with partners around the globe to bring bold ideas to life to change the world for good.

About Scaleup Institute

The ScaleUp Institute is a private sector led, not-for-profit organisation focused on collaborating with policy makers, corporates, finance players, educators and Government at a local and national level. Our mission is to help the UK to become the best place in the world to grow a business as well as start one, and enable our existing high growth businesses to ‘scaleup’ even further.