We recently completed a survey which revealed the reasons why almost 70% of companies approached by financial advisors eventually fail to obtain investment and support.
View the findings here.
Out of the businesses that did not manage to secure capital in 2021, skills gaps were noted as being a key factor in the failure of these transactions. 17% of unsuccessful conversations cited the quality of the management team as a leading factor, and 63% saw a major skills gap in the sales and marketing teams which led to a decision not to invest.
Other reasons behind a lack of investment include the overvaluation of businesses – a major factor for over one third and a contributing factor for over half of unsuccessful transactions – as well as the excessively slow growth rate of businesses – a major factor for 45% of unsuccessful transactions.
Our research highlighted that these skills gaps arise because founders are often subject matter experts, but the majority have never scaled a business before and therefore lack an understanding of what is needed to successfully grow a business beyond the startup phase. In the UK, this is a significant problem – while the country ranks 3rd in the world for start-ups, it is only 13th in the world for scale-ups. Without the correct support, numerous viable small businesses are struggling to make it through the scale-up phase and the UK is missing out on jobs, innovation, and growth as a result.
Simon Philips, CEO of ScaleUp Capital, commented: “Research by Crunchbase shows that 83% of founders are starting up a business for the first time. They do not have the experience, method, and skills they need to build their businesses and enter the scale-up realm. Businesses need to shift from the founder pulling all the levers to being run by a well-rounded management team that bring the expertise and knowledge needed to successfully scale.
From our research, we can see that the most acute skills gap lies in sales and marketing. It is one thing for a founder or CEO to drive sales through passion, but it is quite another thing for an experienced sales team to drive scale. We are failing the next generation of tech unicorns if the critical skills gap is left unaddressed. More needs to be done from a reskilling and upskilling perspective of a business, as well as a visa and tech support perspective of the government. Now more than ever, supporting small businesses will be critical as the country looks to boost growth and productivity post-pandemic.”
Jamie Ritchie, Partner at IBIS Capital, commented: “A portion of start-up and scale-up companies just don’t get the resources they need to grow. Functions like sales and marketing are critical to scaling. As a result, many companies with great potential are overlooked and fail to obtain the capital they need to grow quickly and effectively. At IBIS Capital we often see smaller businesses struggle with their ambitious growth plans because they fail to professionalise and develop their sales and marketing capabilities. It is critical that companies with great potential find genuine value-add investment partners who can provide funding as well as offer hands-on support to successfully scale up. This is the gap in the market that ScaleUp Capital has been addressing for the past two decades”.