Paul Lancaster’s thoughts on ‘startups’ versus ‘scaleups’

This blog is a longer version of a Q&A interview that was published on the Bdaily website as part of their ‘Scaleup Focus Week‘ (25-29 Nov 2019).

Paul Lancaster (Founder & Director, Plan Digital / Newcastle Startup Week) at the Mining Institute in Newcastle upon Tyne.
Paul Lancaster at The Mining Institute, Newcastle upon Tyne

[Bdaily] There is a theory that scaleups are triggered by ‘​significant unpredictable events’ known as Black Swan trigger events. What are your thoughts on this and have you experienced any notable examples?

[Paul] The term ‘Black Swan events’ refers to high profile events which come as a huge surprise as they are so rare & difficult to predict. The biggest, most obvious recent is the EU Referendum of 2016 which none of the politicians, pundits, analysts, business leaders, journalists or citizens expected. Although I personally voted to Remain in the EU, I can understand why many people across the North East & wider UK didn’t – especially in the smaller towns & cities where the positive benefits of EU membership & funding may be less obvious or visible than in the major cities like Newcastle, Manchester, Leeds & of course London.

Although Brexit & the potential departure from the EU poses huge risks to the UK & especially the North East due to our region’s heavy reliance on EU funding to support & subsidise pretty much every sector, I also believe there are huge opportunities for entrepreneurs & business leaders in the Middle East, China, India, Canada, USA & South America.

Even so, I don’t think the UK Government or any of the major political parties have done a particularly good job of preparing businesses for the potential negative impact of Brexit (which I think will be severe in the North East) so it’s down to the entrepreneurs & business leaders to take matters into their own hands & start developing stronger trade links with the rest of the world now, before it’s too late.

[Bdaily] Despite the Brexit extension, companies are still concerned about the impact that Brexit will have on their ability to scale. How important is it for businesses to develop strong international relationships before the deadline of January 31?

[Paul] Businesses who trade only with the EU are extremely vulnerable as our departure will mean they cannot scale their operations & are more likely to shrink. If they or indeed any business haven’t already started planning for departure from the EU, they need to start doing it asap & I would recommend speaking to the Department for International Trade (DIT) as they can offer specialist advice, support & funding to help explore new opportunities across the world.

The official advice from the UK Government is ‘ok’ but very basic & still leaves a lot of questions unanswered. Every business should be working through the official guidance but also speaking to membership organisations or advisory services that specialise in their industry or sector. For example, the best sector-specific advice I’ve come across so far is the ‘No Deal: A Guide for Startups’ by Coadec (The Coalition for a Digital Economy) which clearly outlines what tech / digital startups & scaleups should be doing now.

On a personal basis, I’ve been preparing for a potential EU departure over the past 2 years by developing stronger international links by attending globally significant tech / digital & startup / scaleup events like Lisbon Web Summit in November 2018 & 2019, Techfestival Copenhagen in September 2019, Edinburgh Startup Summit & Turing Fest in Edinburgh in August & October 2019 respectively.

All of these events have provided me with an opportunity to fly the flag for the North East & find international speakers, sponsors & delegates to bring back to our region with our annual Newcastle Startup Week / Newcastle Scaleup Summit festival in May as the hook to get them here. I’m pleased to say that this has been working as our event in May 2019 attracted people from all over the UK plus France, Germany, Switzerland, Denmark, Romania, Azerbaijan, China, India, USA, Canada and South America & I expect our global audience to increase significantly for our next event in May 2020.

We also brought Indian tech giant Zoho onboard as a sponsor of our monthly Founders’ Friday events between November 2018-April 2019 after they contacted us having read about Newcastle Startup Week.

Day 1 ('Inspiration') of Newcastle Startup Week 2019
Day 1 (‘Inspiration’) of Newcastle Startup Week 2019

[Bdaily] What do you think is the ‘magic ingredient’ needed for a business to succeed in scaling? In your opinion, what are the top three reasons why scaleups expand rapidly?

[Paul] From what I have seen, the 3 main ways businesses can rapidly scale is through technological advancements, an injection of money (either through investment, grant funding or by striking gold with a successful product or service) & talent (building teams & hiring talent with expertise & a proven track record of successfully scaling up a business. Any one of these things will require the other two to have a successful business and all 3 at the same time will lead to massive growth. However, with so much going on at the same time it requires absolute focus to make the most of the opportunities before them.

[Bdaily] Larger financial institutions have previously claimed that smaller companies are often opaque to banks and investors. Has this been your experience with businesses you have worked with?

[Paul] I suspect they might say this because the smallest of businesses are often run by the founder as a Sole Trader instead of a Limited Company & therefore not on any official lists or databases that Government organisations or credit scoring / data aggregation companies like Experian have & aren’t legally required to have a business bank account. They also may work from home or in shared offices & co-working spaces like the Tuspark Barclays Eagle Lab in Newcastle (where we are based) or PROTO: The Emerging Technology Centre in Gateshead which in some ways makes it harder for them to find.

[Bdaily] What do you think are the key barriers holding back businesses looking to scale up? What is your advice for businesses coming up against these barriers?

[Paul] In my opinion (based on experience & knowledge I have gained from people around me a proven track record of success), the biggest barriers to ‘scaling up’ are not enough of (or the wrong) funding & finance, lack of time, wrong or inexperienced team, lack of focus & the founder or leadership team not thinking big enough.

In the past 4 months, I’ve been getting some fantastic advice, guidance & mentoring from Andrew Esson (Scaleup Partner, Scaleup North East) after joining the Scaleup North East programme in July. This is helping me ‘think bigger’ & plan how to improve my existing systems & processes, plan how to build a bigger, stronger team & potentially access new sources of funding & investment over the next 6-12 months.

I’ve also been getting some brilliant advice from my accountant Dave Gibson (Co-Founder, Blu Sky Chartered Accountants) who not only gives me great financial advice but is a real inspiration for the way he has used technology to scale his business & the OKR (Objectives & Key Results) methodology to motivate & manage his team to bigger & better things.

More recently, Alan Hodgkiss (Director, Business Doctors) has also been giving me some excellent advice on how to improve existing systems & processes & build a valuable business that is less reliant on me with a view to a potential sale or exit in future years.

If anyone reading this is serious about ‘scaling up’ I would highly recommend working with these guys / their organisations & of course attending our Newcastle Scaleup Summit in May which will give you genuinely useful, practical advice & expertise from all of the people & organisations listed above plus many more who specialise in helping entrepreneurs & business leaders scaleup.

[Bdaily] In your experience, what are the main differences between startups and scaleups? What are the similarities?

[Paul] When you’re in employment, the idea of self-employment / starting your own business can seem really difficult, especially if it means giving up the security of a regular income for something that might or might not work, especially if you have responsibilities like a house & a mortgage. However, having successfully made that transition myself in 2016, I can honestly say that starting up is actually very easy – it’s how to keep going, survive & thrive that’s difficult, especially if you are a service-based company like mine which so far has required a lot of human effort & is largely centred around me with some part-time, freelancers working alongside me as & when I need them.

‘Scaling up’ requires a completely different mindset & to ‘starting up’ & isn’t right for everyone. The official OECD (Organisation for Economic Cooperation & Development) definition of a ‘scaleup’ is a company with 10 employees or more that has successfully grown by 20% or more every year for 3 consecutive years in a row. However, 96% of all businesses in the UK fall below this threshold as they are ‘micro businesses’ with 0-9 employees so the process of ‘scaling up’ is a real challenge if you don’t have the resources in terms of money, people & technology to do it well.

Although I’m now actively looking to grow & scale our operations, the process is making me realise where the gaps are & where I need to focus my efforts to fulfil our potential. One of the biggest barriers I’m finding is my own personal mindset. In some ways I have achieved everything & more that I set out to do when I first started my business in 2016 so I now need to ‘level up’ & raise my own aspirations for the next 3-5yrs.

[Bdaily] As the founder of Newcastle Startup Week, what prompted your decision to incorporate the Scaleup Summit into the event?

My main expertise over the past 16yrs has been on how motivate, inspire, encourage & support more people to start a business & then how to ‘survive & thrive’ beyond the startup phase. However, after running our first Newcastle Startup Week festival in May 2017 which included a ‘Growing & Scaling’ event on Day 4, I could see there was a lot of interest & appetite from delegates to go deeper into these topics, especially owners of established SMEs that were doing ok but struggling to take things to the next level.

As a result, we ran our first 1-day ‘Newcastle Scaleup Summit’ event for 175 people in November 2017 which was a great success but then took the decision to just make it a bigger part of our week-long Newcastle Startup Week festival in May.

Since last year, people now have the option of attending all 5 days which cover the full entrepreneurial journey by having each day themed as ‘Inspiration’, ‘Getting Started’, ‘Funding & Finance’, ‘Scaleup Summit’ & then ‘Keep Going or Pivot?’. Alternatively, some people may choose just to go to Day 4 (‘Scaleup Summit’) which can now be considered like a standalone event within an event. (However, my recommendation would be for people to go to at least 2 days if possible – starting with Day 1 (‘Inspiration’) & then at least 1 other day depending on what stage they are at.

[Bdaily] Nearly 80% of scaleups claim they have introduced a new or significantly improved product, process or service in the last three years (Octopus Report, 2018). Do you believe that innovation is a fundamental part of being a scaleup, and how can companies stay innovative while growing their business? 

[Paul] ‘Innovation’ is essential to scaling up. However, this doesn’t have to be a completely new ‘invention’. It can simply be a new or better way of doing something internally, applying new technology to make existing processes more efficient & cost-effective, doing better sales & marketing of existing products as well as launching new ones to the market. I believe the only way businesses can stay innovative is to have team members actively looking & listening for new ways to do business & how other people are doing it well so they can try to replicate this within their own. I may sound biased as someone who runs monthly & annual events for startups & scaleups but I firmly believe that the best way to do this is to attend events like our monthly Founders’ Friday events & annual Newcastle Startup Week / Newcastle Scaleup Summit festival which feature the best speakers & business experts from the North East, UK & around the world.

I’d also like to stress the fact that business owners need to accept that in order to grow, they have to spend some money on experienced staff or specialist advisors to work with them & can’t just rely on free or heavily-funded events or business support programmes (especially as much of this is now at risk from Brexit).

[Bdaily] According to the Scaleup Institute’s Annual Scaleup Review 2019, tech is the biggest sector for scaleups. Why do you think this is the case? 

[Paul] Yes and no. Technology can make you more efficient & help you save money. However, you need to spend time & money on implementing it properly within your business & most of the time this is something businesses don’t do very well. Even within my own business, I am a big advocate of cloud products & SaaS (Software as a Service) solutions but I know that I’m not using all of them fully & so with a little bit of focus I can be more efficient, effective & productive.

[Bdaily] With an increasing level of attention being afforded to scaleup nationally, are the initiatives at government level enough and in your opinion is the focus where it needs to be? 

[Paul] When Sherry Coutu’s excellent ‘Scaleup Report’ was published in 2014, I think the focus shifted too far towards ‘scaleups’ to the detriment of ‘startups’. You can’t have more scalups without helping startups become strong & sustainable established SME businesses who may or may not be suitable or want to scale up. We also need more people to explore the idea of entrepreneurship & starting their own business or organisation. Having worked closely with the North East LEP over the past few years, I think they have the balance between startup & scaleup just about right & our Newcastle Startup Week / Newcastle Scaleup Summit festival in May (which they have sponsored every year since 2017) is helping them to educate more people on the whole pre-start to pre-scaleup journey.

[Bdaily] The next Scaleup Summit is planned for May 2020. What can Bdaily readers expect from the event? 

[Paul] Like in previous years, the ‘Newcastle Scaleup Summit’ will help people understand how to take a business to the next level & overcome barriers to growth with talks & panel discussions from successful entrepreneurs & business leaders covering the following topics:

1. Adopting a ‘Growth Mindset’ that will help you think much bigger

2. Improving your sales, marketing & PR of existing products or services

3. Innovating, developing & launching new products or services

4. Improving systems & processes to save time & money to invest back into your business

5. Building teams & finding people with the right skills & experience to grow your business

6. Learning how to forge & maintain partnerships with bigger businesses

7. Selling globally & expanding internationally

This year, we had a particular focus on highlighting the opportunities for connecting the North East of England to the South East of Scotland (particularly Newcastle & Edinburgh), the North East & Nordics (especially Newcastle & Copenhagen), the North East & Canada & the North East & Asia. In 2020 we’ll be pushing the international angle further which will be even more important in a (potentially) post-Brexit world.

Want to know how to scale your business?

Book your ticket for our next Newcastle Scaleup Summit event on 21st May 2020 for just £75 (+ booking fees) via our tickets page.

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