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25 April, 2016 - 08:55 By Tony Quested

Business schools want more VC cash for UK scale-up drive

startup, judge business school, cambridge

Cambridge Judge Business School and Oxford’s Saïd Business School have collaborated on a landmark study steered by Barclays to help more UK entrepreneurs scale their businesses globally.

The report, which will be followed up with a round table in May, spells out the potential and the pitfalls inherent in taking startups international and says a cultural sea change is vital.

It shouts loud and clear that the UK needs to increase the scale of venture capital funds, create an effective data system to monitor growth and improve business management & leadership skills.

‘Scale-up UK: Growing Businesses, Growing our Economy’ has been led by Professor Stelios Kavadias of the Cambridge Judge Business School and Professor Thomas Hellmann of Oxford’s Saïd Business School.

It examines a range of issues impacting the UK entrepreneurial ecosystem, including access to investor capital, debt and equity finance, leadership skills and business mentoring.

Barclays has spearheaded the initiative, which was sparked by a meeting of minds at the World Economic Forum, DAVOS. Formed with vice-chancellors of both universities and senior leaders at Barclays, The CBI, Centrica and KPMG, the bank recognised a critical need to break down the barriers to small businesses scaling-up and look to develop solutions to some of these problems for the benefit of future generations.

A launch event in London today was being introduced by Barclays Group CEO, Jes Staley, alongside Cambridge entrepreneur and investor Sherry Coutu, chair of the Scale-up Institute, building on her 2014 Scale-up Report on UK Economic Growth.

The new Oxbridge study report is split into two sections – the crucial role of management and financing scale-up companies. It makes 12 recommendations for action.

Cambridge Judge Business School said that a large proportion of SMEs expressed limited desire to grow in the future. This may be for a variety of reasons such as managing work-life balance or a desire to keep firms small so a founder can manage alone or with only a few employees. Crucially, startups must have a will to grow and commit to ambitious growth, says Professor Kavadias.

He said it was essential for startups to build a strong and broad team, through top management skills. For firms to grow successfully they also needed to engage with their business ecosystem – to establish partnerships that will collaborate and help supplement a lack of resource, to share in their success through alliances, partnerships and collaboration.

Judge added that many small businesses were managed and controlled by their founders but such centralisation imposed a limit on size known as the “bottleneck of one mind.” To grow beyond this limit, a formalisation of roles, organisation and processes is necessary.

“Developing effective management systems that allow growth in employees and profitability through standardisation and delegation,” is vital says Prof Kavadias.

He recommended that startups identified core competencies – or, if not, at least understood that startups may invest in the wrong things. And he warned that businesses were not fully recognising their market strengths, such as a common brand or economies of scale. They needed to articulate competitive strengths and areas to spread into new markets.

Oxford Saïd said the size distribution of small UK venture capital funds was limiting scale-up growth when compared to US counterparts. 
More must be done to increase the number of UK venture capital funds that were sufficiently large to finance scaleups. This required fund sizes to be over £200 million; more experienced firms needed to raise over £350m.

It calls on the UK to establish the London Stock Exchange as the leading pan-European stock market for scale-ups, by working with Deutsche Borse to create a liquid market for scale-up stock.

And it warned that the secondary market was fragmented and limiting scale up growth. “Develop new approaches for creating liquidity in private company shares. The rise of fintech platforms could help to design a new marketplace that attracts buyers and sellers in secondary share schemes,” said Oxford Saïd’s Professor Hellmann.

The full report is available to download here:

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