UK Start-ups Bullish About 2014

UK entrepreneurs are in a bullish mood. They believe the worst is over and that good times lie ahead, with most predicting significant growth, according to a report published on Monday by Silicon Valley BankImportantly for the sluggish UK economy, start-ups are planning on creating new jobs, the overwhelming majority of which will be based in the UK. However young companies did express concerns about accessing the talent needed for expansion.

According to Gerald Brady, SVB’s Head of UK Relationship Banking, eight out of 10 UK entrepreneurs believe 2014 will be a good year. “Some 40% think it will be much better,” he said. “And another 39% believe it will be somewhat better. By contrast only 2% think 2014 will be worse [than 2013].” 

Executives in the UK share an upbeat mood with their counterparts in the United States where 82 % of respondents expect business conditions to improve in 2014. And in both places, executives at young software businesses (those with less than $25 million in revenue) are even more optimistic, with 85% projecting improvement.

That belief is being played out with company expansion. Brady said 84% of UK executives say their business plans to grow in 2014. The remaining 16 % expect to keep their workforce approximately the same. None expect to shrink. 

Pre-revenue UK businesses project a median growth rate of 100%

Most UK entrepreneurs expect significant growth. Two-thirds of the respondents who anticipate growing in 2014 predict increases of more than 20% while 16% expect to at least double in size. The median expected growth rate is 50% in the UK compared with 30% in the U.S.

Once again, younger companies are even more bullish. Nine in 10 say they expect to hire, while four in 10 expect to at least double the size of their workforce. In total, executives at pre-revenue UK businesses project a median growth rate of 100%.

Recruiting Talent is Major Challenge

UK executives say their two biggest challenges in 2014 are scaling operations and recruiting and managing talent. Because scaling operations involves people, the core challenge is finding and retaining talent. 

The report found 94% of UK respondents consider it extremely or somewhat challenging to find the talent they need to grow, up from 89% last year.

Despite the increasingly hostile political climate in the UK towards immigration, Brady did not see this as an obstacle. “When any of the [political] parties talk about immigration they are very clear to differentiate between skilled and unskilled labor.”

Interestingly the anticipated growth is expected to be organic, rather than through M&A. Nearly half (41%) of companies polled are looking outside of the UK and virtually all of those (88%) are looking to the US. 

UK Start-ups Look to Government for Support

Paying for all of this remains a challenge, although according to Brady, UK entrepreneurs are more confident about raising funds (although they raise smaller amounts) compared to U.S. start-ups. However, funding remains a challenge and UK start-ups were more likely to report funding from a government grant and less likely to say they received funding from private equity or corporate investors compared to US start-ups.

These findings are based on Silicon Valley Bank’s annual survey of more than 1,200 executives from software, hardware, cleantech and healthcare companies in start-up and growth stages of business in the U.S., UK and other global innovation hubs. 

The 2014 survey reflects the views of 100 executives with UK-based high-growth technology and healthcare businesses. More than half of the respondents are CEOs, and 85 percent are C-level executives (CEO, COO, CTO or CFO). Some 82% of respondents were from software companies. The median number of employees was 10 and all companies polled were private (compared with 21 in the US and 96% private).




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