Explore the ScaleUp Annual Review 2020

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Identifying firms with High Growth Potential: Unlocking the power of data

Creating the right conditions for high potential businesses to grow to scale is a priority for Government. 

Business finance is key to enabling SMEs to scale up and the Department for Business, Energy and Industrial Strategy (BEIS) is investing £2.5 billion of patient capital alongside the private sector over 10 years through the British Patient Capital Programme. This investment will attract an additional £7.5 billion of new private sector equity investment into high growth potential innovative SMEs.

We recognise that businesses also face a number of internal and external barriers to growth and we are working across government and with the private sector to ensure that businesses have fast access to high quality business support to help them overcome the challenges they face. 

We have worked with Local Enterprise Partnerships (LEPs) to strengthen their local business support ecosystems through two complementary initiatives. We partnered with the Massachusetts Institute of Technology to pilot a version of MIT’s Regional Entrepreneurship Acceleration Programme (REAP), building on earlier work led by the ScaleUp Institute through their Driving Economic Growth programme. These innovative programmes provide a pathway for local areas to convene and foster business support ecosystems tailored around their unique assets, capabilities and comparative advantages. Participating cohorts comprise senior decision-makers from regional government, higher education, corporates, risk capital providers and entrepreneur / start-up communities. Feedback from participating LEPs has been overwhelmingly positive and all areas have demonstrated significant progress in developing local business creation and innovation strategy plans.

Alongside this we have made strong progress in unlocking the power of government-held data to identify and target the right support for businesses. This approach underpins our vision for reforming the business support landscape, driving greater efficiencies and value from government’s investment.  

Data Enabled Change Accelerator

The Data Enabled Change Accelerator (‘DECA’) project pioneers cutting-edge data science techniques (AI) to provide a more intelligent method to identifying businesses with the potential to scale up and connect them to the support available at a local level.  

The first BEIS-HMRC DECA trial was run from March to May 2019, with input from the ScaleUp Institute. BEIS data scientists successfully developed an algorithm to identify firms with scaleup potential. Using behavioural insights (nudge techniques), we sent personalised letters to these businesses highlighting their potential for growth and signposting them to the range of support available in their area. The trial targeted around 2,800 businesses in Leeds, Derbyshire & Nottinghamshire (D2N2), and the West of England.

Over 7% of businesses (201 firms) acted on this communication and contacted their Growth Hub seeking support. Previous less sophisticated trials achieved much lower conversion rates of around 1%. 

The trial successfully demonstrated that data science techniques could be used to identify businesses with high growth potential with a good degree of success. It showed that communications to these businesses, sent from government (in this case from HMRC) can successfully prompt businesses to engage in the government’s business support offer.

Feedback from Growth Hubs and businesses has been very encouraging, indicating that the trial successfully identified firms with the potential to scale up, and prompted firms from a wide range of sectors that would not ordinarily contact their local Growth Hub.

The trial has been amazing and has identified businesses that the Growth Hub wouldn’t normally have classified as scaleup businesses; invisible scaleups in new sectors to those we usually work with. It’s been a great opportunity to better engage with our regional economy and fill the gaps in business support for sectors we weren’t engaging as much with before.
– West of England Growth Hub

Building a clearer view of scaleups

HMRC holds the most comprehensive datasets on individual businesses. We have enriched this through the trial by blending it with other datasets to provide a deeper insight into the characteristics of scaleups. Improvements to HMRC datasets have helped us to build a clearer picture of the scaleup population, enabling us to segment the business population and demonstrate that using data can help to proactively target firms with the right support at the right time. It is important to recognise that HMRC is bound by a strict statutory duty to protect taxpayer confidentiality which limits its ability to share its data across government.

Looking forward 

We plan to build on these successes and expand our approach over the coming years, potentially targeting businesses that the data suggests may have the potential to improve their productivity and competitiveness and to enter into new international markets.

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