What are the challenges facing tech companies looking to scale?
Business Leader Magazine recently hosted an event at Level39 in London, looking at the challenges facing tech companies looking to scale; and provide an insight into current tech and business trends in the UK.
What are the main challenges facing your business?
Oz Alashe MBE: “Cybsafe has grown year on year since its inception and we now employ more than 50 staff; and one of the issues we have faced is attracting and retaining the right talent. The political situation hasn’t helped this, as many people aren’t sure whether they want to come and work in the UK.”
Romina Savova: “I started Pensionbee after I left Morgan Stanley and I had to move my pension and found that nobody wanted to take my money without me having to fill out reams of paperwork.
“The challenges we have faced have been different at each stage of growth and what works when you are at 30 employees, won’t necessarily work when you’re at 60 people or 90 people. You need to keep changing your systems and processes in order to maintain the culture in your business.”
Andrew Scott: “We have four main businesses within the Ascot Group – a publishing business, tech/CRM software company, full-service marketing company and investment business. My challenge is being able to swap hats and go from working on the financial side of the business to then focusing on operations and people.”
Paresh Modi: “One of the challenges we have at Vodafone is consumers and businesses knowing exactly what it is we do and how to navigate working with us.
“The UK brand is a very small microcosm of our global operation and is the fourth largest of our territories. We have over 500 million customers globally and the largest broadband footprint across Europe. We are also the biggest provider of TV content and distribution across Europe.
“My role is to connect the start-up and scale-up ecosystem with what we’re doing at Vodafone. Our goal is to be a world leader in what we do and we can’t achieve that only through our own efforts; which is why we want to talk to businesses because they will often have the solution.
“Our key priorities are leading on 5G, the Internet of Things (IoT) and digital transformation.”
Vaidas Adomauskas: “Revolut has grown from £6m to £7m revenue in less than a month and we are signing up around 50 businesses a day to our service. As part of this growth, we’ve also gone from employing 700 people to 1,500 in only six months. This presents a big challenge; as you must keep evolving your culture and how you work.
“A future challenge for us is also around scaling globally in countries like Australia, Singapore and Japan.”
How have you found securing the funding you need to achieve growth?
Oz Alashe MBE: “We have undergone two rounds of funding – a seed funding round early on in our journey and a Series A funding last year. We will raise again in the future and this will most likely be a Series B funding round.
“We haven’t struggled to access finance and have found that there is a diverse offering in the market. This may be because we found the problem, came up with a solution and then got traction in the market; rather than funding an idea which is much more challenging.
“In the UK many scale-ups say that funding is the biggest challenge, but I wouldn’t agree with that because there is lots of funding available, especially from overseas investors and this is partly because the UK is cheap now due to exchange rates.”
Romina Savova: “We raised capital at the idea stage, which was a seed round of around £1m as we needed a long runway to deal with product development and other factors, such as becoming compliant with the Financial Conduct Authority (FCA).
“We like to raise money from individuals and have utilised government’s EIS scheme and have raised over £18m in total. We have also combined this with attracting funding from strategic foreign investors.”
Andrew Scott: “I would like to highlight a potential bubble, whereby many tech entrepreneurs are too focused on raising capital and not always with making a profit.
“There is lots of funding available and that is due to the weak pound and trends such as pension funds that used to invest in property now investing in funds and businesses.
“My concern is that with so much capital available, many businesses are focused solely on raising money and not making a profit. You can also get into the habit of creating technology but not focusing on what this means for the customer and how it solves a problem in the market.”
Ann Hiatt: “I come from the crazy world of Silicon Valley, where we do things backwards and I have been surrounded by venture capital people and investors for many years. They have traditionally put people and ideas ahead of answering the question of how it converts into customers and profits.
“This is starting to change though, and the trend will be shifted I believe. The problem was created in Silicon Valley where the idea of the brilliant CEO and fundraising has been so prevalent, but you also need to know who your customer is, how you will make a profit and what the exit strategy is.”
Paresh Modi: “What I find is when you see a customer facing pitch you can often feel that is this a customer facing pitch turned into a fundraising pitch. Honestly you can see it. The question I always ask is explain to me which of my problems you’re solving as opposed to how amazing the technology you have is. The pitches that are focused on problems are ones I will want to work with.”
What is driving the US interest in UK tech scale-up businesses?
Ann Hiatt: “We have really good value from dollar to pound right now and the quality of talent is high in the UK and universities are good too. You also find that most disruption and innovation come from the bottom up; rather than the top down in the UK.”
Andrew Scott: “Britain is also seen as a safe place to invest in as it has a very robust legal system and is seen as world-leading in respect to its laws around employment and business practice.”
Regarding people and talent – what have you found to be the biggest challenges?
Vaidas Adomauskas: “When you are growing very fast you need to look at how you recruit and retain talent, and how you maintain your culture. We are open that in the early stages of our business we had some bad press about our internal culture, but this is now in the past and our culture is changing a lot.
“Another challenge is making sure you hire the correct people at every stage of your growth cycle. We hired senior level people from other banks who were very good at getting the business to a certain level but don’t have the skills to then take it to the next level. At every stage of the business you need to consider your staff and the skill profile.
“A good way of getting this right is to invest in internal recruiters and not rely on external agencies. I would also say that having bi-weekly meetings where recruitment is put on the agenda and discussing what skills are needed helps a lot.”
Romina Savova: “We have created our own recruitment process and tend to only hire people who wouldn’t have planned to go to university or work in pensions. We bring them into Pensionbee and train them up initially within our customer services team; so they can learn the culture of how we interact with customers and stakeholders.
“We then recruit from this pool into other areas of the business and people have come through the team to work in roles as diverse as technology and marketing.
“You find that this allows you as a business to be sure that whenever anybody takes on a position of responsibility, they understand the company culture.”
Do you feel enough is done to support emerging female tech entrepreneurs?
Romina Savova: “It is possible to be a successful female entrepreneur, but I don’t think it’s an easy journey though, especially if you want to raise venture capital. Women have a different approach to running a business, taking on capital and what they promise to investors.
“They are less likely to run multi-million-pound losses, and this doesn’t always align with what a VC wants.”
Ann Hiatt: “This is an active discussion now in Silicon Valley because we still see females receiving 10% of what male investors do from VCs but the data shows that this trend is changing. The more forward-thinking organisations are now looking at this.
“We need to keep having this conversation because it uncovers unconscious bias that people may have. Education is a key part of this too as, for example, Google only recruit from the top five universities which means the base code for artifical intelligence (AI) is being written by white guys who all have the same level of education. We need to look at fixing this problem.”
What are likely to be the most disruptive technologies in the future?
Paresh Modi: “In ten years’ time I would say it will be around quantum computing, DNA storage and data but in the short term – for us at least it’s about 5G.
“5G is important because it will enable new experiences for consumer and businesses. The key difference with it is that it will allow huge bandwidth and up to ten times what you would get with 4G. It is also ultra-low latency which means you can influence something somewhere at the press of a button.
“The final point about 5G is how it will unleash the Internet of Things (IoT). Compared with being able to connect thousands of devices in a square kilometre, you will be able to connect hundreds of thousands. This will open so many opportunities in relation to Smart Cities, planning and autonomous vehicles.”
Oz Alashe MBE: “I would say it is access to and how we look at data sets. Data is becoming more relevant to people and we are realising that we own this data and that we are often giving it away too easily; or on the flipside it is taken from and monetised.
“The future of technology will be partly driven by how we democratise and make better use of data; and it will help to drive the use of autonomous vehicles, smart cities and the way we trade space and knowledge. A future like this is not too far away from us; should we chose to lean into it.”
Andrew Scott: “Clearly there are lots of tech advancements that will shape the future of business and life, but I also think it’s important to focus on the concept of speed. The idea that you will place an order today and have it an hour later. All the companies that are leading in their markets are winning the battle around speed and delivery to their customers.”
Ann Hiatt: “I would also say that the future of technology will be influenced by millennials and we’re already seeing a shift around consumers and employees only wanting to work – and engage with – brands that are solving the problems in the world that they care about.
“People are willing to pay more if they feel the brand they are investing in aligns with their values and serves a higher purpose. Data can help to drive these decisions.”
What role do professional services companies have in supporting tech scale-ups?
Oz Alashe MBE: “You are very well served in the sense that there are lots of legal and accountancy firms in the market giving advice. In some respect there is no shortage of advice and you must sift through it to make sure it’s the right advice. Regarding the cost advice – it’s hard to know if it’s at the right level and you need to consider whether the advice fits for the stage you’re at in your business.”
Romina Savova: “I feel that accountants serve start-ups and scale-ups well and provide advice for businesses, whatever the stage of their lifecycle. I don’t see that in the legal sector and you often need a different firm, for whatever stage you’re at in the businesses growth cycle. You must keep moving around firms and you end up with a patchwork of legal support.”