High Growth/High Start Up Rates – and why we must not chase them

Should we throw our limited resources at businesses that we believe have high growth potential or should we just go for lots of start-ups, knowing that a minority of them will experience high growth anyway?  I can imagine LEPS all over the country worrying for seconds over this conundrum.

The plain truth is that both are equally foolish policy goals.

We simply can’t pick winners/high growth businesses. So how do we know which to resource?

And as Drucker said ‘you can’t have the mountain top without the mountain’ . High growth businesses emerge from a strong and vibrant enterprise ecology. An ecology that is diverse, tightly knit and well connected (bridging and bonding, social and cultural capital).

Focus on building the mountain and the top will look after itself.

But please don’t build the mountain by rushing to increase the start up rate.

When we do this we just increase the failure rate too and that undermines aspiration and confidence. So start fewer businesses, but make sure they are good ones, team starts, well thought through and researched. Get survival rates into the 90%s after three years. Not just survival, but successful. Allow these small but significant success show the way to others.

So set up a broad enterprise ecology – lots of people with ideas and the confidence to act on them (this is not just about business but about social impact, culture, festivals, campaigning and so on) and build social networks, communities, that know how to support their members.

Invest your economic development budget in supporting people, who really are committed to making things better, and building communities. Smart, confident people in competent communities will not only give you the economic outputs that you require – but they might just give you something much more interesting as well.

I expect these ideas to be dismissed by those who have High Growth and Mass Start Up Programmes to sell, and by those running economic development teams who have for decades been buying these programmes and commissioning evaluations that say ‘much has been achieved but much remains to be done’.

 

But perhaps some will see that now is as good a time as any to try something new….

 

 

Comments

  1. Mike, this is one of my pet subjects and you and I are going to agree on a lot of things. But I am also delighted that guys like Oli Barrett are out there beating the drum for starting up…

    I was given a whole portfolio of failing companies to look after during part of my time at the venture capital company 3i and I saw first hand how bloody awful it was to fail. People always go on about the “stigma”. I’d start with mentioning divorce (blokes are somehow not as attractive once they’ve lost their business, their savings and their self confidence), and then go on to discuss what it is like having your colleagues/employees desert the sinking ship (and yes there are some great loyalty stories too, but it was the sad cases that I will remember). But most businesses are smaller than that, they are one person who toils away and toils away, hoping that it will work and come good. As you said on Twitter this morning: miserable.

    My conclusion? I am all for encouraging enterprise but I agree that it should never be about targets. It is about giving people the opportunity and showing them the upside and the downside. And if our “protected-characteristic” (great new public sector -speak!) groups want to remain in employment or stay at home looking after the kids, let them. We don’t have to “match the X% start-up rate of women (etc) in America” … or whatever other carefully chosen statistic has been selected to support the latest (ever-changing) government policy.

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