Blog 15th Jul 2020
Image of cambridge with hexagons in use to represent blog on scaling businesses in Cambridge and the decisions entrepreneurs have to make at an early stage of their business journey

Last month I wrote about the critical decisions that businesses have been making that impact the short and medium-term and beyond into 2021; as the COVID-19 pandemic starts to subside. This month I wanted to take the time to talk about the conscious decisions that entrepreneurs have to make earlier in the journey of their business that will ultimately shape potential outcomes (and if they even want to be a ‘business’ at all). This is a choice that seems to have particular resonance in Cambridge, where there is a rich heritage of both selling businesses at an early stage and scaling them over the longer-term.

 

A place like no other

We are proud to be a company that’s founded and operated in Cambridge, UK. It’s a badge of honour for us, and Cambridge is a globally recognized hub, steeped in an academic, engineering and scientific heritage. Almost like no other city in the world, Cambridge has a confidence born from a history of being able to start and build businesses rapidly.

Everything you need to grow your business is within the city. You have access to some of the world’s greatest scientific and engineering minds; the University can be incredibly helpful to businesses across the city and between 2013 and 2017 its many spinouts raised £1.7bn between them; there’s a very well-connected Angel network that’s invested over £150m into 110 different companies over the last two decades; there are a number of investment funds based here and several other London-based funds have strong links to the city (Cambridge ranks second in the UK for VC funding according to research from Tech Nation and Dealroom); and there are strong business networks and entrepreneurs that want to give back, like Cambridge Network, SVC2UK, Founders4Schools and the Department for International Trade.

However, that confidence and culture only gets companies so far, and then it boils down to the ambitions of the people behind the business to drive their growth further. When starting out on their journey, entrepreneurs have to make conscious decisions about their overall goals: are they focused on selling their ideas and technology relatively early in their journey or scaling a company as a whole?

 

Taking a medium or long-term view?

Let’s be clear; there is no right or wrong answer to this. Both are valid paths with different challenges and timelines. It’s purely down to the overall goals of the entrepreneur(s) and investors behind the business. There are serial-entrepreneurs in Cambridge who have focused on producing world-beating science and technology and have made an excellent name and living for themselves by selling relatively early and not scaling.

Focusing on an early exit

However, if you choose to focus on an early exit, based on the technology, ideas, product and/or underlying science, you had better be confident that you are amongst the best in the world at what you do (and that someone else is going to want it at some stage fairly soon). Large corporations pay a premium to acquire something that they need now and that they can’t build in a timely manner, so you need to stand out in a global market. In terms of technology and science, Cambridge has a long history of being able to do just that – Microsoft, Apple and Amazon, all have labs in Cambridge as a result – and so many companies born in the city have that confidence as part of their DNA. However, you will also need to think about how you are going to continue to fund the business while you wait for the acquirer to come along, if commercialization is not a major focus.

Scaling your business

The alternative, of course, is to use your ideas, technology and talent as a foundation to scale a business that becomes a world-beating company in its own right. One that becomes a serious competitor to some of the organizations that may have been your prospective acquirers at an earlier stage. This will involve thinking seriously about how to commercialize your core assets, expand into multiple product lines, diversify the team, adapt the culture and establish an international footprint. If you have been founded in Cambridge this may well mean looking outside of the city for the talent that you need – Cambridge still ‘only’ has a population of 130,000 and is arguably less well known for sales and marketing people than it is for engineers and scientists. This route may take longer and be riskier but could be more fulfilling and ultimately yield greater financial rewards as well.

The city is fortunate to have many successful examples of companies that have taken the scaling route too, including ARM (sold to Softbank for $32B in 2016) and Cambridge Silicon Radio (acquired by Qualcomm for $2.5B in 2014 – its mobile phone connectivity and location business units having already been sold to Samsung for $200M a couple of years earlier).

Making your decision

As an entrepreneur, you have to ask yourself: what are your goals and those of your team? Would they be happy getting to a certain level, being acquired and joining a corporate’s R&D lab? Or are you all in it for the long haul, where you have a collective capability and desire to scale a standalone, sustainable entity that becomes a force to be reckoned with within your chosen market sector? It’s a significant step for many organizations, and it’s a decision that may not be popular with every stakeholder, especially with some early-stage investors, as it could well compromise the plans they had for the business.

You need to carefully consider your choices on a regular basis, taking on-board the opinions of your team, your investors and external advisors (who can be invaluable, particularly if they have experience of wrestling with similar decisions themselves). Things change, new information comes to light, opportunities arise and other external factors may impact the perspective of key stakeholders. Have an open dialogue with all interested parties; be sure to keep them involved and well informed at all times; and then not only will you take the right path, but you will also bring key stakeholders on the journey with you.

John Milliken, CEO, Speechmatics

Squared dark grey stroke speech bubble with a green stroke envelope shape in it

Want to see more content like this?

Sign up for our newsletter!

  • This field is for validation purposes and should be left unchanged.

     

White logo of The Queen's Award for Enterprise: Innovation 2019
X