6 minute read 23 Sep 2021

Our survey shows fast-growth companies are powering ahead, but face several obstacles.

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Will you overlook a fast-growth opportunity, or oversee it?

Authors
Praveen Shankar

UK&I Technology, Media and Telecommunications Market Leader, Ernst & Young LLP

Broad experience in transformation and operations. Driving the 5G agenda. Focused on tackling the most pressing and complex business and technology challenges in the industry.

Debbie O'Hanlon

UK&I Private Leader, Ernst & Young LLP

Business leader helping private & entrepreneurial businesses accelerate growth in this transformative age. Married. Training Springer Spaniel puppy. Keen cyclist, occasional triathlete.

Richard Goold

EY Global Head of TMT Law and UK&I Head of Fast Growth

Leader in technology deals. Advocate for tech investors and entrepreneurs. Inaugural FinTech 40 member. Connecting the (Tech) dots.

Anna Faelten

Partner, Mergers and Acquisitions, Technology, Media and Telecommunications, Ernst & Young LLP

Seasoned corporate financier focused on realising value. Passionate about creating a culture of equality. Loves deals, data and techno. Book writer, mother and wife.

Martyn Whistler

EY Global Technology Sector Lead Analyst

Keen observer of all things technology. Storyteller. Avid reader. Bluff traditionalist who is impatient for the future. Fan of sports, occasionally sporty. Fan of the arts, rarely arty.

6 minute read 23 Sep 2021

Our survey shows fast-growth companies are powering ahead, but face several obstacles.

In brief

  • 78% of fast-growth companies grew revenues over the last 12 months, highlighting their agility and resilience during the pandemic.
  • Our survey of the UK’s 500 most-dynamic fast-growth companies reveals the opportunities that lie ahead in a changing and disruptive business environment.
  • Rapidly growing companies are often faced with challenges in finding the funding, opportunities and talent to drive their next stage of growth.

Many fast-growth companies have not only survived the pandemic but thrived during it, buoyed by their ability to pivot and innovate. Market conditions are, however, making founders delay their business exits and therefore require more funding over a longer period. This, along with the need to focus on talent and new partnerships, means they must act now to ensure future growth.

Dynamic, high-growth companies are hotbeds for innovation that make contributions to business and society that go well beyond their relative size. 

Our May 2021 survey of over 500 of the UK’s most-dynamic high growth companies reveals the opportunities they face as the economy rebounds. Overall the picture is positive, we also found areas where the right support, advice and action are needed to clear bottlenecks and help maintain forward momentum.

For more details, please download the full report, below are our six key takeaways.

1. Many fast-growth companies thrived during the pandemic

The pandemic increased uncertainty and restricted operations for many of the UK’s fast-growth companies, but it is a credit to their resilience that over three quarters of respondents (78%) managed to grow revenues over the last year. That figure was even higher in software as a service (SaaS) and Fintech, with 91% reporting higher revenues, having likely benefitted from pandemic-driven changes such as the shift to remote working, the increase in electronic payments and the rise of retail investing. 

Fast-growth companies are agile and adaptable

84%

are optimistic about their revenue growth prospects over the next 12 months.

Revenue growth in the last 12 months. 
Figures have been rounded up to the nearest decimal place.

The future also appears to be bright for many fast-growth companies. An impressive 84% of respondents are optimistic or highly optimistic about their revenue growth prospects over the next 12 months. This confidence reflects both their digital DNA, which means not having legacies that might hold back more established companies and their agility to pivot to the new normal. Exploiting these advantages will enable them to continue to grow market share.

2. With businesses exits delayed, it’s time to double down on growth 

The pandemic does appear to have dented confidence in one critical area: founders are delaying their exit plans because they believe market conditions and valuations are not currently favourable. Only 23% are planning an exit in the next 1-3 years and that figure falls to just 3% in the next 12 months, with many feeling that either their company or the market is not ready. However, there is more optimism about exiting in the medium to longterm, with 53% planning to exit in more than 3 years. In the meantime, fast-growth companies can focus on what they do best, growing their business. 

3. The search for funding intensifies

With exits being delayed and fast-growth companies typically at the ‘cash burn’ stage of their financial journey, the sector’s perennial problem of sourcing funding is only likely to intensify - nearly two-thirds (65%) of respondents say that funding represents the biggest constraint on their business. At the same time, survey respondents indicated that finding suitable investors was the most common obstacle, highlighting the twin challenge fast-growth companies are facing; not only do they need investment, they need it to be from investors who are aligned with their vision and are willing to build fruitful, long-term relationships. 

Survey participants were able to select up to three options, meaning they may be represented in multiple options.

In response, fast-growth companies must focus more resources on finding funding – across different categories of investors and internationally. Despite this need to expand their funding horizons, 92% of respondents select the UK as the primary location for sourcing possible investors. With the fast-growth sector outperforming during the pandemic, investment appetite is likely to be high, but the companies must step up their short-term efforts – including looking outside the country’s borders – to seek out the funders that can help drive long-term success.

4. Working with large corporates is desirable but challenging

With funding representing a key barrier to future growth, many high-growth companies are eyeing an alternative source of investment – corporates. That makes sense for both parties: fast-growth companies can benefit from the corporate’s huge financial firepower, knowledge and customer base, whilst corporates are equally eager to access the innovation and growth of these ambitious companies. Little surprise then that 61% of fast-growth companies want to explore a relationship with large corporates, specifically because they see them as a preferred provider of investment.

However, our research identified a number of challenges for fast-growth companies, from finding the right corporate and identifying key stakeholders within it, to agreeing contractual terms and aligning working practices and styles. Clearly, both sides need to work harder to understand each other’s needs, to collaborate better and drive future growth. Attention, commitment and investment are vital in all elements of these relationships, including funding and resources, inclusive procurement policies, dedicated contact points and management time.

Corporates are in demand

61%

of fast-growth companies want to explore a partnership with large corporates.

Survey participants were able to select up to three options, meaning they may be represented in multiple options.

5. International ambitions remain strong, but outsourcing opportunities are untapped

Overall, 45% of all respondents have international operations or functions, dropping to 43% for the smallest, early-stage companies in our survey. This is a promising sign that the next generation of UK companies have a global approach to doing business. More than half of all companies surveyed plan to expand overseas and Europe is still an attractive market, despite Brexit. 

Yet, when it comes to back office operations, a majority of fast-growth companies preferred the UK for expanding its finance, IT and tax functions. Whilst this is good news for the domestic job market in those professions, it also raises concerns. Fast-growth companies should fully consider allocating precious capital to build out back-office functions. Exploring the full range of options for international back offices, with a range of companies offering a wide range of managed services, allows companies to retain close control but also flex as they grow.

Planned domestic expansion over the next 12 months

63%

plan to increase finance operations in the UK.

Planned domestic expansion over the next 12 months

57%

plan to increase IT operations in the UK.

6. Taking care of staff will help take care of business

The pandemic highlighted the resilience and flexibility of workforces, but a consequence of this has been the negative impact on mental health and well-being. Forward-thinking companies are making the most of the positive, whilst doing everything they can to minimise the negative impact on their employees.

Nearly two-thirds of fast-growth companies reported that the pandemic has had a negative impact on employee well-being, with a knock-on effect on employee productivity. Companies that were able to boost well-being, for example through the effective roll-out and use of technology, stated that their employees were significantly more productive. Supporting staff will be crucial to business recovery and regrowth as the impacts of the pandemic continue, particularly as more companies shift to hybrid working models. Fast-growth companies should see employee well-being as a bigger differentiator than ever before; getting it right will spur growth and improve culture. Talent shortages are another reason to make people a priority to boost staff recruitment and retention.

Resilience has its limits

60%

of fast-growth companies say they have seen a negative impact on employee well-being as a result of COVID-19.

Talent shortages are having an impact

48%

state that an inability to recruit the right talent has been a constraint on their expansion plans.

Looking ahead

Given the extraordinary challenges that many of these mainly young fast-growth companies have faced, typically without experience of previous crises or accumulated earnings to fall back on, their performance has been outstanding. 

Emerging from the pandemic in positions of strength, they can be the engine for future innovation, but there is no room for complacency as they look for the right funding opportunities, partners and talent to drive growth in the years ahead.

Summary

Fast-growth companies have thrived during the pandemic, but market conditions are having a ripple effect, with founders delaying business exits and requiring greater access to funding and talent in the interim. To ensure future growth, they must act now.

About this article

Authors
Praveen Shankar

UK&I Technology, Media and Telecommunications Market Leader, Ernst & Young LLP

Broad experience in transformation and operations. Driving the 5G agenda. Focused on tackling the most pressing and complex business and technology challenges in the industry.

Debbie O'Hanlon

UK&I Private Leader, Ernst & Young LLP

Business leader helping private & entrepreneurial businesses accelerate growth in this transformative age. Married. Training Springer Spaniel puppy. Keen cyclist, occasional triathlete.

Richard Goold

EY Global Head of TMT Law and UK&I Head of Fast Growth

Leader in technology deals. Advocate for tech investors and entrepreneurs. Inaugural FinTech 40 member. Connecting the (Tech) dots.

Anna Faelten

Partner, Mergers and Acquisitions, Technology, Media and Telecommunications, Ernst & Young LLP

Seasoned corporate financier focused on realising value. Passionate about creating a culture of equality. Loves deals, data and techno. Book writer, mother and wife.

Martyn Whistler

EY Global Technology Sector Lead Analyst

Keen observer of all things technology. Storyteller. Avid reader. Bluff traditionalist who is impatient for the future. Fan of sports, occasionally sporty. Fan of the arts, rarely arty.