Fast growth firms bust stereotypes of success
SINCE 1999 the Wales Fast Growth 50 (FG50) has been celebrating the best of entrepreneurship within the Welsh economy.
On Monday we close the search for the fastest growing Welsh firms in 2017.
During the last 18 years, 551 firms have appeared on the lists published in the Western Mail, and these have created thousands of new jobs and generate billions of pounds of turnover every year for the Welsh economy.
That is an incredible achievement in itself, but what is more relevant is that those firms that have made the FG50 list every year do not fit into the stereotypical image that many will have of high growth firms.
This is not unexpected as a recent research paper, Myth-busting and entrepreneurship policy: the case of high growth firms, written by academic colleagues in Scotland, pointed out that there are a number of myths about high growth firms which, on closer inspection, do not hold true.
First of all, there is a belief that many fast growth firms are young, small businesses and whilst some of the FG50 firms have undoubtedly grown quickly in the first few years of their existence, the average age of businesses on the lists since it started has been around 12 every year.
This suggests that many firms need to establish themselves in the marketplace before they are ready for substantial growth. Indeed, one of the fastest growing firms in Wales last year was the Watkin Jones Group, which was originally established in 1791.
Secondly, there is the myth that fast growing firms are predominantly operating in high technology areas, mainly because during the last couple of decades we have tended to associate rapid growth with businesses such as Apple, Google and Microsoft.
Yet, the majority of high growth firms are in sectors which many would consider “unsexy” and demonstrates that growth can occur in any industry and relies more on having the right management and leadership in place rather than just the product or service they are developing.
That is not to say that high technology firms are not important to an economy and there needs to be greater effort to maximise the potential of those emerging within key sectors, especially in terms of providing the right type of funding that enables them to grow quickly and which has been sadly absent in Wales.
There is also the belief that due to the massive influence of higher education institutions on the creation of innovation hotspots such as Silicon Valley or Route 128 in Boston, that universities are a major source of high growth firms.
Yet, the FG50 list has seen very few university spin-offs emerge over the last few years which either suggests that they are not being nurtured properly or that they simply do not have the capability to grow.
Hopefully that will change in the future, especially through the development of initiatives such as the compound semiconductor and cybersecurity clusters in South East Wales.
Another myth is that many fast growth firms are backed with venture capital funding. That certainly has not been the case with the FG50 and it is noteworthy that funding organisations such as Finance Wales have tended to step in to support companies only after they have appeared on the list.
There is also a belief that high growth firms are involved in steady linear growth and whilst a small number – such as Y3S Loans, Yolk Recruitment, Henry Howard Finance and Smart Solutions – have demonstrated consistent high growth over a period of five years, many of the others will consolidate their market position after a period of rapid expansion.
Others – such as Cardiff-based DVS which appeared in two different decades on the FG50 list – have grown quickly in their formative years but have then gone through a period of steady development before experiencing a further period of rapid growth.
There is also an expectation that high growth firms will grow organically whereas an increasing number – such as taxi business Veezu – will develop through acquiring other similar firms in their sector.
In terms of geography, it is thought that many high growth firms will tend to be found in urban areas and whilst it is true that Cardiff firms normally account for a third of the FG50 list every year, the most successful firms have been found outside of urban areas. These include businesses such as Aerfin (Caerphilly), Afonwen Laundry (Pwllheli), Evabuild (Newtown) and Hydro Industries (Llangennech), all of which were crowned the fastest growing firms in Wales.
Therefore, the reality of growth within many businesses in Wales and elsewhere is very different to what many people think. In fact, the previous obsession with a sectoral approach by policymakers that focused predominantly on supporting young firms may be limiting the potential of the Welsh economy.
And despite some recent positive developments in business support, more certainly needs to be done to identify those firms – as the FG50 has done for the last 18 years – that can create wealth and employment in the economy and, more importantly, support them in enhancing further prosperity and job creation across all areas and sectors of the nation.