Early in the pandemic, the precarious nature of startup life was highlighted by data revealing that many startups could survive just a few months of the current disruption to the business. New research from Insight Partners suggests that the situation is not quite so stark for ScaleUps.
“Past recessions have shown that ScaleUps have an outsized impact
on job creation when it is needed most – and this has proven to be
true once again within the current economic environment and public health crisis,” the authors say. “ScaleUps reacted quickly to the COVID-19 outbreak with policies aimed at securing revenue, with most maintaining positive growth outlooks into 2021.”
Quick growth
ScaleUps are further along their journey than startups, and so focus their efforts on accelerated growth. The report reveals that 80% of ScaleUps are continuing their plans to increase investment in growth throughout 2021.
This is important given the role ScaleUps play in the economy. The authors highlight that despite representing just 2% of all companies in America, they create 35% of new jobs. This is evident today, with 81% of the ScaleUps spoken to for the report saying they plan to maintain or increase their headcount this year.
“ScaleUps are a less appreciated driver of innovation and growth in the economy. Our report reveals the extent to which these companies have been able to capture value and create high-paying jobs in the pandemic and beyond,” the authors say. “For decades, software ScaleUps have been a category of particularly robust growth—the technology industry has numerous business model and product attributes that can help with rapid scaling, providing potential advantages over other industries. ScaleUps are proven, flexible, and resilient job creators, even in the most challenging times.”
Software leading the way
Given the huge push towards digital during the pandemic, it’s perhaps no surprise that software scaleups are leading the way. The report reveals that they constitute 20% of scaleups in America, despite representing just 5% of all companies in the country.
What’s more, the sector is responsible for nearly 10% of all jobs in the United States. The sector is typically characterized by the ability to pivot rapidly to retain and grow the customer base. This contributes to bullishness in the sector, with 58% of software scaleups expecting annual growth to increase over the coming years.
“The unique characteristics of software companies that allow them to scale and grow quicker also helps explain the shift toward growth investing: economies of scale, data science, recurring revenue models, and virality,” the authors say. “This allows for almost uncapped growth potential among software companies and invites investment capital. Simultaneously, increased investment in software companies further propels their growth, leading to a self-reinforcing cycle of unconstrained growth potential.”
