SCALE-UPS, REAL ENGINES OF JOB CREATION

The market creation and exploration phase is followed logically by a phase of growth in commercial activities for start-ups. Not all companies reach this point, and not with the same level of ambition. A new concept is emerging to designate those with a particularly strong growth trajectory: scale-ups.

The concept of scale-up is closely linked to the notion of growth (in English to scale up means to change scale, upwards). As only a very small part of the projects have a real impact and contribute to creating jobs in a significant way, the idea is to focus attention on them, which is why this concept was invented.

The canton of Vaud has been monitoring and labelling scale-ups in the technological fields since 2016. Today, 27 companies are part of this programme; their list is available on the website www.scale-up-vaud.ch. The data for this article are from this initiative in 2019, which counted 25 scale-ups.

What is a scale-up ?

A single episode of growth is not enough to make a difference. To have a lasting impact, a company must grow for several years in a row. The commonly accepted criterion (OECD for example) is an increase - in turnover or, failing that, in employment - of more than 20% per year for at least three consecutive years.

Moving from one to two jobs is also not enough: you must have reached a minimum size for the economic impact to begin to be noticeable. A company is considered eligible if it has 10 employees or a turnover exceeding one million francs.

These criteria are quite restrictive. Less than 5% of start-ups become scale-ups. Moreover, an SME can perfectly well become a scale-up thanks, for example, to a new product that is in high demand, even if this is a rarer case.

«A single episode of growth is not enough to make a diffrence»

Scale-ups create a lot of jobs

By their very definition, scale-ups create many jobs, in Switzerland and abroad. The 25 companies in the Scale-up Vaud programme (stats of 2019) have each created an average of 10 jobs in Switzerland per year over the past four years. In total, over this period, this represents 1,000 new jobs.

In four years, the canton's scale-ups have created more than 1,000 jobs in Switzerland

In the high-tech sector, growth is mainly achieved through the organization's export and internationalization. But the creation of jobs abroad is in most cases accompanied by an increase in the number of staff at headquarters. Scale-ups thus create high value-added jobs.

Scale-ups are no longer start-ups

If we look at the Vaud scale-up cohort, we see that it takes about five more years to go from a small team to about 20 people. It will take another five more years for the fastest of them to move up to the next level and reach 100 jobs.

The growth curve of the canton's scale-ups is resolutely exponential

The challenges of this second phase are quite different. Unlike a start-up, the scale-up has demonstrated the viability of its business model and has found its market. Its challenge is now directly linked to growth: opening branches, creating distribution channels, recruiting, selling, financing its growth, etc.

«Unlike a start-up, the scale-up has demonstrated the viability of its business model and has found its market»

An emerging phenomenon

The emergence, in large numbers, of projects with this type of ambition and capacity is a relatively new phenomenon in the region. Most of the Vaud scale-up cohort, even if they are at very different stages of advancement, is made up of companies created less than 10 years ago.

The majority of the canton's high-growth companies were created less than 10 years ago

An emblematic example of this acceleration is Flyability in the field of inspection drones. As Flyability celebrates its 5th anniversary, it surpasses the 100 employee mark and is ranked number 1 in the "Top 100" start-ups in Switzerland. A kind of "super scale-up".

Still a long way to go

This dynamic is very positive. But if we take a step back and compare it with other regions, we see that there is still a long way to go.

The scope for progress remains significant compared to the United Kingdom and the Nordic countries

The measures do not exactly follow the same definition everywhere (10% growth in sales or employment), but nevertheless allow comparisons between countries.

The measures used for this comparison cover the year 2014, more or less the time when the region's start-up dynamics were at an inflection point. It will be interesting to see, at a future measurement, if the canton has joined the other ecosystems.

This effort is important, because technological scale-ups are the first manifestations of the industries of the future. Being based on innovations, these companies are often focused on emerging and technological areas. Although they represent a relatively small proportion of jobs at the outset, they allow the region to build expertise in areas that will become more important, such as drones or artificial intelligence, for example.

«This effort is important, because technological scale-ups are the first manifestations of the industries of the future»