New Data on Scaleups: Benchmarking the UK, USA and Germany.
Introduction
In assessing the health and growth of national economies, traditional metrics such as Gross Domestic Product (GDP), employment rates, and industrial production have long served — and will continue to serve — as the guiding compass. However, while useful, these indicators can present a picture that needs to be narrower to understand the fastest-growing sectors that drive economic progress. In this article, we propose a novel approach to track fast-growing sectors that could potentially complement the more traditional approaches.
We used our AI capability that deep reads the web to identify and analyse scaleup companies in the UK, the United States, and Germany. The data highlighted significant differences between these countries.
Growth Differences Between Countries
Economic growth has predominantly been quantified through GDP, which measures the total value of goods and services produced over a specified period. Employment rates offer insights into the workforce’s health, indicating the economy’s capacity to create jobs. Industrial production indexes shed light on the output from manufacturing, mining, and utilities, highlighting the sectorial contributions to economic strength. These measures provide a broad and relatively comprehensive view of an economy’s health, enabling comparisons across countries over time.
These traditional metrics have limitations though. For instance, GDP does not account for income distribution, quality of life indicators, or environmental impact. It also fails to capture intangible assets, such as intellectual property and human capital, which are becoming increasingly crucial in today’s knowledge-based economy. Moreover, traditional approaches overlook the nuances and the vibrant shades of modern economic activity, particularly in the burgeoning world of startups and scaleups. Unlike large corporations or early-stage startups, scaleups represent a unique category of businesses that exhibit rapid growth in terms of revenue, employee numbers, or market expansion, serving as a vital indicator of economic vitality and innovation.
Our analysis delves into the significance of scaleups, their impact on economic growth, and how three countries — the UK, the US and Germany — are faring in this realm.
What is a Scaleup
According to the Organisation for Economic Co-operation and Development (OECD), a scaleup is a firm that has experienced an average annualised growth rate in terms of revenues or headcount of at least 20% over three consecutive years, starting from a base of at least ten employees. While this definition is widely accepted, different countries and organisations may use slightly different criteria to define scaleups. However, the overarching idea remains consistent: scaleups are high-growth companies that have gone beyond the startup phase and have the potential to significantly contribute to economic growth and job creation.
Scaleups play a critical role in driving economic vitality by creating jobs, introducing innovative products and services, and expanding into new markets. They also attract investment and talent, contributing to a country’s overall competitiveness. By fostering a supportive environment for scaleups, countries can nurture entrepreneurship and innovation, leading to long-term economic growth and resilience.
For our analysis, we adopted the OECD definition but were also flexible regarding the growth rates for each year (i.e. we also considered the overall growth over the past three years).
Methodology
AI and Web Data
Leveraging advanced AI technologies that deep-read the web to understand the activities of companies, our research capability identified companies matching scaleup criteria based on headcount growth. The AI scanned millions of corporate websites, social media sources, annual reports, official sources and news articles to compile and categorise the scaleups, offering an expansive view of the landscape across these countries. We believe this approach provides a more comprehensive and timely understanding of scaleup activity than traditional methods, which rely on self-reported data, surveys, or lagging indicators.
Analysis of Total Scaleups by Country
Overview
The results present marked differences in the number of scaleups between the countries, each reflecting its own economic policies, market size, and entrepreneurial ethos. These are the highlights by volume:
The United States (US) is at the forefront with 65,494 scaleups, followed by the United Kingdom (UK) with 12,158, and Germany with 8,544.
When we compared these figures to the total number of active companies with web presence in each country, we discovered that the US also has the highest percentage of scaleups (0.82%), followed by the UK (0.73%) and Germany (0.55%).
The UK is about three-quarters the size of the German economy, both in terms of GDP ($3 trillion vs $4 trillion) and population (67m vs 84m people), however, the UK has a significantly higher number of scaleups than Germany (12,158 vs 8,544).
The US with 333m people and a GDP of $25 trillion is way ahead with 65,494 scaleups in total.
Analysis of Scaleup Densities
As a next step, we decided to normalise the scaleup data relative to population size. More specifically, we chose to measure the number of scaleups per 1,000,000 people, as it unveils several benefits, offering a richer, more meaningful metric for assessing the economic impact. This approach facilitates more accurate comparisons across countries, avoiding misinterpretations that could arise from merely tallying scale-up numbers, which would naturally favour larger economies, such as the US. This method provides the following benefits:
Standardisation: Adjusting the number of scaleups for population size enables equitable comparisons among countries, preventing distortions from absolute firm counts.
Contextual Relevance: This metric connects the economic activity of scaleups directly with the general populace, offering a clearer view of entrepreneurial density and its potential influence on the workforce and overall economy.
Economic Insight: It reveals the effectiveness of a country in nurturing high-growth businesses concerning its population, where a higher figure suggests a more dynamic, supportive backdrop for business expansion.
By optimising this data-driven approach, we gained a more nuanced understanding of the economic fabric and entrepreneurial landscape, guiding policy and investment towards fostering robust economic ecosystems. Here is what we found:
Adjusted figures for population show the US leading with 197 scaleups per 1M people, the UK is a close second with 181, and then Germany with 102.
United States
The substantial number of scaleups in the US underscores its extensive entrepreneurial activity, economic size and the opportunities afforded by its substantial population. The US scaleup density per million is the highest of the three countries. The entrepreneurial landscape in the US is characterised by diversity in industries and regional hubs of innovation. Silicon Valley, is the global epicentre of technology and innovation, while cities like Boston, New York and Austin have their unique strengths in biotech and creative industries, respectively.
United Kingdom
The UK also stands out with a remarkable scaleup density per million inhabitants, suggesting that its support mechanisms for start-ups and growth-centric firms are effective. This robust ecosystem not only nurtures new businesses but also ensures they have the resources and guidance needed to scale successfully. This is despite criticism that the UK (and Europe) lacks the late-stage VC / growth funding required that allow successful startups to scale rapidly. The data shows the UK’s density of scaleups is similar to the US. This can be attributed to several factors. The country has a well-established framework for supporting entrepreneurs, including access to funding, mentorship programs, and a favourable regulatory environment. Additionally, the focus on sectors such as financial technology, life sciences, creative industries, and more recently AI provides a fertile ground for innovative ideas to flourish and grow.
Germany
Germany shows the lowest scaleup density among the three. The country’s industrial strategy has traditionally emphasised the Mittelstand and export sectors like Automotive, Energy and Environmental technologies. Despite the lower density, Germany’s scaleups are often deeply integrated into these critical sectors, driving innovation and efficiency.
The German entrepreneurial ecosystem benefits from strong support for research and development, particularly in engineering and manufacturing. This sector-specific focus might contribute to the lower overall density but underscores the strategic alignment of German scaleups with national economic priorities.
Differences Across Sectors
It was also important to analyse the differences in sectors for each country:
In the US, the top three sectors by the number of scaleups are Hospitals and Medical Practices, Information Technology and Services and Computer Software. The latter is the sector with the highest percentage of scaleups (2.60%) based on totals for the sector.
In the UK, the top three sectors by number of scaleups are General Financial Services, Construction and Information Technology and Services. That said, Recruitment shows the highest percentage (1.74%) based on totals for the sector.
In Germany, the top three sectors by number of scaleups are Information Technology and Services, Machinery and Computer Software. That said, General Financial Services is the sector with the highest percentage of scaleups (2.70%) based on totals for the sector.
This data confirms that in the US the majority of scaleups are in the tech sector, whereas in the UK there is a wider sector spread, with many scaleups in services sectors like finance and recruitment. We were surprised to see ‘construction’ as a top sector for UK scaleups. Germany also shows a wider spread when it comes to the top sectors for scaleups and we see ‘machinery’ scaleups, which resonates with the deep industrial base of the German economy.
However, when we analysed the breakdown of scaleups per 1M people using higher-level ‘sector groups’, a different picture emerged, with the UK leading across most sectors:
United States
The US’s high scaleup densities in Technology and Healthcare and Scientific highlights its innovation leadership. However, it has comparatively lower numbers in sectors like Professional Services and Industrial and Agriculture.
Technology: Unsurprisingly, the US demonstrates strong performance in the Technology sector with 22 scaleups per million people. This high density underscores the US’s dominance in tech innovation and its comprehensive venture capital ecosystem.
Healthcare and Scientific: The US leads in this sector with 15 scaleups per million people, reflecting significant investment in pharma/biotech innovation and scientific research.
United Kingdom
The UK is a standout in the majority of sectors, leading in 10 out 13 of our sector groups, with high scaleup density in Professional Services, Technology, Leisure and Hospitality, and Real Estate and Construction:
Professional Services: the UK is distinguished by 28 scaleups per million people, the highest across all sectors and countries, and double the number of the next country (the US with 14 scaleups in professional services). This points to a very dynamic environment for professional services, likely underpinned by London’s global services prominence.
Technology: the UK also exhibits strong performance in the Technology sector with 24 scaleups per million people. This mirrors the UK’s focus on tech innovation, leadership in European venture funding and support through initiatives like the National AI Strategy.
Leisure and Hospitality: the UK leads markedly in this sector with 18 scaleups per million people, suggesting a large market for hospitality businesses, potentially driven by tourism and a robust service culture.
Germany
Germany’s strong performance in Industrial and Agriculture and Technology, yet lower densities in other sectors compared to the UK and the US, may point to sector-specific growth strategies.
Technology: Germany exhibits a significant density of scaleups in the Technology sector with 18 scaleups per million people, not far behind the UK and the US. This indicates a robust tech ecosystem in places like Munich and Berlin.
Industrial and Agriculture: With 13 scaleups per million people, Germany excels in this sector, reflecting its strong industrial base and agricultural innovations. This is in line with Germany’s reputation for engineering and manufacturing excellence.
In summary, normalising scaleup data to population size sheds light on the key growth sectors of each country. The UK’s impressive performance across multiple sectors, particularly in Professional Services and Technology, emphasises its vibrant entrepreneurial ecosystem. Germany’s strengths in Industrial & Agriculture and Technology reflect its industrial capability, while the United States' leadership in Technology and Healthcare and Scientific reaffirms its status as a global innovation hub. These insights can inform policy and investment decisions, cultivating environments that nurture high-growth companies and drive economic development.
Conclusion
Our analysis of scaleup volumes and densities in the US, UK and Germany has highlighted several sectors that seem to be driving growth. The research has shown that the combination of AI and rich web data can provide insights that complement the more traditional methods of tracking growth in countries and regions.
Unsurprisingly, the US has the largest number of scaleups, however, the UK is not far behind when we look at scaleup density per 1M inhabitants the UK leads in the majority of sectors. Despite slower GDP growth compared to the US, and more limited options when it comes to late-stage/growth funding, the country is punching above its weight and producing a large number of scaleups, way ahead of other European countries like Germany.
A final thought: we acknowledge that tracking headcount growth across companies and sectors is not a perfect method. It will miss companies that are growing fast but don’t need to keep hiring lots of people and/or companies where revenues are growing but are still small (and therefore not disclosed in official registers). However, with AI and the richness of the web data, economists, consultants and policymakers can now use signals/indicators that provide a fuller picture of the scaleup landscape and the fastest-growing sectors in an economy. Some of these signals include evidence of companies launching new product launches, signing new clients, receiving funding, increasing hiring, announcing expansion plans, attending events, winning awards, etc. The possibilities are vast, but this will be the topic of a separate post.
If you are interested in scaleup data or need help researching companies and sectors globally, do not hesitate to get in touch: info@glass.ai.