Like many others, Belgian start- and scale-ups could not escape from the effects of the pandemic. Regardless of the company size (in terms of revenue), all scale-ups’ revenue growth was affected with smaller companies taking a larger hit. Nevertheless, after a year of crisis, they are even more confident that their business model and strategy will unlock their growth potential. More than three out of four scale-ups are (highly) confident that they will grow as expected in 2021, finds Deloitte’s latest survey. To grow, the scale-ups surveyed plan to hire up to 2,692 employees in total throughout 2021, leading the way in job creation in Belgium. They will also focus on acquiring new customers and entering new markets, and 65% will look for additional funding.
In April 2020 Deloitte reached out to start- and scale-ups to evaluate how they were being impacted by COVID-19 and what their response had been thus far. Almost a year later, Deloitte reached out again to gain insights into the actual impact of COVID-19 and the expectations for the year ahead.
Scale-ups grow in confidence
In comparison to the survey from April 2020, start- and scale-ups are more confident that their business will emerge stronger and that they will accelerate their growth trajectory in 2021. The key concern to achieving the growth remains the same as last year, namely lower or delayed new business and customer signings. However, 15% fewer scale-ups are experiencing this challenge compared to the survey in April 2020.
International travel limitations and lower cash flow or liquidity issues, two challenges that appear to have had less of an impact than anticipated in April 2020, now see a 18% and 19% drop, respectively. However, smaller organisations faced significantly greater cashflow or liquidity issues than more mature scale-ups. This confirms the relevance of the various measures taken by governments, such as the PMV corona loan, the simplified temporary unemployment procedure, and the postponement of the reimbursement of loans. Despite the concerns, more than 85% of the respondents are somewhat to highly confident that their current strategy and business model will unlock their growth potential.
Koen Vandaele, Managing Partner Ecosystems & Alliances: “Start- and scale-ups have been very resilient when it comes to the continuity of their business during the lockdown periods. Many of them have learned that having resilient leadership and an agile organisation enabled them to respond swiftly to the crisis.”
Start- and scale-ups are true drivers of employment
The April 2020 survey showed that 86% of scale-ups did not plan to freeze or delay hiring, which resulted in the creation of 1,063 jobs for full-time employees in 2020. Through 2021, they plan to grow their workforce with an additional 2,692 employees in total, a significant and very positive move in the Belgian employment market. These additional resources are needed to pursue their ambitious growth plans to further accelerate and attract more customers and users.
“This means the Belgian scale-ups realize a job creation of 320 jobs per 1,000 jobs, which is significantly higher than the average job creation in Belgium (57 per 1,000 jobs)1. It shows that scale-ups are true drivers of employment. Especially for technology-oriented profiles there are a many job opportunities”, said Anaïs De Boulle, Director Scale-ups Ecosystem. “Filling those vacancies in time is the difficulty as it takes a lot of effort to find the right talent in Belgium and elsewhere.”
Ambitions remain high, despite drop in revenue growth
The 2020 revenue growth of both early-growth start-ups and (more) mature scale-ups has been affected by the pandemic. Scale-ups with a lower revenue (less than €1 million) expected a drop of 49pp in revenue growth but experienced a decrease of 69pp. Companies with a revenue between €1 and 3 million predicted a 19pp decrease which turned out to be 28pp. The highest revenue companies (more than €3 million) expected 7pp but experienced a drop of 12pp.
Whilst decreases in realized growth were all systematically higher than was anticipated by the scale-ups regardless of company size, companies with lower revenue (less than €1 million) were more impacted as they not only underestimated the drop in revenue but also showed the highest initial growth expectations.
Christoph Michiels, Partner, ,| Life Sciences & Healthcare: “Not all sectors were impacted equally by loss of revenue growth. In relative term the most resilient sectors are enterprise software (9%), fintech (18%) and sustainability(19%), most likely due to the changes to market, working and living conditions in light of more digitisation and efficiency. The difference in their expected growth revenue and what they actually realized in 2020 is 6%, 21% and 23%, respectively. On the other hand, enterprises that experienced on average the most significant revenue growth in 2020 are start- and scale-ups active in sustainability, digital commerce, and media & entertainment. The mobility sector was hit the hardest in terms of revenue drop.”
The decrease in realized revenue growth in 2020 does not impede start- and scale-ups from being ambitious. More than 25% aspire to at least double their revenue in 2021.
Anaïs De Boulle: “The high expectations regarding revenue growth are not surprising. They are even quite realistic as start- and scale-ups are by definition high-growth ventures. As they have the potential to significantly scale at a fast pace, we expect they will reach their ambitious goals.”
Scale-ups are looking for new investors, new customers, and new markets
Scale-ups want to realize their growth aspirations by acquiring new customers (85%), entering new geographic markets and sectors (58%), concluding partnerships or working with resellers (48%), and upselling to existing customers (42%).
Sixty-five percent of scale-ups are also seeking additional funding of which almost 40% seek an amount superior to €3 million. They aim to raise equity from existing and new investors (venture capitals and corporates), whilst also relying on government grants and subsidies. Over eight out of ten of the respondents seeking additional funding are somewhat to highly confident that they will obtain the required amount.
“Scale-ups also want to get ready to expand their business by having the right digital tools and hands-on onboarding process in place that can be replicated for international growth”, concluded Kelly Dorekens, Partner, Digital Operations.
About the survey
Deloitte surveyed 125 start- and scale-ups to determine how they were affected by the COVID-19 pandemic and what they expect for 2021. The survey has a well-balanced mix between start-ups and more mature scale-ups. 93% of them have a B2B focus. Seventy percent of the respondents have a chairman, (co-)founder or CEO role demonstrating the interest in understanding developments within the ecosystem.