As I See It

Funding our tech growth firms remains a problem

Terry smiling headIn a paper released last week a new partner of a big four accountancy firm said a new wave of entrepreneurial success stories is reinventing the Scottish economy.

David Mitchell of Deloitte’s private markets business, said companies such as FanDuel, Skyscanner, M Squared Lasers, and Taragenyx were transforming the country’s image from one rooted in finance and oil to one now associated with technical invention.

Some might point out that, in fact, Scotland has always been a pioneering country. Television, body scanners, medical breakthroughs have all emerged from Scottish ‘inventors’.

There is, however, undoubtedly a new ‘mood music’ in Scotland which has focused on technology, not just in scientific terms, but in the ability and willingness of those inventors to turn their ideas into thriving businesses.

Edinburgh, in particular, has emerged as a technology centre and its rise among the elite of cities now engaged in high level software has certainly become common currency.

But how far has Scotland, and indeed the UK, really risen up the technology stakes?

A debate generated by the BBC has prompted some to argue that there remains a huge start-up funding problem across the UK.

Fund manager Neil Woodford says small companies are not receiving the capital they require in order to grow.

“We have been appallingly bad at giving those minnows the long-term capital they need,” he told the corporation’s Tech Talent.

Questions have been asked about whether Britain is capable of even producing its own indigenous talent, with many of its tech firms run by incomers.

Furthermore, Mr Woodford says home-grown tech entrepreneurs are not turning promising starts into leading global companies. The chances of Britain creating a Google or a Facebook are limited because the funding and support system is still woefully weak.

While Britain has no shortage of ideas, the problems are the familiar ones, led by the difficulty of finding willing investors prepared to back those ideas at the critical early growth stage.

In Edinburgh, Codebase chief Jamie Coleman some time ago called for a review of funding from government so that instead of a scattergun approach to providing small sums across the board, more of that money should feed into specialist angel type investors to feed the real growth prospects.

The jury is out on this, but there is certainly a lack of venture capital in Scotland that would take the tech sector to the next level.

While some doubt the UK’s ability to match Silicon Valley’s achievements, Scotland can at least lay claim to two of the 20 UK unicorns – firms valued at $1 billion.

That is no mean achievement and shows how far the country has come in recent years helped by the rise of incubators, a broader ecosystem of support, and a culture more tuned to entrepreneurialism.

There remains a problem, though, with a funding regime that that is focused on increasing the ‘start-up’ figures while not extending its support through that ecosystem.

Company creation is critical to growing the economy, but so is ensuring they become sustainable. It is relatively easy to start a business, much more difficult to keep one going.

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