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Funding for growth firms

Interview: Steven Morris, investor

Steven Morris

Steven Morris: market under-served (photo by Terry Murden – DB Media Services)

Spinning a new tech hub

It’s better known for its castle on the hill and the monument to a famous warrior, but Stirling could be on the cusp of something new.

The ancient city is being touted as the next technology centre which has helped build Edinburgh’s reputation as a source of new ideas.

An injection of capital is helping to spark a wave of start-ups, some spinning out of the university, and there is talk that Codebase, the Edinburgh incubator which has helped drive the capital’s rebirth, will open a satellite operation thirty miles north.

One Stirling-based entrepreneur is building a portfolio of emerging companies through an investment business which is harnessing the wealth of global Scots.

From his office in a converted Victorian villa, Steven Morris has attracted £8 million into 11 businesses since he launched ESM Investments just over four years ago.

Morris made his own fortune a decade ago when he sold a video distribution business to a US company.  Through his connections, mainly in Asia, he’s been able to build a syndicate of mainly ex-pat Scots who are keen to put their money into promising companies back home.

He says there is no shortage of opportunities, not just among start-ups, but also in growth firms which are looking for the next stage of funding.

“I am looking to re-balance the portfolio with some later stage companies so that we have them maturing at different stages,” he says.

Morris has worked closely with institutions such as Scottish Development International and the Scottish Investment Bank (SIB) and says growth in the Scottish technology sector is impressive.

But it means demand for funding is outweighing supply within the country’s borders – one reason he’s sought sources of finance from overseas.

“The market is under-served for early stage finance,” he says. “More companies are going to London and overseas to get the funding they need, and London-based investors are heading north knowing these companies want it.”

Codebase

Codebase: Stirling outlet? (photo by Terry Murden)

Others would concur that this is a chronic problem, with Codebase’s Jamie Coleman calling for changes to the way the government distributes funds in order to stimulate a more active venture capital sector.

Morris says one solution may lie in greater collaboration among the funders in order to open more of the doors that are currently being closed to those seeking money.

“One company goes to a funder who can’t put up the funds and so turns them away. They go to the next one who refers them back to the original source. It’s a straight ‘yes or no’ at the moment which isn’t right.

“Instead of being bounced around the various suppliers it would be better if each company provided some of the funds and shared the risk so that companies got the money they needed.”

Morris is talking to a number VCs and angel groups about adopting this model which would probably require an umbrella organisation to oversee it – SIBm, perhaps?

“Maybe, but it’s a public sector body and my belief is that this sort of thing ought to be private sector led,” he says.

He is also looking to develop the corporate venturing sector where big companies invest in smaller firms which, in turn, help their own development. Fintech is creating new businesses providing enabling or disruptive technology that is of value to bigger businesses.

“Investment in this area is untapped and is something we’re keen to develop,” he says.

PERSONAL CHECKLIST

Birthplace: Falkirk

Age: 54

Education: Falkirk College of Technology (mechanical engineering)

Career Highlights: BP, ICS, BSI, ETV Interactive and IBHAN (the US company which acquired it)

Any other interests?

I work with a company in Glasgow called Network 90, a sort of LinkedIn for professional sports people. The footballer Luis Figo and golfer Luke Donald are involved.

I am a road cyclist. I used to play a lot of squash, but ruptured my Achilles. That put an end to all that.

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