Owners selling 'too early'
Technology firms told to focus more on sales and scale
Tech hubs create lots of firms but sales are key
Scottish technology firms have been advised to switch more of their focus from developing their products to achieving sales and scale.
They are spending excessive time trying to create the “perfect product” and many are selling their businesses too early.
These were the views of investor Dan Halliday from Foresight Group who was guest speaker at Johnston Carmichael’s first Meet The Tech Investor event.
Addressing the session, held in the firm’s Dundee office, Mr Halliday said Scotland is producing many exciting technology businesses, but investors wanted to see a revenue stream.
“The most attractive businesses for investment are typically in the B2B space, where they are less exposed to consumers’ disposable income,” he said.
“Software as a service models, which attract income through subscriptions, are especially appealing as investors like to see predictable revenue.
“When seeking companies to invest in we are looking for businesses that have already achieved commercial traction. We’d rather companies had attained their first sales than creating the perfect product, because the market can move on in the time spent on R&D.”
He also recommended that Scottish tech entrepreneurs consider achieving greater growth before exiting.
“There is lots of exciting early stuff happening at an early stage in Scotland, but Scottish start-ups tend to get sold at an earlier stage in comparison with their counterparts in London or San Francisco.
“As investors, we have to work out how to let founders get some equity while also incentivising them to stay on in the business and achieve scale.”
The Meet The Tech Investor event was the first in a series of sessions, Talking Tech in Dundee, being offered by Johnston Carmichael to support businesses in Dundee’s growing life sciences and technology sectors. More than 60 guests attended the session.
Mr Halliday, who is based in Foresight’s recently-opened Edinburgh office, helps to operate the £20m Foresight Growth Fund.
Dundee’s challenge is retaining talent without an eco-system– Dan Halliday, Foresight
Commenting on the current tech scene in Dundee, he said: “What is great for investors about Dundee is that it has some good, under-the-radar businesses which haven’t attracted the attention of investors yet as well as strong universities producing high quality graduates.
“But there is a challenge around retaining talent in the region and ensuring they don’t go elsewhere because there isn’t yet an ecosystem around the sector as there is in Edinburgh or London.
“Success breeds success. Edinburgh, for example, has Skyscanner, which creates a large pool of developers that other technology businesses benefit from.”