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Tech leaders fear many startups won’t survive Covid

Brian Corcoran: ecosystem could be decimated (pic: Terry Murden)

Tech entrepreneurs feel many startups will not survive the COVID-19 crisis with many falling through the gaps for government support.

A survey of 100 tech startups and senior executives released today reveals that more than half of startups (52%) said the Scottish Government is doing too little to support entrepreneurs.

The survey conducted by Turing Fest found that 17% were unclear about what support is available to businesses, suggesting that the government needs a more proactive strategy to communicate with businesses which are facing serious challenges.

In an open letter to the Scottish Government, more than 50 of the group said that “the current interventions, from both the Scottish and UK governments, will not adequately address the unique needs of high-growth Scottish tech companies”.

It calls on the Scottish Government to “act now to protect Scotland’s entrepreneurial future so we do not lose a generation of high-growth startups to COVID-19.”

Unless there is immediate intervention from the Scottish Government, many startups will not survive

– Brian Corcoran, Turing Fest

Tech entrepreneurs are deeply concerned that the COVID-19 crisis could stifle innovation, put promising early-stage companies out of businesses, destroy thousands of jobs and deal a serious blow to Scotland’s digital economy.

Brian Corcoran, CEO of Turing Fest said: “Tech startups can play a key role in rebuilding Scotland’s economy after this pandemic passes, but unless there is immediate intervention from the Scottish Government, many startups will not survive and the ecosystem that the Government, and others, have worked so hard to cultivate could be decimated.”

Asked about the outlook for Scotland’s technology sector in the face of COVID-19, 95% of survey respondents said the pandemic had already had a negative impact on their businesses, with: 

  • 38% furloughing staff
  • 21% considering redundancies
  • 50% freezing or scaling back hiring

Asked what kind of support the tech sector needs, respondents called for more direct financial support: 79% said they wanted to see the government offer bridge grants to help businesses maintain their operations, 67% called for expanded R&D/innovation grants, and 59% identified employee wage subsidies as a key support mechanism.

Scotland’s digital economy businesses employ almost 100,000 people and contribute £6.6bn to the economy. Scottish startups attracted £200m in venture capital investment in 2019, reflecting a fast-growing and competitive tech sector that stands to become a major part of Scotland’s economic future. 

Countries like France and Germany have already announced wide ranging and highly supportive schemes

– Paul Walton, Boundary

Paul Walton, Co-Founder and CTO at home security firm Boundary, said:, “Countries like France and Germany have already announced wide ranging and highly supportive schemes for their tech industry and whilst the UK government’s announcements last week were welcome, the rules of the scheme mean many Scottish companies will not be able to get support from it.” 

Ian Stevenson, Founder and CEO of Cyan Forensics, said: “The current loan scheme seems to be only open to companies profitable enough to demonstrate repayment – which excludes growing equity-backed startups.

“The UK Government’s Future Fund is a great step for VC backed companies, but at present it’s not clear how it can co-exist with the EIS investment that fuels many early stage companies. We need support tailored for the startup sector if we’re to maintain jobs and position for future economic growth”.

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