AS I SEE IT: Scotland should not worry about the sale of its technology stars, says TERRY MURDEN
The sale last week of a young company that emerged from Scotland’s thriving tech sector has prompted another bout of hand-wringing from those who feel homegrown businesses are too eager to take the money and run. It’s a debate that has been with us a long time and one which tells us more about the size and capabilities of the Scottish economy to support growth firms than any short-termism on the part of entrepreneurs.
Current Health, which was snapped up by US listed firm Best Buy for what is described as a “significant’ sum, has grown rapidly since its formation just six years ago by Dundee university drop-out Chris McCann. He and his business partners have developed software for remote patient monitoring that is likely to change the doctor-patient relationship. Its platform is used by many of the world’s leading health systems including Mount Sinai Health System, Geisinger Health, and the UK National Health Service.
During the pandemic, when remote services were a clear winner, the company notched up an impressive 3,000% jump in revenue and 400% expansion of its customer base.
No wonder it has attracted a lot of attention from investors at home and abroad. Edinburgh-based private equity firm Par Equity has led six rounds of investment and in April this year the company raised $43 million (£31m) in a Series B financing round led by US-based Northpond Ventures.
Last week’s story of its being sold curiously went unreported by the rest of the Scottish business media who also failed to pick up on April’s substantial fund-raising. However, our story drew some comment on social media, not least from those who regret the loss of another indigenous firm to a foreign buyer.
Such criticism is understandable in so far as any nation needs a solid stock of home-based head offices which draw decision makers, investors, advisers, R&D and supply chains.
However, Mr McCann, who has already switched the focus of his business to Boston, welcomed his new major shareholder, not just because it will make him a rich man, but because he believes being part of a big US corporation will hasten its growth plans, enabling it to scale in a way that would be more difficult if it remained a modestly sized Scottish business.
I’m reminded once again of a phrase coined some 25 years ago by Frank Blin, a former Coopers & Lybrand / PwC partner, who said Scottish growth firms would inevitably hit a “tartan ceiling”; in other words, they could only grow so far before they were forced to sell in order to move to the next stage. It has happened repeatedly over the years.
On the down side, it can be interpreted as a lack of ambition, but in part it can be attributed to a lack of players able to provide that higher level of financial support. Even the much-vaunted investment summits tend to deal in fairly modest levels of funding at the early stage, while the banks – which talk a good game about supporting SMEs – feel safer offering loans, which means they can offload part of the risk on to the entrepreneur and hopefully expect to get their money back.
It leaves many growth firms to rely on business angels, admission to the stock market, or a trade sale to a partner with deep pockets. Among those who’ve opted for the latter route are BlackCircles (bought by Michelin) and Skyscanner (acquired by the Chinese firm CTrip).
Is it a bad thing that we see so many of our rising stars rushing into the arms of overseas suitors? Apart from the points raised above about the need for a solid foundation of indigenous firms, we have to support inward acquisition as it provides funding for growth that Scotland is not able to provide.
Scottish Enterprise and the new Scottish National Investment Bank are among the bigger institutions supposedly “enabling” the next generation of companies, but they too have their limitations. For the entrepreneurs, however, they often use their big pay day to finance their next big venture.
In the case of BlackCircles, founder Mike Welch launched an online fashion retailer and another tyre business in the US. Skyscanner’s Gareth Williams has become an angel investor in other startups (including Current Health). Chris McCann is staying with his company and will be planning for his newly-expanded business to take a big chunk of that fast-growing remote patient monitoring market. But don’t be surprised if he launches another venture or two in the near future.
tmurden@dailybusinessgroup.co.uk
Terry Murden held senior positions at The Sunday Times, The Scotsman, Scotland on Sunday and The Northern Echo and is now editor of Daily Business
Excellent article Terry. Independent of ownership how many new, genuinely global corporate brand names with market leadership reputations has Scotland produced in the last ten tears.? The infotech revolution creates massive opportunities for convergence across industries, technologies, products, services, customer segments. And allows firms to grow faster in unconventional ways. The emergence of “micro global” companies is not an oxymoron but one of the new realities of global competition. Size, resources and existing knowledge no longer limit firms’ potential to shape (not forecast) industry futures, and to genuinely change the competitive game.
There have been a number of comments on this subject via LinkedIn..
Claudia Cavalluzzo, director of Converge says: Terry Murden raised such a good point with his article.
I find myself in agreement with his views that selling up is not selling out and that Scotland, whilst building a better, hopefully soon well funded tech ecosystem, needs these wins to fuel new venture creation, not just through funding but also thanks to the expertise and experience that these entrepreneurs have gained by buindling and growing a new business. And one with such impact on patients care!
We need them to come back to Scotland to share their learnings and do this again…and again… Chris, Scotland needs you!
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John Anderson, non-executive director, says: Great piece Terry. You and I have talked about this subject for a VERY long time and you have captured the pragmatism of the situation that Christopher and his team faced.
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