Chief entrepreneur Ana Stewart’s claims on Scotland’s tech ecosystem must be challenged, writes TERRY MURDEN
There is little doubt that amid the hand-wringing and angst over economic growth, Scotland has made great strides in creating a thriving eco-system of startups, largely through a shift in government mind-set and by leveraging the talent in its universities. Just how much progress has been made over the rest of the UK, as claimed at the weekend, is more questionable.
Ana Stewart, who works for the Scottish government as an unpaid “chief entrepreneur”, has been speaking of a “nation of great entrepreneurial talent” creating start-ups faster than the UK as a whole. On what basis this is claimed she didn’t make clear, but cities such as Manchester, Cambridge, Bristol and Leeds might have something to say about it. Not to mention London, which is way ahead of everybody.
Ms Stewart took over her role from former Skyscanner executive Mark Logan, who stepped back after constant criticism over his pay packet. He played a key part in guiding economy minister Kate Forbes’s policy on a tech-led strategy. It has helped counter regular claims, not least in reports last week, that the SNP government lacks focus and intent on economic matters. The tech scalers in particular have drawn admiration from around the world along with the government’s CivTech initiative to get young tech firms involved in solving problems in public policy areas.
These are part of what Ms Stewart calls a “huge growth spurt” in start-ups over the last five years, building on Mr Logan’s efforts to develop a “much more vibrant start-up ecosystem” in Scotland.
“We are well ahead of the UK. We are leading the UK in terms of compound growth and start-up rates and we are one of the leading [countries] in Europe,” she declared in an interview with The Herald, adding that the start-up growth is twice that of countries like Sweden”. As an aside she acknowledged that this is from a very low base and that “caution is required around that”. Yes, indeed, we should not get carried away.
I’ve written before about how other areas of the UK, far from lagging behind Scotland are taking a massive lead and how they are doing it without the the structures and funding packages provided by devolved government. In many cases the only additional support is provided through a mayoral office.
Manchester has repeatedly been recognised as the UK’s most entrepreneurial city. It had six unicorn cities back in 2021, more than the whole of Scotland (four). A year earlier, it became the second most attractive UK city for tech investment. It was officially the UK’s Top Digital Tech City and a national leader across multiple industries. This year new research commissioned by ecosystem experts Capital Enterprise showed that Manchester, Liverpool and Leeds are among the top locations for UK entrepreneurs to start new businesses.
And what about Cambridge? Data from Dealroom in June this year revealed it had more companies making the transition from start-up to scale-up than in any other prominent hub for entrepreneurship. On average, 41% of seed-round start-ups in Cambridge made it to a Series A round, even higher than the Bay area (40%).
Research by BNP Paribas in May showed that Edinburgh was the only Scottish city in the top 10 UK startup ecosystems, with Bristol, Cambridge and Leeds topping the list.
Scottish government support has actually become somewhat grudging in recent years, with cuts to enterprise budgets and higher income taxes that are said to be deterring entrepreneurs. Last year I wrote that the proposed Economic Leadership Group that was supposed to oversee Forbes’ National Strategy for Economic Transformation had never met.
Bruntwood SciTech, a Manchester-based property company focused on the science and technology sector, withdrew plans for a £60m tech hub in the vacant Met Tower in Glasgow – just days before Glasgow Tech Week.
Just before he was appointed chairman of Scottish Enterprise, Prof Jim McDonald said that Scotland’s otherwise highly-valued universities were producing half the number of spin-outs as the UK average. “There are great successes to be celebrated in Scotland, but the overarching performance is actually a challenging read,” he told an audience in Glasgow where a new Enterprise Hub was being launched by the Royal Academy of Engineering of which he is president.
There are also been talk over the weekend about Scotland not creating enough companies of value, and certainly not enough to match its independence ambitions. Again, Manchester provides a lesson. Its unicorns – companies valued at $1 billion – include data productivity cloud platform Matillion, ecommerce giants Boohoo, The Hut Group (THG), AO.com, and car marketplace AutoTrader. Enterprise City is a new ‘tech, media, and creative’ cluster in central Manchester around the Old Granada Studios, while MediaCityUK has sprung up in Salford.
This is one city. Not one country. Scotland’s four unicorns are fantasy sports firm FanDuel, now owned by betting giant Flutter and run from the US; Skyscanner, now in Chinese ownership; Craneware, the software company (currently below unicorn value), and BrewDog, the brewer and pubs chain which is making a loss.
If creating unicorns is not a real measure of success, it’s the strength of the underlying SME community that will drive growth and here Manchester is also outgunning over-politicised Scotland.
While Daily Business last week blew a hole in KPMG’s venture capital report for Scotland, by exposing a major weakness in the verification process, venture capital is pouring into Manchester. In 2023, the city’s startups raised £532 million, a 50% increase on 2021. Matillion drew investment from Silicon Valley-based investor Lightspeed Venture Partners. Other sizeable raises in recent years include electric vehicle charging infrastructure Be.EV (£110m in 2022) and customer engagement platform Connex One (£93m in 2022). Both these latter two investments dwarf the funding raised for companies through Scotland’s techscaler programme.
Scotland’s progress in building an entreprenuerial culture should not be doubted. It is a cause for celebration. But no one should underestimate the progress also being made elsewhere, in some cases more pronounced and with more impact.
Terry Murden was Scotland editor and Business Editor at The Sunday Times, Business Editor at The Scotsman, and Business and City Editor at Scotland on Sunday. He is now Editor of Daily Business
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