A Rallying Call For the Scottish Startup Scene

June 15, 2011 By Mike McGrail 32 Comments

The Social Penguin Blog is based in Scotland and is firmly of the belief that the Startup scene within our country needs a boost, not just in support but in recognition. Christopher McCann and Michael Hayes explore the issues below…

Scotland has a long tradition of innovation and entrepreneurship, from the Logarithms of John Napier to James Watt’s work on the steam engine. But who from Scotland has innovated in the modern age? Scotland has fallen behind on the world stage of innovation and we must seize that back and once again become a global centre of excellence in technology and entrepreneurship.

James Watt - A Father of Scottish Innovation

The Internet has provided an outlet for a new breed of entrepreneurs but the Scottish mindset has not moved with the times. We are a country with a mindset for manufacturing but that can now no longer compete with the emerging markets of China and India. So how can Scotland compete with other countries? Well, we should look to our strengths; in particular we have a long tradition of excellent education giving Scotland a highly skilled workforce.

We have the skills in Scotland to compete internationally in the tech industry but what is holding us back? In our opinion there are several things that must change before we can truly realize our potential.

Firstly, our universities need to recognize their role in shaping future entrepreneurs and members of the community. Becoming an entrepreneur is not for everyone but it must be presented as an option and inspiration should be provided at every opportunity. We believe it to be crucial that inspirational and successful entrepreneurs are welcomed into our universities on a regular basis and that students are actively encouraged to consider starting their own businesses. Instead, 90% of computer science graduates will enter the financial sector. This must change.

We must also challenge a lack of ambition and a “someone else will do it” attitude, which is prevalent in Scotland. We have been told on many occasions 99.99% of businesses fail and not to get ahead of ourselves. We don’t think this is the right attitude. You can be the next Facebook. Why not? No one will be the next Facebook until someone just does it!

We also have a startup community in Scotland, which is disjointed and incohesive. In our opinion it is essential that a tight startup community exists to assist, nurture and support entrepreneurs and startups. A close community can swap skills, support and advice and it is essential to the success of Scotland on a global stage. We must all take the time to go out and meet one another, attend events and create a close community of support and exchange.

Lastly, there is the investment community and a risk-averse and hidden culture that exists throughout Scotland and the UK as a whole. In our view investors must be willing to take a step forward to support the tech startup community. Capital must be available to allow good startups to succeed and investors must look towards a new mindset. We meet a lot of business-to-business and service-based startups in Scotland as opposed to in the US where there are more business to consumer and product-based startups. A lot of this is due to UK (and probably EU) investor fear of consumer-based business models. That isn’t to say all investors are that way inclined but a healthy proportion are. We have to change that.

Scotland has the skills and the talent to become a global icon for technology and entrepreneurship but there must be changes. Our universities must promote entrepreneurship and show it as an exciting and reward opportunity. Communities must be grown to support fledgling startups and capital must be available from investors who truly understand the technology industry. These are just some changes that we believe must happen for Scotland to truly flourish in the global technology industry.

Thanks to Christopher and Michael for this post, they are looking to make a difference so please do contact them if you feel the same.

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Humanising your startup through social media – Christopher McCann

Filed Under: Start-ups Tagged With: innovation, startups

About Mike McGrail

Mike McGrail is the owner of The Social Penguin Blog. He delivers digital goodness for The BIG Partnership. He likes scotch and leather-bound books. Follow Mike's ramblings on Twitter. He also resides on Google Plus here.

http://twitter.com/idle_bull Geoff Kennedy

Hi, great post on a particularly significant topic at the moment!

There seems to be plenty of individuals (and companies) with talent and some amazing skills. But the trend seems to be to try and sell these skills, often to each other. This is often purely down to the necessity of cash which obviously can’t be avoided. However if a more longsighted approach was taken with more collaboration and skills swapping going on then I believe that’s when we’ll really have something significant to sell beyond the local environment.
That’s not to say this isn’t going on already, but it needs to happen more.

Geoff

http://www.christophmccann.com Christopher McCann

Thanks Geoff. Your absolutely right – we have a great workforce but fewer and fewer see starting a business as a viable option. This really saddens me because our economy needs more startups and private sector employment. I think we are on the right path now but it will be a long process!

http://twitter.com/AlexDRobertson Alex Robertson

Great post.This year I spent some time attempting to develop investment into a technology startup. The model was one based on initial blue chip and larger B2B sales turning into a more B2C sales model. While investors were very receptive to the product, the main issue raised was that of the B2C model – it was certainly not something they were keen on – so great point there. Investors need to be a bit more keen on this sort of model.

As for a community I’m not sure of the scene in Glasgow but certainly I found the Edinburgh tech community incredibly receptive to startup. This is probably something to do with the Edinburgh Informatics forum being a fantastic place for start-up incubation. They provide support to start-ups in the form of office space as well as courses on marketing, management and investment support. Many with fantastic speakers from MIT and other institutions. Certainly I found it amazing the amount of support available.
Of course this is just one man’s opinion and short experience!

One final point is that when speaking to various “angel” investors over the last year the main problem is not money or willingness to invest but a lack of approaches from businesses. Be interesting to hear from people who have had the opposite reaction!

Anonymous

Thanks for your comment Alex. Informatics Forum in Edinburgh is great and there are lot of great startups that have been very receptive but why should it be a Glasgow and an Edinburgh scene? We need to have a community across Scotland.

http://twitter.com/AlexDRobertson Alex Robertson

Absolutely – I suppose that its mainly reminiscent of the classic Edinburgh Glasgow divide. Those that study at one rarely migrate easily to the other. so there isn’t perhaps the core fraternity of university alumni to organise events. Problem is finding suitable venues/times/events/sponsors for these things!

Anonymous

Thanks for your comment Alex. Informatics Forum in Edinburgh is great and there are lot of great startups that have been very receptive but why should it be a Glasgow and an Edinburgh scene? We need to have a community across Scotland.
http://www.christophmccann.com Christopher McCann

I couldn’t agree more Alex. I think European investors as a whole generally don’t get consumer based business models and favour B2B models. I do to an extent agree with your last point in that I think some businesses don’t try hard enough to go out and meet investors – but at the same time I also think in the UK investors are more risk-averse and more hidden making it harder for businesses to reach them.
Jennie

I agree that the Edinburgh scene is tight-knit and receptive – the opposite of the post’s claim! You can’t have an entrepreneurial scene that stretches across the whole of Scotland and still works; it’s too geographically spread. Companies need to be in the same building (yay for Appleton Tower), not the same country.

Even from my viewpoint here in Silicon Valley, which is around 50 miles north-south, you have a “San Francisco” community and a “Valley” community — the Valley community is even fragmented, but people make the effort to get to events in central places and co-work from a select few locations.

What we need in Scotland to echo some of the Valley feel is:
- Centralised hackerspace/coworking space large enough to support at least 100 entrepreneurs. Happy Hour every Friday, all local startups are invited. Mailing list for members. Standup “show and tell” demos every day.
- Bring EPIS back! And a similar YC-esque summer scheme targeted at students – do something meaningful in your summer holiday. Ideally lean-style, once compsci students cotton on they can make actual cash and wipe out their student loan in 3 months of summer work, they’ll all start doing it. We hope.
- More funding competitions and hackathon events with real sponsors and real prizes. Startup Weekend style.
- Role models that have actually made it, whether locally or from elsewhere with a good grasp of the Scottish scene and the challenges therein; when I was in Edinburgh there were a surprisingly small number of these around
- Similarly, advisors who have made it in the right sector (say, B2C web startups) and who have experience with Lean. Let’s get Eric Ries and Dave McClure in residence for 3 months, or the next best thing.
- Finally, forging links with angel groups that do invest in this kind of stuff and can overcome the geography, or a local angel syndicate that becomes well educated and aware of the huge opportunities in our space, so there’s a clear path to funding.

So, who’s with me?

–Jennie, former Edinburgh entrepreneur now in the Valley

http://twitter.com/roomitchell Andrew Mitchell

And bring back EPIS!! http://www.epis.ed.ac.uk/

http://www.christophmccann.com Christopher McCann

Definitely – we need to have a lot more of this in Scotland!

http://twitter.com/roomitchell Andrew Mitchell

And bring back EPIS!! http://www.epis.ed.ac.uk/
http://twitter.com/robzie81 Rob Zaleski

Excellent post Christopher and Michael!
Being from the States, I really can’t comment particularly on the state of things in Scotland, but I think that you raise some excellent and universal points. An educational push toward technological entrepreneurship would certainly help push the next generation in the right direction. Entrpreneurship comes with many rewards as well as risks, which is something that needs to be stressed. As far as investments go, if one can’t find it in the the UK’s lack of interest, parterships from afar are becoming much easier with all the digital technology available. Online meetingplaces easily replace the need to travel and meet face to face. That’s potentially a fallback option. I understand the want, however, to keep it on the homefront.
Scotland: Take heed. This is your call to action.

Anonymous

Thanks Rob. Good point on looking out with the UK for investment.
http://www.christophmccann.com Christopher McCann

Cheers Rob. Your absolutely right about the need to look for investment abroad as well as inside the UK.
Jennie

As a former Scottish startup, when I looked for investment elsewhere I was advised to move there to be taken seriously — investors vastly prefer local companies within shouting distance. I can understand why; they get plenty of local pitches, so why invest in something that will be harder to deal with?

http://twitter.com/robzie81 Rob Zaleski

I understand that there may be some opposition or hesitation to financially backing a start-up from afar, but I think the possibility of it happening in the current state of social media is greater than before. It would still require coaxing, still require selling yourself and your idea, and you would have to work hard at marketing yourself locally as well as possibly globally. That’s why I added the disclaimer of it being a back up idea. It obviously would be more likely and beneficial to try to keep within “shouting distance,” but social media extends that term much further than it did even five years ago.

Jennie

Social media doesn’t make up for face to face meetings and the ability to participate in the network of companies connected by the investor. I’m not trying to knock your comment, but I just don’t see the same world you do. None of the investors I’ve spoken to in the last year want to fund stuff that’s in a different country. They are, however, quite happy for that startup to move if they see it as high potential – YC is a great example of a ‘time-specific’ investment where companies move, but often move back afterwards.

http://twitter.com/robzie81 Rob Zaleski

I can sympathize with your perspective. Although, I think webinars and online meetings are quickly making traveling to meet face to face seem costly and outmoded. It don’t know that it will ever replace actual contact completely, but it has definitely proven its worth. I don’t deal with investors much, and it seems like you’ve had more experience which illuminates your point.
I’m not familiar with YC, though.

http://www.scottishbusinessforums.co.uk Barry Hynd

Really great post and particularly apt given recent press stories and the like. It’s also something that’s very close to my heart so I’ll apologise now if my response appears a tad over-zealous. So here’s my 2p….

Education – I dont get at all how anyone can say Scotland or the UK provides an education that in any way supports entrepreneurialism. Education I believe is why we are in the situation we are in. It needs overhauled from the core so that we start to produce people that want to start and grow companies.

Divides – There’s divides all over Scotland that are so endemic that it holds things back. Some other posters have also alluded to this but i’ve seen on many occassions where business based in Edinburgh who try to go west or north just not succeed because the perception of being an “Edinburgh company”. I’ve seen this occur in most major locations so it’s no specific to any area it’s all across Scotland.

I think the theory of people collaborating is brilliant. This is something i’ve sought to do for many years with the business forums I own and while it’s worked to a certain degree it hasn’t been a hige success. If you look at any networking company, chamber of commerce or anything where it has a local element you’ll find cliques form that become closed to outsiders. It even happen in social media as well and this is the fundamental reason why I believe collaboration is simply a pipe dream becuase ultimately it wont suit everyone and someone will want control.

Investment – I’m not sure I understand why you should be talking about investment with regards to startups. Startups should be funded by the owners who need to believe in what they are doing and put their money where their mouth is. The days when you can get a shed load of money off the back of an idea are well and truly done. Put your money in and prove the concept and you’ll get a far better return anyway.

Apologies if I sound like i’m ranting. It is a bit late and it is an area I feel quite passionate about. A great debate though and looking for others thoughts

Anonymous

In regards to investment for a startup there is nothing like YC or 500 startups in Scotland (as far as I know) but do agree it can be done using your own money. Regardless of how you get started it’s likely there will come a time when you will need investment and in Scotland do you think the investors are there for tech startups?

http://www.scottishbusinessforums.co.uk Barry Hynd

Hi Michael,

Looking for investment too early is where alot of businesses actually fail. It stifles them and eventually it leads to entrepreneurs feeling as if they are just employees. Surely part of proving a business concept revolves around actually making it work financially and get it to actually turn a profit? It’s these profits that should be re-invested back into the business to make it grow.

I dont actually believe that lack of investment stifles startups. What they lack is the essential business skills to actually go out and market/sell what their business does. You’d be far better to invest in getting the tools you need to make this easier than spend someone else’s money on an idea that might work.

The main issue I see is that the support network for startups is inadequate and out of date. It needs something fresh and new that can help to promote and encourage what’s been written above.

http://www.christophmccann.com Christopher McCann

Hi Barry,

Thanks a lot for your comment. I can completely see what you are saying and I definitely agree that startups shouldn’t be actually taking capital too early but i think its really important that capital is available to allow startups to scale once their product is off the ground and getting traction.

This is particularly crucial in the tech industry because a lot of tech startups won’t be making revenue straight away. Facebook for example didn’t go cash flow positive until 2010. If there had not be an availability of capital to support Facebook until then it would have struggled to scale.

Investment has to be available for those startups who are ready to take it to the next level. In my opinion the majority of major internet companies today would not be there if it had not been for significant VC and angel investment.

Cheers,

Chris

http://www.littleriot.co.uk Hello

I disagree fully that the start-up community in Scotland is “disjointed and incohesive”. Scotland has a wealth of resources available for start-ups and the community is far more resolved than in other areas of the UK.

I graduated from Dundee University last year. During my time there, I participated in the Enterprise Gym – a series of workshops which run every semester to encourage students to develop business ideas, resulting in a Dragons Den style pitching session, with cash seed funding as prizes. Entrepreneurship was fully encouraging during the four years I spent there and it was always shows as an exciting and reward opportunity for us as students and graduates. Despite no longer being a student, I am still supported by the resources I had access to whilst at university.

Upon graduating, I started my own company (http://www.littleriot.co.uk) and have found nothing but opportunities and resources in Scotland and its vibrant start-up scene. I have a business mentor with EDTC Technology Gateway (http://www.edtc.org.uk/) an organisation supporting the development of new products. I have received advice and guidance from the Princes Scottish Youth Trust (http://www.psybt.org.uk/) and Scottish Enterprise (http://www.scottish-enterprise.com/) and the Go Group (http://www.thegogroup.co.uk/) have also provided a wealth of resources. SMART:Scotland also pump hundreds of thousands of pounds every year into new ideas and innovation (http://www.scottish-enterprise.com/fund-your-business/innovation-and-rd-grants/smart-scotland.aspx).

Whilst at university I also received a series of lectures from the Cultural Enterprise Office (http://www.culturalenterpriseoffice.co.uk/website/) as part of my course, encouraging students to consider starting your own company as a viable option. I am currently participating in their Starter for 6 program, a six month program aimed at helping people develop their ideas into sustainable businesses. I have enjoyed a series of highly useful workshops as well as mentorship, specialist advice sessions, networking and telephone coaching. Each place on the program is worth around £8000, and this culminates next month with a pitch for funding. With £150,000 to go around, I think it is unfair to say that there are few opportunities for start-ups to secure capital.

Scotland also recognises innovation and its roots in Scotland with awards such as the John Logie Baird Awards (http://www.johnlogiebairdawards.co.uk) and there are various incubation centres supporting innovative development such as Innovation Centres Scotland (http://www.innovationcentre.org/). There are also plenty of smaller organisations popping up to support the community of start-ups such as Start Up Cafe (http://startupcafe.co.uk/).

I am currently studying a Masters in Newcastle several days a week. Despite being hailed as an up-and-coming “digital city” due to its wealth of digital companies and networking scene, there is FAR less here on offer for start-ups. I briefly entertained the idea of setting up my company’s base in Newcastle, but having done some research into my options, it’s a no brainer: Scotland has far more to offer a fledging start-up than the North East of England does. Obviously I cannot comment on other areas of the UK, but I find it horrifically unfair that you are tarring Scotland as lacking in ambition and waiting for someone else to do it.

My experience of being a start-up in Scotland has only been a positive one. Throughout my education I was encouraged to explore entrepreneurship and supported whilst doing so.

I do, however, agree that investors approach start-ups and the instillation of capital with a very closed mind. Sadly this is the attitude of many people in the UK and Europe: we just do not have the same positive approach to enterprise as the US does. But all we can do to change that is continue to produce excellent start-ups… and perhaps not label our country as such a poor place to do so.
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Daniel Winterstein

Good post. I think you’ve left out a key problem: weakness of the local market.
There is little more important to building a business than the initial customers. Selling to the world is great, but it helps if you can start by selling locally to customers you can talk to.

The Scottish business-to-business market for start-ups is quite small. The largest markets in Scotland are the state and financial sectors, then energy. These are risk averse markets (e.g. state sector procurement requires proof you’ve done it before, which actively discourages buying innovative solutions from a start-up).

Business-to-consumer often requires significant VC capital, which as you observe can be hard to find.

What to do?
Public sector organisations could be given a license (and possibly funds) to support innovation through slightly riskier procurement.
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http://www.facebook.com/kevinjbradshaw Kevin Bradshaw

No lack of good ideas or talent in Scotland. Main issue is access to sizeable, but probably more importantly knowledgeable and fast capital for growth. SE does all it possibly can to support, private sector needs to do more.
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http://www.facebook.com/profile.php?id=100002629527595 Rapp Edinburgh

We couldn’t agree more which is why we have launched our competition – DirtyPrettyDigitalThings. An event at Social Media Week in Glasgow in September to find Scotland’s answer to Zuckerberg. Please read the blog post to find out more – we believe the next big thing digital thing could come from Scotland.

http://socialmediaweek.org/glasgow/2011/07/19/dirty-pretty-digital-things-guest-blog-by-claire-wood-at-rapp-edinburgh/