09 May 2017

The first ‘Scottish Startup Survey’ points to a positive outlook, but finance is still the greatest concern for entrepreneurs.

A poll of 300 Scottish startups by Informatics Ventures in association with University of Edinburgh Business School and the Freer Consultancy has found Scotland’s startup community to be in relatively confident mood in 2017.

Despite the UK’s decision to leave the EU (Brexit) and the prospect of a second referendum on Scottish independence (IndyRef2) in the short to medium-term, the country’s startups see attracting investment (36%), developing a customer base (29%) and hiring talent (24%) as more immediate challenges.

Funding

  • 95% of the survey respondents require additional funding over the next 12 months
  • 76% of respondents aim to increase customer revenues this year
  • 61% are seeking investment from angels and high net worth private investors
  • 49% are seeking Scottish Investment Bank funding
  • 47% are seeking VC or corporate venture funding
  • 18% are seeking equity crowdfunding
  • 4% are seeking debt crowdfunding

Brexit and IndyRef2

  • 14% of survey respondents not concerned about the current political landscape
  • 44% more concerned by Brexit than IndyRef2
  • 25% more preocupied by IndyRef2 than Brexit
  • 17% said they were concerned about Brexit and IndyRef2 in equal measure
  • 42% of respondents said the ability to attract and retain talent, including non-UK nationals, was their primary concern
  • 15% of respondents voiced concerns over Brexit’s likely to impact on the strength of Scotland’s universities.

Biggest benefits of basing business in Scotland

  • The strength of Scotland’s universities is viewed as the single largest benefit of basing a startup in Scotland (21%) followed by Government support for startups (18%) and then the ability to attract talent (14%) and Scotland’s advisory network (14%).
  • Only 1% of respondents listed access to finance as a benefit of basing a startup in Scotland.

Dr Ben Spigel, Chancellor’s Fellow and Lecturer in Entrepreneurship at University of Edinburgh Business School, said:

“Scotland already has one of the most vibrant and exciting entrepreneurial economies in Europe. The exit of its two unicorns, Skyscanner and Fanduel, should only help to cement this by creating and inspiring a new generation of expert mentors, founders, advisors, and investors.

“But it’s no surprise that our entrepreneurs are concerned about the political landscape – there’s a real risk Brexit will make it harder for Scotland’s entrepreneurs to find the best tech and scale-up talent.

“These findings show just how essential it is for the Scottish government, universities, and colleges to concentrate building a skilled and energetic workforce to support the growth of the country’s tech startups and scale-ups.”

Steve Ewing, Director of Operations at Informatics Ventures, said:

“It is encouraging to see that our most promising young companies remain confident about their growth prospects in 2017 and the years ahead in spite of concerns around funding and an uncertain political environment.

“There has been a definite ‘FanDuel-Skyscanner effect’ which has put Scotland further up the world order of tech in terms of recognition and it’s our hope that this will help to build even stronger links to the UK and international investor networks that are so important to the future success of the Scottish tech scene.”

Most important target markets

  • Of the startups surveyed, 50% of respondents said North America is their most important target market, followed by the rest of Europe (18%), the UK (13%) and Asia (7%).

Hiring talent

  • Developer and engineering talent is most sought after at 53%.
  • While 31% of respondents indicated a Chief Technology Officer was their most important hire, only 7% said a Chief Marketing Officer was their most important hire.

Other

  • Ctrip’s acquisition of Skyscanner and FanDuel’s merger with DraftKings are both seen to be positive developments for the Scottish tech ecosystem with 76% of respondents saying increased international recognition improves Scotland’s ability to scale its tech companies.
  • 75% of the sample consider their company to be a “startup” while 25% consider themselves to be in the “scale-up” category.
  • 67% of the startups surveyed said they were revenue generating compared to 33% who said they were pre-revenue.
  • 31% of the survey defined their startup (or scale-up) as Software as a Service (Saas).
  • 11% of the respondents defined their startup as HealthTech, 10% as BioTech, 8% as Energy, 8% as Digital Media, 6% as Hardware, 7% as Wearables and 1% as FinTech.
  • Administrate, pureLiFi and snap40 were among the startups considered to have the best chance to reach $1billion or unicorn valuations.
  • Gareth Williams (Skyscanner), Nigel and Lesley Eccles (FanDuel), Chris van der Kuyl (4J Studios) are among the most inspirational tech founders.

The survey comes ahead of the Engage Invest Exploit (EIE) technology showcase, in May 2017.

Image source: @iStockphoto/Yuri_Arcurs