15 September 2020
The Scottish Government's announcement that they are accepting the recommendations of the recent Logan report suggests a new phase in Scotland's entrepreneurial ecosystem. The Logan report, authored by Mark Logan, the former COO of Skyscanner, laid out a roadmap for supporting the tech economy with the goal of producing more unicorn entrepreneurial firms that grow quickly from their founding to be worth more than a billion pounds. Building globally competitive technology firms is a key part of Scotland's broader economic development efforts, especially now as the Covid pandemic and worldwide decarbonisation efforts will shrink the oil and gas sector and potentially the tourism market as well.
The first tangible outcome of this report has been the investment of £4 million to support five new technology hubs with more promised for entrepreneur-led support organisations. But do these investments represent a new approach to support Scotland's entrepreneurial ecosystem, or are they simply the next iteration of other failed schemes to build a gleaming Silicon Glen?
Ironically, if the Scottish government wants to succeed at supporting entrepreneurs, it must get better at failing. Too often, ambitious plans to support entrepreneurs in new industries have been hamstrung by the need to show high performance by the next election. Publicly funded organisations are forced to try to meet key metrics set by bureaucrats that have little relevancy to actual business success, but look good on annual reports. Above all, these programmes try to avoid failures that get covered on the front page or raised by the opposition in First Minister's Questions.
...government and support systems need to tolerate risk and accept that the true value of these projects may not be visible for a decade or more.
But entrepreneurship requires risk, and so does its support. The Logan report discussed the need for more risk-tolerant policy and it's important that this recommendation is followed. We must be prepared for the failure of the firms these new technology hubs support, and indeed for the hubs themselves to fail. This isn't to say that we should tolerate profligate spending of public money, but instead that the government and support systems need to tolerate risk and accept that the true value of these projects may not be visible for a decade or more. Accepting failure allows us to take risks on who gets support and allows support programmes to go out on a limb for companies with promise but which might not look great on paper.
Indeed, one of the great shifts this new approach to risk would allow is for the support for technology entrepreneurship to move beyond what we normally consider technology. Some of the biggest recent successes in the Scottish entrepreneurial community have been non-tech firms such as Brew Dog and Genius Foods. Because these types of firms require more up-front investment than software development, they are riskier, but they also have the potential to create a far larger economic impact. But is the Scottish Government willing to take the risk of supporting big risks and then failing?
A version of this article first appeared in The Times.