Tech it up a notch: Scaling Scottish innovation – UKTN

In May 2024 UKTN released a regional tech report in partnership with KPMG putting a spotlight on the innovation, strengths and challenges faced by the Scottish tech industry.

To explore the topic further, UKTN and KPMG brought together a group of experts in all things Scottish tech for a panel discussion on how the local community can advance the nation’s global standing and accelerate the impressive growth seen in Scotland.

The panel discussed how Scottish tech firms can approach the early stages of growth, how a gap in Scotland’s digital skills can be overcome and why tech companies need to think globally long before they consider expanding internationally.

Scaling Scotland’s tech businesses

A recent report from KPMG revealed that in 2023, Scottish firms pulled in £359m in VC investments in 2023, with standout deals including alternative meat startup ENOUGH’s £31m round and fintech DirectID’s £7.69m raise courtesy of the investment arm of IKEA.

This momentum has continued into 2024, with Scottish businesses securing £184m of VC funding in the first half of the year despite a global slowdown in fundraising.

Though this suggests a positive performance for the nation compared with other UK regions, there is a clear appetite for more funding, particularly towards the scaleup stage, where Amy Burnett, KPMG Emerging Giants lead for Scotland, said there is a “chasm” that “we need to address”.

For tech businesses in Scotland to grow, as is the case anywhere else, attracting the attention of investors is essential, but for Patricia El-Jichi, investment manager at Par Equity, the good news is the nation offers plenty of opportunities to do so for those willing to put in the work.

“Don’t be afraid to tap into your local ecosystem,” she said. “Your local incubators, accelerators, investment programs.”

According to El-Jichi, Scotland benefits from a strong and collaborative ecosystem that is eager to support its members.

“They have their own networks, and they can introduce you to other investors that are based in other parts of the UK or abroad.”

This was reflected in UKTN’s Scotland report, which found great enthusiasm in the industry regarding the availability of networking events and communities, with highlights including Glasgow City Innovation District, ONE Tech Hub and Techscaler.

El-Jichi also noted how encouraging the launch of Glasgow Tech Week, a first-of-its-kind event in Scotland, earlier this year was.

Putting your business in front of the eyes of investors is just part of the battle, however, according to Dr Poonam Malik, co-founder and chair of Microplate Dx.

Dr Malik urged founders to “do their own investor research” because “you need to align with and approach the investors that are right for you, otherwise you will hear more no’s than yeses”.

One thing in particular that companies need to understand about prospective investors according to Dr Malik is “risk appetite”.

This is of particular concern to many subsectors that make up a lot of Scottish tech, from life sciences to space tech, these are sectors that require not only years of research behind them but also a regulatory pathway that may put off those not willing to invest patiently.

Digital skills shortage? Get creative

In UKTN’s Scotland report, respondents to the stakeholder survey largely believed that the availability of talent needed improving, something that much of the UK has been struggling with.

Dr Malik said companies in Scotland should be thinking “creatively” about how to plug that skills gap, whether that’s through “remote working” or even considering sponsoring visas, something that can be off-putting to smaller companies due to the associated costs.

According to Onyinye Igbokwe, head of regional engagement for central Scotland at Codebase, there is a massively untapped source of talent in the form of the nation’s vast supply of international students.

Scotland is home to some of the world’s best higher education institutions that draw talented individuals from all corners of the world.

She described her own experience guest lecturing at the University of Glasgow. In one particular class, she noticed that the vast majority of students were international, and while they were all bright and educated, almost none of them were aware of the tech companies based just outside their campus.

“They go to school here, learn whatever they’re learning and after they go home…international students are coming in here, and we’re letting them go.”

For Igbokwe, university enterprise teams need to focus on encouraging these talented students to stick around and grow their ideas locally. There may be great resources for spinning out companies from universities but without proper outreach to these students, they’ll have no reason to stay in Scotland beyond their studies.

She added that beyond university students, many of the international people coming to Scotland could contribute massively to the local tech economy if the barriers to recruitment allowed it.

A large part of the problem there, according to Igbokwe, is that much of the regulation affecting this is determined by Westminster, which she feels is more focused on immigrant communities in England.

“Scotland is operating in deficit for it because you can’t keep talent here because of all the stringent rules, and England is better off because they don’t need to keep those people there because they already have diversity.”

El-Jichi added that while Scotland doesn’t have the level of multiculturalism as London, it remains an attractive place for foreigners due to its quality of life and the culture of tolerance. To go a step beyond in retaining foreign talent, she argued examining the structure of visas is a must.

Dr Malik pointed out that “a big barrier in international students starting and growing successful businesses is lack of local networks for them, people who could believe in their business idea early and back this with equivalent of ‘friends and family’ investment rounds.

Scottish tech on the international stage

More companies reaching the stage of a scaleup and beyond is something the Scottish tech industry is keen to see, but to truly elevate its global standing, there is a need for companies to make a splash internationally.

For Sandy Kennedy, a director at Intelligent Growth Solutions, which has itself become an intercontinental powerhouse, there is a real opportunity to do this by thinking beyond the limits that many in Scotland place upon themselves.

Kennedy described how Intelligent Growth Solutions, which develops vertical farming technology, partnering with academia and research organisations massively boosted the company’s progress.

The issue, however, is that according to Kennedy, “we do love a silo in Scotland”.

He argued that there is a culture of siloing in which everybody is “put in a box”, whether they’re investors, academics or entrepreneurs.

“That’s not how it should work, we’ve got to break down silos, we’ve got to really start thinking”.

This is part of what forms what Kennedy described as a global mindset, something that needs to be baked into founders right from the beginning of the businesses’ journeys.

After Intelligent Growth Solutions had secured a few seed rounds, Kennedy said they made the deliberate decision to seek the next stage of funding in America.

“We believed that part of our story needed to be that we were attracted to the top VCs in the world…so, therefore, part of our narrative was not that we’re great in our small Scottish market, but that we’re great in an international market.”

The group still had a strong desire to represent and continue to support Scotland, in part because it felt its “purpose is rooted in Scotland”, but as Burnett put it, “you’ve got to go where the money is”.

Thank you to all of the panellists for sharing their insights into the future of the Scottish tech industry, as well as those who attended the discussion.