MORE than a decade after the dotcom bubble burst, firms such as Skyscanner are leading a new technology boom, writes Gareth Mackie
When Gareth Williams sat down with two friends and a laptop in 2001 to create a simple spreadsheet of flight prices, his main concern was making it easy to find a cheap holiday.
Their idea turned into Skyscanner, a company based in a small office in Leith manned by a handful of enthusiastic young staff.
Now, after doubling profits and turnover and receiving investment from a Silicon Valley venture fund, it is poised to become the world’s biggest travel search engine.
Analysts value the business at £500 million and it is hiring more staff to fill its swanky new headquarters in Edinburgh’s Quartermile.
The company, which Williams co-founded with Bonamy Grimes and Barry Smith, also has offices in Glasgow, Barcelona, Beijing, Miami and Singapore, and its 400-strong workforce is set to grow to 600 this year.
Skyscanner has been described as “one of the best technology companies ever to come out of Europe” by Sir Michael Moritz, the chairman of US-based venture capital firm Sequoia Capital, which has also backed technology titans Apple and Google, and took a minority stake in the business last year.
And other companies are now finding that investors’ attention is returning to a sector that some saw as off limits after the dotcom bubble burst just as Skyscanner was setting up.
Photography website Blipfoto recently raised £200,000 to accelerate its overseas expansion, taking the total investment in the company to more than £900,000.
Holoxica, a University of Edinburgh spin-out that is pioneering 3D displays featuring the kind of holographic images seen in films such as Minority Report and Star Wars, last week hit a £60,000 fundraising target through ShareIn, a new Scottish crowdfunding site dedicated to the technology and healthcare sectors.
ShareIn chief executive Jude Cook says: “We built this platform because we are passionate about innovation and want to give amazing ideas a chance to flourish, and we are delighted to see that other people feel the same.”
Another Edinburgh spin-out hoping to tap into this new source of finance is Carbomap, a company led by Professor Iain Woodhouse that has developed laser systems for use on aircraft and unmanned aerial vehicles to measure how much carbon is absorbed by the world’s forests. The firm has already raised about £140,000 from the university’s technology fund, Scottish Enterprise and its own directors, and is now hoping to bring in at least £80,000 through ShareIn to take its product to the market.
Carbomap has secured the services of adviser Leon Walker, the former chief executive of oil and gas surveyor MTEM, itself also born out of the university’s School of GeoSciences. MTEM launched in 2004 with £7.4m in funding from backers including Scottish Equity Partners, and three years later was snapped up by Norway’s Petroleum Geo-Services for $275m (£168m) – of which £8.6m went back to the university.
Woodhouse says: “We still see the academic benefits from MTEM in the school, in terms of funded posts, and successes like that help to change people’s mentality.
“Ten years ago, my colleagues might have thought I was wasting their time by getting involved in start-ups, but now they see that the school and university can benefit directly when you have a big success like MTEM. The culture is more supportive than it used to be.”
So is Scotland on the cusp of a new tech boom? Jonathan Harris, of Young Company Finance, believes we are, and says companies have become adept at identifying a problem and then finding a solution, rather than developing technology in the hope of finding a market.
“There are all sorts of things being developed now which could be really promising,” says Harris, who compiles statistics on university spin-outs. The potential for good companies is very bright.”
According to a Spinouts UK survey published by Young Company Finance, almost 1,600 companies have been born out of research carried out at UK universities since 2001. Of those, 504 were from Scottish institutions – including 244 from Edinburgh University alone.
However, Harris cautions that, while Scotland’s educational establishments can develop “technology that’s as good as anywhere else”, their spin-outs tend to get less funding than those south of the Border, “partly because of closeness to market and existing funds”.
One recent example of where Scottish know-how ended up travelling south is Data2Text, a company spun out of the University of Aberdeen in 2009 that uses a form of artificial intelligence to turn complex sets of data into reports that read as though they were written by a human. Its software is already being used by the Met Office and an oil and gas producer in the Gulf of Mexico.
Data2Text was acquired in October by London-based Arria NLG, which is now valued at more than £117m after floating on the Alternative Investment Market at the end of last year.
David Smith, director of technology, engineering and creative industries at Scottish Enterprise, notes that the tech sector goes through cycles of growth and contraction, “but the trend for some time has been upwards in terms of opportunities” as the global economic outlook brightens.
He adds: “In the past, people tended to get excited about technology for technology’s sake, but now there’s a far sharper focus on understanding customer needs and addressing those.”
Smith says Scotland is “punching above its weight” in commercialising university research, while the development agency has invested about £30m in early-stage deals over the past year through the Scottish Investment Bank (SIB), leveraging a further £60m from private sector partners and investment funds.
SIB last week participated in a £4m injection secured by spin-out Edinburgh Molecular Imaging (EMI). It will help EMI develop technology to diagnose and monitor diseases such as respiratory conditions that kill one in five people in the UK.
Smith says: “Without a doubt, because of some of the societal challenges that we face, technology has a major role to play in helping to address those and develop new markets.”