Andrew Collier: Business plan hatching

Published on 24/02/2013 00:00

An entrepreneurs’ ecosystem is taking shape in Scotland and could lead to a business revolution North of the border, finds Andrew Collier

NO man, as the old saying goes, is an island. The same is true of businesses. If they are to be truly successful, some sort of collaboration is vital. Sharing of best practice; networking; joint ventures – are all examples of how companies can work together not just for mutual benefit, but to maximise their own growth and profits.

This kind of co-operation is, however, normally localised and informal. It does not normally develop to the point where there is a real sense of common purpose, perhaps to the point of mutual dependence.

By nurturing businesses right from the start, they can receive the impetus they need and go on to success. That in turn fuels jobs, drives further investment and helps the Scottish economy.

An exciting new initiative is using truly innovative thinking to build and create a mutually supportive network in which small businesses can thrive. The Royal Bank of Scotland (RBS) is one of it’s main driving forces, and the Regional Managing Director for Business Banking at RBS, Gordon Merrylees, is leading the charge.

The bank is supporting and promoting an “entrepreneurial ecosystem”. This idea evolved originally at the Babson Institute in Boston, which has been rated as one of the best entrepreneurial colleges in the US for the last 20 years. It is a success in America – now RBS and others are bringing it to Scotland.

The entrepreneurial ecosystem consists of organisations, such as banks, government, the universities and further education colleges, the enterprise community, the angel network and venture capitalists all working together. Essentially, it is creating a climate and a network which works together to support entrepreneurs.

For RBS, support for an ecosystem is not about trying to win new bank accounts – it is about making a contribution to the wider economy by helping entrepreneurs achieve their ambitions of setting up a business then helping that business survive and thrive.

Merrylees is responsible for handling the accounts of companies with a turnover up to £2 million. The Boston experience, he says, is an exemplar for Scotland: “It’s worked very well, and they’ve not been precious about collaborating. It involves the local authorities, the governor, the mayor, the banks, business schools, the universities, the politicians, the venture capitalists and the angel network. The corporates act as mentors, funders and leaders.”

Here in Scotland, the bank itself plans to be a trusted adviser to early-stage companies, working within the ecosystem. We really want to understand the entrepreneurial mindset and work with it.”

One of the biggest challenges, he says, is to increase the survival rate of new-start businesses – at present, some 50 per cent fail within the first three years.

Merrylees sees a new and exciting innovation, Entrepreneurial Spark (ESpark), as being a hugely important part of the ecosystem. It is Scotland’s first free business incubator and accelerator programme, and RBS is putting almost £400,000 into it over four years.

ESpark is a revolutionary concept. It uses business “hatcheries” to provide expert business mentoring support in fully serviced office facilities at no cost to start-ups.

In 2012 businesses supported by ESpark created nearly 200 jobs, made a turnover in excess of £3.5m and secured more than £2.5m worth of funding. Not a bad return for an organisation launched in the last two years.

Hatcheries have already opened in Glasgow and Ayrshire, using successful Scottish entrepreneurs Sir Tom Hunter and Sir Willie Haughey. A third, at South Gyle in Edinburgh, was launched on Friday with the backing of businesswoman and philanthropist Ann Gloag.

Merrylees continues: “We saw there was an opportunity to become involved by providing oxygen for businesses growth – such as prize money, knowledge, expertise and mentoring. It was appropriate for us to do so, as we bank the majority of small-to-medium sized enterprises in Scotland.

“We want RBS to become the bank of choice for SMEs and entrepreneurs. The aim is to add value beyond traditional banking and we see this as a real opportunity to give back to the Scottish economy and do the right thing in society.”

“I’m really encouraging my people to open up their networks to small business and put them in touch with the ecosystem network. Effectively, what we’re trying to do is put entrepreneurs in touch with the best people who can facilitate growth.”

Organisations he sees being part of the developing ecosystem include Scottish Enterprise, business schools, Scottish Development International, Business Gateways, the Institute of Directors Scotland, the Saltire Foundation and a range of businesses and other bodies.

“In Boston, they see this as being like a shopping mall – there are anchor tenants and everyone is dependant on each other. There is collaboration to make the mall a success. At RBS, we are working hard to pull everything together.”

Merrylees defines the really big issues as achieving world-class mentoring, access to good networks, creating the right entrepreneurial mindset, and bringing education about entrepreneurship to people at a younger age.

“We also need to establish a coherent policy with the Scottish Government, and to provide access to role models. We know, for instance, that provision of authentic role models is particularly important for female entrepreneurs but would also like to roll it out more widely.”

By putting a support structure in place which incorporates these elements, he says, three-year business survival rates in Scotland could improve to 70 per cent or above. He sees the ecosystem, along with other economic growth initiatives such as the Scottish Government’s EDGE fund – which John Swinney recently doubled to £2m – as fundamental towards achieving this.

The experience in Boston shows the potential for success is remarkable. In a period between July and October of last year, 361 businesses were supported, $362m of funding was raised, 2910 jobs were created and $92m of revenue was created.

Of all the initiatives within the ecosystem, ESpark is one of the most exciting. Jim Duffy is its chief executive. He explains that more than 130 companies have so far signed up for a place in one of the existing hatcheries.

“We have all types of business – social enterprises, charities, the self-employed and so on,” he says. “ESpark is special because it is focused very much on the entrepreneur. We work very closely with them as people and concentrate on the mindset and the behaviour of the entrepreneur.”

By doing this, he adds, business leaders learn to have an attitude to succeed which can apply to virtually any sector. “If you sit in your silo, then you will die in your silo. But if you come into a hatchery with 40 or 50 other companies, then you engage in peer-to-peer collaboration and can share the pain and the joy.”

So, how does it work? “There’s a big, open space with desks and meeting rooms. It may be that a company working on hip replacement technology is positioned next to someone working on websites and someone else selling products.

“The companies have to attend a weekly networking event where they pitch to each other. Then, every 45 days, they go off on a weekend designed to accelerate their progress by boosting their confidence, skills and acumen as well as problem solving.

“It is all designed to develop entrepreneurial mindsets and behaviour. The aim is to ensure they know each other, trust each other and are prepared to give back.

“We’ll create an entrepreneurial renaissance for the future. I believe this could be at the core of Scotland’s entrepreneurism over the next five to 10 years.”

“RBS is keen to take an ambassadorial role and is putting real effort into the networking side. It is very keen to help promote us.”

Another organisation involved in the ecosystem, and which RBS is assisting, is Power of Youth Scotland, part of a growing community of young entrepreneurs dedicated to building a better world through business. It is hosting an action programme this spring.

Adam Purves, the organisation’s founder, says there has never been a better time to be an entrepreneur, but that Scotland currently doesn’t have the right mindset. “There’s a lack of good entrepreneurial education at a young age and a lack of mentors and creative policy.

“It’s the wrong way up at the moment – civil servants can’t teach people how to run a business. And this generation want to do more than make money, they want to put something into society.”

Purves believes the ecosystem has to be led by entrepreneurs. “A lot of Europeans are complacent – look at China. They have created a very positive push for the country. The difference is huge and it works incredibly well. But we will make a difference here in Scotland too.”

Retail therapy switched online

Case study: Cally Russell

THE online shopping market is growing at between 15% and 20% every year. More and more of us buy everything from car insurance to cats without ever going near a physical retail outlet. We can do the research, read the reviews, ask our friends for recommendations and share our own delights and disappointments with them.

But when it comes to shopping for clothes, we’re a bit more traditional in our habits. If Cally Russell, 24, has anything to do with it, there’s about to be a revolution – with him and his team at the centre of it. The founder of Mallzee.com has been busy gathering a lot of information about how people shop online, what kind of sites they like to go to, how they make their buying decisions.

“We started out by looking at all these factors and we could see that while people would go to sites like Compare the Market for insurance, they weren’t looking at clothes in that kind of way,” says Cally.

“Offline, they shop with friends, they visit lots of different places, it’s a social event and the retail outlets are easily accessible. You try things on and get your friend’s opinion before you decide what to buy.”

All of which makes shopping for clothes online a rather lonely experience, and that’s what Cally wants to change. “When we launch on April 3, we’ll be offering access to some 300 shops. You can take a short survey that will identify the kinds of outlets where you’re likely to find what you like and you can browse there, wherever you are in the world.

“The extra dimension is that you can then personalise the way you shop, have all the stores you like in one place, and chat live with your friends while you browse – and you get paid while you shop!”

Already, more than 3,000 people have signed up to the site in anticipation of its launch. Cally adds: “We’ve had a lot of interest from retailers around the globe and we hope that over the next three years we’ll build up to a million users. We’re setting the bar high but we believe it’s perfectly achievable.”

The ESpark hatchery has given huge support, says Cally. “It’s been fantastic. It’s given us a space to grow and it gives us that community of people with whom we can share things. You need a mentor, someone who not only understands your particular sphere but has the general business acumen you need. That’s a fantastic help.”

Finding investors for an innovative business concept can be difficult. Traditional lenders like banks tend to prefer ideas that are tried and tested, but Cally has found that business angels are very responsive. “They like the international reach and the potential, and they’ve been very supportive in letting us do things in our way,” he says.

“We’ll change the way people shop online. E-commerce is growing massively and now is the time to get involved. Mallzee.com will operate any and everywhere in the world from a strong base in Scotland.”

Welcome move for dog owners

Case study: Grant Mackenzie

IT’S a cold, wet and muddy lunchtime somewhere in Scotland. You’ve just been hiking along the riverbank with your Labrador. He’s tired, you’re tired, and it’s time to sit down and enjoy a drink and something to eat. But there’s a problem.

You know a lovely little pub that has an open turf fire and serves delightful food but they have a sign that says “No dogs, other than guide dogs, allowed inside.” It’s not really a day for sitting outside. Wouldn’t life be so much easier if you knew in advance just where you and your dog could sit down together for a drink, perhaps go on a camping holiday, or stay in a hotel or bed and breakfast in Scotland?

It is with that premise that Grant MacKenzie established his website, We Welcome Dogs. “I travelled around the US, South America, Europe, and I found a lot more places allowed dogs in than do in the UK, even though we’re supposed to be a nation of dog lovers,” he says. “I met a dog in a butcher’s in Buenos Aires! You wouldn’t see that here.

“It was with that experience, and what I was finding here with my own dog, that I thought there would be a demand for a single site that would tell you what businesses were dog-friendly in Scotland.”

Grant contacted the Food Standards Agency to find out exactly what the legal demands on businesses were regarding dogs on the premises. “They say it’s basically up to the proprietor to decide, so long as dogs aren’t in an area where food is being prepared, so it’s a bit of a misconception that this is what stands in the way of being a dog-friendly operator,” he says.

Having won a Scottish Enterprise Tourism Innovation Award in 2012, Grant was able to gather some momentum behind him and took his site live in October, with apps for smartphones following soon afterwards.

Now with his foot just across the door of the new ESpark facility which opened at the Gyle in Edinburgh on Friday, Grant is already starting to see the advantages that such a community brings: “The business model is evolving over time and ESpark is showing me possible ways of improving my ideas.

“It’s important to be able to bounce these ideas around with people who have experience of setting up other technology-based businesses. It’s good that the ESpark mentors challenge preconceived ideas. You can get too stuck on your own perception of what your business ought to be, and being pushed to think through your own ideas is good.”

ESpark is also helping Grant to open doors. “As a small business, it can be very difficult to get to those contacts, to get them to listen, and ESpark seems likely to be able to help me in that context. That’s good news,” he says.

As We Welcome Dogs develops and builds its brand, Grant hopes to be able to move it out around the UK and elsewhere in Europe.

See www.wewelcomedogs.co.uk

Entrepreneur welcomes Edinburgh ESpark

Case study: Melanie Sherwood

Melanie Sherwood is setting about making her lifelong dream come true: “I have always wanted to run my own business,” she says, “and now I’m taking that leap forward.”

She certainly is. At the age of 43, she has resigned from her full-time job as a learning and development expert and has taken her first tentative steps into the ESpark hatchery in Edinburgh.

Her planned business idea, called www.onestopshowshop.com, will match products and services for hire with people in the performing arts looking for them. So if your next stage production of Macbeth requires a few witch costumes, a crown or two and some armour, you’ll know where to find what you need when the site goes live.

“It is still a seed of an idea,” says Melanie. My partner and I came up with the concept about 18 months ago but the timing wasn’t right then for me to give up my job.”

Melanie is one of the first entrants – or chicklets – to cross the step of the new Edinburgh Espark hatchery at The Gyle, which opened its doors on Friday. She is full of enthusiasm for the programme.

“I am just so happy to be in this environment, sharing ideas and enthusiasm with other entrepreneurs and getting all the mentoring and support I know I need. I love the atmosphere of sharing and support, of joining forces and working together because that benefits everybody and increases enthusiasm and productivity.”

Born and brought up in Australia, Melanie studied performing arts in Melbourne. Among her many claims to fame are four appearances on Neighbours, the Australian soap.

“Performing arts are my real passion,” she says. “It’s wonderful to be putting into place a business that is so close to my heart. The fact that I’m a bit older than some of the new start-ups means I have a breadth of life experience in a host of areas, all of it useful in this new environment. I’ve worked in training, in administration, in marketing and customer relations and of course as an actor and a singer on stage, in films and on TV.

“Those skills are all relevant when it comes to running a business. There is a lot I still need to do. I need to research more closely the viability of my idea but ESpark is very good at encouraging people. Jim Duffy [the chief executive of ESpark] told me not to be disheartened if my original idea doesn’t work out. It may well evolve into something different and better and I will have learned those core skills.”

Melanie’s had her first few days at the hatchery and her first ideation session. “That’s when your mentor really asks you the hard questions about what you’re doing,” Melanie explains. “Your ideas, your plans, what it is you want to achieve, what kind of person you are. That gets you thinking and focusing properly.”

ESpark also offers practical workshops in areas such as managing cash flow, dealing with sales, VAT, accounting and many others. Melanie has already signed up to several.

“All of these practical skills are important if I am to create a sustainable business. Capital is important as well and I’m hoping that, a bit further down the line, the Royal Bank will be listening sympathetically to my plans.”