Scottish firms struggling to get access to funding

Every company has to start somewhere. Picture: TSPL
Every company has to start somewhere. Picture: TSPL
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ALMOST half the country’s start-up firms believe that access to finance is the biggest challenge facing their business, and many fear that Scotland lacks the appropriate funding environment to help them develop.

But, in a major survey of the Scottish start-up scene, compiled by Young Company Finance (YCF) and published today, the vast majority are confident they will be able to grow their business from a base north of the Border.

The research, carried out for Edinburgh-based mentoring organisation Informatics Ventures, found 48 per cent of new companies said the biggest hurdle on their path to growth was access to finance, and 41 per cent were “not confident” about Scotland’s funding environment.

Despite these fears, nine out of ten firms were either “moderately” or “very” confident in their ability to scale up their business without having to move their base elsewhere.

Gordon Stuart, senior executive at Informatics Ventures, said: “That says a lot about the increasingly ‘can do’ attitude of our most promising young business talent in Scotland.”

Today’s survey comes ahead of the Engage Invest Exploit (EIE) forum, to be held this week in Edinburgh, where Informatics Ventures has selected 60 early-stage companies to showcase their technology.

Kerry Sharp, head of the Scottish Investment Bank, which co-invests alongside private sector partners, said: “Access to finance continues to be challenging for many companies. This highlights the importance of EIE in giving some of Scotland’s most promising science and technology companies a platform to engage with Scottish and international investors.”

However, Jim Duffy, chief executive of business accelerator programme Entrepreneurial Spark (ESpark), told Scotland on Sunday that start-ups need to “earn the right” to finance, and a good idea alone is not enough to attract investment.

He added: “Part of the problem that start-ups have is not a lack of funding, but understanding how and where to get it. A start-up will get funding if it’s believable, well thought-out and has a decent team – and we don’t build enough of them in Scotland.

“I recently visited New York and spent a lot of time in Boston, and people are leaving MIT and Harvard in teams, ready to go into accelerators and incubators. It’s part of the culture there, but in Scotland there’s a lack of understanding about how to grow a start-up.”

ESpark, backed by business figures including Lord Haughey, Sir Tom Hunter and Ann Gloag, supported 280 start-ups last year, up from 139 in 2012.

New businesses are “hothoused” for five months in one of three “hatcheries” in Ayrshire, Edinburgh and Glasgow, where they receive free office space, business mentoring and advice. Funding attracted by the fledgling firms more than trebled to £8 million.

Given their concerns over the state of Scotland’s funding landscape, 85 per cent of the start-ups surveyed by YCF said they need closer links to London – a finding that Duffy agreed with entirely.

He said: “We’re sending entrepreneurs down the M6 every week to get cash in London, because the investment community in Scotland focuses on technology and biotech, although it only makes up about 3 per cent of our businesses.”

EIE14 is being held on Thursday at the Assembly Rooms in Edinburgh. The event is run in conjunction with Edinburgh BioQuarter, the Edinburgh Centre for Carbon Innovation and the Scottish Inv­estment Bank.