There was some unfortunate news from the Scottish tech scene last week, with the announcement that IT network deployment specialist Hutchinson Networks had gone into administration with the loss of around 100 jobs.
I spent some time engaging with the company last year around its communications requirements and, like many others I’m sure, got the impression that things were pointed in the right direction with growing UK and global sales.
At the same time, the company was only a year on from securing a £2 million plus financing round that came seven years after Hutchinson was founded. So, as a friend from the tech community remarked this week, perhaps sales were not quite as strong as advertised. Whatever the case, hopefully Scotland’s industry skills shortage means the Hutchinson folks who lost their jobs will find new employment soon.
While this episode is a lowlight for Scottish tech, there are encouraging signs of other scale-ups on the verge of making significant breakthroughs. In areas like cloud computing, healthtech and fintech, the collective hope is that Scotland’s most promising scale-ups can reach what might be described as pre-unicorn status – in other words, technology scale-companies that can realistically move towards $1 billion (£783,000) valuations.
High-calibre venture capitalists I have spoken to about the subject say other UK tech hubs outside London, including Manchester and Cambridge, are doing a better job of producing these pre-unicorn candidates, but the stars are starting to align for Scotland – we just need to move a lot quicker. We might learn some lessons from LinkedIn co-founder and Greylock Partners partner Reid Hoffman who writes about “blitzscaling, the lightning-fast path to building massively valuable companies” in his latest book.
Of course, tech ecosystem success in Scotland is not going to rely on how many unicorns we produce, but the general consensus seems to be that a much stronger bedrock of £50-100 million-valued companies (described as a “funnel of high growth companies” by an entrepreneur and start-up investor contact yesterday) would be a big step in the right direction. In reality, you would expect companies to be taken out at this level – by way of acquisitions or initial public offerings – so Scottish unicorns may prove to be truly mythical beasts in the years ahead.
At the E2E #ScaleUp2Success event at Spaces in Edinburgh last Wednesday evening, Scottish Business Network founding director Russell Dalgleish shared the generally accepted definition of a scale-up (which comes from the UK’s ScaleUp Institute) as a company with five or more employees, north of £1m in revenues and turnover growth of at least 20 per cent for three years straight.
Clyde Blowers Capital CEO and chairman Jim McColl, who revealed news about his new banking venture positioned to support SMEs, talked about having a “big vision” and getting “the right people who will find the way ahead”. He also said: “If you have 1 per cent of the market, you need to think about how you get to 3 per cent.” Cortex Worldwide founder and CEO Peter Proud said tenacity is integral to scale-up success. “Build something that is scalable”, said Proud, whose company counts Microsoft as its main customer, adding “hire well”, “aim high” and “keep going”. Five years on from starting up, Cortex has built a market-leading technology platform and a high-quality team to match, is self-funded by revenue and has credentials in spades to be one of the next big things in Scottish tech.
There was some great news for Scotland’s creative industries scene last week with the launch of the Creative Bridge accelerator at CodeBase. Through priming candidates with entrepreneurial and digital skill sets, the exotic mix of creative talent and technology could lead to powerhouse companies of the future.
Nick Freer is the founding director of the Freer Consultancy and Full Circle Partners