Every nation in the world is currently trying to work out what the global economy will look like in the future and how they can claim a place in it.
While there’s only so much that can be predicted with any certainty, it seems clear that technology-based companies are set to play an increasingly important role in most major economies. Digital technologies underpin modern business, so it stands to reason that this industry will be critical to Scotland’s economic success.
A recent report by Skills Development Scotland (SDS) found the technology sector is contributing £4.9 billion to the Scottish economy every year, and supporting nearly 100,000 jobs. SDS expects the industry to grow one and a half times faster than the overall economy in the next decade.
A similar report published earlier this year by entrepreneurial network Tech Nation estimated that there are now around 9,000 digital tech businesses in Scotland and that, as a result, digital jobs are on the increase, particularly in Glasgow, Edinburgh and Dundee.
BGF is a generalist investor, backing businesses across every region and sector, from heavy manufacturing to food and drink, construction materials to oil and gas. With more of these companies becoming “tech-enabled”, the opportunities for Scotland in the tech, software and digital space are evident.
Scottish companies leading the way
Scotland has long been a hub of innovation and we have, of course, already seen a number of tech firms emerge, producing cutting-edge technology or game-changing software. For example, in BGF’s portfolio we have M Squared Lasers, a developer of photonics and quantum laser systems based in Glasgow. The business produces the technology to bring forward new applications in science and industry that address a number of challenges facing society, including using light to measure global atmospheric pollution and climate-change gases, improve quantum computing and microscopically map degenerative brain diseases. M Squared has grown more than ten-fold since BGF first invested £3.85 million in 2012. With further investment since, the business continues to drive development of new technology with more than 10 per cent of revenues going into research and development to power its innovation.
BGF has invested in more than 50 tech and digital companies across the UK and Ireland since 2011. These include Care Sourcer, an Edinburgh-based health tech that uses a technology platform to match care seekers with care providers. With an aging population, the provision of care at home is an increasing problem for the NHS and thus there is growing need for carers.
BGF invested in Care Sourcer in May 2017, and the company has since raised £8.5m on its mission to tackle the UK’s care crisis. Most recently it secured a £1.5m grant from Scottish Enterprise which it will use to create 70 jobs.
There are six million small and medium-sized enterprises in the UK; 346,000 in Scotland. Nationally, they represent 60 per cent of all employment and 99 per cent of all businesses. However, only around 30,000, across the UK as a whole, are growing at a rate of more than 10 per cent a year and employing more than a handful of people. Indeed, research from accountancy firm RSM suggests that the number of new tech start-ups in Scotland dipped by 4 per cent last year, but that still means we saw almost 450 new ventures formed.
However, what we’re seeing is that there is real innovation and ambition there, it just needs to be supported and encouraged. To ensure more companies like M Squared Lasers and Care Sourcer have the ability to grow and reach their potential, it’s crucial that the tools are there to enable them to do so.
With Edinburgh, Glasgow and Dundee still regularly featuring in lists of the top UK cities to launch a start-up, it’s clear that the innovation infrastructure, talent pool and funding is all in place to enable these rapidly scalable companies to emerge – whether that’s in fintech, e-commerce, gaming, oil and gas, tech or any other digital sector. BGF is focused on continuing to play its part in enabling tech companies to scale via the provision of long-term, flexible capital, a wealth of experience and access to its talent network of 5,500 board level executives.
There are countless challenges and opportunities that are coming about as a result of technological change and it’s clear that every country is trying to position itself to benefit. But Scotland is already at the forefront of the evolution, with examples of ambition and innovation on a global scale existing here. Now is not the time to stand back – if we take a collaborative approach and go for growth, powering up new industries and reinventing the old, there’s no reason why Scotland can’t compete for a slice of what is clearly a very lucrative pie.