Situations vacant: Ambitious entrepreneurs to replace Scotland's "lost generation" of young tycoons

AS HE WATCHED the string of BMWs, Mercedes and other top of the range cars pull up outside the Gleneagles hotel on Thursday, John Anderson was in a fighting mood. The Entrepreneurial Exchange's annual conference is normally a good opportunity to have a relaxed catch up with some of Scotland's biggest business names, including Sir Tom Farmer, Martin Gilbert and Ann Gloag over a whisky or two in one of the hotel's well-stocked bars.

But this year Anderson, the exchange's chief executive, had an agenda. Just a few days earlier, a damning report from the University of Strathclyde warned that Scotland had a "lost generation" of entrepreneurs in their 30s and early 40s.

The annual Global Entrepreneurship Monitor (GEM) also highlighted a greater disinterest among young Scots in starting their own firms than those in other parts of the UK - a factor that was likely to severely hamper Scotland's economic development.

Described by Sir Tom Hunter as "disappointing", the report had Anderson fired up. As he stood to address the 250 entrepreneurs who had gathered in the Gleneagles' ballroom, he brandished newspaper reports of Scotland's "lost generation" and issued a rallying cry to his members.

He warned that the highly respected report was a "reality check" and it was time for those who had enjoyed the sweet taste of success to get behind the next up and coming entrepreneurs and ensure that Scotland had a healthy pipeline of successful businesses.

The Exchange along with four other organisations, including the Saltire Foundation, The Prince's Scottish Youth Business Trust (PSYBT), Scottish Institute for Enterprise and Young Enterprise Scotland, have today taken Anderson's call to arms once step further, publishing an open letter to First Minister Alex Salmond's government to back a more comprehensive strategy for entrepreneurship.

While Anderson disagrees that those such as Duncan Bannatyne, Sir David Murray and Michelle Mone belong to a dying breed, he concedes that if there is a general perception that Scotland is no longer an entrepreneurial country then policymakers and business leaders have a problem on their hands.

"The people who are inside that little part of the ecosystem are finding there are still plenty of people taking risks," said Anderson. But he added: "The fact that we don't recognise this as reality means we are not going to get the message across (about entrepreneurialism]. The job is to highlight the successes again."He urged the older members of the 430-strong exchange to "give something back" to the 20 per cent who are under the age of 40 through mentoring and other support.

But despite Anderson's fighting talk, the mood at the carnival-themed conference was far from doom and gloom and talk turned to those in the so-called "lost generation" age group who were making a name for themselves, including Dougal Sharp, founder of Edinburgh beer company Innis & Gunn, Mike Welch of tyre company Blackcircles.com, and James Watt and Martin Dickie, the outspoken pair behind the maverick brewery company BrewDog. Others on the up-and-coming list included Tony Stone of Stoats Porridge Bars and Lucinda Bruce-Gardyne, founder of gluten-free bread company Genius Foods.

The list of rising young stars began to get so long that some started to wonder whether there was really a lost generation at all.

"It just doesn't seem to stack up," said Keith Neilson, the 42-year-old co-founder of healthcare software company Craneware and himself one of Scotland's hottest prospects. "When we are at business events, the vast majority are also in that age group of 30 to 40. There's a whole lot of people out there who have set up businesses or who have taken over fairly poorly run family companies and applied entrepreneurial skills to make them very successful."

Christian Arno, who set up translation company Lingo24 in 2001 after graduating from Oxford University and is now in his early thirties, also stressed that he doesn't feel unique among his peers. "It's interesting the different sectors that people (of my age group] have got involved in," he said. "There's a lot of consumer businesses - such as beer companies."

Andrew Ley, corporate partner at the law firm HBJ Gateley, argues that Scotland "shouldn't be writing off the thirties yet".

He suggests that some young entrepreneurs have not yet made quite the name for themselves as the likes of Chris Gorman and Sir Tom Hunter did at a similar age because the real money is made when entrepreneurs are able to exit their first companies, pocket a pile of cash and set up a string of other ventures.

Due to the banking crisis and the consequent funding drought, corporate deals dried up after 2008 and entrepreneurs who had hoped to strike deals with venture capital or private equity firms have had to delay their plans.

"There's perhaps a lot of people in their thirties and forties who are currently running their own businesses and who are finding it harder to exit," Ley says. "It hinders them from making that chunk of cash and starting their next one. You have probably got a slight blip with people being locked into their investments."John Waddell, head of Archangel Informal Investment, the group that brings together wealthy investors who want to back early stage companies, says that in the technology and life sciences sector, the problems started as early as 2003 after the dotcom crash.

"There was an exit drought that started in 2003 after the dotcom crash when investors became more wary of backing early stage companies," he said.

However, buyers are beginning to come back into the market, according to Waddell - good news for those entrepreneurs who are desperate to make some money and move on to their next big project.

"Now there is more activity in the market for selling hi-tech businesses," Waddell added. "There is an overhang of these businesses and trade buyers have come back in as prices have fallen."

Gareth Williams, the 42-year-old entrepreneur behind Edinburgh-based travel search firm Skyscanner, also paints an optimistic picture. "I can only speak for the web or tech sector but there's more happening now than at any time since 2001 and the dot com crash," he said.

What is hampering Scots technology entrepreneurs, says Williams, is a lack of appetite from venture capitalists (VCs). Early stage technology firms find it difficult to attract funding of between 3m and 10m. This gap used to be filled by VCs but most of the VC funds active in the UK are now only interested in larger projects.

This can prove a challenge for many entrepreneurs who want to growth their businesses. However it's not a problem that is particular to Scotland, he says. "A lot of the VC organisations are based out of Silicon Valley and it's very common that they will only fund a business if it is headquartered in the Valley or in San Francisco.

"That's something that affects web start-ups quite a bit but it's a factor that affects Europe (as a whole]"

But others wonder if Scotland's poor rate of business start-ups has more to do with a problem that is deeply embedded in Scottish culture and society.

Hamish Robertson, who launched his IT outsourcing business, Robertson Technologies from a student flat six years ago, says there is an ingrained "employability" culture in Scotland.

Students are encouraged to go to university and then get a job in one of the professions or at one of the Central Belt's long-established employers such as the Royal Bank of Scotland, Standard Life or Bank of Scotland. Although there is a lot of interest in entrepreneurialism thanks to programmes such as Dragons' Den and The Apprentice, many are put off by the risk of failure, he says.

"There's probably more interest in entrepreneurship at the moment than there ever has been," he says. "What is missing is possibly the call to action. While people are interested, they are not actually doing it."In Scotland as a country we do have an employability culture and that's not going to change in one generation."

Jim Bishop, partner at Ernst & Young, which will hold its annual Scottish Entrepreneur of the Year Awards at Gleneagles on 23 June, agrees.

He says that reports ten years ago were coming to the same conclusions at the GEM and yet, despite a lot of effort on the part of organisations such as the Entrepreneurial Exchange, PSYBT and the Scottish Institute for Enterprise, nothing much appears to have changed.

"Despite huge amounts of effort - we are doing more today then we have ever - the frustrating thing is nothing seems to be working. Nobody has the answer.

"It's a cultural issue. A fear of failure is still in the Scottish psyche."

While E&Y has been encouraged by the strength of applications to this year's awards, Bishop says the long-term trend is "worrying".

Many agree that the work being undertaken at school level in Scotland to encourage entrepreneurial activity is good but this needs to be continued consistently at the further education level, according to Bishop. One of the recommendations of the GEM was to adopt a similar strategy to the Welsh Entrepreneurship Action Plan which, among other things, has appointed "entrepreneurial champions" to explain to higher education students how their skills could be applied to starting new businesses.

While many universities such as Edinburgh have excellent programmes, some feel that it's something that is not taken seriously enough by the whole of the higher education sector, including further education colleges.

The results of the latest GEM may make for depressing reading and while not everyone agrees with the idea of a lost generation, there is one point upon which all agree: that Scotland must move forward with a more comprehensive strategy for entrepreneurship.

As the five organisations behind today's open letter conclude: "We have a choice: Do we drop back into the popular pastime of casting blame and bemoaning our fate? Or do we step up and take the actions now and make a dramatic change?".