Last week in Edinburgh, a select group from Scotland’s entrepreneurial ecosystem was at Hampden & Co, the UK’s first private bank in over quarter of a century, for a panel discussion on accelerating corporate growth.
Alongside venture capital firm Par Equity and the consulting arm of Scottish chartered accountancy firm Anderson, Anderson & Brown, there was some lively debate around the opportunities and challenges facing both the established and fledgling companies on Scotland’s corporate scene.
The narrative played out around themes including investment, skills, culture, sales, cash flow, performance management and all things digital where the conversation touched on the renowned “FANG” technology stocks - Facebook, Amazon, Netflix and Google - that have monumentally disrupted historic marketplaces.
Along with some fine wines, business buzzwords flowed, most notably “capital”, “innovation”, “data”, “artificial intelligence” and so-called hybrid propositions where a company, for example, offers both hardware and software to its customers. One reccurring topic when the discussion was opened up to the floor was around the central idea that executing growth in the digital economy requires a new and ever-changing approach.
Par Equity supremo Paul Atkinson, one of the main players in Scotland’s early-stage investment community, said Par’s recent experience out on the coalface is that exit values are quite regularly dented by companies coming up short over what Atkinson described as the “innovation story”.
Callum Murray, CEO of one of Scotland’s most highly fancied start-ups Amiqus, remarked that the legal tech company he founded focuses on “behaviours” to achieve business outcomes - in other words, focus on the process and the innovation will follow. With storied Silicon Valley VC firm Andreessen Horowitz investing $65 million last week in an enterprise that offers AI-powered legal advice to start-ups, Murray appears to be jockeying into an increasingly high-value space.
As the post-event networking began, Jock Millican, Equity Gap director and chairman of LINC Scotland, explained that because most start-ups are constantly evolving their products, that presents something of a moving target for investors like Equity Gap or Par Equity. Shot Scope, a wearable tech start-up tracking the performance of golfers, is an Equity Gap portfolio company whose reiterated product is beginning to make an impact in the US.
Over lunch last week with Cortex Worldwide CEO Pete Proud, I posed the question of how to best position your company for success. Proud, whose five-year old firm manages multiple websites for one of the world’s largest listed companies, opines: “What is fundamental in any life form is oxygen, and the equivalent to oxygen in any start-up company is cash… for every yin there is a yang. So, if you take a loan you have to pay it back with interest and if you go down the venture capital or private equity route you are effectively selling part of your company and can potentially lose control through dilution.
“From our experience,the best source of cash is from paying clients as they don’t want equity, they put deadlines on you, they make your product better, and ultimately they make you into a proper company that is much more valuable.” The upshot is that each company has different requirements as it moves through different phases of growth.
Catching up with George Elliot, chairman of healthware-focused software provider Craneware, , I was reminded of his view that “it’s not just digital skills that we need [in Scotland] but also commercial skills and knowledge of how to scale and market your product.”
While Jock Millican and George Elliot are most definitely titans of the Scottish business scene, my favourite stories about both are still about them playing rugby in their native Borders, in Edinburgh and for their country.
Nick Freer is a founding director of the Freer Consultancy and Full Circle Partners