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Innovation is at the heart of Scotland as a nation. Penicillin, the television and the telephone are just some of the landmark innovations that have emanated from this country. Now, those era-defining inventions have helped pave the way for further growth in wider sectors such as space, life sciences and finance, with all these areas linked by one key aspect – technology. The rise in sectors and their links to technology has seen cities across Scotland flourish as tech hubs, with the focus now on ensuring these new communities continue to grow and develop.
The tech industry is growing at one-and-a-half times the overall economy; it now includes close to 15,000 firms and 400,000 employees. Covering all areas from net zero to clean tech, the scale is wide, the scope epic and the possibilities endless.
The tech ecosystem has flourished in recent years, and as a result Scotland is really putting itself on the global map. So much so that it is now a vital contributor to the health and wellbeing of our economy.
That’s why we’re delighted to be involved in this spotlight on Scotland. The next few years might be tricky, but there will be lots of opportunities for all those involved with focus turning to furthering investment, upskilling current and upcoming talent, and ensuring Scotland remains a key player in the rise of the tech industry.
Dundee is ‘the heart of the Scottish gaming industry’, as one tech expert put it, but its tech scene is also fuelled by ‘high quality’ university spinouts, particularly in cybersecurity and life sciences. Dundee’s cyber specialism has been recognised and further invested in since Abertay University was named University of Excellence for Cyber Security in 2020. It launched an £18m Cyber Quarter at the university in 2022. The city’s regeneration projects are also creating new opportunities and facilities for tech businesses alongside a new collaborative tech hub, JustTech, at the University of Dundee, and the DigiTay upskilling programme as part of Tay Cities Deal.
The National Robotarium in Edinburgh is seen as a real asset to the Scottish economy, playing a significant role in promoting the development and applications of AI and robotics, and supporting companies based there. Edinburgh’s strength in data and AI is further enhanced by the Data Driven Innovation programme as part of the Edinburgh City Region Deal. Edinburgh also has particular strengths in fintech and SaaS.
8,680 Scottish registered tech businesses, 5% of all private sector businesses
Source: Scottish Government
21% increase in new technology businesses launched in 2023
Source:
RSM
Scotland has a very active angel investor community. When asked about key investors into Scottish tech, stakeholders generally reference angel investors above VC firms or larger investors, and tend to say that the pre-seed and seed funding landscape is better supported than growth stage funding.
But there are mixed views about the current provision of very early-stage funding (which includes angel investors and grant funding). Some stakeholders are extremely positive about the prevalence of angel networks, claiming that Scotland is one of the best places in the UK to raise early-stage investment as a result of the angel community, but others believe that ‘microcapital’ – i.e. small investments from angels and public sector grants – in fact make it harder for startups to later raise more funding in order to grow, and that these investments provide less value to receiving company than VC investment would.
Securing scaleup or post-seed funding is particularly challenging, and responses to UKTN’s survey for this report showed that most people assume that scaleups will have to ‘go to London’ to raise at that stage. Aleks Tomczyk, co-founder of Edinburgh-based fintech Exizent, said: “Angel and pre-seed investment is pretty good. Seed and scaleup investment are available but often piecemeal – but recent regionally focused funds are encouraging. Getting larger sums for big ideas or scaling remains best sourced elsewhere.
“The public sector grant/funding landscape is fragmented and forever changing. Public sector investments take too long to get and often come with crazy conditions that put off new professional investors in future rounds – they are often investment of last resort, therefore. Public sector grants require a lot of paperwork for small amounts if you are an ambitious company that knows what it is doing – they are also very dependent upon annual cycles and political interference/short-termism which makes them unreliable for more ambitious companies.
Par Equity
Eos Advisory
The Scottish National Investment Bank
Techstart Ventures
Deepbridge
BGF
Equity Gap
Scottish Equity Partners
Investing Women Angels
Maven Capital Partners
Panoramic
Kelvin Capital
Mercia
Puma Private Equity
Foresight
Mint Ventures
Scottish Enterprise
Archangel Investors
Scotland is rich in entrepreneurial history. From great economic thinkers to inventors of the everyday things we all take for granted like the telephone and TV. More recently, Scotland is growing its reputation in newer technologies and industries across a range of sectors. With exciting new businesses springing up all the time, we are forging a path in tech innovation – from life sciences looking for ways to extend and enhance lives, to software development that makes life easier or safer.
At the Scottish National Investment Bank, we are a mission-led impact investor, we invest in businesses and projects that deliver tangible long-term societal and economic benefit for the people of Scotland. The three missions provide a framework against which we assess all of our investments. Every penny must be committed to help deliver Scotland’s net zero ambitions, to scale up innovation and technology, or to transform and regenerate communities.
Delivering against our innovation mission is my focus, so we know and support an exciting array of technology businesses. With an investment portfolio of 35 businesses delivering across all of our missions, we’re pleased that almost half are focused on innovation. Our investments are looking to deliver commercial returns alongside societal impact, so we’re particularly interested in supporting businesses ambitious to scale up and grow.
Examples of our recent technology investments include £5m into cloud-based CMS software business, Forrit. Our investment has allowed them to expand their workforce and target new markets. Another recent £2.6m investment into digital forensic experts Cyacomb is allowing them to scale up their operations and look for new markets. Emerging as a university spinout, they created new technology to pinpoint harmful content at source, allowing law enforcement, social media, and messaging companies to quickly find and block illegal images and videos.
£20m investment was also made into Par Equity’s new venture fund, set to grow to £100m. This fund will boost innovative technology companies, building talent and capability in the sector.
Our support doesn’t stop at investment – we work with our investees to help get them to that next growth stage. We have a network of excellent non-executive directors to bring in to support the boards, and a key part of our role is to bring other investors alongside us to crowd in as much capital for businesses ready to take that next step.
Scotland’s tech scene is thriving. We’re seeing other investors looking to do more which is testament to this flourishing sector creating jobs, innovation and industry for the future.
