A leading technology adviser has branded the UK government’s policy of focusing heavily on business creation as a ‘mistake’.
Hugh Campbell, Managing Partner of investment bank GP Bullhound, said the policy focus should be on helping businesses of upwards of 10 staff rapidly scale up, creating global entities that can make a much greater economic impact.
Campbell, who was in Edinburgh attending the annual technology investor showcase EIE2016, said: “I think our challenge is less at really early stage and should be much more focused on scale-up; how do we focus all our energy and attention on companies who have 10 people and grow that to 100 or a thousand?
“The government policy is all around business creation; they focus on going from zero to seven. I think that’s a mistake. That money should be invested in helping companies getting to a hundred or a thousand. That will have a massive economic impact on a city or a region.”
Campbell praised the work of fellow speaker at the EIE2016, entrepreneur and investor Sherry Coutu, saying her Scale-Up Institute was the right approach to making a more lasting economic impact.
“I think Sherry is absolutely right on this; if we don’t focus on scaling up businesses, including the tech businesses we see here today in Edinburgh, we will potentially miss out on creating the next SkyScanner.
“And that would be a shame. Scotland – and Edinburgh – has a rich history of business creation, going back to Wolfson and today with the likes of Skyscanner, Craneware and Maxymiser. You have a number of really successful businesses but we don’t always want to talk about that. We need to talk positively about the successful companies that have come out of Scotland. In the UK the media tend to talk about the negative things. There was a recent article about one of the 40 unicorns who have gone bust instead of talking about the 39 unicorns that have been created.”
Other barriers to growing successful technology firms include a culture of early exit, which Campbell said is beginning to improve with a “new generation” of tech entrepreneurs.
“Historically, it’s been a problem and I think even now we still have that culture. Culturally we do struggle with that. I don’t think yet we have the concept of re-investing your time and doing it again, again and again. We tend to think if we’ve found something that’s good we can’t believe our luck, we’re pretty sure it’s never going to happen again and so we bugger off to Monte Carlo with the proceeds.”
He said the deal data backs up that theory as the median value of a venture-backed tech exit is around £20m, adding: “The confidence and maturity of companies is getting better but it’s very lonely as a CEO. You need strong support structures, you need strong investors, you need mentors, you need great finance and good lawyers.”
Campbell praised Scotland’s universities for the calibre of its graduates but said the challenge now is how do you encourage clever computer scientists or engineers to start a technology business rather than take a job in the city; equally, there is a problem to overcome with the lack of local, ‘intelligent’ capital to help those start-ups thrive.
“Whilst you can try and get investors from London to move, until they are very local or happen to find a really successful investment it’s hard to get them regularly to make the trips,” Campbell added.