Tech entrepreneurs who start a business need to be open-minded on their quest for success, one of Scotland’s leading digital strategists has said.

Many companies who start with a product in mind may end up ‘pivoting’ to do something completely different, says Steven Drost, chief strategy officer at CodeBase.

Drost, who helps run the £42 million Techscaler programme, backed by Scottish Government, said that the ability to ‘iterate’ and not be fixed on a single vision of the future will be key.

“It’s not about having this super-cool vision and this idea, and then pursuing it at all costs,” he says. “That can work, certainly, but it’s mostly this weird evolutionary thing where the idea is just as likely to take you on a journey.”

Drost cites the productivity platform Slack.

“It started off as a game,” he says. “So, iterating and failing fast, as much as these are overused terms, this is kind of what we’re trying to create, that culture and understanding that it’s normal to shift and adapt.”

There are other examples: Twitter, now X, started life as a podcasting platform, until Apple launched its own version and Jack Dorsey pitched the idea of a short messaging service within the company. PayPal’s original focus was developing software security for handheld devices.

Drost is trying to inculcate a spirit of inquiry within the entrepreneurs and founders joining the Techscaler programme, which he oversees. However he is pleased with the progress for the latest cohort of companies signing up to take part.

According to the latest figures, there were 141 sign-ups to the First Steps programme, and 139 who turned up on the first day, which Drost describes as a “really positive sign”. The Techscaler contract was awarded to CodeBase in July 2022, and the first year of activity was largely “bedding in time”, supporting the companies that wanted to be part of it, and forming regional networks and partnerships. Encouragingly, the new figures show a fairly even spread of would-be entrepreneurs coming from all parts of the country.

“We were looking at what was already there, trying to socialise what we were doing, and bring in great people,” Drost adds. “And now we’re starting to see some nice momentum, and putting some real marketing into it, which is great.”

But in terms of spawning the next unicorn company, people need to be patient. “It will take time,” Drost cautions. “To a large extent, our success will be mirrored by societal awareness of the programme. This is what we’re here for though, we’re really emotional about it, we want to incentivise really smart people to come and do this.”

It’s very much a recruitment drive, a call to digital arms, but Drost thinks the current levels of economic uncertainty, and arguably drift, are ripping up old norms, forcing people to think differently about their future career prospects.

“My generation – I’m 50 – would have maybe looked at a graduate training scheme, at one of the big banks or something like that,” he says. “Those opportunities still exist, of course, but I think they are maybe not as palatable as they once were. It’s just not like that now, if you’re a Gen X.”

At the same time, we need not be scared about embarking on something that also might have once been considered a risky undertaking.

“I guess the challenge is to not let it turn into fear,” he adds. “We’ve already faced so many upheavals, from the advent of the internet, to the death of the high street, and Covid. All of these things have really, really changed people’s lives, but I think the challenge for us is to tell people not to be scared of these changes, and to try and point out the opportunities to build new stuff.”

It’s a challenge we collectively face, with old industries struggling to compete in global markets. Many have fallen into obsolescence or are increasingly propped up by state subsidies. By contrast the tech sector is relatively under-capitalised, certainly in Scotland, where companies struggle to attract the levels of investment needed to scale. There is huge interest and excitement around discovering the next Apple, Google or Facebook, but the reality is that Scotland – and the UK more widely – are falling further behind the US. The benefits of the latest tech hype cycle around generative AI platforms like ChatGPT or Bard continue to accrue to the Americans. Differentiation, or new discovery, is really hard.

At the tail-end of last year, Drost went on a couple of business trips, first to Helsinki for the Slush tech festival, and then to Shanghai, for events at another fast-growing tech hub. At Slush, he observed the “vast number” of nation state agencies all looking to address these economic challenges, mostly from across Europe. He attended some ‘mixer’ events at Slush with European peers, and found a rich ecosystem building community, supported in much the same way as Techscaler – through government intervention.

Drost believes the initiatives have largely spread through a meme effect but also because Europe has failed to achieve the kind of prestige in tech compared to its well-established fashion, retail or consumer goods brands. “We’ve become takers of technology, rather than makers, which needs to change,” he says. “You tell me that one British app, that one German or French app that you use all the time. Those mega-platforms, they’re all American or Chinese. We’ve not done that. And we’re about to go through another iteration, or paradigm shift, and already the signs are looking pessimistic.”

It’s hard not to feel a general sense of foreboding, given the geopolitical outlook: war in Europe, the rise of populism, climate change. Policymakers are trying to encourage more company creation schemes – like Techscaler – and Scotland’s universities are increasingly looking to spinouts as a means to generate cash in the real economy beyond merely applying for research grants and handouts. The £600 million data-driven innovation programme at the universities of Edinburgh and Heriot-Watt are starting to bear fruit, however: new facilities such as the Bayes Centre, the National Robotarium and Edinburgh Futures Institute at the Old Royal Infirmary are vying to become important global hubs for technology and innovation. Innovation investment zones in Glasgow and the North East of Scotland are to be supported by £160 million in UK Government funding.

However that is a drop in the ocean compared to what the Centre for Cities has called for. The think tank said £14.5 billion should be spent on city innovation zones in Birmingham, Glasgow, and Manchester. Drost, who witnessed the astonishing scale of development in Shanghai, believes infrastructure to attract the right people will be key to scaling up companies. “I don’t know what the hit rate is in China, but there is this feeling of – eventually – that ‘if you build it, they will come’. And if you look at these kinds of places, places like Shenzhen or Chongqing, there’s loads of activity; there are five or six unicorn companies and tens of thousands of high value jobs being created.”

He adds: “Don’t get me wrong, China has its challenges, and we’re in this kind of perma-crisis globally right now, but the thing that really worries me about Europe is that we’re not building enough. We talk so much about redistributing stuff, but that’s dwindling, so if we’re going to do anything about that we have to start building.”

Europe’s economic problems were highlighted last year in a paper by the European Centre for International Political Economy. Their research showed that the ranking of gross domestic product (GDP) per capita in 14 EU member states, which together represented 89 percent of EU GDP, was lower in 2021 than in 2000. Many European countries, the research found, showed a widening prosperity gap – according to the GDP per capita metric – between the EU and the US, with some large economies in Europe ranking in relative terms alongside some of the poorest American states. Ireland, by contrast, which has embraced some controversial policies to attract Big Tech, was the second highest GDP per capita performer after Luxembourg, another country which has maximised its appetite for investment.

At Slush, people were having these kind of conversations, says Drost, looking to tech ecosystems as engines to address faltering growth and productivity. But the US was notably absent from the nation state participants. “I’m not a fan of this communitarian versus libertarian idea, where in Europe it’s the state that does everything and in America it’s not, especially when you look at the tax breaks and subsidies that the likes of Tesla gets,” he says. “So it’s difficult to look at it that way, it’s more subtle than that, but again it comes back to this thing about whether we want to be makers or takers of technology. And if you look at the US, or China, you can draw the analogy that they’re the land owners, they own the digital land. We don’t own anything, we’re just building on stuff that other people own.”

In its own modest way, Techscaler is working to address these economic challenges. Headquartered in Edinburgh, at the foot of Edinburgh Castle, it now has a network that extends across the country: in Stirling, Aberdeen, Glasgow, and even the Borders, among other locations. The organisation is, Drost says, small and “nimble” enough to be “fast-moving” and “reactive”, so that it can quickly close feedback loops on new ideas and innovations. In practical terms, that translates as it’s probably not worth building something that’s been done a thousand times before. The link with Silicon Valley-based Reforge has also been key to founders’ education programmes, and knocking entrepreneurs’ ideas into shape, or ‘product-market fit’, to use the jargon. Drost also credits the sheer volume of information out there now for entrepreneurs, through podcasts and blog posts, that wasn’t widely available a decade ago.

But it also comes back to infrastructure, having somewhere to go and meet people – and build a business. The regional hubs offer co-working places, gathering points, an ability to convene in times where there is a tendency to work remotely. The spark of human connection, and the sugar rush of collaborating on an idea, is essential for creativity, especially in the early stages of a startup. “We’ve got to have that if we’re going to have a go at building stuff, making mistakes, learning together and going again,” says Drost.

He adds: “I’m optimistic, I have to be. And there are some good signs, some green shoots coming through, as we get these messages out: that there is infrastructure here, if you want to come and build something, we’ll help you, we’ll point you in the right direction, make introductions like crazy and get you in front of things. And that’s what we’re trying to do, I guess. We’re wanting to say Scotland is a great place to do that, but we’ve got to work hard and keep at it.”

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