In November of 2022, with funding by the Scottish Government and delivered by Codebase, Techscaler emerged onto the scene, looking to strengthen the country’s tech sector and encourage entrepreneurship. 

The idea was spun out of the 2020 Scottish technology ecosystem review, or Mark Logan report, which first put forward the idea for a “long-term, affordable, high-quality incubation space,” for the Scottish tech sphere. 

The £42m programme’s task is now carrying out a tall order: build a network of startup and scale up hubs across Scotland, aiming to build on, and eventually surpass traditional incubation programmes. 

At the end of March, Tecscaler released a report looking back on its first year of operation with 517 startups and scaleups supported, 11 hubs launched, £52.12 million in capital raised and an overall network of around 2,500 members. 

The findings sparked debate within the Scottish tech community about whether the report inflated the actual value of the programme, and if Scotland is approaching its growth the right way. 

Critics of the report say the programme isn’t giving startups what they really need to thrive, and worse, a hostile investment and talent acquisition environment is potentially killing many businesses before they really get off the ground. Worse, the discourse as of late seems to point out a ‘positive feedback loop’ present in Scotland about the ecosystem, which leaves little space for dissent. 

Supporters on the other hand say that the ecosystem already has its share of nay-sayers, and Techscaler is an example of an actual, boots on the ground, programme making a measurable difference in the ecosystem. 

That, paired with the fact that Scotland is already punching above its weight in the startup ecosystem, competing with the likes of Germany and France in Q1 this year in terms of VC funding secured. 

No matter which side of the debate one might fall on in the wake of this report, the question remains: is it working?

Year one: Looking under the hood

Money-wise £52.12m is no small amount, and this number was raised across 45 deals, making the average deal just over £1.1m which falls in line with the average seed round in the UK (£500k-£1.5m). It is important to note here that a small number of massive deals could have skewed the average number higher than it would have been otherwise.

However, the report did not disclose what stage the companies who received funding were at, and most significantly, if these deals would have been reached regardless of the startup’s participation in Techscaler. 

The fact remains that there were 517 startups involved with Techscaler in the first year, and considering the money raised was done across just 45 deals, many have nothing yet. 

Further illustrating this, 50.2% of these startups are producing an annual recurring revenue (ARR) of less than £50k. Notable here is that there is no indication of companies who have zero ARR.

Despite this, there is a sizable amount of startups making a commendable ARR, with 17.3% making £50k-£150k, 16.3% making £150k-£500k. While this number can seem comparatively low to startups in international markets, it’s important to note we don’t know at what stage these startups are in. 

A SaaS growth report shows that only the top startups will reach $1m ARR within nine months, with the median startup taking two years and nine months. While this is looking at just SaaS companies, the leading sector in Scotland’s high-growth tech landscape is SaaS, with 173 companies. 

If we can look at the focus of Techscaler startups as an indicator for where they are in their journey time-wise, then 65% being focused on product and development should be a good indicator that perhaps they are under that 2 year and 9 months threshold. 

Another notable stat in the report is where the funding originates from with Techscaler startups. A whopping 46.6% are self-funded, with 23.6% receiving grants and only 1.4% landing VC funding. 

Looking at the Scottish landscape more widely, we see that Scottish Enterprise has completed significantly more deals for high-growth businesses in Scotland than anyone else. 

While Scotland can be considered “spoiled,” with government funding compared to other international ecosystems which have a more bootstrapped and private sector-led startup ecosystem, this is by no means a bad thing.

Many Scottish business pundits believe that there are genuinely good intentions behind the support, and the government is trying to build bigger and better businesses. 

This is a double edged sword however. While the government is a steadfast presence in the Scottish ecosystem for capital, the fact remains that it makes the funding landscape ‘political’.

“We have a tendency in our ecosystem to get stuck in a positive feedback loop. I think that’s  because most of the ecosystem actors are funded by the government,” said Daniel Grant, Glasgow-based founder of Notation.

“We need to get better at talking about our failures and saying, ‘we tried this thing, it didn’t work, but we gained some insights’. If we can learn and iterate, that’s still a success.”

This drives into the crux of what Techscaler is trying to achieve. Dr Michaela Hruskova, lecturer and researcher in entrepreneurship at the University of Stirling points out that developing an entrepreneurial mindset and competencies is invaluable. 

“Supporting entrepreneurs through education and mentoring is certainly the better way compared to just giving up money,” she says. “We need to make sure that we don’t end up with ‘zombie companies’ run by entrepreneurs on benefits.”

“There is the risk of entrepreneurs learning – not how to do business – but how to fill out funding applications. That could be a disaster in the long term.”

Making Fertile Soil

To understand the impact Techscaler has made on the Scottish tech ecosystem, it is important to acknowledge it is still in its first year. 

“I’m increasingly sceptical of the value of just spouting numbers,” said Colin Mason, emeritus professor and honorary senior research fellow at the University of Glasgow Adam Smith Business School. “Numbers don’t lie, but they certainly don’t tell the truth.”

What Techscaler is setting out to do, above all else, is create a fertile soil for startups to thrive. To do this, time and resources are spent to make founders ready to take on the challenges startups face. 

Grant points out that while £52m is nothing to cry home about in the larger international scope of tech funding, that is still millions of pounds in deals that potentially would have otherwise not happened. 

Further, of the number of startups who haven’t accessed funding yet, the impact of Techscaler on their business journey hasn’t been released yet, and cannot be quantified with a monetary value. 

“It’s really hard to capture the impact because a lot of it is long term, so we’re unlikely to see results immediately,” said Dr Hruskova.

This sentiment was echoed by Alex Gordon-Furse, CEO of Playmaker who was involved with Techscaler. According to him, a mere number invested into a company is just that, a number.

“If you actually dig deeper and speak to the companies that have been through it, you’ll find that the impact has been alot broader,” he said. 

“There’s a lot of immeasurable and lagging indicators of value that haven’t yet provided fruit, so they’re not things that you can report on yet. The point is that the fruits of the work that’s being done now will be reportable, more widely, in three, four, or five years.”

He predicts that because of the groundwork being laid through Techscaler now, Scotland could start seeing bigger rounds in late stage funding, bigger exits, and more companies spreading globally.

This benefits entrepreneurs as well, since many just need a bit of a confidence boost to actually pursue their startup. “I think a lot of people who are toying with a business idea just need a bit of encouragement and a bit of support to show there’s other people who are just like them, who have been there, done it, and made it,” said Hruskova.

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Investing in the Jockey, Not the Horse

Techscaler’s programme is made up of a number of courses, the most popular of which are the startup basics and first steps courses with 193 and 210 participants respectively. These programmes focus on giving entrepreneurs the tools they need to build a strong foundation on which to launch a startup, and eventually get a first version of their product into market. 

What this indicates is that the Techscaler programme, more than anything, is working on developing founders, perhaps more so than the startup ideas themselves. As Colin Mason puts it, Investing in the jockey, not the horse. 

“Mark Logan’s report on the Scottish tech ecosystem was saying we have this funnel idea, and it is you need to widen the funnel at all stages to try and reduce the attrition rate.” 

“Just as the ecosystem evolves and matures, what is appropriate in forms of support will vary,” he continued. “Hopefully in ten year’s time there’ll be a different set of issues needed to be addressed to take the ecosystem to a new phase, which would mean different kinds of policy interventions.” 

Commenting on this, Daniel Grant said: “A big part of what makes Techscaler valuable is the levelling up aspect. It’s not just supporting the top tier startups, and those that are shooting for the moon. It’s providing something for every entrepreneur.”

“That’s also valuable to the economy, and it’s in line with Scottish values. You don’t have to be running a Silicon Valley startup.You might just be doing something in  a smaller market, but you would get help nonetheless.”

One such founder who fits that description is Aleksandra Czech-Seklecka, founder of VanFill.

“I even remember crying sometimes, because it was too much,” she said.“Techscaler was a safe space to go to, they put me on track.” 

Czech-Seklecka says that as an immigrant from Poland who speaks English as a second language, a female-founder, and someone who lives with a chronic illness, she often felt discriminated against in the startup space. 

“The whole team is so supportive, even during the hard times,” she continued, “Even after I finished the first steps programme, I still have the support.”

She said that from the first time she interacted with the programme when they visited Inverness, she received tangible helpful advice that helped her move forward with an idea for an app she had.

“It’s hard work and a bumpy journey, and Techscaler did more than just sharing, it built a community that understands what it takes to build a business.”

Not a Milestone, but a Starting point

Looking at the report, Grant said: “It’s not a milestone but a starting point. What really matters is whether the next point creates an upward line.”

Perhaps this is a point people on every side of the debate around Techscaler’s progress could agree on. The programme is new, actually tactile benefits may not be visible right away. 

“It’s a massive, long game, it’s not easy,” said Gordon-Furse. “Everything has to be judged relative to where things were before. So that £52m in funding that was generated by the companies that went through Techscaler is already a measurably good statistic to use, because it’s actually making an impact, that’s £52m,that wouldn’t have otherwise been raised.”

“Things compound over time, but they have to start in order to compound,” he says. 

In that we can see that this is year one in what is going to be a long journey, and while unquestioning support could create positive feedback loops and dampen the competitive spirit needed, divisiveness will only work against a country which always has worked best when united for a common goal.