Scotland has a scale-up problem.

Despite its rising and marked success in creating a bustling startup environment, Scottish startups often struggle to reach the next step in their enterprise journey – from startup to scale-up is no easy feat in any environment, but it seems as if the exceptional examples of startups that have managed to break through the mould are just that – exceptions.

At DIGIT’s sixth annual Expo, a panel of those that have successfully done it reveal the specific challenges, and also benefits, the Scottish scale-up ecosystem poses, as well as advice on how Scotland can continue to grow its tech and wider entrepreneurial ecosystem.

It’s already been nearly five years since the start of the pandemic which rocked the global economy and dramatically transformed the future of work.

Over 40,000 new businesses were created just last year in Scotland, with a survival rate of 43.7% for startups in their first five years.

“There is, however, a well-documented problem to scale businesses in Scotland, Esther Stringer, managing director of Border Crossing UX, who chaired the panel on growing pains at DIGIT’s Expo.

Delegates heard from Colin Hewit, CEO and founder of Float, Leah Hutcheon, CEO and founder of Appointedd, Rachel Jones, founder and former CEO of SnapDragon, and Greg Aitken, CFO of Quorum Cyber talk about their startup and scale-up journeys in Scotland.

Scotland: Close-Knit or Closed Off?

A pattern quickly revealed itself as the panel delved into the common pitfalls of the Scottish ecosystem – many of the variables that aided Scottish startups in their early-stages were holding back their scaling capabilities.

This seems the most true when it comes to market size – Scotland’s close-knit, tightly networked ecosystem is beneficial in startups that are trying to find the right funding and the right people, quickly. But when trying to scale, the size of Scotland’s market can be a major constraint to acquiring the higher level of investment necessary.

“If you look at getting started from a pure startup phase, I don’t think there’s an issue there,” Greg Aitken said. “In fact, having a concentrated economy can be a good thing, you can get yourself going and build relationships really quickly.

“But if you’re trying to scale a business, and bring a change into that business, then you do have limitations from the marketplace.”

Colin Hewit described the Scottish tech ecosystem as a bubble, which has its positives and negatives.

“There’s lots of good stuff happening in our ecosystem,” Hewitt said, going on to refer to the plethora of top rate universities in Scotland and the talent pool they offer.

“But you’re in a bubble, and I’m telling you to get out of that bubble.”

Spreading outside of Scotland, making that four hour journey to talk to London investors, going international even for a mindset shift, can be transformative and enable the next step in the scale-up journey.

Breaking out of the Scottish bubble can also provide invaluable insight into the scale-up experience.

Scotland offers a broad startup network that continues to grow, with an ever-increasing array of connection opportunities and ecosystem support systems. But it also lacks the maturity of other markets, meaning those embarking on a scale-up journey lack access to mentors, and the attitude that it can be done.

“If you’re in London, there’s a maturity of the network, with people who have scaled and can talk from a place of learnt and earnt wisdom about the challenges that might be around the corner,” Leah Hutcheon said.

The talk of London brought the panel to the idea of globalisation. Scotland’s small market is well known for certain things – whiskey, wool, and talent, but it can also lack an essential aspect to scaling up – access to capital.

“I’ve met investors who will not look outside a 10 mile radius of London because they think that they can deploy all their capital there and they don’t like anybody else,” Aitken said.

“As a Scottish business, you might be looked at as being a bit smaller, provincial, potentially.”

But an international mindset especially for a technology firm can be essential – in terms of service and funding.

Rachel Jones, founder of SnapDragon, said she entered the startup world with an international mindset, which she emphasised to delegates was essential to taking her company to the next step.

Since she didn’t come from a tech background, Jones widened her search for technical expertise and funding to across the globe, since her service was all online.

Hutcheon concurred: “As a tech company, we were born global, so we can take the best of both worlds.”

This best of both worlds – of Scotland’s homegrown, close-knit ecosystem, and tech’s inherent globalism, was a key theme throughout the panel. Offering technical capabilities allows tech businesses based in Scotland to reach a global audience – startups should be having a global outlook in seeking investment as well.

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For Aitken, who joined Quorum Cyber when it was worth £3 million and now exceeds a worth of £30m, he noted that Scotland may not be the region relying on investment, but “we do rely on it for talent.”

“While we are powered by tech, we are a peoples business, we spend 80% of our expenditure on salaries.”

He referenced Scotland’s top universities, as well as the focus on cyber and technology across the Scottish higher education system. Quorum even introduced a graduate scheme to expand its staff and bring in young talent.

“One of the questions you get asked in funding rounds as you scale, is how are you going to increase your top line, and how are you going to deliver and scale by three times, four times, five times,” he explained. “We always have a strong answer because we can point toward the grad scheme, we can point towards the talent that is concentrated in Scotland.”

Hewitt agreed, noting the transformation of the tech and startup scene in Edinburgh and Glasgow in the past five years, largely driven by their universities.

An Attitude Problem?

The supportive ecosystem needs to be harnessed, however.

“As founders, it is your responsibility to look for the opportunities and look for the good,” Hutcheon said. “I have been unashamed in asking for help from a lot of people.”

The Scottish ecosystem has been lauded by the panel as supportive, but founders also noted the negativity in mindset.

“We can get in our own way for sure,” Hutcheon said, noting negativity in the press.

Aitkin noted the differences in international mindset, Aitkin referencing the positivity and boundless imagination of the ‘American Dream’ – even if it comes short in reality – and the enthusiasm for creating support in Middle eastern markets.

“Culture eats strategy for breakfast,” Jones noted. “No one talks about being an entrepreneur in school here. We need enterprise embedded in the curriculum.”

Hewitt noted that sending people across the pond to Silicon Valley and New York was some of the most beneficial things his company had done to shift mindsets toward entrepreneurial success.

He also noted that the international market can be tapped into not just for funding, but for leadership as well.

The change to remote work means companies can hire international board members.

“That means we get the benefits of local networks, university talents, a smaller ecosystem with better connectivity, but also bring in experienced mentors from an international pool,” Hewitt said.

International recruitment can also help in the growing skills shortage, Jones noted, pointed out that Scottish startups are often overly intimidated by visa charges and international recruitment struggles.

To strengthen Scotland further, Aitken hopes we do not lose sight of the fantastic education system fuelling one of Scotland’s greatest strengths, its talent pool.

“I despair at some of the conditions that young students are in,” he said.

“These are not environments conducive to creating world class talent, which we have.

“I hope we don’t lose sight of that.”

The mix of Scotland’s positives and negatives create a massive overlap, with a collective need to be positive, and not lose sight of the positive aspects of Scotland’s ecosystem, without being overly confined by it.

Since each panel member pointed out Scotland’s lack of scale-up mentorship, each speaker took the opportunity to use their platform to spread some advice to prospective scale-ups.

For Aitken, it was building momentum and being able to make fast, necessary decisions in order to scale a business.

“Try and find the right people and put them in the right place as quickly as possible,” he said. “Technical ability is key, but I wouldn’t underestimate grit, resilience, ambition, and determination.”

He called Quarom’s prolific rise – from £3m to £30m in three years – “exhausting.” Having the right people with ‘grit’ behind him made all the difference.

Hewit recommended getting “out fo your bubble.”

“We’re limited only by our mindset,” he said. Finding strength in the network, getting second opinions and finding a founder network is vital to the journey.

“Having no ego when it comes to doing things,” Hutechon said. She encouraged delegates to ask questions, ask for help, and to “Go out, be hungary, don’t have an ego, and just get stuff done.”

Jones offered up an important lesson that she herself learned when she stepped down as CEO of SnapDragon.

“Someone said I wouldn’t be the right person to run the business at a certain stage,” she said. “Nevermind egos, let’s just deliver,” she advised.