Scotland’s tech sector needs support to push it past the tipping point to become a world-class industry, according to entrepreneur and former Skyscanner COO Mark Logan.
A report published this week, led by Logan and commissioned by the Scottish Government, has made 34 recommendations on how Scotland can transform its tech industry and help promote startups and evolve them into scaleups.
The Scottish Technology Ecosystem Review suggests creating a national network of hubs for technology startups and the establishment of a new fund to invest in the Scottish tech sector.
DIGIT spoke with Logan about the report and some of the unique insights that come from his 30-year career across Scotland’s tech sector.
Reaching the ‘Tipping Point’
The report’s origins date back to May 2020 when Scottish Finance Secretary Kate Forbes asked Logan to examine how Scotland’s tech sector can contribute to the country’s post-Covid economic recovery and beyond.
“It’s been a passion of mine to see Scotland fulfil its undoubted potential,” he said. “I wanted to contribute to supporting our ecosystem to get to the next level alongside other people.”
“I spent a lot of time advocating for the things you see in the report,” Logan added. “The Scottish Government was aware I was interested in the area and reached out to me to work with them on transforming the ecosystem to a higher level of output.”
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As part of the report, Logan identified two different types of tech sectors, which he calls pre-and post-tipping point. This “tipping point”, Logan explained, arrives when a critical mass of companies, workers and investment comes together to feed into each other; creating a dynamic and creative market while attracting new talent and investment.
Although the future is promising for Scotland’s tech ecosystem, Logan conceded that currently, the sector is still at a pre-tipping point phase. “We don’t have the dynamics of post-tipping point sector,” he warned. “We don’t have a sufficiently high rate of companies coming to scale that causes those forces to start operating.”
“Having said that, there are lots of good aspects to the ecosystem. The quality and ambition level of recent startups founders is at least as high than any I’ve seen before. There are many worthwhile initiatives – support conferences like Turing Fest or institutions like Codebase,” Logan continued.
“We have a lot of the building blocks, but we have to be honest with ourselves; we know we’re not producing that stream of companies at the same rate as some of the ecosystems we admire out there.”
The ecosystem report focuses on the key steps needed to support Scotland’s tech ecosystem and highlights particular actions that could push it over this elusive tipping point. The goal is to create an environment where tech startups can grow to maturity and become successful.
“A big part of the report talks about the social and economic structure of an ecosystem,” Logan noted. “That’s very often neglected because it’s not as tangible as physical buildings and things like that. But that social infrastructure is what builds identity and confidence within the country’s ecosystem.”
Attracting international speakers and educators and providing them with a platform is one of the central recommendations of the report. In doing this, the ecosystem can help build Scotland’s reputation as a great place to do business, attract talent and, crucially, long-term investment.
“What we’re trying to do is make Scotland a place you would come to hear from great speakers, where you would come to see great companies, investor conferences, regardless of whether or not they’re Scottish,” he explained.
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In the report, Logan used a funnel as a representation of a healthy ecosystem, allowing readers to visualise a large group of startups, which then progress to a smaller number of scaleups all the way to the coveted unicorns – startups valued at $1 billion or more.
“You need that balanced ecosystem so that you’ve got the right representation of skills at different levels. I use the term of a collapsed funnel, which is to say that we have a lot of small companies, but not very many breaking through to large scale,” he explained.
A key factor behind Scotland failing to produce a greater volume of large-scale companies, Logan said, is that the ecosystem doesn’t harbour enough management experience. Similarly, engineering talent is also a major bottleneck for the sector; greatly inhibiting growth and presenting significant challenges for organisations looking to scale.
“When we start to get more companies like Skyscanner, for example, then that rapidly starts to correct itself. I know many people who’ve left Skyscanner over time that are now working in the new startups. If we can get that pattern running at a greater scale, that makes a huge difference to those earlier stage companies,” he said.
Critically, the report’s key message is that all its recommendations have to be implemented together instead of piecemeal. Instead of providing incremental benefits to the tech ecosystem, serious change will occur when changes are implemented in unison.
“If we start providing our startups today with world-class education and growth models, then some of those companies will breakthrough in 24-36 months,” he explained. “If we overhaul how we educate our children, then you will see the benefits from that in five to eight years.”
While growing any economy is difficult at the best of times, this year, and presumably, the years to come will be particularly difficult. However, Logan does not appear discouraged by the immediate future.
“Many really successful tech companies are born in the most difficult economic circumstances. We can do the same thing with our ecosystems on a larger scale,” he said.
While Scotland does not have the advantage of scale that many other tech sectors do, it has other factors in its favour. “We have a strong incubator, we have acceleration programmes, novel government funding models, startups at different stages and we’ve got probably the most suitable syndicate networks in Europe, if not beyond,” Logan asserted.
He also noted that Scotland’s relatively small size is a strength in itself, providing the nation and the tech ecosystem with a degree of agility that others cannot rely upon.
“We ought to be able to coordinate ourselves across government, government agencies, the education sector and industry more easily than larger countries,” he said.
Despite these challenges and the work that needs to be done, Logan considers Scotland’s tech sector to have considerable promise. “Our companies have to be amongst the best in the world to compete internationally, and that in turn means we need to have one of the best ecosystems to support them.”