Scottish tech startups remain in a resilient mood despite ongoing economic uncertainty, a new survey has found.

The 6th annual Scottish Startup Survey, run by the EIE Investor Readiness Programme in association with the Freer Consultancy, examines the state of the Scottish technology startup industry.

This year’s survey sample included the EIE22 cohort, alumni companies and a number of other early to late stage startups across the country.

Notably, while 89% of survey respondents raised concerns about the global economic outlook, 88% revealed their startup had grown in 2022 despite challenging conditions.

71% of participants also said they have come out of the pandemic in a stronger position to achieve growth.

In addition, more than half (55%) of startup leaders believe that the Scottish tech ecosystem is in a “stronger position” compared to a year ago.

Commenting on the survey findings, Nick Freer, Founding Director at Freer Consultancy, said: “Now in its sixth year, our hope is that the findings are instructive and provide insight for both the Scottish tech ecosystem and investors, and other interested parties from tech hubs outside Scotland.”

International challenges

Despite a resilient and positive outlook, more than two-thirds (68%) of respondents said that Brexit had slowed growth. The impact of Brexit on the technology sector has been a recurring issue in recent years – particularly with regard to talent.

Although 67% of startups are currently targeting talent pools outside Scotland, 69% said they have found it difficult to hire over the last 12 months.

76% of respondents revealed that engineers and developers were among the hardest roles to fill.

Michael Moore, Director General, British Private Equity & Venture Capital Association (BVCA), said: “Scotland’s tech scene is increasingly vibrant, and this survey also highlights its resilience as economic conditions change.”

Access to capital

Access to venture capital also continues to affect the Scottish tech sector, the survey found.

While an overwhelming majority (93%) of respondents said Scotland is a good place to launch a startup, 88% admitted they are targeting investors outside of Scotland.

Investor markets in London and the rest of the UK are a destination for Scottish startups seeking venture capital, the survey found, with nearly half (46%) tapping into this market. Startups are also targeting the North American and European investor regions.

Mark Logan’s Technology Ecosystem Review identified venture capital as a key issue affecting the Scottish tech ecosystem.

In particular, the 2021 report noted that while access to angel investment and seed funding remained strong, many startups falter seeking later-stage investment.

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The survey revealed that tech founders are targeting venture capital and angel firms in near equal measure (83% versus 80%).

Nick Freer said the survey provides a valuable insight into long-standing venture capital issues, as well as this growing theme of startups seeking options outside of the Scottish ecosystem.

He said: “One of this year’s more revealing findings is that, alongside targeting homegrown investors, so many of our startups are looking for investment outside Scotland.

“And that matches what we’ve seen in recent times, in terms of an increasing number of the rest of the UK and international investors backing startups here.”

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