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Technology / AI and automation

How Scotland learnt to create $1bn tech unicorns

It may have escaped the attention of Old Street, but the technologists of Silicon Glen have been busy of late.

For the last few months FanDuel, fantasy sports specialist that hails from Edinburgh, has looked a likely contender to become the second $1bn company to emerge from the Scottish capital, following the success of flight comparison site Skyscanner, which attained "unicorn" status only this February and also began in the Scottish capital.

Such price-tags are justifying what has in some ways been a tough fifteen years for the industry, battered first by the dotcom crash and second by the financial crash – which particularly struck Edinburgh, a financial services hub.

"In the 80s and 90s we’d had all this investment in the tech sector," said Polly Purvis, chief executive of the trade group ScotlandIS. When the dotcom collapse came "not only did the small companies disappear but a lot of the large companies moved out of Scotland."

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The financial crash, according to Purvis, was not so hard on the tech sector. Even as the Royal Bank of Scotland went into meltdown Silicon Glen’s software-dominated economy kept afloat. So with the country now producing unicorns what does the future hold for Scotland’s tech sector?

Scotch incubators

CodeBase is housed in a drab civil service building towards the South of Edinburgh which belies the creativity happening inside.

Sprawled across three floors the incubator houses some of the keenest technology firms in the whole of Scotland. Beginning as a spin-off from a previous start-up incubator known as TechCube, the project’s founding companies literally put the walls up before they got down to business.

"It really brought us together, building this and feeling something was happening in Edinburgh," said Colin Hewitt, founder and chief executive of Float, makers of cash flow software.

CodeBase is perhaps the most prominent example of the Scottish tech sector coming together to support its members. Tenants at the incubator enjoy a host of formal and informal benefits, from monthly leases to regular meetings in which they can swap tips.

One common topic of discussion is investing, one area that Scotland is not so lucky in. Whilst angel investors are plentiful in Scotland, venture capital firms which can offer more money are harder to come by, even among the financiers of Edinburgh.

Hewitt maintains that finding good investors has become easier because the start-ups are more closely connected by incubators like CodeBase. "I think up until now the investors have had a lot of the power," he said. "Now if you’re an investor and you screw over a company everyone is going to know very quickly."

For Purvis of Scotland IS and other ambitious Scottish technologists, venture capital remains a key goal. "We’ve got a challenge around venture capital," she said. "All tech sector companies will say that."

London connection

That much at least is true of Scotland’s tech sector, in contrast to companies from Silicon Valley which are spoilt for choice. As Gordon Stuart, director of operations at trade body Informatics Ventures, put it: "Even venture capitalists that are global still like to invest locally."

If this is one area which London rules over Edinburgh, some have found ways to piggyback off their neighbour’s strengths. James Varga, chief executive of identity firm miiCard, boasts that he can be in Canary Wharf at 8.30 if he has to, such is the strength of the transport links around Edinburgh.

Even so, it does prompt the question of why one would bother setting up a tech company in Scotland when places like London and Cambridge are so near. The answer given by our interviewees was always the same: Quality of Life.

"This is a great environment to be working in," Purvis said. "People get a better work-life balance." Her comments are backed up by Float’s Hewitt and miiCard’s Varga, who both live a short distance from where they work.

For an industry that has been at the forefront of advocating better working conditions such assets are hardly trivial. At any rate, the rolling hills of Scotland seem a more likely home form unicorns than the cramped and smoggy City of London.
This article is from the CBROnline archive: some formatting and images may not be present.