Global tech advisory firm GP Bullhound stopped in Edinburgh last week on the latest leg of a whistle-stop tour to promote its Titans of Tech report. Looking at Europe as a whole, GP Bullhound noted that with more billion-dollar tech companies than ever before and a record twelve months of fundraising, Europe can rival the US and Asia as a hub for the best tech companies on the planet.
Fast forward a week and Faang stocks in the US - Facebook, Apple, Amazon, Netflix and Google - had $1 trillion wiped off their market value (around half the value of the entire FTSE 100) from yearly highs, spreading a chill over stock markets worldwide and turning bull markets bearish overnight. The European ecosystem has yet to produce tech titans of Faang stature, although Sweden’s music streaming platform Spotify is showing signs of closing the gap with a valuation close to $30 billion.
The Scottish tech reality is probably best put into the context of what is happening elsewhere in the UK - rather than against the rest of Europe, never mind the States or Asia - and if you believe in the corporate mantra that “only the paranoid survive”, perhaps it’s time we admit to a bit of anxiety that we could be falling behind other tech hubs in the British Isles.
Most venture capitalists with a trained eye on the UK ecosystem admit that Manchester has overtaken Edinburgh in unicorn-creating potential. Not only has the capital of the Northern Powerhouse produced more unicorns - think boohoo, The Hut Group and Onthebeach.com - but, perhaps more importantly, it has a much more extensive hotbed of pre-unicorn quality startups primed to prance towards sky-high valuations.
So, how is it that Manchester is socking it to us in Scotland on the tech front? Population is definitely a factor, with Greater Manchester boasting a population close to 3 million. In geographic terms, travel time from Manchester to London is around 2 hours, considerably closer than Edinburgh and Glasgow and nearer to London’s critical mass of tech investors and their prized chequebooks.
Former senior Skyscanner executive Richard Lennox wrote in this column a fortnight ago that we shouldn’t measure tech success by unicorns, rather we should concentrate on creating “small giants” - “companies who focus on being great over big, have found a product-market fit and are looking to to create sustainable, profitable, medium-sized enterprises”. Of course, if you produce more small giants you improve your chances of producing billion dollar companies like Skyscanner, FanDuel or Rockstar North.
Mark Logan, Skyscanner’s former COO, is now sharing his scale-up wisdom as an adviser and non-executive with a number of Scotland’s most promising early stage tech companies. Much fancied healthtech startup Care Sourcer, up for three awards at this week’s inaugural Scottish Startup Awards, is one of Logan’s growing NXD portfolio. With investor backing from Accelerated Digital Ventures (ADV), who made Care Sourcer its first ever startup investment in Scotland, close observers view the healthtech startup as a soon-to-be small giant and a very probable unicorn contender.
Back at GP Bullhound’s Titans of Tech event, hosted by Informatics Ventures at the Bayes Centre, other Scottish tech stories of recent times - including AIM-listed Craneware (now with a valuation within touching distance of £1 billion) and wealth management platform FNZ (sold earlier this year to Generation Investment Management for £1.6 billion) - were discussed during a Q&A with key players from the Scottish ecosystem.
They included Glasgow-headquartered Scottish Equity Partners (SEP) - original backers of Craneware and Skyscanner - and, giving a view from the top recently, the venture capital firm’s Managing Director Calum Paterson (Paterson is also the current chair of the British Private Equity & Venture Capital Association) said: “The UK is now home to a third of all technology unicorns in Europe and accounts for 30% of all European venture capital investment. We have a supportive ecosystem for technological innovation and the emergence of an increasingly large and impressive pool of dynamic and agile technology companies right across the country - not just in London, but in regional hubs such as Cambridge, Manchester, Belfast and Edinburgh.”