Despite a vote on independence looming, start-ups in Scotland are keeping their heads down and leading the small business boom north of the border
Something has been stirring in Scotland of late. And for those of you who think we’re talking about independence, think again. While people operating outside of the British business community could be forgiven for assuming as such, what is really making waves north of the border is a sizeable start-up surge. Indeed, figures released recently by the Global Entrepreneurship Monitor (GEM) show that Scotland now has more entrepreneurs than at any other point in its illustrious history.
It has not gone unnoticed that companies such as BrewDog, Skyscanner, Vegware and SKYCIG – among others – have been proudly flying the flag for Scottish enterprise over the last five years, and seem to have engendered a certain entrepreneurial spirit among the everyday citizen. “It is a great time right now – you can feel that something is happening,” says Lucy-Rose Walker, chief solutions officer at Entrepreneurial Spark, a new and fast-growing incubator for start-ups launched in January 2012, and backed by a trio of Scottish entrepreneurs.
Indeed, the emergence of an organisation in the form of Entrepreneurial Spark is telling enough, with the Scottish government recognising how essential the country’s younger, more exciting, enterprises are to its economic future – whether that is as part of the UK, or not.
“Certainly the government here in Scotland recognises it is the ‘meat and two veg’ companies who are going to kickstart the economy and have a big impact on it moving forward,” adds Walker. “It is not all necessarily about building million- and billion-pound businesses. It is just about creating that start-up renaissance.”
Of course, one must be careful not to get ahead of oneself. We are, after all, living in a recession, and much like other parts of the UK, a rise in start-up businesses should also be treated with a healthy dose of cynicism. Things are put in perspective by somebody who is very much on the inside of Scotland’s small business community. “Over the last 18 months or so, you have seen Scotland’s business start-up figures increase and, as a small-business organisation, naturally we support Scotland’s entrepreneurs and self-employed,” says Stuart McKinnon, senior public affairs advisor at the Federation of Small Businesses (FSB) in Scotland. “But there is a little bit of concern that a proportion of the new self-employed are simply displaced from the ranks of the employed as a consequence of redundancies in either the public sector or larger private-sector employers.”
Stuart McKinnon, senior public affairs advisor at the Federation of Small Businesses (FSB)
Nevertheless, it is clear that such an eventuality should not be treated as a sign of weakness and the FSB, among others, is eager to help stimulate and support the start-up spirit in Scotland. “I think there is an opportunity to give these people the best chance to succeed,” adds McKinnon. “That means getting the support right for start-ups and the very smallest firms.”
Well, it would seem that there is already ample assistance in place for aspiring entrepreneurs looking to set sail in Bonnie Scotland. And this is only likely to increase with time, according to Elaine Morrison, senior manager on the commercialisation portfolio at economic development agency Scottish Enterprise. She says: “Public- and private-sector organisations across Scotland have been coming together to really understand whether there are other, better, faster and more sustainable ways to make the ecosystem work effectively and ensure that Scotland is recognised as a place where entrepreneurs can start up and flourish.”
However, one message that comes through strongly from all quarters is how the breadth and quality of the current support network in Scotland has laid an incredibly solid groundwork for established businesses, as well as new and expanding enterprises. “There is a real sense among the business community of people who want to give something back,” says Amy Dalrymple, policy and research manager at the Scottish Chambers of Commerce (SCC). She cites the example of the SCC’s Business Mentoring Scotland service, which currently boasts in the region of 900 business professionals who voluntarily lend a helping hand to younger firms on areas from sales and marketing to other key processes. “This is just an example of the kind of culture that I think there is in Scotland,” adds Dalrymple. “It is supportive and about saying, ‘We are a business community and we need to grow together.’”
McKinnon affirms that Scotland has a “distinct business support network in comparison to the rest of the UK”, and draws attention to how Scottish Enterprise is fulfilling a role akin to that of regional development agencies (RDAs), which were abolished in England last year. He also bangs the drum for the much lauded Business Gateway, a scheme run by local authorities in Scotland that acts as a useful port of call for Scottish businesses of any shape and size. “While it is difficult to compare Scotland with England because there are significant historic differences, many of our members in Scotland do really appreciate the support that both of these agencies provide,” says McKinnon.
And the government is doing its bit too, with the Encouraging Dynamic Growth Entrepreneurs (EDGE) fund awarding grants of up to £50,000 to the innovative companies identified as having the ability to lead Scotland’s charge to entrepreneurial greatness. EDGE is run in conjunction with Scottish Enterprise, Highlands and Islands Enterprise, Business Gateway and Entrepreneurial Spark, as well as the Royal Bank of Scotland, which has offered an additional package of support to the programme.
Suffice to say, Scotland in itself has enough attractions for business owners without all of the above, and much of it has to do with its size. “It has a great deal going for it in the fact that, because it is a small country, you can find out quite quickly whether something is going to work or not,” says Walker. “So, ultimately, your aim may be to take something global, but you can start it quite small and test it out – and have quite a big impact in a small country quite quickly.”
Lucy Frankel, communications director at Vegware
A sense of localisation also paves the way for businesses to have more of an influence on those in control of the purse strings. “You have better access to the people in positions of power,” explains Lucy Frankel, communications director at Vegware, the eco-friendly food service packaging company named FSB Streamline UK Business of the Year in April. “We have a fantastic relationship with our local politicians; we had Richard Lockhead, the cabinet secretary for environmental and rural affairs come to open our new office recently; we have had two Scottish parliamentary motions in our name; and the whole of Edinburgh city council voted unanimously to support what we are doing.”
So, what do Edinburgh and Glasgow – Scotland’s two largest cities – provide the entrepreneur that London, in particular, doesn’t? One dominant theme here appears to revolve around the calibre of available talent, aided in part by the quality of life on offer in Scotland, and the educational prowess that the country’s universities can boast.
“The variant of skilled people and industries that are available within Edinburgh and Glasgow means you can tap into most markets from here, so it is certainly a good place to start,” says Doug Mutter, operations manager for Edinburgh-based e-cigarette provider SKYCIG, which is currently outstripping its rivals in what has become a highly competitive market. “Edinburgh itself, where we’re based, is a thriving city, it is very functional across a whole range of industries and we have tapped into knowing there will be plenty of skilled people available in the area. We have assembled a great team of multi-skilled people throughout all the departments.”
And, as far as Scotland’s educational institutes are concerned, not only are they globally recognised centres of excellence, but they also play a huge part in the development of the business scene around them. “There is a real enthusiasm in the university community for growing the commercial impact of the research that they are doing,” says Dalrymple. “So there are plenty of opportunities for somebody looking to start a business to hook up with some of the really innovative work going on at that academic level.”
Alexander Cole, founder and CEO of fledgling Edinburgh technology firm Peekabu Studios, would certainly vouch for this, having started up while studying in the city. Edinburgh University granted him a small amount of financial support before he went on to winning a fund from the Scottish Institute of Enterprise, followed by a fellowship from the Royal Society of Edinburgh. The latter, it seems, was indispensable. “It came just at the right time for me to be able to knuckle down and do the proper market testing that I needed to do,” he says. “Not a lot of people know about it, but it is a massive boost and couldn’t have come at a better time for me.”
Cole has only shed light on yet more avenues for support here – and when one throws the riches of resources on its doorstep into the equation, it is of little wonder that Scotland stands itself in good stead as a place to do business. It will thus come of little surprise to learn that the majority of start-ups are not overly concerned about how a breakaway from the rest of the UK could affect any future success. More accurately, the general consensus appears to be that there is not yet enough information to make an informed judgement. The default attitude is therefore ‘business as usual’ – and that is nothing if not admirable. “This is a political debate and most business people are getting on with running their businesses,” says Dalrymple. “There is a view that it is something of a distraction, in a way – the debate at the moment has been characterised by a lot of partisan statements being thrown around and that is not useful for businesses.”
That said, McKinnon admits it won’t be an easy decision for Scotland’s SMEs when the time comes. “It is a challenge for these business owners to decide whether they can separate what might be good for their business, and what they might believe individually,” he says. “There are lots of debates about what the small-business and large-business communities think at the moment and I am sure we will hear a lot more about that in the next year.”
Constitutional concerns aside though, any budding start-up could well regret not considering Scotland as a launch pad, and established home, for their venture. “It really isn’t an outpost – it is a fantastic base from which to grow your business,” says Frankel. And, with improved transport links bringing all parts of the UK closer than ever before, it offers an attractive and realistic alternative to good old London. Needless to say, a recent Ernst & Young report – which shows a 49% rise in foreign inward investment to Scotland – almost speaks for itself.
Flying the flag
One company currently taking Scotland, and the world, by storm is compostable food-packaging enterprise Vegware. Founded by Edinburgh University graduate Jo Frankel in 2006, Vegware bases its operations in the Scottish capital, where it now has two offices, and in Danielson in Connecticut, USA. It has further operational outposts in South Africa and Australia and boasts a range of partners across continental Europe. The firm produces packaging for the food-service industry (see right) that can be recycled alongside food waste by virtue of being put together using natural starches and compostable material. The idea for the business came to Frankel when he was in California and used a bio-plastic spoon to eat some frozen yogurt – he realised that no company at the time was producing anything similar in the UK.
Suffice to say, Frankel has exploited the gap in the market rather successfully, and from an initial team of two in 2008 – business partner Dominic Marjoram joined when Vegware became a limited company – the company now employs more than 30 staff in Scotland. And communications director Lucy Frankel is adamant that there could be no place better for Vegware to conduct the majority of its work. “I think it is the energy and dedication of the people in Edinburgh that has helped our fantastic trajectory for growth,” she says. “There are quite a few people selling packaging in the market but people come back to us, and tell their friends about us, because they just enjoy dealing with us. The people we have been lucky enough to hire are great to work with – they are dynamic, energetic and really well qualified.”
Frankel is also keen to lavish praise on the Scottish government for its forward-thinking green policies, that have given Vegware a solid platform from which to spread its positive message far and wide. “There is legislation coming into force on 1 January 2014, which is far ahead of England, for example, in terms of waste management, because all businesses are going to be required by law to recycle various key waste streams,” she says. We find this really exciting because we know that introducing food recycling and going zero waste is good for your business. It saves money, it is good for overall sustainability, because you are avoiding landfill tax, and you are setting yourselves up to be future-proofed.”
Vegware is on target to report 15-fold growth since 2009 and with plenty more products and global projects in the pipeline, it is certainly showing what can be achieved with a bit of innovation and imagination. Indeed, this is only enhanced by the quality of life offered by an energetic Edinburgh. “Most of our team either walk or cycle to work, and if you have a happy workforce, you are going to be more productive,” says Frankel. And to top it off Vegware has just been handed a Queen’s Award for Enterprise in Sustainable Development. You can’t argue with that.
The British beer industry has definitely had a little bit of character – and controversy – injected into it recently, thanks mainly to the efforts of a certain brewery called BrewDog. Founded in 2007 by Aberdeenshire pair James Watt and Martin Dickie, it would be something of an understatement to say that BrewDog has enjoyed a monumental rise in the last few years. Through a combination of bold and brash marketing campaigns, and an attractive range of boundary-pushing beer, Messrs Watt and Dickie have certainly managed to put their venture, and Scotland, firmly on the entrepreneurial map.
Only last month, BrewDog raised a staggering £1m in 24 hours in its third crowdfunding push, coined Equity for Punks 3, and has opened its first overseas venue in Stockholm, Sweden, with more in the pipeline. “Scotland is a great place to do business,” says Watt. “Organisations such as Scottish Enterprise and Scottish Development International provide a great support structure for ambitious, internationally minded companies and Scotland is a great base to export from with its global reputation for amazing quality food and drink.”