Scotland has long been celebrated as a nation of innovators. A highly skilled workforce, support from Scottish universities to student spin-off firms, access to foreign markets, and a network of active investors makes Scotland a natural leader in the entrepreneurial space for tech startups.

The entrepreneurial ecosystem in Scotland is thriving with organisations that can support, nurture and grow young innovative businesses, and there is a buoyant and active group of angel syndicates to fund exciting high growth companies. In addition, the Scottish Investment Bank continues to stimulate the SME funding market in Scotland through the supply of growth capital. Organisations such as EIE , FutureX InnovationInformatic venturesScottish EdgeConverge ChallengeTuring Festival  and Scottish Enterprise continue to identify and  aid  up-and-coming, innovative, high-growth potential entrepreneurial talent. We discussed these major players and how they can help in our article Help starting a business in Scotland.

The growth of tech startups in Scotland is evidenced by the statistics; the Scottish Technology Industry Survey 2018 reveals that between 2010 and 2017, the number of digital technologies businesses in Scotland grew by 60%, or approximately 3,500 companies. In 2018 alone, approximately 9,400 digital technologies businesses were registered in Scotland. According to data from the Office of National Statistics (ONS), computer programming  consultancy is the largest sub-sector, making up 85% of all digital technologies businesses in Scotland (and employing 56% of the tech workforce) which has also been the fastest growing sector with a 68% growth since 2010.

This has been confirmed by the research undertaken by RSM which shows that 440 software and programming businesses were incorporated north of the border during 2017, a 77 per cent increase on the 249 launched in the previous year. The percentage increase puts Scotland second only to the north-east of England of the 12 UK regions examined.

Software startups in Scotland have been bringing about significant changes in various sectors, like the Software Company GSI – which uses their patented AI to transform raw satellite, drone, UAV and other big data into valuable business intelligence – and the Edinburgh based Administrate, whose software helps training providers save time and money. Both these software startups are TalentSpark clients and are considered dynamic businesses to watch out for.

Overall, 2018 was a good year for smaller tech businesses in Scotland, with 74% reporting an increase in sales (up 10% from 2017) and 43% increasing their profit margins. Optimism appears stable as 72% of small businesses have a positive outlook for 2019. The main reason for this optimism has been attributed to the introduction of new products, strong demand for existing products and services, and changes in market dynamics or regulatory environments. With technologies like AI and blockchain disrupting the market, 2019 is seeing more and more startups stepping up to the plate to tap into new opportunities.

Startups in Scotland have also been making strides in their cash flow situation; 46% experienced improvement while only 7% reported substantial difficulties compared to the previous year. Since most early stage companies ignore cash flow forecasting because they view it as either an overwhelming task or an optional distraction, it is refreshing to see businesses getting better at managing when and how their cash moves in and out.

Investors often state that whilst the technology needs to be attractive and a significant market illustrated, ultimately the team and its passion and resilience are the key reasons why they will eventually put money in. Businesses are focusing on investing more in people by building and expanding their teams. 77% of small businesses expect to increase employee levels during 2019 while 64% of them are likely to recruit graduates, and 32% are likely to take on modern apprentices (up from 30% in 2017).

The startup scene in Scotland, especially the tech sector, is very strong at the moment and has the potential to drive the economy.  In light of the rapid technological advancements, we firmly believe that the future holds even more opportunities for this sector, and we know just how important talent is in securing the vital investment needed for growth.

If you’re an early stage business interested in securing the top talent to build your business or are interested in working in an exciting innovative business, let’s talk.