Support for start-ups is vital for Scotland’s economic growth

March 01, 2012 − by Cathy Quail − in Business News, Featured − Comments Off

Scotland likes to think of itself as a nation of innovators, home to people possessed of an entrepreneurial spirit and a determination to convert ideas into reality.

In the current climate, when the Scottish business community is facing more challenges than it has done for generations, it’s never been more important to ensure that the environment here is right for ideas and ambition to flourish.

Clearly, at a time when many businesses have been encountering frustration in their dealings with banks, a crucial element in creating that environment is providing access to funding.

As a result of what’s been happening in our economy in the last two years or so,  many of the angel syndicates have moved away from investing in very early stage businesses and are now more focused on supporting companies higher up the food chain.

Alongside funding, however, we also need to be aware that many start-up companies need assistance with a whole range of other areas if they are to have a realistic chance of being successful in today’s tough economy.

Understandably, many of the individuals who run these companies have a laser-like focus on their technology and what it can deliver in the marketplace but are sometimes on less comfortable ground when it comes to areas such as accounting, legal matters, corporate governance and marketing.

As managing director of Strathclyde University Incubator I’ve spent more than 20 years delivering assistance to primarily early stage technology businesses and, in that time, we’ve worked successfully with around 140 companies, many of which have gone on to great success.

By creating an environment that prepares the ground for businesses to succeed, we’ve been able to support some excellent companies who have ‘graduated’ from the Incubator and are going from strength to strength.

  • SpaceandPeople is now the European market-leader in promotional space sales.
  • Cascade Technologies is another great example of a business which took the right approach to commercialising its technology and adapted it to the needs of the market.

However, there’s no doubt that, at present, access to finance is the biggest concern for start-up companies and if we’re serious about helping people with ambition and innovative ideas then we need to do everything we can to support them.

That’s why we’re launching a new angel syndicate, Gabriel Investments Syndicate Ltd,  which is specifically aimed at supporting young businesses. The idea grew out of a ‘Dragons Den’-style investors event I was invited to attend as a “dragon” and together with the other “dragons” there, very quickly agreed to provide around £10,000 funding for one of the companies that presented at the event.

That gave me the idea of approaching individuals who may be interested in starting a syndicate to help pump prime this early stage of the market. The aim is to make the process as simple as possible in order to get the funds injected into the company quickly without the need for lengthy due diligence.

In order to qualify for matched funding from the Scottish Co-Investment Fund, deals need to be a minimum of £20,000 so we’ve modified our original idea to accommodate this funding requirement. We’re looking at a commitment of £10,000 from each syndicate member in order to help start up 5 companies in year one, with the hope that syndicate will grow, enabling us to look at more potential investments over time.

The plan is to have between four and six events each year at which five projects or company ideas will be put in front of our syndicate and, at each round, we’ll select one business to invest in and support through to at least the next level of investment.

The aim, having invested this early funding, is to nurture the business and guide them through an investor ready and corporate governance programme. We want to ensure they are prepared for the situation where the next round of investors will look to get involved when they can see that, as well as having an idea which is going to work in the marketplace, the company has given due attention to all the other key elements which give a business the best chance of being a success.

Our strategy is to position the successful candidates so that, ideally within a six-to-nine month timescale, they’re in good shape to be considered for a second round of funding which will move the business on to the next level of development.

Our role in paving the way for that will be to work closely with them to make sure that, while they refine their product or service that they also hit four or five key benchmarks which will make them an attractive proposition for new investors. As the syndicate develops and grows , it will become self-funding and we’ll be able to expand the number of companies we’re able to assist.

It would be all too easy to ignore start-ups and mistakenly think that we should be focusing on companies which are already trading and making their contribution to economic growth. Of course, it’s vital that we do that but it’s equally essential that we don’t neglect those companies which are just starting out and, with the correct support, could soon be making a massive contribution to the Scottish economy.

Gill MacAulay
Managing Director, Strathclyde University Incubator

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