Description
In such a criteria with regards to increasing innovation driven entrepreneurship in scotland through collective impact.
Increasing innovation-driven
entrepreneurship in Scotland
through COLLECTIVE IMPACT
2
Page 3 Foreword
Page 4 Executive Summary
Page 6 Our Vision for Scotland
Page 7 Section 1 Setting the Scene
Page 7 1.1 Introduction to MIT REAP
Page 7 1.2 Scotland’s latent opportunity
Page 8 1.3 Scotland’s MIT REAP goals
Page 9 Section 2 Learning through MIT REAP
Page 9 2.1 The importance of Innovation-driven enterprises
Page 10 2.2 Importance of linking E-cap with I-cap
Page 12 2.3 Value of Collective Impact
Page 12 2.4 Importance of investment and mentoring by successful
entrepreneurs within incubators and accelerators
Page 13 2.5 Value of learning from other regions
Page 14 Section 3 Scotland – Investigating the Issues
Page 14 3.1 Key economic facts about Scotland
Page 16 3.2 The Scottish IDE ecosystem
Page 20 3.3 Business formation and growth ambitions in Scotland
Page 22 3.4 GEDI research
Page 22 3.5 Interpretation of research
Page 22 3.6 Stakeholder discussions
Page 24 3.7 Five key themes
Page 26 Section 4 Developing Solutions and Actions
Page 27 4.1 Efective Connections
Page 29 4.2 Skills for Growth
Page 31 4.3 Financing for Growth
Page 33 4.4 Role of Universities
Page 35 4.5 Role Models
Page 36 4.6 Corporate discussion group
Page 36 4.7 Applying the Collective Impact approach in Scotland
Page 38 Section 5 Conclusions and Recommendations
Page 39 Calls to Action for stakeholders in Scotland
Page 41 Annexes
Page 42 Annex A - The REAP Scotland Team
Page 44 Annex B - The MIT REAP Programme
Page 45 Annex C - Workshops, Stakeholder Meetings and Task Groups
Page 46 Annex D - Stakeholder Participants and Consultees
Page 47 Annex E - History and Challenges to Risk Capital in Scotland
Page 47 Annex F - Backbone Organisation
CONTENTS
3
Scotland already has strong foundations in place to
achieve this, but, in key areas the environment in
which our talented entrepreneurs and innovators
operate is not optimal and this constrains progress.
In addressing these constraints through specifc
and targeted actions we can stimulate a new era of
innovation-driven entrepreneurship in Scotland. A
relentless focus on customers and markets, combined
with high levels of market orientated innovation and
access to a variety of funds for business growth, will
deliver increased numbers of ambitious companies
growing rapidly with both a determined and
disciplined approach.
In this document we describe the Scottish
entrepreneurial ecosystem and what should be done
to improve it. By working collectively Scotland
can accelerate the performance of innovation-
driven entrepreneurial businesses for the beneft
of both society and the Scottish economy. We
have developed these proposals through intensive
consultation with our stakeholders, including
entrepreneurs, investors, corporate organisations,
academia and agencies of government. Throughout
this document we have taken into account the
Scottish Government’s CAN DO framework.
FOREWORD
In Scotland we have an opportunity to rede?ne ourselves as a
nation of dynamic and high achieving entrepreneurs, targeting
global market opportunities, using innovation as a key driver of
sales growth, making a signi?cant contribution to the creation of
employment and wealth
We ask our stakeholders to work collectively to deliver this stakeholder initiative
for acceleration of innovation-driven entrepreneurship across Scotland.
Simon Grey
CEO,
AWS Ocean Energy
REAP SCOTLAND TEAM
Donna Chisholm
Head of Business
Innovation and Growth
Sectors, Highlands and
Islands Enterprise
Ian Ritchie
Chairman,
Iomart plc
Professor
Jonathan Levie
Director of Knowledge
Exchange, Hunter Centre
for Entrepreneurship,
University of Strathclyde
Jonathan Harris
Editor,
Young Company Finance
Clive Reeves
Collaborative Funding
Manager, Scottish
Enterprise
4 MIT REAP Team Scotland Initiative
• Scotland is a prosperous nation with world leading
capabilities for scientifc research and invention.
• However, over the past 30 years Scotland has
not delivered economic growth on a par with
the world’s best performing innovation-driven
economies.
• Entrepreneurship, particularly when combined with
market orientated innovation, is known to create
• In order to investigate how Scotland’s performance
in entrepreneurship can be enhanced, a team from
Scotland participated in the Massachusetts Institute
of Technology inaugural Regional Entrepreneurship
Acceleration Programme.
• During this Programme the REAP Scotland team
participated in four multinational residential
workshops alongside teams from Finland, New
Zealand, and regions of China, Spain and Mexico.
• The workshops provided a framework for analysis
of Scotland’s innovation-based entrepreneurial
ecosystem and development of a strategic action
plan for improvement.
• Between the workshops the team carried out an
investigation of the entrepreneurial ecosystem
in Scotland using both academic research and
stakeholder consultation.
• The result is this document.
Scotland’s Innovation-driven entrepreneurship opportunity
Scotland’s participation in MIT REAP
companies capable of capturing substantial value
and delivering signifcant economic beneft.
• Promoting innovation-driven entrepreneurship and
creating the conditions for young companies to
grow is a key focus of Scotland’s economic strategy.
EXECUTIVE
SUMMARY
5
For each of the fve action areas, the REAP Scotland
team gathered input from expert groups to identify
specifc actions which are presented within the
main text of this report, and summarised within
the conclusion. Furthermore, the team concludes
this is best delivered using a collective impact
approach which involves all players in Scotland’s
entrepreneurial ecosystem. This includes individual
entrepreneurs through to Scotland’s largest
businesses, government and business support
organisations, universities and the fnance and
investment community. To maximise efectiveness,
this collective approach will require coordination by
an independent organisation which will provide a
Participation in REAP and the associated stakeholder
consultation has identifed fve areas which currently
constrain the ecosystem. These fve areas require
attention and action, if Scotland’s performance
in building innovation-driven enterprises is to be
enhanced:
1. Actions to improve networking linkages between
innovation capacity and entrepreneurial capacity
to improve the rate of creation or transformation
of growth businesses.
2. Actions to improve skills for growth through
provision of internationally excellent education in
entrepreneurship and management.
3. Actions to improve access to growth fnance
Delivery of the plan
An initiative for realising Scotland’s potential
‘backbone’. This backbone organisation will work across
all stakeholders to ensure ongoing alignment of vision,
delivery of mutually re-enforcing actions, continuous
communications and an agreed monitoring framework.
The REAP Scotland team recommends that the
backbone should be a non-proft stakeholder-led
organisation, potentially a new or existing foundation,
which is funded by a mix of public and private funds.
This organisation should have a small core team and
should help to coordinate stakeholder-led collective
actions to achieve impact. The REAP team proposes
to continue with early implementation of the strategy
actions on an interim basis over the next 9-12 months
as the backbone model is established.
through private initiatives in the fnance sector
and enhancement of management capability in
companies.
4. Actions to leverage the role of our universities
to improve entrepreneurship and management
education and build links with alumni to foster
mentoring, support and development of Scotland’s
ambitious entrepreneurs.
5. Actions to promote innovation-driven
entrepreneurship to individuals of all ages as a
worthy and rewarding career choice through a
positive communication strategy and extensive
use of role models.
CALL TO ACTION
REAP Scotland team invites, and calls to action, all those with an interest in improving the
performance of Scotland in the feld of innovation-driven entrepreneurship to engage with
and support the actions of this stakeholder led initiative. We ask for your endorsement,
participation and support in working collectively to deliver a world class ecosystem which
stimulates and supports the growth of innovation-driven enterprises.
MIT REAP Team Scotland Initiative
SECTION 3
xxxxx - xxxxxxxxxxxxxxxxxxxxxxx Section x
6
our vision for
Scotland
A vibrant, dynamic society which inspires, resources and
rewards innovators and entrepreneurs.
A forward looking business culture which celebrates
success and acknowledges failure, recognising the value in
both. Where inspirational role models are well known and
accessible, showcasing Scotland’s entrepreneurs and their
contribution to society.
An ef?cient and joined up entrepreneurial ecosystem
where innovators, entrepreneurs, ?nanciers, educators,
government and established corporations all play their
part to enable Scotland to realise its potential for creating
and growing signi?cant innovation-based enterprises.
An open, globalised economy characterised by opportunity
and resource, attracting top talent from around the world
who see Scotland as a centre for vigorous, successful and
sustainable business growth.
7
SECTION 1
Setting the scene
1.1 Introduction to MIT REAP
For over two years between 2012 and 2014 a team
from Scotland participated in the Massachusetts
Institute of Technology (MIT) inaugural Regional
Entrepreneurship Acceleration Program (REAP).
Delivered by the world leading MIT Sloan School of
Management, REAP is designed to help regions and
nations to accelerate economic development and job
creation through efectively enhancing innovation-
driven entrepreneurial ecosystems.
Scotland’s participation in the programme was
through an independent team of key stakeholders, the
REAP Scotland Team, brought together by Highlands
and Islands Enterprise (HIE) and Scottish Enterprise
(SE). The team worked alongside groups from Finland,
New Zealand, and regions of China, Spain and Mexico.
Scotland’s team consisted of entrepreneurs with
experience of building enterprises of various scales
(SMEs and large companies), representatives from
academia, the fnance and investment community,
and the economic development agencies. Members
are identifed in Annex A and were brought together
to ensure a balanced view across critical areas of the
Scottish entrepreneurial ecosystem. Annex B provides
a short overview of the MIT REAP programme.
Over the two years the team participated in four MIT
led workshops, two onsite at the MIT Sloan School in
1http://www.cforic.org/pages/ukci2013.php
2http://www.edinburgh-inspiringcapital.com/live/working_in_edinburgh.aspx
Boston USA, one in Edinburgh and one in Auckland,
New Zealand. Between the workshops the team
completed MIT assignments, held monthly team
meetings and carried out signifcant consultation
with wider stakeholders through a number of
forums. Leading entrepreneurs in Scotland were also
consulted for their views and comments.
1.2 Scotland’s latent opportunity
Scotland is a nation of well educated, inventive and
industrious people. Scots are known the globe over
for tenacity and fortitude having played a leading
role in establishing trade around the world. Scots
have been leading advanced scientifc research and
inventive discovery for over 200 years. Today Scottish
scientists are at the forefront of advanced research
including, for example, in fundamental physics,
energy, engineering and life sciences.
Scots also have a strong commercial record: during the
19th century, Scots traders built Glasgow to become
the “Second City of the British Empire” whilst today
both Aberdeen and Edinburgh feature in the top four
of the UK’s most competitive cities outside London
(2013)
1
. Edinburgh has the highest percentage of
professionals in the UK, with 43% of the population
holding a degree-level or professional qualifcation
2
.
SECTION 3
Setting the scene Section 1
Despite this track record of outstanding success and
highly educated people, Scotland produces few home
grown enterprises of global scale. There is latent
potential to create signifcant wealth from Scotland’s
innovative capacity, but opportunities are not being
realised at present.
This document sets out to defne what is constraining
our ability to scale-up the businesses entrepreneurs
create, and aims to identify action areas to overcome
these constraints.
1.3 Scotland’s MIT REAP Goals
The Scottish team set out on the REAP programme
with the objective of producing three specifc outputs:
• Recommendations on ways to improve the
entrepreneurial ecosystem to accelerate business
growth.
• Specifc project/programme ideas which are
capable of implementation within the wider
context of Scotland’s entrepreneurial ecosystem.
• Recommendations to Government, and its agencies,
on public sector interventions to improve the
performance of Scotland’s entrepreneurial
ecosystem.
During the programme these objectives were
sharpened to focus on the conditions for creation
and acceleration of innovation-driven enterprises
(IDEs). Over the two years of the REAP Programme
the Scotland team gained signifcant knowledge
and understanding in relation to the Scottish
entrepreneurial ecosystem itself, the wider
economic issues, and leading international academic
thinking around entrepreneurial business growth. In
particular the team identifed that the creation and
growth of IDEs represents an important opportunity
for Scotland.
Accordingly, the original objectives of the REAP
Scotland team were re-focused to concentrate
on how we might improve the entrepreneurial
ecosystem specifcally to enable the creation and
scale up of IDEs to maximise the growth opportunity
for Scotland.
8 MIT REAP Team Scotland Initiative
“In terms of the wider ecosystem, we do a good
job talking about this and what needs to change
- we just need to make it happen. And to come
to the table as equal partners. It needs us all
involved - from SMEs to corporates to academia
to government to investors. SMEs should not be
daunted by academics or large corporates, we all
have just as much to bring. We need to get the best
team together and make this happen”
Colin Stewart, Citi
9
SECTION 2
Learning through
MIT REAP
The REAP Scotland team was guided by the insights
and experience of the MIT faculty, their advice on
stakeholder strategy development and through the
sharing of experiences between participating nations
and regions. This took place during the international
workshops. In addition, the team commissioned
academic research, carried out intensive stakeholder
consultations and set up a number of working groups
– all designed to defne specifc actions which
will strengthen Scotland’s IDE ecosystem. The key
concepts and learning included:
• The importance of innovation-driven enterprises
in an entrepreneurial ecosystem;
• The importance of linking innovation capacity with
entrepreneurial capacity;
• The value of Collective Impact to solve complex
social challenges;
• The importance of visibility, investment and
mentoring by successful entrepreneurs at every
level;
• The value of learning from other regions of the
world, tailored to suit local circumstances;
• Throughout, it was recognised that a joined up
approach to action across the whole ecosystem by the
full range of stakeholders is vital as is the requirement
for patience to allow actions to take efect.
Each of these learning points is described in the next
section.
2.1 The importance of Innovation-driven
enterprises
Innovation-driven enterprises or ‘IDEs’ are
enterprises which lead the competition and secure
business growth by creating new products or services
that excite customers and can be rolled out quickly
and efectively. They often compete in new ways,
using new business models to respond rapidly to
evolving trends in a highly connected marketplace.
They turn the dynamic of ever-shorter product
lifecycles to their advantage. To do this they focus
on innovation as a key driver of growth.
According to the Organisation for Economic Co-
operation and Development (OECD) more than half
the productivity growth in developed nations now
3
OECD (2012) OECD Compendium of productivity indicators 2012
SECTION 3
Learning through MIT REAP Section 2
comes from innovation
3
. It is also identifed as the
engine of long term economic development and has
underpinned much of the UK’s productivity growth.
As NESTA said in its report in 2009
4
“Innovation may
be responsible for two-thirds of UK private sector
productivity growth between 2000 and 2007”.
While all IDEs are innovation-driven, this is not
limited to technology based businesses. IDEs
operate across most industry sectors. Aggreko,
Global Energy Group, Wolfson Microelectronics and
Skyscanner are impressive examples of Scottish IDEs
successfully delivering across global markets.
In the United States, IDEs are highly valued as
a source of wealth creation and employment. In
contrast, Europe in general has been less successful
in cultivating IDEs
5
. The process of creating IDEs,
‘IDE entrepreneurship’, has specifc challenges
and is distinct from the creation of small local
businesses. Several elements of the entrepreneurial
ecosystem must be functioning well and working
together, to create the optimum conditions for IDEs
to fourish.
MIT faculty at the Martin Trust Center for MIT
Entrepreneurship set out the diference between
IDEs and SMEs as follows in Table 1
6
:
The REAP Scotland team has focused attention on
the stimulation of more IDEs, either through the
creation of new businesses, or transformation of
existing companies, for example through family
succession. New IDEs in Scotland are likely to start
as SMEs ‘with a difference’ as Table 1 demonstrates.
Existing SMEs can transform themselves into IDEs
by adopting a disciplined approach to structuring
their business model for scalable accelerated
growth, and by selling innovative products or
services to larger, higher value markets.
2.2 Importance of linking E-cap with I-cap
A key theme highlighted by the MIT faculty is the
importance of linking the innovation capacity
(I-cap) with the entrepreneurial capacity (E-cap)
of a region. Often innovators have great ideas
(I-cap) but lack the entrepreneurial skills (E-cap) to
develop them. Similarly there are many talented
entrepreneurs whose talents are wasted on low
quality ideas.
MIT faculty believe that the key to success in the
Boston entrepreneurial ecosystem has been the
linking of I-cap with E-cap, thus enabling talented
entrepreneurs and innovators to meet, facilitated
through well developed networks, leading to the
formation of many IDEs.
4http://www.nesta.org.uk/publications/innovation-index-2009
5
Coad et al., 2014, UK Innovation Survey Innovative Firms and Growth, BIS, March
6http://entrepreneurship.mit.edu/sites/default/fles/AuletMurray_IDEvSME.pdf
SME Entrepreneurship IDE Entrepreneurship
Local and regional markets National and global markets
Innovation not necessary nor a competitive
advantage; replicable businesses
Based on innovation (tech, process, business
model) and potential competitive advantage
Jobs generally performed locally
Tradable jobs—can be performed locally or
elsewhere
Modest capital; often bank fnancing; often
family business
External equity capital often required; diverse
ownership
Linear growth
Initial losses followed by rapid growth…or failure;
requires investment
Table 1: Difference between SME entrepreneurship and IDE entrepreneurship (Source: MIT Sloan School of Management)
10 MIT REAP Team Scotland Initiative
11
Figure 1 – the MIT view of strong links between innovation and entrepreneurship ?ourishing in clusters to generate
economic impact (Source: MIT Sloan School of Management)
MIT REAP IDE Ecosystem Framework
Economic Impact
Focused Clusters
Linkages
E-Cap i-Cap
SECTION 3
Learning through MIT REAP Section 2
2.3 Value of collective impact
In order to create lasting solutions to large
scale issues, organisations - including those in
government, civil society, and the business sector -
need to coordinate their eforts and work together
around a clearly defned goal.
The Collective Impact approach is the commitment
of a group of actors from diferent stakeholder
groups to a common agenda for solving complex
economic and social problems. Collective Impact
is a signifcant shift from the social sector’s
current paradigm of ‘isolated impact’, because the
underlying premise of Collective Impact is that no
single organisation can create large-scale lasting
change.
There is no “silver bullet” solution to systemic
problems, and these cannot be solved by simply
scaling or replicating one organisation or
programme. Strong organisations are necessary, but
not sufcient for large-scale change.
Not all societal problems are suitable for Collective
Impact solutions. Collective Impact is best
employed for problems that are complex and
systematic rather than technical in nature.
Collective Impact initiatives are currently being
employed around the world in education,
healthcare, homelessness, the environment, and
community development. Many of the initiatives
underway are already showing concrete results,
reinforcing the promise of Collective Impact in
solving complex issues
7
. The REAP team believe
this approach can be applied to the Scottish
entrepreneurial ecosystem.
The Collective Impact approach is an important
and distinctive element of this REAP initiative. It is
what sets this initiative apart because it does not
rely heavily on delivery and success from just one
or two lead bodies. The Collective Impact approach
– as the name suggests – relies on the collective
input and delivery of key players or stakeholders
who all share a common interest in the success of
this initiative.
2.3.1 The ?ve conditions of collective impact
success
Collective Impact is more rigorous and specifc than
collaboration among organisations. There are fve
conditions that, together, lead to meaningful results.
These are:
• Common Agenda: All participants have a
shared vision for change including a common
understanding of the problem and a joint approach
to solving it through agreed actions.
• Continuous Communication: Consistent and open
communication is needed across the many players to
build trust, assure mutual objectives, and appreciate
common motivation.
• Mutually Reinforcing Activities: Participant
activities must be diferentiated while still being
coordinated through a mutually reinforcing plan of
action.
• Shared Measurement: Collecting data and
measuring results consistently across all participants
ensures eforts remain aligned and participants hold
each other accountable.
• Backbone Organisation: Creating and managing
collective impact requires a separate organisation(s)
with staf and a specifc set of skills to serve as the
backbone for the entire initiative and coordinate
participating organisations and agencies.
By tracking contributions and progress towards agreed
goals, collectively Scotland can change and develop
our entrepreneurial ecosystem, increasing our pool of
successful entrepreneurs and rapidly growing IDEs.
2.4 Importance of investment and mentoring
by successful entrepreneurs within specialist
incubators and accelerators
The REAP Scotland team was impressed by the
prevalence of highly successful entrepreneurs, many
7http://www.ssireview.org/articles/entry/collective_impact
12 MIT REAP Team Scotland Initiative
13
of whom are now multi-millionaires, both within
the teaching staf at MIT and engaged in supporting
growing companies through investment and
mentoring across the Greater Boston area.
Initiatives the team found particularly exciting were
accelerators sponsored by corporations, venture
capitalists and successful entrepreneurs. Examples
include Bolt (hardware), Greentown Labs (energy)
and Healthbox (healthcare). These centres appeared
to blend access to facilities, specialist knowledge and
capital in a way that is likely to be highly successful
in producing IDE scale-up. The REAP team believes
this specialist innovation-driven approach could be
replicated in Scotland with good efect.
2.5 Value of learning from other regions
The REAP Scotland team noted how other regions and
nations approached participation in the programme.
In particular:
• The team from Andalucia used an impressive
public-private partnership with Telefonica and
others to sponsor acceleration of entrepreneurship
activities very publicly;
• The team from Mexico hired a dedicated
project manager with excellent business and
communication skills to drive their progress;
• The team from China was entirely privately funded,
very ambitious, and extremely self-reliant;
• The team from New Zealand was heavily
government-led and had to work hard to rebuild
momentum when departmental re-organisation
disrupted their progress;
• The team from Finland highlighted the issues with
an economy which becomes too reliant on a single
‘mega-player’ such as Nokia, and the importance of
universities such as Aalto was evident in the wider
ecosystem.
These observations all contributed to the Scottish
team’s view that the backbone organisation
established to lead and facilitate this initiative must
involve all stakeholders, should not be government
led, and must have access to sufcient professional
resources to really drive change.
One of the key points of learning from REAP was
that what works well in one region or nation will
not necessarily work in another. Each region has a
unique set of economic circumstances, resources,
opportunities and constraints. Hence adaptation of
successful approaches and initiatives, rather than
replication, is needed. We must learn from elsewhere
and Scotland should continue to draw on knowledge
and best practice from innovation-based economies
to achieve the REAP Vision.
“The Collective Impact approach is the commitment of a
group of actors from different sectors to a common agenda
for solving complex economic and social problems. Collective
Impact is a signi?cant shift from the social sector’s current
paradigm of ‘isolated impact’, because the underlying
premise of Collective Impact is that no single organisation
can create large-scale lasting change”
SECTION 3
Scotland -
Investigating
the Issues
• Firstly the team quantifed the ecosystem as it
currently exists in terms of its entrepreneurs, capital,
corporations, government and universities. This
analysis is detailed further in this section.
• Secondly the team commissioned research to
investigate the performance of the ecosystem in
using data from the Global Entrepreneurship Monitor
(GEM) and other sources. This work is described in
detail in Chapter 4 of the GEM Scotland Report 2012
and summarised in section 3.4 of this document.
• Thirdly having identifed potential issues within the
ecosystem, the team arranged a series of stakeholder
meetings to further investigate key areas and gather
opinion regarding potential courses of action.
• Finally having considered the research and
validated this against stakeholder opinion, the
team established a series of task groups with the
intention of identifying specifc actions which
would lead to an improvement in Scotland’s IDE
entrepreneurship ecosystem.
The frst two steps in this methodology are described
in the remainder of this section, while the third and
fourth steps are described in section 4 “Developing
solutions and actions”.
3.1 Key Economic Facts about Scotland
Table 2 provides an overview of Scottish economic
performance.
In order to investigate
the issues in the Scottish
entrepreneurial ecosystem,
the REAP team adopted the
following methodology
Table 2: Scotland key economic facts (Sources: Business Population Estimates for the UK and Regions 2013, BIS; Business
Demography Births, Deaths and Survival, ONS; Fiscal Commission Working Group, First Report – Macro-economic
Framework, Scottish Government 2013; Global Entrepreneurship Monitor.)
14 MIT REAP Team Scotland Initiative
Population in millions (% of UK population), 2011 5.26 (8.3%) (UK - 63.2 (100%))
GDP per capita, US$, (% of UK) 2010 34,184 (96%) (UK- 35,715 (100%))
Unemployment rate (%), Nov-Jan 2014 6.9 (UK - 7.2)
No. of businesses with UK HQ in Scotland (% of UK), 2013 325,570 (6.6%) (UK - 4.9 million (100%)
No. of businesses with UK HQ in Scotland per 10,000
population (% of UK), 2013
740 (78%) (UK - 947 (100%)
Registered businesses with UK HQ in Scotland (% of
UK), 2013
149,635 (6.8%) (UK -2.2 million (100%)
SME percentage (based on location of HQ), 2013 99.7% of registered businesses (UK – 99.7%)
Medium sized registered businesses with UK HQ in
Scotland (% of UK total), 2013
2,270 (7.4%) accounting for 15% of jobs in registered
businesses (UK: 30,685, 14% of jobs)
Large businesses with UK HQ in Scotland (% of UK total), 2013 465 (7.1%) accounting for 45% of jobs (UK: 6,595, 46%)
15
Entrepreneurial
ecosystem
Stakeholder model
Risk Capital
entrepreneur
university
government
corporate
Figure 2 – Key stakeholders in the entrepreneurial ecosystem (source: MIT Sloan School of Management)
SECTION 3
Scotland - Investigating the Issues Section 3
Scotland has almost 150,000 SMEs, the majority
of which are run by owner managers or small
management teams. Whilst some might assume that
this indicates healthy entrepreneurial activity, the
majority of these managers are not actively seeking to
grow their businesses and create signifcant wealth –
instead many are content with running a sustainable
enterprise which meets their needs and those of their
dependants.
An indication of active, ambitious entrepreneurs is
found by studying the membership of organisations
such as the Entrepreneurial Exchange and
other networking organisations, by considering
entrepreneurs engaging in professional development
(such as that supported by HIE and SE) and reviewing
deal-fow for risk fnancing. These indicators paint
a diferent picture with the number of ambitious
entrepreneurs active in Scotland being limited to a
few hundred at the most.
At the ‘top of the tree’ we see some high profle
entrepreneurs who have built global businesses,
however these are truly the exception rather
than the norm. Examples of globally successful
high-technology businesses built in Scotland are
3.2 The Scottish IDE ecosystem
The MIT faculty advised that highly efective IDE
ecosystems require strong collaboration and
interactions between fve key stakeholder groups.
These are entrepreneurs, risk capital, universities,
government and corporate organisations as shown
in Figure 2. These key groups were represented
throughout the consultation exercise, and the REAP
Scotland team was formed from the outset to ensure
these stakeholder interests were represented within
the team. Linking these actors is a further set of
organisations, corporations, physical infrastructure,
resources and information, for example networking
groups, professional advisers, websites, etc.
Below the fve key stakeholder groups are
summarised as they currently operate within the
Scottish IDE ecosystem.
3.2.1 Entrepreneurs
Despite its heritage and innovation capabilities,
and notwithstanding some notable success stories,
Scotland lacks a substantial body of experienced,
talented, and well networked entrepreneurs.
“I feel that the challenge in Scotland
for small companies lies more around
the area of making enterprises ‘investor
ready’ rather than there necessarily
being a challenge around levels of risk
capital in the market”
Peter Estibeiro, i2eye Diagnostics
16 MIT REAP Team Scotland Initiative
17
particularly rare. GEM indicates around 20% of
existing owner-managers are serial entrepreneurs,
compared to 26% in the United States, so Scotland
is performing reasonably well in this area. Scotland’s
economy would beneft from many more experienced,
successful entrepreneurs following the example set
by Sir Tom Hunter and Lord Haughey in investing
money and time in young, dynamic businesses.
3.2.2 Risk Capital
Scotland has a highly sophisticated angel community
which invests across a broad portfolio of early stage
companies. Investments at £250k-£500k are typical,
often matched by public funds invested under
commercial terms by the Scottish Investment Bank
(SIB). In addition, there are approximately 40 venture
capitalists active in Scotland (i.e. currently investing in
companies and/or actively exploring opportunities).
While the risk capital market has known weaknesses
in Scotland, which will be addressed later in this
document, there are clear strengths from which to
develop stronger solutions and increase deal fow.
3.2.3 Universities
Scotland has 19 universities and institutes of higher
education which together win approximately £2
billion of public funds from UK research councils,
industry, charities and the Scottish Funding Council
(SFC). The sector has a strong international reputation
for research and teaching with particular recognised
strengths in informatics, engineering, physics and
life sciences. The sector in Scotland outperforms
the overall UK fgure for research publications per
capita by approximately x1.3. Scotland is perceived
as delivering a strong supply of new inventions.
While there are hot spots of entrepreneurial activity,
the sector is generally characterised as providing a
discipline intensive education rather than a strongly
entrepreneurial experience.
3.2.4 Corporate Organisations
Some 2270 large businesses (with 250 or more
employees) and 3705 medium-sized businesses
(with between 50 and 249 employees) operated
in Scotland in 2013. However, only 18% of large
and 59% of medium sized businesses were owned
and headquartered in Scotland. Enterprises with
ultimate ownership outside of Scotland (either in the
rest of the UK or overseas) accounted for 3% of all
businesses, but 35% of all employment and 58% of
all revenues. These fgures account for Scotland often
being referred to as a “branch economy”. However,
large companies include a signifcant presence of
multinational organisations which bring to Scotland
a wealth of knowledge and skills on international
business, accessing global markets and customers,
supply chain development and most important of all,
the management and delivery of innovation into the
marketplace. In addition, Scotland hosts a number of
headquarters of fnancial institutions with signifcant
levels of funds under management in Scotland as
well as the associated expertise in management of
fnancial risk. However, these funds are not currently
deployed at signifcant levels into IDEs.
3.2.5 Government
The Scottish Government has recently renewed its
commitment to the development of the culture of
entrepreneurship across Scotland through publication
of the Scotland CAN DO framework. This operates
alongside the commitment from government
agencies to drive forward programmes which support
the development and growth of IDEs and, at the
same time, which help inspire and support the
entrepreneurs who drive these businesses. There has
been a systematic and intensive efort to develop the
innovation ecosystem in Scotland over the past 10-15
years. Now similar attention is required to optimise
the entrepreneurial ecosystem, in order to achieve the
REAP objective of increased numbers of IDEs able to
fourish in Scotland.
3.2.6 Innovation and entrepreneurship in
Scotland
Having described the entrepreneurship ecosystem in
general terms, it is also useful to consider innovation
and entrepreneurship and how they link in Scotland,
particularly given the team’s recognition of the
economic impact of IDEs and the importance of
linking innovation and entrepreneurial capacity.
We begin by discussing R&D expenditure in higher
education and in business and then consider the
implications for business creation and growth.
SECTION 3
Scotland - Investigating the Issues Section 3
Figure 3: HERD in Scotland in comparison with other OECD countries (Source: Scottish Government)
Scottish spinouts as % of all UK spinouts with some
HEI ownership
2010/11 2011/12
Businesses created 17% 14%
Businesses active after 3 years 16% 16%
Total active frms 17% 17%
Employment 21% 20%
Turnover 32% 28%
External investment 16% 23%
Table 3: Scottish Higher Education Institute spinouts as a percentage of all UK HEI spinouts
(Source: Higher Education – Business and Community interaction Surveys)
18 MIT REAP Team Scotland Initiative
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3.2.7 Higher Education R&D expenditure
(HERD)
Scotland is an international leader in R&D
expenditure within higher education (HERD). Our
HERD as percentage of GDP in 2012 is relatively high
at 0.80%, compared with the UK fgure of 0.46% and
a USA fgure of 0.39%. See Figure 3.
With this expenditure, one would expect a relatively
high rate of spill-over into Scottish business. This
could happen through university spinout companies,
through technology licensing, contract research
and consultancy, and through hiring of graduates,
especially those with science and engineering (STEM)
qualifcations. In terms of spinouts, Scotland does
indeed have a relatively high performance rate, as
shown in Table 3. The 181 university spin outs from
Scottish Universities active in 2012 represent 0.12%
of the registered business population in Scotland,
had sales equivalent to 0.13% of the total revenues
of Scottish registered businesses at the start of 2013.
In 2011/12, Scottish universities also captured 27%
of the total value of contract research, 29% of the
total value of consultancy, 19% of the total value
of software licenses, and 15% of the total value of
intellectual property income from SMEs across the
UK university sector. However, only 9% of continuing
professional development income from SMEs to
universities across the UK went to Scottish institutions
8
.
3.2.8 Innovation in Scottish business
In contrast to our performance in HERD, business
R&D expenditure (BERD) in Scotland lags signifcantly
behind that of the rest of the UK (0.59% of GDP,
compared with 1.09% for the UK). See Figure 4,
below. While BERD is low in Scotland, business R&D
expenditure is a relatively crude input measure which
does not accurately refect the level of innovation
taking place within businesses. It does not take
account of structural diferences across industrial
sectors and, potentially, the positive spill-over efects
of high R&D spending within the university sector.
Another way of measuring innovation is in terms of
its outputs, such as the proportion of businesses with
high levels of sales from new to market products.
Figure 4: BERD in Scotland in comparison with other OECD countries (Source: Scottish Government)
B
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Sources: Business Population Estimates for the UK and Regions 2013, BIS; Higher Education – Business and Community interaction
Survey 2011/2012
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SECTION 3
Scotland - Investigating the Issues Section 3
Using this measure, the 2008 UK innovation survey
found that Scotland had 9.35% of highly innovative
businesses
9
, in a year when it had only 6.8% of the
total of UK registered businesses.
People are the critical resource for innovation.
Businesses with low rates of innovation hardly
ever employ STEM graduates. But the more STEM
graduates that Businesses employ, the more R&D
they conduct, the more new to market products or
processes they have, the more they co-operate with
other organisations such as universities and the
more use they make of external information
10
. Whilst
Scotland produces a slightly higher share of these
graduates, Scottish businesses employ a slightly lower
share, thus reducing the innovative capacity in our
companies.
3.3 Business formation and growth ambitions
in Scotland
Having established that Scotland is a leader in
R&D spending within higher education, but lags
signifcantly in business R&D, we now turn our
attention to how Scotland is performing in terms
of the output that interested the REAP team most –
business formation and growth.
By looking at performance in this area we can
highlight where improvement may be required and
perhaps move towards setting inspirational targets for
achievement in the future.
In particular a more empirical review of the system
helps to set in context the more analytical approach
taken through the GEDI analysis described in section
3.4 of this report.
3.3.1 Small businesses and entrepreneurship
Scotland has a relatively small population of
businesses: only 78% of what we would expect on
a per capita basis, relative to the UK as a whole. Of
Scotland’s 150,000 or so registered businesses,
99.7% are SMEs, the majority of which are run
by owner-managers making up around 9% of the
Scottish working population. Table 5 reveals the
9
UK Innovation Survey 2008 data; calculations by Coad et al. (2014)
10
Coad et al., 2014, UK Innovation Survey Innovative Firms and Growth, BIS, March
11
Sources: Business Population Estimates for the UK and Regions 2013, BIS; Business Demography Births, Deaths and Survival, ONS; Global
Entrepreneurship Monitor UK estimates; TBR/Qa SME Growth Ambitions Survey 2012; UK Innovation Survey
Share of registered businesses in professional, scientifc, technical
sector, 2013
15.3% (UK – 14.0%)
Potential IDE rate (TEA entrepreneurs with over 25% of customers
outside the country, expect to employ at least 20 in 5 years’ time,
some product or market or technology novelty), average 2009 to 2013
0.18% (UK – 0.21%)
Scottish share of UK frms with high levels of R&D in Scotland, 2008 8.77% (UK – 100%)
Scottish share of UK frms with high levels of sales from new to
market products, 2008
9.35% (UK – 100%)
Table 4: Innovation-related business measures comparing Scotland and the UK
11
20 MIT REAP Team Scotland Initiative
21
attitudes of owner-managers in Scotland towards
growing their businesses to scale. Only a minority are
actively seeking to grow their businesses and create
signifcant wealth – instead many are content with
running a sustainable business which meets their
needs and those of their dependants.
While Scotland seems to have more highly innovative
businesses than one would expect given its relatively
low business population, it seems to have fewer
ambitious business owner-managers and considerably
more owner-managers who are satisfed with their
organisation’s current size. It has fewer high growth
businesses than one would expect and the proportion
of individuals in the working age population who are
actively trying to start or running new innovative,
ambitious, internationally-oriented businesses is
also lower in Scotland than in the UK – though not by
much, and the gap may be narrowing
13
.
In short, it appears that Scotland is not meeting its
potential in delivering high-growth businesses from a
population of innovative young companies. Scotland
has fewer ambitious business owner-managers and
considerably more owner-managers who are satisfed
with their organisation’s current size.
3.3.2 Relationship between innovation and
growth
The relationship between innovation and growth
across the UK is complex. Very few businesses
sustain growth for more than a few years, and many of
those who do are not necessarily innovative. Recent
research by the Enterprise Research Centre suggests
that only about 17% of job creation in Scotland
comes from high growth businesses as defned by the
OECD, dropping from a peak of 41% in the 2001-
2004 period. Compared with the UK, job creation
in Scotland seems to come more from established
businesses with 10 or more employees than new or
12
Sources: Enterprise Research Centre; TBR/Qa SME Growth Ambitions Survey 2012; UK Innovation Survey
13
GEM data suggests that the three year average was 0.23% for Scotland and 0.21% for the UK.
Number (% of UK total) of high growth frms,
2010/13 period (based on OECD defnition)
669 (6.6%) (UK – 10,172 (100%))
High Growth Firms contribution to all job creation in
2010/13 period
17% (UK – 18%)
% of SME owner-managers with substantive ambition for
growth, 2011/12
18% (UK – 22%)
% of SME owner-managers with any intention of growth,
2011/12
71% (UK - 80%)
% of SME owner-managers satisfed with their
organisation’s current size, 2011/12
44% (UK - 33%)
Table 5: Growth-related business measures comparing Scotland and the UK
12
.
SECTION 3
Scotland - Investigating the Issues Section 3
very small businesses. The benefts of innovation
may be captured by businesses other than those who
developed the innovation; for example one business
may copy another and implement the innovation in
a superior way. It is rare for individual businesses to
sustain innovation and growth over long periods; this
requires a combination of talent, ambition, and good
timing. But that does not mean that it is impossible or
that the hit rate cannot be improved – quite the contrary.
The REAP team has focused efort on exploring these
issues and developing strategies to address them.
3.4 GEDI research
To bench-mark Scotland’s entrepreneurial
performance, the REAP Scotland team commissioned
an analysis of existing data. Drawing on sources such
as the Global Entrepreneurship Monitor (GEM) and
published regional and national data, a methodology
was employed that enabled comparisons to be made
with 27 innovation-driven economies. The team
examined both the entrepreneurship and innovation
capacities of the ecosystem in Scotland. From this
analysis, seven “pillars” were identifed as areas of
weakness and possible bottlenecks in the Scottish
entrepreneurship ecosystem and these were:
• Opportunity Perception
• Start-up Skills
• Networking
• Product and Process Innovation
• High Growth Aspirations
• Internationalisation
• Risk Capital
This research is summarised in the radar plot shown
in Figure 5 which identifes the fourteen ‘pillars’ used
to analyse the ecosystem. For each pillar, Scotland’s
performance is compared with the 27 innovation-
driven economies. A full description of this GEDI
analysis is presented as Chapter 4 within the GEM
Scotland 2012 publication.
3.5 Interpretation of research
Having considered the Scottish IDE entrepreneurship
ecosystem using various methods, the REAP team
considered their fndings and further characterised
them within the Scottish context as follows:
• There is a tendency for the majority of Scottish
entrepreneurs to lack aspiration, or lack the
confdence to show it - be that to achieve high
growth in the international market place or just to
develop new business processes. The high level
of start-ups coming out of universities does not
indicate a lack of ambition amongst inventors
and technologists to commercialise their ideas,
however these early enterprises may be being
held back by a variety of factors, including vision,
entrepreneurial skills and confdence to drive the
business forward. The REAP team believe there are
a common set of ecosystem factors that link these
characteristics, and these can be addressed through
focused action;
• Although there is a strong community of business
angel groups in Scotland capable of providing early
stage capital, there is a genuine lack of visibility
and access to development-stage risk capital for
Scottish businesses. This is partly due to a lack
of suitable fnancial institutions in Scotland, but
also due to the absence of the networks that
entrepreneurs need to access capital further afeld;
• Because few companies grow to scale in Scotland,
the country is missing people with key skills and
experience necessary to lead a business through a
high-growth phase. Entrepreneurs may be unaware
that they lack these skills, are unsure how to
develop them, or do not know how or where to
connect to others to learn from their experience.
This contributes to the difculties in accessing
capital and reduces the confdence of business
founders. Thus this factor manifests itself within
the previous two issues.
3.6 Stakeholder discussions
Having carried out the assessment of the
entrepreneurship ecosystem in Scotland, the REAP
team were keen to validate their initial fndings
through consultation with key stakeholders.
Discussion group themes were selected on the basis
of the GEDI research and grouped as follows:
• Opportunity Perception and Internationalisation
• Risk Capital
22 MIT REAP Team Scotland Initiative
Scotland versus Other Innovation
Driven Nations
Risk Capital
(Aspirations)
Internalisation
(Aspirations)
High Growth
(Aspirations)
Process Innovation
(Aspirations)
Product Innovation
(Aspirations)
Completion
(Activity)
Quality of
Human Resources
(Activity)
Tech Sector
(Activity)
Opportunity Startup
(Activity)
Cultural Support
(Attitudes)
Networking
(Attitudes)
NonFear of Failure
(Attitudes)
Startup Skills
(Attitudes)
Opportunity Perception
(Attitudes)
0.9
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Figure 5: Comparison of Scotland with 27 innovation-driven economies using GEDI methodology
Scotland versus Other Innovation
Driven Nations
Lower Quartile Median Upper Quartile Scotland
SECTION 3
Scotland - Investigating the Issues Section 3
• Start-up Skills and High Growth Ambition
• Product & Process Innovation and Networking
Individuals with an interest, experience or expert
knowledge in each of the areas were identifed and
invited to join a discussion group on each theme
with the aim of validating the fndings, assessing any
underlying causes (i.e. potential constraints on IDE
ecosystem), proposing solutions and potential actions,
plus adding personal insights. The discussions were
carried out during February 2013 and their timing
within the overall REAP programme is shown in Annex
C. These consultations confrmed and reinforced the
research results and provided key insights into fve
underlying constrains on the IDE system. Annex D
shows a full list of stakeholders consulted.
3.7 Five Key Themes
Based on these consultations, and follow-up
discussions across the REAP Scotland team, fve key
theme areas were identifed for the REAP stakeholder
initiative. The REAP Scotland team believes these fve
theme areas, if addressed correctly, over time will
strengthen all seven areas of weakness identifed through
the GEDI research. This strengthening of the ecosystem
will drive a step-change in Scotland’s performance in
growing IDE businesses. The fve key themes which
underpin the REAP stakeholder initiative are:
• Efective Connections
• Skills for Growth
• Financing for Growth
• Role of Universities
• Role Models
The rationale for these fve themes is summarised
below.
3.7.1 Effective Connections
Networking provides the opportunity for entrepreneurs
to meet like-minded people, fnanciers, technologists,
advisers and potential employees, as well as gathering
market and customer intelligence and potential sales
leads. Interactions promote innovation, inspire and
increase aspiration, stimulate new business ideas,
provide learning, opportunity and sharing of best
practice, ofer new opportunities and can develop
confdence through validation and peer support.
Opportunity for and quality of productive networking
opportunities is recognised as a key factor in the
efectiveness of an entrepreneurial ecosystem.
The REAP team concluded that networking
opportunities in Scotland, whilst excellent in some
areas were nonetheless fragmented. In particular the
opportunity for technologists and potential innovators
to meet entrepreneurs and the opportunity for early-
stage entrepreneurs to meet successful business
leaders was limited in certain regions and sectors. The
opportunities for entrepreneurs and entrepreneurial
teams to meet and network with other players in the
ecosystem such as investors, academics, students and
large corporate enterprises is also not evenly available
across Scotland as a whole. Some geographies or urban
centres do ofer numerous opportunities but there are
gaps where access and quality of provision could be
improved.
The team decided to explore this area in more detail
on the basis that improving the quality of networking
in Scotland could help to address many of the
weaknesses in the ecosystem.
3.7.2 Skills for Growth
A key weakness identifed by the research was in the
area of skills required to scale-up a business. Further
to this, lack of management capability is often an
underlying reason for growing companies to fail, either
through failure to access or successfully use fnance, or
for a host of other reasons related to accelerating the
growth of the business.
The REAP team therefore saw the development of
skills for growth as a key requirement to better prepare
entrepreneurs for IDE growth and success. Whilst
provision of internationally outstanding executive
education by the university sector will provide some
of the answers, there are wider issues ranging from
access to key technical skills, through to a general lack
of awareness amongst entrepreneurs of the skills with
which they need to be equipped. Being armed with
the right skills for growth will ensure entrepreneurs
and entrepreneurial teams are best placed to take
maximum advantage of the opportunities ofered by
other players in the ecosystem.
24 MIT REAP Team Scotland Initiative
25
Consideration should also be given to programmes
which specifcally encourage experienced mid-career
Scots (or even those with a connection to Scotland,
such as by family or by education) to return to Scotland
to contribute to the pool of entrepreneurial talent
here. An Industrial Fellowship scheme could provide
a model here and stimulate a new wave of talented
diaspora Scots to return to Scotland and add value to
the ecosystem.
3.7.3 Financing for Growth
One of the primary characteristics of an IDE is that it
is likely to require signifcant capital to achieve rapid
scale-up, to industrialise production and to access
international markets. Whilst Scotland has arguably
one of the most active business angel investment
communities in Europe, and Edinburgh is a major
fnancial centre, access to scale-up stage risk fnance,
for example venture capital (VC), is very limited. Gaps
exist in access to fnance in the £1M-£5M investment
range which is a major barrier to IDE growth. This
problem is exacerbated by the lack of high quality
growth-stage fnancial advisers and a lack of
knowledge amongst entrepreneurs as to how to access
capital markets in London or overseas.
The REAP team therefore identifed the need for action
to enable IDEs to access fnance for growth and to seek
to create new sources of risk capital which would be
more compatible with working with existing business
angel fnance.
3.7.4 Role of Universities
The REAP team recognised that the role of universities
is crucial to a vibrant IDE ecosystem and MIT provides
a shining example of this within the Boston ecosystem.
The team was interested to understand how
Scotland’s university sector could adapt to address the
weaknesses identifed by the GEDI research, becoming
more intensively connected players in the ecosystem.
In particular the team was keen to explore three key
areas: 1) how entrepreneurship education can be
included much more widely within a wide range of
undergraduate courses, particularly those of a technical
nature; 2) how Scottish universities can create very
high quality executive education for entrepreneurs
and innovators, and 3) how universities can foster
linkages and connections between innovators and
entrepreneurs. Further opportunities to increase
linkages with alumni and between universities were
also identifed as likely to have positive impact.
3.7.5 Role Models
The team proposed that a number of the identifed
weaknesses which related to aspiration could be
linked to a combination of cultural conservatism and
a lack of vision of what may be possible. For example,
public attitudes towards success in business can be
negative, perhaps based on envy or mistrust. To change
these attitudes and raise the confdence and pride of
entrepreneurs requires a change in general culture
to one that accepts entrepreneurship as a valuable,
worthy and vital contribution to society. The fear
of failure issue also still needs to be tackled with a
turnaround in perception required so that failure is
seen as a valuable learning experience and as ‘earning
your stripes’. To achieve this, the REAP team suggested
that entrepreneurial role models should be widely used
and celebrated. This would raise public awareness
of the importance of entrepreneurship and provide
confdence and inspiration to other entrepreneurs.
SECTION 4
Developing
solutions and
actions
With the exception of the Financing for Growth
and Universities task groups, each task group was
initiated through a meeting chaired by an individual
of standing in the Scottish entrepreneurial ecosystem
and co-chaired by a member of the REAP team.
Around 20 individuals were invited to attend each
one. Discussions focused on determining actions
which could make a real diference to Scotland’s
entrepreneurial performance in the themed area and
stakeholders were invited to accept responsibility for
beginning to deliver on these actions.
Financing for Growth discussions took place within
the REAP team, with input from a working group
comprising the Royal Society of Edinburgh (RSE)
working in partnership with the Institute of Chartered
Accountants in Scotland (ICAS) and Scottish Financial
Enterprise (SFE). This group was asked by the Scottish
Government to advise on weaknesses in the risk
capital market in Scotland. Given the important
role of this RSE Working group, it was considered
unnecessary to convene a similar working group
through REAP. Instead, the REAP Scotland team sought
direct input from the RSE Working Group which was
chaired by Ian Ritchie who is also a member of the
REAP team.
The Universities task group was convened by inviting
senior “entrepreneurial professors” from research-
intensive universities to take part in a series of
discussions on the issues raised by the GEDI research.
Group members were invited to inspire each other to
identify specifc actions they might promote within
their own university. To add further inspiration,
this group also commissioned a series of vignettes
on the entrepreneurial ecosystems of outstanding
universities across the world.
The initial task group meetings resulted in
identifcation of stakeholder led “actions” which
form the core of the REAP recommendations. These
calls to action are a combination of “quick wins” and
long-term changes, aimed at holistic culture change
and lasting impact rather than short term piecemeal
Having completed the assessment of the current state of the
IDE ecosystem and validated this with stakeholders, the REAP
team probed the ?ve key theme areas by forming task groups
with the purpose of identifying key actions to address the
constraints, and in doing so to begin the application of the
collective impact approach. This section of the report focuses
on the actions identi?ed through the task groups and further
developed through discussion within the REAP Scotland team
26 MIT REAP Team Scotland Initiative
27
initiatives. The actions are listed individually under
their related headings throughout the following
section and then drawn together within the
conclusions section of this document. All stakeholders
who were consulted through the workshops or task
groups, or approached directly for their views, have
played an important role in helping to identify these
actions and are listed in Annex D.
4.1 Effective connections
Building efective connections through networking
with helpful contacts is vital at every stage of
business growth. Networks grow increasingly
important as companies scale up, becoming the
source of customers, suppliers, partners, employees,
and investors and inspiration and support.
The right connections can provide entrepreneurs with
links to people who might be able to answer specifc
questions relating to growing their companies, or
might be able to provide mentoring (whether formal
or informal) or other forms of support.
4.1.1 Key ?ndings
In the commissioned research and subsequent
consultations, though examples of pockets of good
networking existed, as a wider topic networking
was frequently seen as inefcient in Scotland. The
term ‘networking’ means diferent things to diferent
people, ranging from attendance at networking
events to fnding ways to engage with others who
have faced similar business challenges. In essence
however, the issue relates to information fows within
the ecosystem, and between the ecosystem and the
outside world – how well people are aware of others
in the network and how to access them.
The stakeholders participating in this task group
specifcally noted that there are many sources of
commercially valuable information and skills in
certain pockets of the ecosystem, such as experienced
entrepreneurs and the research base, and in the
more formal networks. The problem seems to be
that this information is not fltering through to less
experienced entrepreneurs as much as it could. Some
of the issues highlighted include the following:
• Current formal and informal networks appear not
to be working as well as they might be in certain
areas, and as a result fewer potentially successful
entrepreneurs can fnd the connections they
need. The need for peer-to-peer networking was
particularly commented on as entrepreneurs learn
from others facing the same challenges and can
share experience and knowledge.
• Connections by entrepreneurs with markets and
resources outside Scotland seem relatively weak.
Johannah Bisset, WEB Rigging Services
“In terms of generating effective connections,
the public sector support I received to develop
connections in markets like Nigeria and Brazil
where there is a larger demand for our product,
was extremely helpful. It is our business to be
seeking out new contacts and connections so
any support we do get in this area is a bonus ”
SECTION 3
Developing solutions and actions Section 4
• The REAP Scotland team has found that many early
stage entrepreneurs do not appreciate the benefts
of networking, or are very unsure how to set about
building efective connections.
• The stakeholders within this task group were
very supportive of proposals to greatly imprive
networking for the beneft of ambitious
entrepreneurs.
A highly functioning ecosystem would include an
environment where entrepreneurs can quickly and
easily fnd and contact people who can help them
build or grow their businesses. Examples from other
parts of the world (e.g. the Greater Boston area)
show substantial benefts in mixing innovators and
entrepreneurs from all sectors. In some areas such
help is relatively easy to fnd in Scotland, such as
exporting, software development, or taxation, but in
felds such as product development, sales, marketing,
regulatory approvals, or senior human resource
management, answers to specifc issues can be more
elusive.
The REAP team believes that many business
membership organisations and other networks in
Scotland might be able to introduce entrepreneurs
to relevant experts or mentors, but that this potential
is often unrealised either because entrepreneurs are
unaware of the resources available, or because of
a lack of connectivity between organisations. Also,
some business membership organisations don’t see
themselves as primarily providing this function.
There are already many networks active in Scotland,
serving a very wide range of interests. These include
organisations which exist primarily to bring together
people with similar interests or backgrounds, such
as trade associations, university alumni groups, and
more specialist groups such as the Entrepreneurial
Exchange or Informatics Ventures. Other networks
exist as the outcome of another activity e.g. the
Scottish MIT EDP Alumni network and these can
produce very valuable connections. These also
include the networks created in more formal ways
by business incubators, the Saltire Fellows and RSE
Fellows, and events organisers such as Business
Forum Scotland.
Both physical /face to face networking and online/
remote networking opportunities were important.
Many of the actions required to improve information
fows and facilitate more efective connections will be
in the remit of existing networking organisations. To
help stimulate further developments, the REAP team
proposes three simple actions as frst steps.
4.1.2 Priorities for Action
1. Guide to Networking for Entrepreneurs
It is proposed to produce a Guide to Networking in
Scotland for entrepreneurs which could be used
both to inform and educate frst-time entrepreneurs
themselves. This would be an ongoing resource/
reminder for established entrepreneurs and to help
current network organisations to open more doors for
them. The content will include:
• The value of networks both physical and online and
how to get the best out of them
• Networking events – how to fnd and select relevant
events
• Networking organisations – an outline of the main
organisations in Scotland, and what to expect from
them
• Personal contacts – how to fnd the person with the
knowledge or experience you need
• Confdence – some tips for approaching people you
have not met before
• Pitching – how to get your message across when
meeting new contacts
• Further information – websites, blogs, articles and
other sources of relevant material.
2. A ‘network of networks’
The REAP team proposes to initiate a series of
gatherings at which networking organisations can
share information on their activities and discuss issues
relating to the Scottish entrepreneurial ecosystem.
The aim is both to help networks make connections
with each other, and to consider the national dimension
collectively and the part they each play in it. Through
consideration of collective impact, networking
organisations can assist entrepreneurs at all stages of
growing their business to make the right contacts and
broaden their knowledge of the ecosystem.
Participation will be open to all organisations which
28 MIT REAP Team Scotland Initiative
29
can demonstrate the capacity to make introductions to
individuals within their networks. Some of the major
national organisations (e.g. GlobalScots, Entrepreneurial
Exchange, trade associations, etc.) will be encouraged to
form the core of the programme. Participation will also
be open to all bona-fde entrepreneurs who wish to be
part of this national conversation.
3. Online hub or forum for IDEs
Development of an online hub or forum for remote
networking is recommended for sharing of knowledge,
experience, success stories and successful handling
of specifc challenges – all targeting the needs of
IDE entrepreneurs. This should include a message
board to post current challenges and requests for
help or new connections. It could include a database
of entrepreneurs, support organisations, networking
events and updates on risk capital.
4.2 Skills for Growth
4.2.1 Key Findings
Throughout the REAP consultation process, there
has been consensus that continuously developing
skills for growth is a key component of success for
every ambitious entrepreneur. The REAP team has
focused on the skills needed by entrepreneurs
and entrepreneurial teams already in business,
rather than on start-up skills. To drive a successful
IDE, an entrepreneur needs an armoury of start-
up, fnancial, operational, management, strategic,
leadership and creative skills along with vision,
belief and resilience. The availability of high quality
opportunities for entrepreneurs to acquire or refne
their skills is considered essential, and Scotland needs
a comprehensive programme of international standing
if we are to build global competitive IDEs.
Typically, as an IDE grows and employs larger numbers
of staf, the entrepreneur will move from being a
‘jack of all trades’, essentially being responsible
for multiple or all aspects of the business, to being
in a strategic or leadership position, employing
others to enhance business expertise in key roles.
Most entrepreneurs agree that they need a sound
understanding of all aspects of their business in order
to be able to bring in the right people when the time
comes to build, or change, their team.
Nigel Eccles, FanDuel
”After becoming an
entrepreneur at an early age
and growing my business for
some time, I took the decision to
focus on developing my entre-
preneurial skills. Taking part
on leadership programmes and
entrepreneurship development
programmes with MIT allowed
me to think in a more strategic
and global way about my
business, which took us from
strength to strength. I also
realised the key to growing my
business has been access to
‘very good people’ and acquiring
people with the right skill set ”
Michael Laurenson, Blueshell Mussels
“In terms of skills for growth,
there is a great interest in public
sector organisations providing
training in the ‘sexy’ stuff like
strategy and ?nancing but
there needs to be more of a
focus on the very basic stuff
that companies need to do
like providing practical help in
accounting and legal support”
SECTION 3
Developing solutions and actions Section 4
Whilst certain skills are learned ‘on the job’, a
structured approach to building knowledge,
particularly in a group learning environment, where
networking, peer learning and the sharing of best
practice between entrepreneurs, greatly enhances the
learning experience.
A recurring theme amongst successful IDEs is the
importance of hiring people at an early stage who
have previous experience of growing a business to
scale, and skilled individuals are often difcult to
source from within Scotland, as discussed earlier.
In addition, the experience gained from working in
a large company, often a rich training ground for
entrepreneurs and innovators, is frequently obtained
by moving to corporate operations outside of
Scotland. Attracting talent from outside of Scotland
is essential to the growth of IDEs.
Skills in recruitment and talent retention is a core
competency of successful IDEs. A year or two on, a
company scaling up will be very diferent from when
it frst starts to grow signifcantly. The entrepreneur
or entrepreneurial team must be capable of meeting
the challenges the company will face at diferent
stages of growth. Over the course of the REAP team’s
research on the subject of Skills for Growth, three key
areas were identifed as specifc skills requirements
for entrepreneurs and their teams to successfully grow
their business:
• Continuing to build an entrepreneurial mindset,
culture and global ambition
• Key entrepreneurial capabilities and knowledge in
business
• International market knowledge and capability
There is widespread recognition that Scotland lacks
high quality skills development opportunities for IDEs
in the area of sales and in many aspects of fnancing
for business growth. There was strong demand from
those consulted for increased targeted support in
these felds.
4.2.1 Priorities for Action
• Agreement on the composite set of entrepreneurial
skills required for scaling up IDEs across providers of
executive education for entrepreneurs in Scotland.
There is a signifcant role here for entrepreneurs
to be proactive in articulating their own skills
requirements.
• Provision of a coherent, world class programme of
training in Scotland for entrepreneurs, drawing on
industry experience and international best practice.
30 MIT REAP Team Scotland Initiative
“Technical skills or experience is not a must in terms of being
hired in my company. For example, our current Financial
Director did not have any pre-existing technical knowledge
for the role but is smart enough to get the area and has been
a great hire. It is clear that skills for growth can be taught to
the right person with the right capability. You should hire for
personality and ?t with the company culture, rather than for
existing skills”
PJ Darling, Spark Energy
31
Included in this is recognition of “just in time”
learning provided via technology though by massive
open online courses (MOOCs).
• Development of a clear, interactive map of the
entrepreneurship skills development opportunities
available in Scotland. This should be user friendly,
widely communicated and easily accessible for
entrepreneurs at each stage of their personal and
business development.
• Introduction of a new programme to encourage
suitably experienced mid-career managers to return
to Scotland and bring new skills and economic value
back into Scotland.
4.3 FINANCING FOR GROWTH
4.3.1 Key Findings
A key strength in the entrepreneurial ecosystem in
Scotland is the highly developed and highly active
business angel investment community which encourages
and intensively supports early stage IDEs. This is arguably
one of the most advanced business angel networks in
Europe. However, there remain signifcant challenges
in access to risk fnance for businesses in Scotland,
particularly in securing funds for scale-up.
There is a clear perception amongst entrepreneurs
within IDE businesses in Scotland that access to the
levels of risk fnance required to grow their IDEs to
the point of entry in the global marketplace is highly
challenging. Entrepreneurs believe this is the case
even for businesses with clear plans and credible
management teams and often leads to businesses
securing inadequate levels of funding. This contrasts
with an investor perspective that funding is always
available for the most compelling propositions.
We summarise the historical context and current
situation of the risk capital scene in Scotland in
Annex E.
Independently from REAP, an RSE Working Group
in partnership with the Institute of Chartered
Accountants in Scotland (ICAS) and Scottish Financial
Enterprise (SFE) identifed a systemic weakness in
routes for businesses to access follow-on funding. It
is recognised that for some angel-invested companies
an ‘angel friendly’ source of follow-on investment
funding is required possibly through a Venture Capital
Trust and/or pension or institutional investors. The
REAP team supports this view and considers it will be
important to build an evidence base which clarifes
the numbers of companies per year which are in this
‘seeking follow-on funding’ scenario.
“I think there are big gaps in the funding landscape. There
are dif?culties at start up stage and then you hit particular
dif?culties again when you are stuck in the £1M-£5M turnover
mark and try to raise money at this point. I have seen no
change in this in the last 10 years. The visibility of investment
in Scotland is not good. It’s hidden. Any way we can make this
easier in Scotland will lead to a more entrepreneurial society”
Peter Murphy, Simple Audio
SECTION 3
Developing solutions and actions Section 4
While a new approach which enables access to ‘angel
friendly’ follow-on funding should help more IDE
businesses to scale-up, the REAP team also believes
there are opportunities for businesses to explore
a wider range of investment options, including for
example an earlier and more targeted approach
to Venture Capital (VC) funding. Again, the REAP
team believes a stronger evidence base is needed
to understand the scale of funding required by
businesses to realise their ambitions and how the
ecosystem can be developed to accelerate these
opportunities. Connecting with our recommendations
for development of skills for growth, the REAP
team believes entrepreneurs should be assisted
in developing their understanding of all potential
fnancing routes for IDE businesses so that more
informed investment strategies can be developed
by IDE businesses at the outset. This should include
improved dissemination of key funding options
(including assessment of relevant pros and cons),
improved networking infrastructure and advisory
infrastructure to help businesses to target more
efectively the potential investors both in Scotland,
and internationally.
While the angel networks and VCs currently active in
Scotland are the main source of risk fnance for the
portfolio of IDEs in Scotland, there are three specifc
opportunities.
• Firstly, a number of institutions which manage
investment funds are headquartered in Scotland.
This brings important expertise in risk management
and investor opportunities which arguably remain
under-represented in supporting IDE scale-up.
• Secondly, women in Scotland make up only a
small part of the angel investment community,
yet research indicates for many age groups
the wealth of men and women across the UK is
similar
14
. Women investors represent a signifcant
opportunity to release more risk capital into the
system. In addition to funding, private investors
bring vision, resolve and key business skills to
the company – and hence the opportunity, here,
to increase the number of experienced business
women active in IDE scale-up. The UK has the
most favourable tax benefts for angel investors
in Europe, yet this is not promoted widely, nor
well understood as an alternative to traditional
investment options.
• Thirdly, the advent of Crowdfunding introduces
a new form of risk fundraising which has already
proved successful for a number of businesses in
Scotland
15
. It is likely that this will become more
signifcant and greater communication of the benefts
of this as a funding option should be communicated
to early stage entrepreneurs and IDEs.
Before presenting the REAP recommended actions,
further reference to the requirement for evidence
of investment requirements of IDEs, and their
experience, to date is appropriate. The REAP team
takes the view that robust evidence of the level of
demand for risk fnance is necessary to appraise
at national level the scale of the challenge. This
information will help inform entrepreneurs, investors
and policy makers. The REAP team recommends
this information is collected using a voluntary on-
line questionnaire methodology which explores
a company’s IDE growth potential, its investment
requirements and experience to date in securing the
required investment.
4.3.2 Priorities for Action
• Development and dissemination of a strategic
guide document and supporting materials which
help educate and inform IDE entrepreneurs of all
key funding options for accessing risk fnance to
ensure the most efective option is selected from
the outset and is understood.
• Development of a resource, both information and
14
A survey in February 2014 of 2.059 adults by YouGov for Duncan Lawrie Private Bank found that among 45-54 year olds, average
wealth of women was only 5% behind that of men, and that among those aged 55 or older, the wealth of women was on average 5%
higher than that of men. Seehttp://www.templars.co.uk/new-research-reveals-a-17-gender-wealth-gap/
15
Aberdeen based BrewDog raised £4.25m in equity funding in 2013 from its customer base, and Edinburgh’s RunRev raised £473k
in pre-selling licenses and features via Kickstarter. New Scottish crowdfunding sites Squareknot, Bloom VC and ShareIn have been
launched and are actively raising funds for enterprises.
32 MIT REAP Team Scotland Initiative
33
appropriate facilitation, which assists businesses
to target and engage more efectively with
international VCs operating across sectors and
geographies which are relevant to Scottish IDEs. This
should include information on deal fow history and
practical advice on establishing contact and building
mutual interest.
• Better promotion of the advantages of becoming a
business angel to women across Scotland, including
promotion of tax incentives for investors (such as EIS).
• Development of an online questionnaire to collate
evidence of demand by IDE businesses for access to
risk fnance to enable their scale-up.
4.4 Role of Universities
4.4.1 Key Findings
Universities already make a signifcant contribution to
entrepreneurship and the success of IDEs in Scotland. In
developing strategies for the growth of entrepreneurship
in Scotland the REAP team believes there are further
opportunities for the university sector to play a pivotal role.
Many stakeholders identifed and welcomed the
opportunity for the university sector to consistently play
an increased role in the ecosystem. Both the challenge
and opportunity exist for Scotland’s universities to
provide an entrepreneurial experience for students,
staf, alumni members, business collaborators and
customers alike that matches the very best worldwide.
This experience should span inspiration, ambition,
access to skills development and, where appropriate,
direct support for the development of business ideas
which have potential to become successful IDEs.
The REAP team believes the university sector has
the opportunity to play a pivotal role in the further
development of Scotland’s entrepreneurial ecosystem
and an entrepreneurial culture that is open to the world.
In consultation with stakeholders the REAP team
explored areas where specifc actions can help transform
Scotland’s universities to deliver a truly world-class
entrepreneurial experience across the sector and across
all subject areas.
4.4.2 Priorities for Action
• Continuing development of a high level task group
made up of entrepreneurial university professionals
with the objective of implementing a step-change
in the contribution universities make to the
entrepreneurial ecosystem in Scotland.
• Application of the Collective Impact approach to
development and sharing of local and international
best practice across Scotland’s universities. There are
many examples of excellent programmes/initiatives
within Scottish Universities which inspire and support
management skills but these are ‘hot spots’ rather
than the norm. The purpose of applying the Collective
Impact approach is to drive a more sector-wide
implementation of this best practice. It is envisaged
this will be taken forward through practitioner-led
commitments, actions and review – including an
annual conference event.
• Increased focus on leadership training, business
skills and, where desired, entrepreneurship within all
undergraduate and post graduate courses following
the recommendations of the Scottish Science
Advisory Council report on this area
16
.
• Leverage of university alumni networks and
encouragement of alumni mid-career decisions to
build IDEs. This would combine entrepreneurial
aspiration with a supportive environment for new
founders who already have signifcant business
experience. The REAP team recognises that IDEs are
often driven by individuals with business experience
at a mid-career point; university alumni networks
could provide an important route for awareness
raising of IDE opportunity and implementation
support.
16http://www.scottishscience.org.uk/s...e-attachments/Final SSAC Innovation report -
FEB%2013_0.pdf
SECTION 3
Developing solutions and actions Section 4
“I consider the role of universities and their linkages with industry very
important. We purposely placed ourselves near Edinburgh University.
We have a lot of great talent coming out of the Scottish University system,
both home grown and foreign students”
Gareth Williams, Skyscanner
Tommy Cook, Calnex Solutions
34 MIT REAP Team Scotland Initiative
“We ?nd it challenging working with universities, primarily because
our project cycle timeframes are relatively short compared to typical
university cycle times. The specialist nature of our business means,
unsurprisingly, when they have not been involved from the very start,
the university partners can struggle to get out of the ‘catch up’ mode.
If they are engaged from the very start, that could alleviate some of the
pressure. However, this should not distract from the important role of the
universities to act as good feeders of engineers and skilled talent”
35
• Development of a comprehensive set of IDE
performance metrics for the international
benchmarking of the sector and monitoring of
ongoing developments.
4.5 Role models
4.5.1 Key ?ndings
It is widely accepted that contact with entrepreneurs,
whether socially or within a family context, greatly
improves perceptions of self-employment as an
attractive career option. Positive exposure to
entrepreneurs in the media increases general
appreciation of their importance in our economy. As
role models, Scotland’s entrepreneurs can inspire
and advise others as they grow IDEs. As well as
sharing insights into achieving success, explaining
the experience of coping with failure transfers
invaluable knowledge and builds confdence in
others.
Scotland has a tremendous variety of successful
entrepreneurs and entrepreneurial teams across
many felds of industry and commerce, but they tend
to be largely invisible in the Scottish media. Some
of this can be attributed to a belief that their story is
not that impressive or worthy of attention. Scotland’s
people are largely inherently modest, alongside being
very dynamic and versatile in business.
Compared to other occupations and professions,
Scottish society seems to lend limited real credibility
to entrepreneurship as a career or calling. Arguably
cultural factors also contribute to a natural reticence
among those with success stories to share their
knowledge, fearing the accusation they might be
“blowing their own trumpets.”
This is not helped by a national media which regularly
refers to a very small number of older, well known,
largely male entrepreneurs while either ignoring, or
being unaware of, a diverse group of younger and other
business leaders. As a result the general impression
of an entrepreneur can be closer to a caricature, based
upon few individuals, rather than a broad church of
individuals in businesses from across Scotland.
There is a clear need to fnd ways of raising the
profle of our leading, most dynamic and risk taking
entrepreneurs so they are visible, accessible where
appropriate, and frequently inspirational to those who
are driven to follow in their footsteps. Scotland should
also draw in entrepreneurs from across the world – the
rock stars of entrepreneurship – to celebrate the global
nature of business and to reinforce key messages that
our people are every part as capable, dynamic and able
to build international businesses of scale, as any nation
can be.
4.5.2 Priorities for Action
• We need more of Scotland’s entrepreneurs to take
an active part within the ecosystem. We need more
entrepreneurs to ofer to make themselves available
to others, through the wide range of private and
public sector organisations that run mentoring
programmes.
• Wider availability of recent and relevant case
studies. Agencies and organisations with a business
growth focus, or in receipt of public sector business
development funds, should explicitly make available
a regular series of fresh case studies on business
success. Those in receipt of public funds for
business growth should “payback” into the system,
through greater activity in becoming role models
themselves.
• Encouraging female entrepreneurs to step into the
spotlight and encourage other women to become
entrepreneurs and role models. There is a need
for more female entrepreneurial role models of all
ages from Scotland to showcase diversity and to
build critical mass. Young entrepreneurs should also
feature more regularly in business pages, journals
and online publications highlighting Scotland’s
future business leaders.
SECTION 3
Developing solutions and actions Section 4
4.6 Corporate Discussion Group
An additional discussion group was formed
around the theme of “The Role of Large Corporate
organisations in the Scottish Entrepreneurial
Ecosystem”. Input was sought from entrepreneurs in
large businesses because the REAP team recognised
this vital viewpoint was not fully represented on the
team itself and that inclusion of the large corporate
perspective would bring much additional value. The
views of this group are woven throughout the fndings
and recommendations of this document.
4.7 Applying the Collective Impact Approach in
Scotland
Having defned actions which address the identifed
constraints within the Scottish IDE ecosystem we
now turn attention to how key stakeholders can work
collectively to deliver these actions in order to realise
IDE performance improvements. As stated earlier the
Collective Impact approach requires the following
conditions:
• Common Agenda: All participants have a
shared vision for change including a common
understanding of the problem and a joint approach
to solving it through agreed actions.
• Continuous Communication: Consistent and
open communication is needed across the many
players to build trust, assure mutual objectives, and
appreciate common motivation.
• Mutually Reinforcing Activities: Participant
activities must be diferentiated while still being
coordinated through a mutually reinforcing plan of
action.
• Shared Measurement: Collecting data and
measuring results consistently across all
participants ensures eforts remain aligned and
participants hold each other accountable.
• Backbone Organisation: Creating and
managing collective impact requires a separate
organisation(s) with staf and a specifc set of skills
to serve as the backbone for the entire initiative
and coordinate participating organisations and
agencies.
The REAP Scotland team supports the view that
continuous communication between stakeholders
is important to the delivery of this initiative and will
work to ensure a backbone organisation is formed
with capability to support this communications
function.
Further to this, the team has engaged intensively with
stakeholders and is confdent the proposed actions
are mutually reinforcing. The team will work with
the backbone organisation to ensure ongoing and
intensive support is maintained by key stakeholders,
which should include entrepreneurs, investors,
academics, corporate organisations and agencies
of government. We need to continue to harness
the collective resources and commitment of all
stakeholders to maximise the pace of delivery of each
identifed action.
Monitoring of the acceleration of the ecosystem
which results from actioning of the REAP initiative
is important – both in demonstrating the value of
what we are achieving, in maintaining pace, and
in guiding stakeholders in how best to refne the
approach with time. Again, this will be a priority area
for the backbone organisation working closely with all
ecosystem stakeholder groups.
Turning attention to the backbone organisation, the
REAP Scotland team proposes the Collective Impact
approach is supported by an independent foundation,
either new or existing, which operates to a 10 year
horizon and beyond. This should be funded by a mix
of public and private funding, moving to a fully private
sector funding model at the earliest opportunity.
However, recognising the time and attention required
to develop the correct model and achieve collective
impact, the REAP Scotland team will provide
backbone support for this initiative on an interim
basis over the next 9-12 months. The REAP team will
require an efective secretariat function during this
transition phase. We set out in Annex F the proposed
specifcation for the foundation.
36 MIT REAP Team Scotland Initiative
Samantha Faircliff, Cairngorm Brewery
“I consider myself a role model to an extent. Until I get to ease off some
of my workload, I am limited to how much impact I can have 1-2-1 or 1-to
many in the Scottish start up scene. However, I do what I can through
?nancial sponsorship of programmes such as TechMeetup and others.
I meet with some interesting start ups and answer questions where I
can. The greatest impact we are having, though, is showing that a $1bn
internet company can be built in Scotland”
Gareth Williams, Skyscanner
37
“Having mentors and role models in your network can be
hugely valuable. Connections I have made through public sector
training programmes have been invaluable in areas such as
exporting, social media, marketing and IT.. From this and my
own experience of mentoring, what is really important is being
able to ask very basic questions of mentors and get straight-
forward answers. Having an opinion that you can trust gives
you con?dence in your own decisions so you can keep pushing
forward knowing you are doing the right thing”
38 MIT REAP Team Scotland Initiative
The REAP Scotland team set out to understand
how a world-class entrepreneurial ecosystem
functions, and how the Scottish system could be
improved to enable IDEs to grow to scale and
compete globally. The team used a 14 pillar analysis
(GEDI methodology) to establish those areas of
the ecosystem where Scotland performs well and
where we are weakest compared with leading
innovation-driven economies. From this work, and
in consultation with key stakeholders across the IDE
ecosystem in Scotland, we established fve theme
areas which present important opportunities to
improve, signifcantly, the overall efectiveness of the
ecosystem. These fve themes are:
• Efective Connections
• Skills for Growth
• Financing for Growth
• Role of Universities
• Role Models
The REAP Scotland team identifed opportunities
in each of these fve theme areas and through
consultation, identifed specifc priorities for action.
The REAP team frmly believes that intensive and
incisive delivery of these priorities for action,
achieved working collectively with stakeholders will
deliver a step change in both the numbers and rate
of acceleration of IDE businesses across Scotland.
We summarise these actions in the following section
“Calls to Action for stakeholders in Scotland”. All of
these actions require both commitment to the overall
strategic vision and commitment of resources by
stakeholders across the Scottish ecosystem.
Recognising the importance of a backbone organisation in
supporting this Collective Impact approach, we propose a
foundation model which we introduced in section 4.
While the foundation model is being established
over the next 9-12 months, we propose an interim
arrangement whereby the REAP Team provide the
backbone function assisted by an operational secretariat.
We have set out a vision for a highly developed IDE
ecosystem in Scotland which seeks to inspire, nurture
and support the ambitions of our IDE entrepreneurs.
We can achieve this by building on the strengths of
our world leading universities, by developing our
capabilities to access risk fnance, by drawing on
the knowledge and capabilities of our corporate
organisations and in partnership with government
policies and initiatives that truly support the spirit of
IDE entrepreneurship.
Collectively, let’s work to redefne Scotland
as a country of dynamic and high achieving
entrepreneurs who gain and share inspiration,
skills and capability for scale-up from the
supportive and world class IDE ecosystem which we
can, together, build.
SECTION 5
Conclusions and
recommendations
Developing a world-class IDE ecosystem
39
Effective connections
• Production of a “Guide to Networking for Entrepreneurs”
• Stimulation of a connected ‘network of networks’
• Development of an online hub or forum for networking and knowledge exchange of
innovation-driven enterprises
Calls to Action for stakeholders in Scotland
Skills for growth
• Agreement of the composite set of entrepreneurial skills required for scaling up
IDEs across providers of executive education for entrepreneurs in Scotland. There
is a signifcant role here for entrepreneurs to be proactive in articulating their own
skills requirements.
• Provision of a coherent, world class programme of training in Scotland for
entrepreneurs, drawing on industry experience and international best practice.
Included in this is recognition of “just in time” learning provided via technology
though by massive open online courses (MOOCs).
• Development of a clear, interactive map of the entrepreneurial skills development
opportunities available in Scotland. This should be user friendly, widely
communicated and easily accessible for entrepreneurs at each stage of their
personal and business development.
• Introduction of a new programme to encourage suitably experienced mid-career
managers to return to Scotland and bring new skills and economic value back into
Scotland.
Financing for growth
• Development and dissemination of a strategic guide document which helps
educate and inform IDE entrepreneurs of all key funding options for accessing risk
fnance to ensure the most efective option is selected from the outset.
• Development of a resource, both information and appropriate facilitation, which
assists businesses to target and engage more efectively with international VCs
operating across sectors and geographies which are relevant to Scottish IDEs. This
should include information on deal fow history and practical advice on establishing
contact and building mutual interest.
• Increased promotion of the advantages of becoming a business angel to women
across Scotland, including promotion of tax incentives for investors (such as EIS).
• Development of an online questionnaire to collate evidence of demand by IDE
businesses for access to risk fnance to enable their scale-up.
SECTION 3
Conclusions and recommendations Section 5
40 MIT REAP Team Scotland Initiative
Role models
• Encouragement of more of Scotland’s entrepreneurs to take an active part
within the ecosystem. Encouragement of more entrepreneurs to ofer to make
themselves available to others, through the wide range of private and public sector
organisations that run mentoring programmes.
• Increasing availability of recent and relevant case studies. Agencies and
organisations with a business growth focus, or in receipt of public sector business
development funds, should explicitly make available a regular series of fresh case
studies on business success. Those in receipt of public funds for business growth
should “payback” into the system, through greater activity in becoming role models
themselves.
• Encouragement of female entrepreneurs to step in to the spotlight and encourage
other women to become entrepreneurs and role models. There is a need for more
female entrepreneurial role models of all ages from Scotland to showcase diversity
and to build critical mass. Young entrepreneurs should also feature more regularly
in business pages, journals and online publications highlighting Scotland’s future
business leaders.
Role of universities
• Development of a high level task group with the objective of implementing a
step-change in increasing the contribution universities make to the entrepreneurial
ecosystem in Scotland.
• Application of the Collective Impact approach to development and sharing of local
and international best practice across Scotland’s universities.
• Increased focus on leadership training, business skills and, where desired,
entrepreneurship within all undergraduate and post graduate courses (following the
recommendations of the Scottish Science Advisory Council report on this area).
• Leverage of university alumni networks and the encouragement of mid-career decisions
to build IDEs. This would combine entrepreneurial aspiration with a supportive
environment for new founders who already have signifcant business experience.
• Development of a comprehensive set of IDE performance metrics for the international
benchmarking of the sector and monitoring of ongoing developments.
41
ANNEXES
Annex A - The REAP Scotland Team
Annex B - The MIT REAP Programme
Annex C – Workshops, Stakeholder Meetings and Task Groups
Annex D – Stakeholder Participants and Consultees
Annex E – History and Challenges to Risk Capital in Scotland
Annex F – Backbone Organisation
SECTION 3
ANNEXES
Donna Chisholm (Team Leader) is Head of Business
Innovation and Growth Sectors at Highlands and
Islands Enterprise (HIE), Scotland’s economic and
community development agency for the North
and West of Scotland. She is responsible for HIE’s
work in the areas of entrepreneurship, business
innovation, leadership, internationalisation and key
sector development. Before joining HIE in 2007,
for over fve years Donna was project director for
the redevelopment of Eden Court in Inverness,
coordinating the £23million capital project from
inception to completion. Prior to this she worked for
East Ayrshire Council as a service head, and also in
the private sector.
She sits on the board of the Digital Health Institute
and is a member of the Interface Advisory Board.
Simon Grey is the Chief Executive of wave energy
technology company AWS Ocean Energy Ltd.
He also runs the innovation and engineering
consultancy 4c Engineering. He is a chartered
electrical engineer with 29 years’ experience
in power generation projects and business
management of which 24 years have been in the
renewables sector.
Simon founded his frst company Edinburgh
Hydro Systems Ltd in 1988 and since that time
has founded and run several other ventures in
renewable energy. In 2004 Simon founded AWS
Ocean Energy and has led the growth of this new
venture to commercialise leading wave-power IP. In
that time he has secured over £18million of funding
for the company.
In December 2013 Simon joined forces with 4c
Design in Glasgow to form a new innovation,
technology development and engineering company,
4C Engineering. He is now focussed on growing
this new venture whilst also managing the next
investment phase for AWS.
Ian Ritchie is the non-executive Chairman of Iomart plc,
Computer Applications Service, the Interactive Design
Institute, Cogbooks, Blipfoto and Red Fox Media. He
founded OWL in 1984 which pioneered hypertext
application development (a forerunner to the world wide
web) and sold the company to Panasonic in 1989. Since
then he has been involved in over 30 start-up high-
tech businesses, including Digital Bridges, Voxar, VIS
Interactive, Sonaptic and Orbital. He is an active Business
Angel and a member of the advisory board of Pentech
Ventures. He is Honorary Treasurer of the Royal Academy
of Engineering (FREng) and the Vice President, Business
of the Royal Society of Edinburgh (FRSE). He serves on
the board of the Edinburgh International Science Festival
and Chairs the Board of Our Dynamic Earth, Edinburgh’s
Science Centre. He is a Trustee of the Saltire Foundation,
The David Hume Institute and the Nominet Trust. He was
awarded a CBE in the 2003 New Year’s Honours list for
services to Enterprise and Education.
Professor Jonathan Levie is a Professor in the Hunter
Centre for Entrepreneurship at the University of
Strathclyde, Glasgow, where he is Director of Knowledge
Exchange. He has held research and teaching posts
at the London Business School, Babson College (US),
INSEAD (France), and University College, Cork (Ireland).
Professor Levie co-directs Global Entrepreneurship
Monitor (GEM) in the UK. He is also a Research Theme
Leader at the UK’s Enterprise Research Centre, where
he is engaged in research on ambition and venture
growth. With Sharon Ballard, a US-based entrepreneur, he
developed “Supercoach Entrepreneurial Training” a set
of coaching tools and techniques for coaching frst-time
entrepreneurs, and has coached entrepreneurs in a wide
range of sectors from agri-tourism to high technology in
the US, Europe, and the Middle and Far East. His most
recent articles have appeared in Journal of Management
Studies, Research Policy, Entrepreneurship Theory &
Practice, Small Business Economics, and Family Business
Review, among others.
Annex A - The REAP Scotland Team
42 MIT REAP Team Scotland Initiative
43
Jonathan Harris is the publisher and editor of Young
Company Finance (YCF), a monthly review of early
stage high growth companies in Scotland which
focuses particularly on the issues of how to fund
growth.
After graduating from Cambridge, Jonathan joined
Scottish shipping group The Ben Line, and after four
years in Japan worked with the group ofshore drilling
subsidiary Atlantic Drilling Co Ltd, eventually serving
15 years as director and general manager.
During the prolonged recession in the ofshore
industry in the early 1990s, Jonathan left Ben Line
and started working with young companies, in various
roles including adviser and interim chief executive.
He acquired YCF from its founder Gavin Don in
November 2000.
Since February 2011 YCF’s activities in Scotland have
been operated in partnership with LINC Scotland, the
business angel capital association, of which Jonathan
is a director. Besides publishing the YCF monthly
journal and producing the YCF annual conference,
Jonathan has carried out a range of research studies
in the young company sector, including the recent
Risk Capital Market in Scotland 2009-2011 report for
Scottish Enterprise.
Outside Scotland, YCF’s Spinouts UK project conducts
an ongoing survey of all spinouts from universities
across the UK.
Clive Reeves is Manager for Collaborative Funding at
Scottish Enterprise. He has a Ph.D. from University of
Glasgow for research into nano-scale silicon devices,
and has worked for British Aerospace, BBC Television
and IBM’s Research Divison, New York. Before
joining Scottish Enterprise, he was a senior lecturer
in the Department of Electronics and Electrical
Engineering at the University of Edinburgh. His
current interests in economic development focus on
inititatives to support both business innovation and
the development and support of entrepreneurship.
Over the past 2 years Clive has worked closely with
the Scottish Funding Council and Highlands and
Islands Enterprise in developing a £90m programme
to support industry demand led Innovation Centres in
partnership with Scotland’s universities.
Assistance throughout the REAP project was provided
by Kate MacInnes, Entrepreneurial Support Manager
at Scottish Enterprise, and Stephanie Anderson,
Development Manager for Entrepreneurship and
Innovation at Highlands and Islands Enterprise.
”I think there are big gaps in the funding
landscape and that it is very dif?cult
for SMEs. There are dif?culties at start
up stage and then you hit particular
dif?culties again when you are stuck in
the £1M-£5M turnover mark and try to
raise money at this point. I have seen
no change in this in the last 10 years.
The visability of investment in Scotland
is not good. It’s hidden. It’s incredibly
dif?cult for SMEs. Any way we can make
this easier in Scotland will lead to a more
entrepreneurial society. There are lots of
advisors out there, lots of advice but no
matter how good your idea or product is,
it is dif?cult.”
Peter Murphy, Simple Audio
SECTION 3
ANNEXES
The MIT Regional Entrepreneurship Acceleration
Program (REAP) is a two year programme designed by
the Martin Trust Center for MIT Entrepreneurship and
the MIT Sloan School of Management to help regions
accelerate economic development and job creation.
MIT REAP serves to educate, engage, and enable
teams from key regions around the globe in the
development and execution of a well-designed
acceleration strategy, focused on entrepreneurial
activity that can enhance innovation-driven economic
development and job creation.
Learning Experience
The REAP programme enables regional team
members to learn and collaborate with MIT experts,
catalyze regional action, and leverage global best
practice through cross-regional collaboration.
Participants attend highly interactive two-and-half
day educational workshop twice each year. Between
workshops, they engage in signifcant action-oriented
activities in their regions, leveraging faculty coaching
and an online community of practice to enable
regions to more efectively share analysis, execute
action plans, and sustain impact.
Who Should Participate?
Through an application process, the REAP selection
committee will choose eight regions as members of
each REAP cohort. Each region participating in REAP
will assemble an initial cross-functional team of fve
to seven members.
Participants from these sectors will be executives and
decision-makers with:
1. An intimate understanding of their regional
entrepreneurial ecosystem and their sector.
2. The ability to infuence the creation and
implementation of policy and programmes in their
own sector.
3. A demonstrated deep commitment to working
with this diverse core team to impact strategic
change in their regions.
The REAP programme allows participants to:
• Understand key drivers of successful innovation-
driven entrepreneurial (IDE) ecosystems.
• Deploy MIT rigor and use frameworks to assess
their region’s capacities and to evaluate the
current entrepreneurial ecosystem as a foundation
for further analysis, strategy, and implementation.
• Build an interdisciplinary team to create and
validate a vision of their region’s ecosystem at its
full potential.
• Compare and learn from other regions globally
through case studies and cross-regional dialogue.
Connect to an active community of practice and
collaborate with other regions.
• Design a REAP Acceleration Strategy to harness
the power of innovation and entrepreneurship and
accelerate growth in their region’s ecosystem.
Annex B – The MIT REAP Programme
44 MIT REAP Team Scotland Initiative
45
Annex C
Workshops, Stakeholder Meetings and Task Groups
Activity Location Date
REAP Workshop 1 Boston 1
st
February – 3
rd
February 2012
REAP Workshop 2 Edinburgh 30
th
September – 2
nd
October 2012
Stakeholder discussion: Opportunity
perception and internationalisation
Edinburgh 12 February 2013
Stakeholder discussion: Risk Capital Edinburgh 13 February 2013
Stakeholder discussion: Startup skills
& high growth ambition
Edinburgh 13 February 2013
Stakeholder discussion: Product &
process innovation & networking
Edinburgh 26 February 2013
Effective connections Task Group Edinburgh
REAP Workshop 3
Additional Days
Auckland
Christchurch
25
th
March – 27
th
March 2013
27
th
March – 29
th
March 2013
Corporate Discussion Group Edinburgh 21
st
August 2013
Role of Universities Task Group
Discussion
Edinburgh 26
th
August 2013
Skills for Growth Task Group Discussion Edinburgh 27
th
August 2013
Role Models Task Group Discussion Edinburgh 8
th
October 2013
REAP Workshop 4 Boston 24
th
February – 26
th
February 2014
SECTION 3
ANNEXES
Colin Adams (Informatics Ventures, University of
Edinburgh)
John Anderson (Entrepreneurial Exchange)
Stan Arnauld (Weber Shandwick)
Erikka Askeland (Press and Journal)
Alastair Balfour (Company Creators)
Donella Beaton (Donella Beaton Associates)
Steve Beaumont (University of Glasgow)
Tim Bedford (University of Strathclyde)
Johannah Bisset (WEB Rigging Services)
Jim Bonar (Enterprise Fellowship)
Vicky Brock (Clear Returns)
James Browning (Mpathy Medical)
Craig Chatwin (Saltire Foundation)
Gaelle Ciriego (Ipso Facto)
Silvio Clemente (Scottish Enterprise)
Tommy Cook (Calnex Solutions)
PJ Darling (Spark Energy)
Paula Douglas (Scottish Enterprise)
Pete Downes (Dundee University)
Nigel Eccles (Fanduel)
Peter Estibeiro (i2eye Diagnostics)
Steve Ewing (Informatics Ventures, University of
Edinburgh)
Samantha Fairclif (Cairngorm Brewery)
Paul Ferri (University of Strathclyde)
Ronnie Forbes (QikServe)
David Fraser (Fusion)
Mez Glasse-Duf (Saltire Foundation)
Fiona Godsman (Scottish Institute for Enterprise)
Patrick Graham (Business Group Fund)
Ben Gray (DC Thomson)
Colin Hewitt (Float)
John Innes (Selex)
Mervyn Jones (Maple Jones)
Sandy Kennedy (Saltire Foundation)
David Lane (Heriot Watt University)
Michael Laurenson (Blueshell Mussels)
Geof Leask (Young Enterprise Scotland)
Ewen MacPherson (Ideality)
Colin Mason (Adam Smith Business School, University
of Glasgow)
Jim Mather (University of Strathclyde)
Brian McGuire (Entrepreneurial Spark)
Ryder Meggitt (Saltire Foundation)
David Milne (Wolfson Electronics)
Andrew Mitchell (Edinburgh Centre for Carbon
Innovation)
Eleanor Mitchell (Scottish Enterprise)
Simon Mone (Metadigital)
Keith Muir (Cytomos)
Kenny Mumford (MBM Commercial)
Peter Murphy (Simple Audio)
Ken Naismith (Ken Naismith)
Phil Newman (Pergali)
Stewart Nicol (Inverness Chamber of Commerce)
Alasdair Northrop (Scottish Business Insider)
Ben Panter (Blackford Analysis)
Darren Peattie (Inside Industry)
Darren Pirie (Royal Bank of Scotland)
Andy Porter (Aberdeen University)
Beth Scott (Scottish Development International)
Alex Scott-Tonge (The Power of Youth)
Leanne Sherry (Saltire Foundation)
Morna Simpson (fock.edu)
Maurice Smith (TVI Ltd)
Colin Stewart (Citi)
Alan Suttie (FearsomEngine)
Ian Underwood (Scottish Science Advisory Council)
Rob Walker (MonitorHub)
Neil Wilkie (Scottish Enterprise)
David Wilkinson (Institute of Directors)
Gareth Williams (Skyscanner)
Annex D – Stakeholder Participants and
Consultees
46 MIT REAP Team Scotland Initiative
47
The availability of risk fnance for IDEs in Scotland has
changed radically over the last few decades and the
current climate is heavily infuenced by signifcant
UK Government’s tax breaks for business angels (EIS
and SEIS) and the co-investment fund operated by
the Scottish Investment Bank (SIB), the investment
arm of Scottish Enterprise and Highlands and Islands
Enterprise.
The huge loss of capital in the dot.com boom and
bust of 2001, compounded by the fnancial crash
of 2008 when post-2001 enterprises might have
been expected to begin to mature, led to a relatively
poor performance of technology investments. As a
consequence, fund managers no longer regard this as
an investment sector in which they want to engage.
Venture Capital (VC) companies have generally moved
away from early stages towards later stages and
larger investments, or have moved to a private equity
(PE) model where they replace public listings of
companies. Other VCs have exited the market having
failed to raise follow on investment funds.
The Enterprise Investment Scheme (EIS), frst
introduced in 1994 and its early stage version, the
Seed EIS (SEIS) introduced in 2012, provides very
The REAP team propose that a backbone organisation
is founded to coordinate the Collective Impact
delivery of the REAP recommendations. It will have a
relentless focus on improving the ecosystem for IDEs
in Scotland. Its mission will be to foster innovation-
driven entrepreneurship in Scotland through
stakeholder collaboration and engagement. It
will be established with the following principles of
operation:
generous tax breaks for individual investors (the best
such tax support anywhere in the developed world).
As a result the UK has built a strong community of
business angels.
In Scotland, the development of Scottish Enterprise’s
Co-Investment Fund has been very signifcant in the
development of syndicates of business angels. The
Co-Investment Fund accredits investment groups,
syndicates and VCs, following which they can call on
SIB to match their investment on the same commercial
terms. The Co-Investment Fund has been largely
responsible for the development of angel syndicates
- ten years ago there were three syndicates and today
there are nearly twenty.
Because the vast majority of new IDEs in Scotland
need seed funding in the sub-£1m range this system
works well, and many enterprises are now being
funding as a result of this support. Follow-on funding,
however, remains a signifcant challenge, compounded
by the fact that business angels are often reluctant to
encourage their companies to raise Venture Capital
due to restrictions imposed with their tax breaks. This
often leads angels to prefer to sell businesses rather
than grow them, possibly too early.
• Private funded, non-proft
• Government endorsed but private sector led
• Stakeholder representative leadership group
• Major currency is work-in-kind
• Initially supported by HIE/SE but transitioning to
self-sustainability within two years
• Network of stakeholder groups collaborating to
promote conditions for IDE growth in Scotland
• Ambitious - seeks to have signifcant impact.
Annex E – History and Challenges to Risk Capital
in Scotland
Annex F – Backbone Organisation
Collectively, let’s work to redefine Scotland
as a country of dynamic and high achieving
entrepreneurs who gain and share inspiration,
skills and capability for scale-up from the
supportive and world class IDE ecosystem
which we can, together, build.
www.hie.co.uk | www.scottish-enterprise.com
[email protected]
doc_884449905.pdf
In such a criteria with regards to increasing innovation driven entrepreneurship in scotland through collective impact.
Increasing innovation-driven
entrepreneurship in Scotland
through COLLECTIVE IMPACT
2
Page 3 Foreword
Page 4 Executive Summary
Page 6 Our Vision for Scotland
Page 7 Section 1 Setting the Scene
Page 7 1.1 Introduction to MIT REAP
Page 7 1.2 Scotland’s latent opportunity
Page 8 1.3 Scotland’s MIT REAP goals
Page 9 Section 2 Learning through MIT REAP
Page 9 2.1 The importance of Innovation-driven enterprises
Page 10 2.2 Importance of linking E-cap with I-cap
Page 12 2.3 Value of Collective Impact
Page 12 2.4 Importance of investment and mentoring by successful
entrepreneurs within incubators and accelerators
Page 13 2.5 Value of learning from other regions
Page 14 Section 3 Scotland – Investigating the Issues
Page 14 3.1 Key economic facts about Scotland
Page 16 3.2 The Scottish IDE ecosystem
Page 20 3.3 Business formation and growth ambitions in Scotland
Page 22 3.4 GEDI research
Page 22 3.5 Interpretation of research
Page 22 3.6 Stakeholder discussions
Page 24 3.7 Five key themes
Page 26 Section 4 Developing Solutions and Actions
Page 27 4.1 Efective Connections
Page 29 4.2 Skills for Growth
Page 31 4.3 Financing for Growth
Page 33 4.4 Role of Universities
Page 35 4.5 Role Models
Page 36 4.6 Corporate discussion group
Page 36 4.7 Applying the Collective Impact approach in Scotland
Page 38 Section 5 Conclusions and Recommendations
Page 39 Calls to Action for stakeholders in Scotland
Page 41 Annexes
Page 42 Annex A - The REAP Scotland Team
Page 44 Annex B - The MIT REAP Programme
Page 45 Annex C - Workshops, Stakeholder Meetings and Task Groups
Page 46 Annex D - Stakeholder Participants and Consultees
Page 47 Annex E - History and Challenges to Risk Capital in Scotland
Page 47 Annex F - Backbone Organisation
CONTENTS
3
Scotland already has strong foundations in place to
achieve this, but, in key areas the environment in
which our talented entrepreneurs and innovators
operate is not optimal and this constrains progress.
In addressing these constraints through specifc
and targeted actions we can stimulate a new era of
innovation-driven entrepreneurship in Scotland. A
relentless focus on customers and markets, combined
with high levels of market orientated innovation and
access to a variety of funds for business growth, will
deliver increased numbers of ambitious companies
growing rapidly with both a determined and
disciplined approach.
In this document we describe the Scottish
entrepreneurial ecosystem and what should be done
to improve it. By working collectively Scotland
can accelerate the performance of innovation-
driven entrepreneurial businesses for the beneft
of both society and the Scottish economy. We
have developed these proposals through intensive
consultation with our stakeholders, including
entrepreneurs, investors, corporate organisations,
academia and agencies of government. Throughout
this document we have taken into account the
Scottish Government’s CAN DO framework.
FOREWORD
In Scotland we have an opportunity to rede?ne ourselves as a
nation of dynamic and high achieving entrepreneurs, targeting
global market opportunities, using innovation as a key driver of
sales growth, making a signi?cant contribution to the creation of
employment and wealth
We ask our stakeholders to work collectively to deliver this stakeholder initiative
for acceleration of innovation-driven entrepreneurship across Scotland.
Simon Grey
CEO,
AWS Ocean Energy
REAP SCOTLAND TEAM
Donna Chisholm
Head of Business
Innovation and Growth
Sectors, Highlands and
Islands Enterprise
Ian Ritchie
Chairman,
Iomart plc
Professor
Jonathan Levie
Director of Knowledge
Exchange, Hunter Centre
for Entrepreneurship,
University of Strathclyde
Jonathan Harris
Editor,
Young Company Finance
Clive Reeves
Collaborative Funding
Manager, Scottish
Enterprise
4 MIT REAP Team Scotland Initiative
• Scotland is a prosperous nation with world leading
capabilities for scientifc research and invention.
• However, over the past 30 years Scotland has
not delivered economic growth on a par with
the world’s best performing innovation-driven
economies.
• Entrepreneurship, particularly when combined with
market orientated innovation, is known to create
• In order to investigate how Scotland’s performance
in entrepreneurship can be enhanced, a team from
Scotland participated in the Massachusetts Institute
of Technology inaugural Regional Entrepreneurship
Acceleration Programme.
• During this Programme the REAP Scotland team
participated in four multinational residential
workshops alongside teams from Finland, New
Zealand, and regions of China, Spain and Mexico.
• The workshops provided a framework for analysis
of Scotland’s innovation-based entrepreneurial
ecosystem and development of a strategic action
plan for improvement.
• Between the workshops the team carried out an
investigation of the entrepreneurial ecosystem
in Scotland using both academic research and
stakeholder consultation.
• The result is this document.
Scotland’s Innovation-driven entrepreneurship opportunity
Scotland’s participation in MIT REAP
companies capable of capturing substantial value
and delivering signifcant economic beneft.
• Promoting innovation-driven entrepreneurship and
creating the conditions for young companies to
grow is a key focus of Scotland’s economic strategy.
EXECUTIVE
SUMMARY
5
For each of the fve action areas, the REAP Scotland
team gathered input from expert groups to identify
specifc actions which are presented within the
main text of this report, and summarised within
the conclusion. Furthermore, the team concludes
this is best delivered using a collective impact
approach which involves all players in Scotland’s
entrepreneurial ecosystem. This includes individual
entrepreneurs through to Scotland’s largest
businesses, government and business support
organisations, universities and the fnance and
investment community. To maximise efectiveness,
this collective approach will require coordination by
an independent organisation which will provide a
Participation in REAP and the associated stakeholder
consultation has identifed fve areas which currently
constrain the ecosystem. These fve areas require
attention and action, if Scotland’s performance
in building innovation-driven enterprises is to be
enhanced:
1. Actions to improve networking linkages between
innovation capacity and entrepreneurial capacity
to improve the rate of creation or transformation
of growth businesses.
2. Actions to improve skills for growth through
provision of internationally excellent education in
entrepreneurship and management.
3. Actions to improve access to growth fnance
Delivery of the plan
An initiative for realising Scotland’s potential
‘backbone’. This backbone organisation will work across
all stakeholders to ensure ongoing alignment of vision,
delivery of mutually re-enforcing actions, continuous
communications and an agreed monitoring framework.
The REAP Scotland team recommends that the
backbone should be a non-proft stakeholder-led
organisation, potentially a new or existing foundation,
which is funded by a mix of public and private funds.
This organisation should have a small core team and
should help to coordinate stakeholder-led collective
actions to achieve impact. The REAP team proposes
to continue with early implementation of the strategy
actions on an interim basis over the next 9-12 months
as the backbone model is established.
through private initiatives in the fnance sector
and enhancement of management capability in
companies.
4. Actions to leverage the role of our universities
to improve entrepreneurship and management
education and build links with alumni to foster
mentoring, support and development of Scotland’s
ambitious entrepreneurs.
5. Actions to promote innovation-driven
entrepreneurship to individuals of all ages as a
worthy and rewarding career choice through a
positive communication strategy and extensive
use of role models.
CALL TO ACTION
REAP Scotland team invites, and calls to action, all those with an interest in improving the
performance of Scotland in the feld of innovation-driven entrepreneurship to engage with
and support the actions of this stakeholder led initiative. We ask for your endorsement,
participation and support in working collectively to deliver a world class ecosystem which
stimulates and supports the growth of innovation-driven enterprises.
MIT REAP Team Scotland Initiative
SECTION 3
xxxxx - xxxxxxxxxxxxxxxxxxxxxxx Section x
6
our vision for
Scotland
A vibrant, dynamic society which inspires, resources and
rewards innovators and entrepreneurs.
A forward looking business culture which celebrates
success and acknowledges failure, recognising the value in
both. Where inspirational role models are well known and
accessible, showcasing Scotland’s entrepreneurs and their
contribution to society.
An ef?cient and joined up entrepreneurial ecosystem
where innovators, entrepreneurs, ?nanciers, educators,
government and established corporations all play their
part to enable Scotland to realise its potential for creating
and growing signi?cant innovation-based enterprises.
An open, globalised economy characterised by opportunity
and resource, attracting top talent from around the world
who see Scotland as a centre for vigorous, successful and
sustainable business growth.
7
SECTION 1
Setting the scene
1.1 Introduction to MIT REAP
For over two years between 2012 and 2014 a team
from Scotland participated in the Massachusetts
Institute of Technology (MIT) inaugural Regional
Entrepreneurship Acceleration Program (REAP).
Delivered by the world leading MIT Sloan School of
Management, REAP is designed to help regions and
nations to accelerate economic development and job
creation through efectively enhancing innovation-
driven entrepreneurial ecosystems.
Scotland’s participation in the programme was
through an independent team of key stakeholders, the
REAP Scotland Team, brought together by Highlands
and Islands Enterprise (HIE) and Scottish Enterprise
(SE). The team worked alongside groups from Finland,
New Zealand, and regions of China, Spain and Mexico.
Scotland’s team consisted of entrepreneurs with
experience of building enterprises of various scales
(SMEs and large companies), representatives from
academia, the fnance and investment community,
and the economic development agencies. Members
are identifed in Annex A and were brought together
to ensure a balanced view across critical areas of the
Scottish entrepreneurial ecosystem. Annex B provides
a short overview of the MIT REAP programme.
Over the two years the team participated in four MIT
led workshops, two onsite at the MIT Sloan School in
1http://www.cforic.org/pages/ukci2013.php
2http://www.edinburgh-inspiringcapital.com/live/working_in_edinburgh.aspx
Boston USA, one in Edinburgh and one in Auckland,
New Zealand. Between the workshops the team
completed MIT assignments, held monthly team
meetings and carried out signifcant consultation
with wider stakeholders through a number of
forums. Leading entrepreneurs in Scotland were also
consulted for their views and comments.
1.2 Scotland’s latent opportunity
Scotland is a nation of well educated, inventive and
industrious people. Scots are known the globe over
for tenacity and fortitude having played a leading
role in establishing trade around the world. Scots
have been leading advanced scientifc research and
inventive discovery for over 200 years. Today Scottish
scientists are at the forefront of advanced research
including, for example, in fundamental physics,
energy, engineering and life sciences.
Scots also have a strong commercial record: during the
19th century, Scots traders built Glasgow to become
the “Second City of the British Empire” whilst today
both Aberdeen and Edinburgh feature in the top four
of the UK’s most competitive cities outside London
(2013)
1
. Edinburgh has the highest percentage of
professionals in the UK, with 43% of the population
holding a degree-level or professional qualifcation
2
.
SECTION 3
Setting the scene Section 1
Despite this track record of outstanding success and
highly educated people, Scotland produces few home
grown enterprises of global scale. There is latent
potential to create signifcant wealth from Scotland’s
innovative capacity, but opportunities are not being
realised at present.
This document sets out to defne what is constraining
our ability to scale-up the businesses entrepreneurs
create, and aims to identify action areas to overcome
these constraints.
1.3 Scotland’s MIT REAP Goals
The Scottish team set out on the REAP programme
with the objective of producing three specifc outputs:
• Recommendations on ways to improve the
entrepreneurial ecosystem to accelerate business
growth.
• Specifc project/programme ideas which are
capable of implementation within the wider
context of Scotland’s entrepreneurial ecosystem.
• Recommendations to Government, and its agencies,
on public sector interventions to improve the
performance of Scotland’s entrepreneurial
ecosystem.
During the programme these objectives were
sharpened to focus on the conditions for creation
and acceleration of innovation-driven enterprises
(IDEs). Over the two years of the REAP Programme
the Scotland team gained signifcant knowledge
and understanding in relation to the Scottish
entrepreneurial ecosystem itself, the wider
economic issues, and leading international academic
thinking around entrepreneurial business growth. In
particular the team identifed that the creation and
growth of IDEs represents an important opportunity
for Scotland.
Accordingly, the original objectives of the REAP
Scotland team were re-focused to concentrate
on how we might improve the entrepreneurial
ecosystem specifcally to enable the creation and
scale up of IDEs to maximise the growth opportunity
for Scotland.
8 MIT REAP Team Scotland Initiative
“In terms of the wider ecosystem, we do a good
job talking about this and what needs to change
- we just need to make it happen. And to come
to the table as equal partners. It needs us all
involved - from SMEs to corporates to academia
to government to investors. SMEs should not be
daunted by academics or large corporates, we all
have just as much to bring. We need to get the best
team together and make this happen”
Colin Stewart, Citi
9
SECTION 2
Learning through
MIT REAP
The REAP Scotland team was guided by the insights
and experience of the MIT faculty, their advice on
stakeholder strategy development and through the
sharing of experiences between participating nations
and regions. This took place during the international
workshops. In addition, the team commissioned
academic research, carried out intensive stakeholder
consultations and set up a number of working groups
– all designed to defne specifc actions which
will strengthen Scotland’s IDE ecosystem. The key
concepts and learning included:
• The importance of innovation-driven enterprises
in an entrepreneurial ecosystem;
• The importance of linking innovation capacity with
entrepreneurial capacity;
• The value of Collective Impact to solve complex
social challenges;
• The importance of visibility, investment and
mentoring by successful entrepreneurs at every
level;
• The value of learning from other regions of the
world, tailored to suit local circumstances;
• Throughout, it was recognised that a joined up
approach to action across the whole ecosystem by the
full range of stakeholders is vital as is the requirement
for patience to allow actions to take efect.
Each of these learning points is described in the next
section.
2.1 The importance of Innovation-driven
enterprises
Innovation-driven enterprises or ‘IDEs’ are
enterprises which lead the competition and secure
business growth by creating new products or services
that excite customers and can be rolled out quickly
and efectively. They often compete in new ways,
using new business models to respond rapidly to
evolving trends in a highly connected marketplace.
They turn the dynamic of ever-shorter product
lifecycles to their advantage. To do this they focus
on innovation as a key driver of growth.
According to the Organisation for Economic Co-
operation and Development (OECD) more than half
the productivity growth in developed nations now
3
OECD (2012) OECD Compendium of productivity indicators 2012
SECTION 3
Learning through MIT REAP Section 2
comes from innovation
3
. It is also identifed as the
engine of long term economic development and has
underpinned much of the UK’s productivity growth.
As NESTA said in its report in 2009
4
“Innovation may
be responsible for two-thirds of UK private sector
productivity growth between 2000 and 2007”.
While all IDEs are innovation-driven, this is not
limited to technology based businesses. IDEs
operate across most industry sectors. Aggreko,
Global Energy Group, Wolfson Microelectronics and
Skyscanner are impressive examples of Scottish IDEs
successfully delivering across global markets.
In the United States, IDEs are highly valued as
a source of wealth creation and employment. In
contrast, Europe in general has been less successful
in cultivating IDEs
5
. The process of creating IDEs,
‘IDE entrepreneurship’, has specifc challenges
and is distinct from the creation of small local
businesses. Several elements of the entrepreneurial
ecosystem must be functioning well and working
together, to create the optimum conditions for IDEs
to fourish.
MIT faculty at the Martin Trust Center for MIT
Entrepreneurship set out the diference between
IDEs and SMEs as follows in Table 1
6
:
The REAP Scotland team has focused attention on
the stimulation of more IDEs, either through the
creation of new businesses, or transformation of
existing companies, for example through family
succession. New IDEs in Scotland are likely to start
as SMEs ‘with a difference’ as Table 1 demonstrates.
Existing SMEs can transform themselves into IDEs
by adopting a disciplined approach to structuring
their business model for scalable accelerated
growth, and by selling innovative products or
services to larger, higher value markets.
2.2 Importance of linking E-cap with I-cap
A key theme highlighted by the MIT faculty is the
importance of linking the innovation capacity
(I-cap) with the entrepreneurial capacity (E-cap)
of a region. Often innovators have great ideas
(I-cap) but lack the entrepreneurial skills (E-cap) to
develop them. Similarly there are many talented
entrepreneurs whose talents are wasted on low
quality ideas.
MIT faculty believe that the key to success in the
Boston entrepreneurial ecosystem has been the
linking of I-cap with E-cap, thus enabling talented
entrepreneurs and innovators to meet, facilitated
through well developed networks, leading to the
formation of many IDEs.
4http://www.nesta.org.uk/publications/innovation-index-2009
5
Coad et al., 2014, UK Innovation Survey Innovative Firms and Growth, BIS, March
6http://entrepreneurship.mit.edu/sites/default/fles/AuletMurray_IDEvSME.pdf
SME Entrepreneurship IDE Entrepreneurship
Local and regional markets National and global markets
Innovation not necessary nor a competitive
advantage; replicable businesses
Based on innovation (tech, process, business
model) and potential competitive advantage
Jobs generally performed locally
Tradable jobs—can be performed locally or
elsewhere
Modest capital; often bank fnancing; often
family business
External equity capital often required; diverse
ownership
Linear growth
Initial losses followed by rapid growth…or failure;
requires investment
Table 1: Difference between SME entrepreneurship and IDE entrepreneurship (Source: MIT Sloan School of Management)
10 MIT REAP Team Scotland Initiative
11
Figure 1 – the MIT view of strong links between innovation and entrepreneurship ?ourishing in clusters to generate
economic impact (Source: MIT Sloan School of Management)
MIT REAP IDE Ecosystem Framework
Economic Impact
Focused Clusters
Linkages
E-Cap i-Cap
SECTION 3
Learning through MIT REAP Section 2
2.3 Value of collective impact
In order to create lasting solutions to large
scale issues, organisations - including those in
government, civil society, and the business sector -
need to coordinate their eforts and work together
around a clearly defned goal.
The Collective Impact approach is the commitment
of a group of actors from diferent stakeholder
groups to a common agenda for solving complex
economic and social problems. Collective Impact
is a signifcant shift from the social sector’s
current paradigm of ‘isolated impact’, because the
underlying premise of Collective Impact is that no
single organisation can create large-scale lasting
change.
There is no “silver bullet” solution to systemic
problems, and these cannot be solved by simply
scaling or replicating one organisation or
programme. Strong organisations are necessary, but
not sufcient for large-scale change.
Not all societal problems are suitable for Collective
Impact solutions. Collective Impact is best
employed for problems that are complex and
systematic rather than technical in nature.
Collective Impact initiatives are currently being
employed around the world in education,
healthcare, homelessness, the environment, and
community development. Many of the initiatives
underway are already showing concrete results,
reinforcing the promise of Collective Impact in
solving complex issues
7
. The REAP team believe
this approach can be applied to the Scottish
entrepreneurial ecosystem.
The Collective Impact approach is an important
and distinctive element of this REAP initiative. It is
what sets this initiative apart because it does not
rely heavily on delivery and success from just one
or two lead bodies. The Collective Impact approach
– as the name suggests – relies on the collective
input and delivery of key players or stakeholders
who all share a common interest in the success of
this initiative.
2.3.1 The ?ve conditions of collective impact
success
Collective Impact is more rigorous and specifc than
collaboration among organisations. There are fve
conditions that, together, lead to meaningful results.
These are:
• Common Agenda: All participants have a
shared vision for change including a common
understanding of the problem and a joint approach
to solving it through agreed actions.
• Continuous Communication: Consistent and open
communication is needed across the many players to
build trust, assure mutual objectives, and appreciate
common motivation.
• Mutually Reinforcing Activities: Participant
activities must be diferentiated while still being
coordinated through a mutually reinforcing plan of
action.
• Shared Measurement: Collecting data and
measuring results consistently across all participants
ensures eforts remain aligned and participants hold
each other accountable.
• Backbone Organisation: Creating and managing
collective impact requires a separate organisation(s)
with staf and a specifc set of skills to serve as the
backbone for the entire initiative and coordinate
participating organisations and agencies.
By tracking contributions and progress towards agreed
goals, collectively Scotland can change and develop
our entrepreneurial ecosystem, increasing our pool of
successful entrepreneurs and rapidly growing IDEs.
2.4 Importance of investment and mentoring
by successful entrepreneurs within specialist
incubators and accelerators
The REAP Scotland team was impressed by the
prevalence of highly successful entrepreneurs, many
7http://www.ssireview.org/articles/entry/collective_impact
12 MIT REAP Team Scotland Initiative
13
of whom are now multi-millionaires, both within
the teaching staf at MIT and engaged in supporting
growing companies through investment and
mentoring across the Greater Boston area.
Initiatives the team found particularly exciting were
accelerators sponsored by corporations, venture
capitalists and successful entrepreneurs. Examples
include Bolt (hardware), Greentown Labs (energy)
and Healthbox (healthcare). These centres appeared
to blend access to facilities, specialist knowledge and
capital in a way that is likely to be highly successful
in producing IDE scale-up. The REAP team believes
this specialist innovation-driven approach could be
replicated in Scotland with good efect.
2.5 Value of learning from other regions
The REAP Scotland team noted how other regions and
nations approached participation in the programme.
In particular:
• The team from Andalucia used an impressive
public-private partnership with Telefonica and
others to sponsor acceleration of entrepreneurship
activities very publicly;
• The team from Mexico hired a dedicated
project manager with excellent business and
communication skills to drive their progress;
• The team from China was entirely privately funded,
very ambitious, and extremely self-reliant;
• The team from New Zealand was heavily
government-led and had to work hard to rebuild
momentum when departmental re-organisation
disrupted their progress;
• The team from Finland highlighted the issues with
an economy which becomes too reliant on a single
‘mega-player’ such as Nokia, and the importance of
universities such as Aalto was evident in the wider
ecosystem.
These observations all contributed to the Scottish
team’s view that the backbone organisation
established to lead and facilitate this initiative must
involve all stakeholders, should not be government
led, and must have access to sufcient professional
resources to really drive change.
One of the key points of learning from REAP was
that what works well in one region or nation will
not necessarily work in another. Each region has a
unique set of economic circumstances, resources,
opportunities and constraints. Hence adaptation of
successful approaches and initiatives, rather than
replication, is needed. We must learn from elsewhere
and Scotland should continue to draw on knowledge
and best practice from innovation-based economies
to achieve the REAP Vision.
“The Collective Impact approach is the commitment of a
group of actors from different sectors to a common agenda
for solving complex economic and social problems. Collective
Impact is a signi?cant shift from the social sector’s current
paradigm of ‘isolated impact’, because the underlying
premise of Collective Impact is that no single organisation
can create large-scale lasting change”
SECTION 3
Scotland -
Investigating
the Issues
• Firstly the team quantifed the ecosystem as it
currently exists in terms of its entrepreneurs, capital,
corporations, government and universities. This
analysis is detailed further in this section.
• Secondly the team commissioned research to
investigate the performance of the ecosystem in
using data from the Global Entrepreneurship Monitor
(GEM) and other sources. This work is described in
detail in Chapter 4 of the GEM Scotland Report 2012
and summarised in section 3.4 of this document.
• Thirdly having identifed potential issues within the
ecosystem, the team arranged a series of stakeholder
meetings to further investigate key areas and gather
opinion regarding potential courses of action.
• Finally having considered the research and
validated this against stakeholder opinion, the
team established a series of task groups with the
intention of identifying specifc actions which
would lead to an improvement in Scotland’s IDE
entrepreneurship ecosystem.
The frst two steps in this methodology are described
in the remainder of this section, while the third and
fourth steps are described in section 4 “Developing
solutions and actions”.
3.1 Key Economic Facts about Scotland
Table 2 provides an overview of Scottish economic
performance.
In order to investigate
the issues in the Scottish
entrepreneurial ecosystem,
the REAP team adopted the
following methodology
Table 2: Scotland key economic facts (Sources: Business Population Estimates for the UK and Regions 2013, BIS; Business
Demography Births, Deaths and Survival, ONS; Fiscal Commission Working Group, First Report – Macro-economic
Framework, Scottish Government 2013; Global Entrepreneurship Monitor.)
14 MIT REAP Team Scotland Initiative
Population in millions (% of UK population), 2011 5.26 (8.3%) (UK - 63.2 (100%))
GDP per capita, US$, (% of UK) 2010 34,184 (96%) (UK- 35,715 (100%))
Unemployment rate (%), Nov-Jan 2014 6.9 (UK - 7.2)
No. of businesses with UK HQ in Scotland (% of UK), 2013 325,570 (6.6%) (UK - 4.9 million (100%)
No. of businesses with UK HQ in Scotland per 10,000
population (% of UK), 2013
740 (78%) (UK - 947 (100%)
Registered businesses with UK HQ in Scotland (% of
UK), 2013
149,635 (6.8%) (UK -2.2 million (100%)
SME percentage (based on location of HQ), 2013 99.7% of registered businesses (UK – 99.7%)
Medium sized registered businesses with UK HQ in
Scotland (% of UK total), 2013
2,270 (7.4%) accounting for 15% of jobs in registered
businesses (UK: 30,685, 14% of jobs)
Large businesses with UK HQ in Scotland (% of UK total), 2013 465 (7.1%) accounting for 45% of jobs (UK: 6,595, 46%)
15
Entrepreneurial
ecosystem
Stakeholder model
Risk Capital
entrepreneur
university
government
corporate
Figure 2 – Key stakeholders in the entrepreneurial ecosystem (source: MIT Sloan School of Management)
SECTION 3
Scotland - Investigating the Issues Section 3
Scotland has almost 150,000 SMEs, the majority
of which are run by owner managers or small
management teams. Whilst some might assume that
this indicates healthy entrepreneurial activity, the
majority of these managers are not actively seeking to
grow their businesses and create signifcant wealth –
instead many are content with running a sustainable
enterprise which meets their needs and those of their
dependants.
An indication of active, ambitious entrepreneurs is
found by studying the membership of organisations
such as the Entrepreneurial Exchange and
other networking organisations, by considering
entrepreneurs engaging in professional development
(such as that supported by HIE and SE) and reviewing
deal-fow for risk fnancing. These indicators paint
a diferent picture with the number of ambitious
entrepreneurs active in Scotland being limited to a
few hundred at the most.
At the ‘top of the tree’ we see some high profle
entrepreneurs who have built global businesses,
however these are truly the exception rather
than the norm. Examples of globally successful
high-technology businesses built in Scotland are
3.2 The Scottish IDE ecosystem
The MIT faculty advised that highly efective IDE
ecosystems require strong collaboration and
interactions between fve key stakeholder groups.
These are entrepreneurs, risk capital, universities,
government and corporate organisations as shown
in Figure 2. These key groups were represented
throughout the consultation exercise, and the REAP
Scotland team was formed from the outset to ensure
these stakeholder interests were represented within
the team. Linking these actors is a further set of
organisations, corporations, physical infrastructure,
resources and information, for example networking
groups, professional advisers, websites, etc.
Below the fve key stakeholder groups are
summarised as they currently operate within the
Scottish IDE ecosystem.
3.2.1 Entrepreneurs
Despite its heritage and innovation capabilities,
and notwithstanding some notable success stories,
Scotland lacks a substantial body of experienced,
talented, and well networked entrepreneurs.
“I feel that the challenge in Scotland
for small companies lies more around
the area of making enterprises ‘investor
ready’ rather than there necessarily
being a challenge around levels of risk
capital in the market”
Peter Estibeiro, i2eye Diagnostics
16 MIT REAP Team Scotland Initiative
17
particularly rare. GEM indicates around 20% of
existing owner-managers are serial entrepreneurs,
compared to 26% in the United States, so Scotland
is performing reasonably well in this area. Scotland’s
economy would beneft from many more experienced,
successful entrepreneurs following the example set
by Sir Tom Hunter and Lord Haughey in investing
money and time in young, dynamic businesses.
3.2.2 Risk Capital
Scotland has a highly sophisticated angel community
which invests across a broad portfolio of early stage
companies. Investments at £250k-£500k are typical,
often matched by public funds invested under
commercial terms by the Scottish Investment Bank
(SIB). In addition, there are approximately 40 venture
capitalists active in Scotland (i.e. currently investing in
companies and/or actively exploring opportunities).
While the risk capital market has known weaknesses
in Scotland, which will be addressed later in this
document, there are clear strengths from which to
develop stronger solutions and increase deal fow.
3.2.3 Universities
Scotland has 19 universities and institutes of higher
education which together win approximately £2
billion of public funds from UK research councils,
industry, charities and the Scottish Funding Council
(SFC). The sector has a strong international reputation
for research and teaching with particular recognised
strengths in informatics, engineering, physics and
life sciences. The sector in Scotland outperforms
the overall UK fgure for research publications per
capita by approximately x1.3. Scotland is perceived
as delivering a strong supply of new inventions.
While there are hot spots of entrepreneurial activity,
the sector is generally characterised as providing a
discipline intensive education rather than a strongly
entrepreneurial experience.
3.2.4 Corporate Organisations
Some 2270 large businesses (with 250 or more
employees) and 3705 medium-sized businesses
(with between 50 and 249 employees) operated
in Scotland in 2013. However, only 18% of large
and 59% of medium sized businesses were owned
and headquartered in Scotland. Enterprises with
ultimate ownership outside of Scotland (either in the
rest of the UK or overseas) accounted for 3% of all
businesses, but 35% of all employment and 58% of
all revenues. These fgures account for Scotland often
being referred to as a “branch economy”. However,
large companies include a signifcant presence of
multinational organisations which bring to Scotland
a wealth of knowledge and skills on international
business, accessing global markets and customers,
supply chain development and most important of all,
the management and delivery of innovation into the
marketplace. In addition, Scotland hosts a number of
headquarters of fnancial institutions with signifcant
levels of funds under management in Scotland as
well as the associated expertise in management of
fnancial risk. However, these funds are not currently
deployed at signifcant levels into IDEs.
3.2.5 Government
The Scottish Government has recently renewed its
commitment to the development of the culture of
entrepreneurship across Scotland through publication
of the Scotland CAN DO framework. This operates
alongside the commitment from government
agencies to drive forward programmes which support
the development and growth of IDEs and, at the
same time, which help inspire and support the
entrepreneurs who drive these businesses. There has
been a systematic and intensive efort to develop the
innovation ecosystem in Scotland over the past 10-15
years. Now similar attention is required to optimise
the entrepreneurial ecosystem, in order to achieve the
REAP objective of increased numbers of IDEs able to
fourish in Scotland.
3.2.6 Innovation and entrepreneurship in
Scotland
Having described the entrepreneurship ecosystem in
general terms, it is also useful to consider innovation
and entrepreneurship and how they link in Scotland,
particularly given the team’s recognition of the
economic impact of IDEs and the importance of
linking innovation and entrepreneurial capacity.
We begin by discussing R&D expenditure in higher
education and in business and then consider the
implications for business creation and growth.
SECTION 3
Scotland - Investigating the Issues Section 3
Figure 3: HERD in Scotland in comparison with other OECD countries (Source: Scottish Government)
Scottish spinouts as % of all UK spinouts with some
HEI ownership
2010/11 2011/12
Businesses created 17% 14%
Businesses active after 3 years 16% 16%
Total active frms 17% 17%
Employment 21% 20%
Turnover 32% 28%
External investment 16% 23%
Table 3: Scottish Higher Education Institute spinouts as a percentage of all UK HEI spinouts
(Source: Higher Education – Business and Community interaction Surveys)
18 MIT REAP Team Scotland Initiative
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3.2.7 Higher Education R&D expenditure
(HERD)
Scotland is an international leader in R&D
expenditure within higher education (HERD). Our
HERD as percentage of GDP in 2012 is relatively high
at 0.80%, compared with the UK fgure of 0.46% and
a USA fgure of 0.39%. See Figure 3.
With this expenditure, one would expect a relatively
high rate of spill-over into Scottish business. This
could happen through university spinout companies,
through technology licensing, contract research
and consultancy, and through hiring of graduates,
especially those with science and engineering (STEM)
qualifcations. In terms of spinouts, Scotland does
indeed have a relatively high performance rate, as
shown in Table 3. The 181 university spin outs from
Scottish Universities active in 2012 represent 0.12%
of the registered business population in Scotland,
had sales equivalent to 0.13% of the total revenues
of Scottish registered businesses at the start of 2013.
In 2011/12, Scottish universities also captured 27%
of the total value of contract research, 29% of the
total value of consultancy, 19% of the total value
of software licenses, and 15% of the total value of
intellectual property income from SMEs across the
UK university sector. However, only 9% of continuing
professional development income from SMEs to
universities across the UK went to Scottish institutions
8
.
3.2.8 Innovation in Scottish business
In contrast to our performance in HERD, business
R&D expenditure (BERD) in Scotland lags signifcantly
behind that of the rest of the UK (0.59% of GDP,
compared with 1.09% for the UK). See Figure 4,
below. While BERD is low in Scotland, business R&D
expenditure is a relatively crude input measure which
does not accurately refect the level of innovation
taking place within businesses. It does not take
account of structural diferences across industrial
sectors and, potentially, the positive spill-over efects
of high R&D spending within the university sector.
Another way of measuring innovation is in terms of
its outputs, such as the proportion of businesses with
high levels of sales from new to market products.
Figure 4: BERD in Scotland in comparison with other OECD countries (Source: Scottish Government)
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SECTION 3
Scotland - Investigating the Issues Section 3
Using this measure, the 2008 UK innovation survey
found that Scotland had 9.35% of highly innovative
businesses
9
, in a year when it had only 6.8% of the
total of UK registered businesses.
People are the critical resource for innovation.
Businesses with low rates of innovation hardly
ever employ STEM graduates. But the more STEM
graduates that Businesses employ, the more R&D
they conduct, the more new to market products or
processes they have, the more they co-operate with
other organisations such as universities and the
more use they make of external information
10
. Whilst
Scotland produces a slightly higher share of these
graduates, Scottish businesses employ a slightly lower
share, thus reducing the innovative capacity in our
companies.
3.3 Business formation and growth ambitions
in Scotland
Having established that Scotland is a leader in
R&D spending within higher education, but lags
signifcantly in business R&D, we now turn our
attention to how Scotland is performing in terms
of the output that interested the REAP team most –
business formation and growth.
By looking at performance in this area we can
highlight where improvement may be required and
perhaps move towards setting inspirational targets for
achievement in the future.
In particular a more empirical review of the system
helps to set in context the more analytical approach
taken through the GEDI analysis described in section
3.4 of this report.
3.3.1 Small businesses and entrepreneurship
Scotland has a relatively small population of
businesses: only 78% of what we would expect on
a per capita basis, relative to the UK as a whole. Of
Scotland’s 150,000 or so registered businesses,
99.7% are SMEs, the majority of which are run
by owner-managers making up around 9% of the
Scottish working population. Table 5 reveals the
9
UK Innovation Survey 2008 data; calculations by Coad et al. (2014)
10
Coad et al., 2014, UK Innovation Survey Innovative Firms and Growth, BIS, March
11
Sources: Business Population Estimates for the UK and Regions 2013, BIS; Business Demography Births, Deaths and Survival, ONS; Global
Entrepreneurship Monitor UK estimates; TBR/Qa SME Growth Ambitions Survey 2012; UK Innovation Survey
Share of registered businesses in professional, scientifc, technical
sector, 2013
15.3% (UK – 14.0%)
Potential IDE rate (TEA entrepreneurs with over 25% of customers
outside the country, expect to employ at least 20 in 5 years’ time,
some product or market or technology novelty), average 2009 to 2013
0.18% (UK – 0.21%)
Scottish share of UK frms with high levels of R&D in Scotland, 2008 8.77% (UK – 100%)
Scottish share of UK frms with high levels of sales from new to
market products, 2008
9.35% (UK – 100%)
Table 4: Innovation-related business measures comparing Scotland and the UK
11
20 MIT REAP Team Scotland Initiative
21
attitudes of owner-managers in Scotland towards
growing their businesses to scale. Only a minority are
actively seeking to grow their businesses and create
signifcant wealth – instead many are content with
running a sustainable business which meets their
needs and those of their dependants.
While Scotland seems to have more highly innovative
businesses than one would expect given its relatively
low business population, it seems to have fewer
ambitious business owner-managers and considerably
more owner-managers who are satisfed with their
organisation’s current size. It has fewer high growth
businesses than one would expect and the proportion
of individuals in the working age population who are
actively trying to start or running new innovative,
ambitious, internationally-oriented businesses is
also lower in Scotland than in the UK – though not by
much, and the gap may be narrowing
13
.
In short, it appears that Scotland is not meeting its
potential in delivering high-growth businesses from a
population of innovative young companies. Scotland
has fewer ambitious business owner-managers and
considerably more owner-managers who are satisfed
with their organisation’s current size.
3.3.2 Relationship between innovation and
growth
The relationship between innovation and growth
across the UK is complex. Very few businesses
sustain growth for more than a few years, and many of
those who do are not necessarily innovative. Recent
research by the Enterprise Research Centre suggests
that only about 17% of job creation in Scotland
comes from high growth businesses as defned by the
OECD, dropping from a peak of 41% in the 2001-
2004 period. Compared with the UK, job creation
in Scotland seems to come more from established
businesses with 10 or more employees than new or
12
Sources: Enterprise Research Centre; TBR/Qa SME Growth Ambitions Survey 2012; UK Innovation Survey
13
GEM data suggests that the three year average was 0.23% for Scotland and 0.21% for the UK.
Number (% of UK total) of high growth frms,
2010/13 period (based on OECD defnition)
669 (6.6%) (UK – 10,172 (100%))
High Growth Firms contribution to all job creation in
2010/13 period
17% (UK – 18%)
% of SME owner-managers with substantive ambition for
growth, 2011/12
18% (UK – 22%)
% of SME owner-managers with any intention of growth,
2011/12
71% (UK - 80%)
% of SME owner-managers satisfed with their
organisation’s current size, 2011/12
44% (UK - 33%)
Table 5: Growth-related business measures comparing Scotland and the UK
12
.
SECTION 3
Scotland - Investigating the Issues Section 3
very small businesses. The benefts of innovation
may be captured by businesses other than those who
developed the innovation; for example one business
may copy another and implement the innovation in
a superior way. It is rare for individual businesses to
sustain innovation and growth over long periods; this
requires a combination of talent, ambition, and good
timing. But that does not mean that it is impossible or
that the hit rate cannot be improved – quite the contrary.
The REAP team has focused efort on exploring these
issues and developing strategies to address them.
3.4 GEDI research
To bench-mark Scotland’s entrepreneurial
performance, the REAP Scotland team commissioned
an analysis of existing data. Drawing on sources such
as the Global Entrepreneurship Monitor (GEM) and
published regional and national data, a methodology
was employed that enabled comparisons to be made
with 27 innovation-driven economies. The team
examined both the entrepreneurship and innovation
capacities of the ecosystem in Scotland. From this
analysis, seven “pillars” were identifed as areas of
weakness and possible bottlenecks in the Scottish
entrepreneurship ecosystem and these were:
• Opportunity Perception
• Start-up Skills
• Networking
• Product and Process Innovation
• High Growth Aspirations
• Internationalisation
• Risk Capital
This research is summarised in the radar plot shown
in Figure 5 which identifes the fourteen ‘pillars’ used
to analyse the ecosystem. For each pillar, Scotland’s
performance is compared with the 27 innovation-
driven economies. A full description of this GEDI
analysis is presented as Chapter 4 within the GEM
Scotland 2012 publication.
3.5 Interpretation of research
Having considered the Scottish IDE entrepreneurship
ecosystem using various methods, the REAP team
considered their fndings and further characterised
them within the Scottish context as follows:
• There is a tendency for the majority of Scottish
entrepreneurs to lack aspiration, or lack the
confdence to show it - be that to achieve high
growth in the international market place or just to
develop new business processes. The high level
of start-ups coming out of universities does not
indicate a lack of ambition amongst inventors
and technologists to commercialise their ideas,
however these early enterprises may be being
held back by a variety of factors, including vision,
entrepreneurial skills and confdence to drive the
business forward. The REAP team believe there are
a common set of ecosystem factors that link these
characteristics, and these can be addressed through
focused action;
• Although there is a strong community of business
angel groups in Scotland capable of providing early
stage capital, there is a genuine lack of visibility
and access to development-stage risk capital for
Scottish businesses. This is partly due to a lack
of suitable fnancial institutions in Scotland, but
also due to the absence of the networks that
entrepreneurs need to access capital further afeld;
• Because few companies grow to scale in Scotland,
the country is missing people with key skills and
experience necessary to lead a business through a
high-growth phase. Entrepreneurs may be unaware
that they lack these skills, are unsure how to
develop them, or do not know how or where to
connect to others to learn from their experience.
This contributes to the difculties in accessing
capital and reduces the confdence of business
founders. Thus this factor manifests itself within
the previous two issues.
3.6 Stakeholder discussions
Having carried out the assessment of the
entrepreneurship ecosystem in Scotland, the REAP
team were keen to validate their initial fndings
through consultation with key stakeholders.
Discussion group themes were selected on the basis
of the GEDI research and grouped as follows:
• Opportunity Perception and Internationalisation
• Risk Capital
22 MIT REAP Team Scotland Initiative
Scotland versus Other Innovation
Driven Nations
Risk Capital
(Aspirations)
Internalisation
(Aspirations)
High Growth
(Aspirations)
Process Innovation
(Aspirations)
Product Innovation
(Aspirations)
Completion
(Activity)
Quality of
Human Resources
(Activity)
Tech Sector
(Activity)
Opportunity Startup
(Activity)
Cultural Support
(Attitudes)
Networking
(Attitudes)
NonFear of Failure
(Attitudes)
Startup Skills
(Attitudes)
Opportunity Perception
(Attitudes)
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
23
Figure 5: Comparison of Scotland with 27 innovation-driven economies using GEDI methodology
Scotland versus Other Innovation
Driven Nations
Lower Quartile Median Upper Quartile Scotland
SECTION 3
Scotland - Investigating the Issues Section 3
• Start-up Skills and High Growth Ambition
• Product & Process Innovation and Networking
Individuals with an interest, experience or expert
knowledge in each of the areas were identifed and
invited to join a discussion group on each theme
with the aim of validating the fndings, assessing any
underlying causes (i.e. potential constraints on IDE
ecosystem), proposing solutions and potential actions,
plus adding personal insights. The discussions were
carried out during February 2013 and their timing
within the overall REAP programme is shown in Annex
C. These consultations confrmed and reinforced the
research results and provided key insights into fve
underlying constrains on the IDE system. Annex D
shows a full list of stakeholders consulted.
3.7 Five Key Themes
Based on these consultations, and follow-up
discussions across the REAP Scotland team, fve key
theme areas were identifed for the REAP stakeholder
initiative. The REAP Scotland team believes these fve
theme areas, if addressed correctly, over time will
strengthen all seven areas of weakness identifed through
the GEDI research. This strengthening of the ecosystem
will drive a step-change in Scotland’s performance in
growing IDE businesses. The fve key themes which
underpin the REAP stakeholder initiative are:
• Efective Connections
• Skills for Growth
• Financing for Growth
• Role of Universities
• Role Models
The rationale for these fve themes is summarised
below.
3.7.1 Effective Connections
Networking provides the opportunity for entrepreneurs
to meet like-minded people, fnanciers, technologists,
advisers and potential employees, as well as gathering
market and customer intelligence and potential sales
leads. Interactions promote innovation, inspire and
increase aspiration, stimulate new business ideas,
provide learning, opportunity and sharing of best
practice, ofer new opportunities and can develop
confdence through validation and peer support.
Opportunity for and quality of productive networking
opportunities is recognised as a key factor in the
efectiveness of an entrepreneurial ecosystem.
The REAP team concluded that networking
opportunities in Scotland, whilst excellent in some
areas were nonetheless fragmented. In particular the
opportunity for technologists and potential innovators
to meet entrepreneurs and the opportunity for early-
stage entrepreneurs to meet successful business
leaders was limited in certain regions and sectors. The
opportunities for entrepreneurs and entrepreneurial
teams to meet and network with other players in the
ecosystem such as investors, academics, students and
large corporate enterprises is also not evenly available
across Scotland as a whole. Some geographies or urban
centres do ofer numerous opportunities but there are
gaps where access and quality of provision could be
improved.
The team decided to explore this area in more detail
on the basis that improving the quality of networking
in Scotland could help to address many of the
weaknesses in the ecosystem.
3.7.2 Skills for Growth
A key weakness identifed by the research was in the
area of skills required to scale-up a business. Further
to this, lack of management capability is often an
underlying reason for growing companies to fail, either
through failure to access or successfully use fnance, or
for a host of other reasons related to accelerating the
growth of the business.
The REAP team therefore saw the development of
skills for growth as a key requirement to better prepare
entrepreneurs for IDE growth and success. Whilst
provision of internationally outstanding executive
education by the university sector will provide some
of the answers, there are wider issues ranging from
access to key technical skills, through to a general lack
of awareness amongst entrepreneurs of the skills with
which they need to be equipped. Being armed with
the right skills for growth will ensure entrepreneurs
and entrepreneurial teams are best placed to take
maximum advantage of the opportunities ofered by
other players in the ecosystem.
24 MIT REAP Team Scotland Initiative
25
Consideration should also be given to programmes
which specifcally encourage experienced mid-career
Scots (or even those with a connection to Scotland,
such as by family or by education) to return to Scotland
to contribute to the pool of entrepreneurial talent
here. An Industrial Fellowship scheme could provide
a model here and stimulate a new wave of talented
diaspora Scots to return to Scotland and add value to
the ecosystem.
3.7.3 Financing for Growth
One of the primary characteristics of an IDE is that it
is likely to require signifcant capital to achieve rapid
scale-up, to industrialise production and to access
international markets. Whilst Scotland has arguably
one of the most active business angel investment
communities in Europe, and Edinburgh is a major
fnancial centre, access to scale-up stage risk fnance,
for example venture capital (VC), is very limited. Gaps
exist in access to fnance in the £1M-£5M investment
range which is a major barrier to IDE growth. This
problem is exacerbated by the lack of high quality
growth-stage fnancial advisers and a lack of
knowledge amongst entrepreneurs as to how to access
capital markets in London or overseas.
The REAP team therefore identifed the need for action
to enable IDEs to access fnance for growth and to seek
to create new sources of risk capital which would be
more compatible with working with existing business
angel fnance.
3.7.4 Role of Universities
The REAP team recognised that the role of universities
is crucial to a vibrant IDE ecosystem and MIT provides
a shining example of this within the Boston ecosystem.
The team was interested to understand how
Scotland’s university sector could adapt to address the
weaknesses identifed by the GEDI research, becoming
more intensively connected players in the ecosystem.
In particular the team was keen to explore three key
areas: 1) how entrepreneurship education can be
included much more widely within a wide range of
undergraduate courses, particularly those of a technical
nature; 2) how Scottish universities can create very
high quality executive education for entrepreneurs
and innovators, and 3) how universities can foster
linkages and connections between innovators and
entrepreneurs. Further opportunities to increase
linkages with alumni and between universities were
also identifed as likely to have positive impact.
3.7.5 Role Models
The team proposed that a number of the identifed
weaknesses which related to aspiration could be
linked to a combination of cultural conservatism and
a lack of vision of what may be possible. For example,
public attitudes towards success in business can be
negative, perhaps based on envy or mistrust. To change
these attitudes and raise the confdence and pride of
entrepreneurs requires a change in general culture
to one that accepts entrepreneurship as a valuable,
worthy and vital contribution to society. The fear
of failure issue also still needs to be tackled with a
turnaround in perception required so that failure is
seen as a valuable learning experience and as ‘earning
your stripes’. To achieve this, the REAP team suggested
that entrepreneurial role models should be widely used
and celebrated. This would raise public awareness
of the importance of entrepreneurship and provide
confdence and inspiration to other entrepreneurs.
SECTION 4
Developing
solutions and
actions
With the exception of the Financing for Growth
and Universities task groups, each task group was
initiated through a meeting chaired by an individual
of standing in the Scottish entrepreneurial ecosystem
and co-chaired by a member of the REAP team.
Around 20 individuals were invited to attend each
one. Discussions focused on determining actions
which could make a real diference to Scotland’s
entrepreneurial performance in the themed area and
stakeholders were invited to accept responsibility for
beginning to deliver on these actions.
Financing for Growth discussions took place within
the REAP team, with input from a working group
comprising the Royal Society of Edinburgh (RSE)
working in partnership with the Institute of Chartered
Accountants in Scotland (ICAS) and Scottish Financial
Enterprise (SFE). This group was asked by the Scottish
Government to advise on weaknesses in the risk
capital market in Scotland. Given the important
role of this RSE Working group, it was considered
unnecessary to convene a similar working group
through REAP. Instead, the REAP Scotland team sought
direct input from the RSE Working Group which was
chaired by Ian Ritchie who is also a member of the
REAP team.
The Universities task group was convened by inviting
senior “entrepreneurial professors” from research-
intensive universities to take part in a series of
discussions on the issues raised by the GEDI research.
Group members were invited to inspire each other to
identify specifc actions they might promote within
their own university. To add further inspiration,
this group also commissioned a series of vignettes
on the entrepreneurial ecosystems of outstanding
universities across the world.
The initial task group meetings resulted in
identifcation of stakeholder led “actions” which
form the core of the REAP recommendations. These
calls to action are a combination of “quick wins” and
long-term changes, aimed at holistic culture change
and lasting impact rather than short term piecemeal
Having completed the assessment of the current state of the
IDE ecosystem and validated this with stakeholders, the REAP
team probed the ?ve key theme areas by forming task groups
with the purpose of identifying key actions to address the
constraints, and in doing so to begin the application of the
collective impact approach. This section of the report focuses
on the actions identi?ed through the task groups and further
developed through discussion within the REAP Scotland team
26 MIT REAP Team Scotland Initiative
27
initiatives. The actions are listed individually under
their related headings throughout the following
section and then drawn together within the
conclusions section of this document. All stakeholders
who were consulted through the workshops or task
groups, or approached directly for their views, have
played an important role in helping to identify these
actions and are listed in Annex D.
4.1 Effective connections
Building efective connections through networking
with helpful contacts is vital at every stage of
business growth. Networks grow increasingly
important as companies scale up, becoming the
source of customers, suppliers, partners, employees,
and investors and inspiration and support.
The right connections can provide entrepreneurs with
links to people who might be able to answer specifc
questions relating to growing their companies, or
might be able to provide mentoring (whether formal
or informal) or other forms of support.
4.1.1 Key ?ndings
In the commissioned research and subsequent
consultations, though examples of pockets of good
networking existed, as a wider topic networking
was frequently seen as inefcient in Scotland. The
term ‘networking’ means diferent things to diferent
people, ranging from attendance at networking
events to fnding ways to engage with others who
have faced similar business challenges. In essence
however, the issue relates to information fows within
the ecosystem, and between the ecosystem and the
outside world – how well people are aware of others
in the network and how to access them.
The stakeholders participating in this task group
specifcally noted that there are many sources of
commercially valuable information and skills in
certain pockets of the ecosystem, such as experienced
entrepreneurs and the research base, and in the
more formal networks. The problem seems to be
that this information is not fltering through to less
experienced entrepreneurs as much as it could. Some
of the issues highlighted include the following:
• Current formal and informal networks appear not
to be working as well as they might be in certain
areas, and as a result fewer potentially successful
entrepreneurs can fnd the connections they
need. The need for peer-to-peer networking was
particularly commented on as entrepreneurs learn
from others facing the same challenges and can
share experience and knowledge.
• Connections by entrepreneurs with markets and
resources outside Scotland seem relatively weak.
Johannah Bisset, WEB Rigging Services
“In terms of generating effective connections,
the public sector support I received to develop
connections in markets like Nigeria and Brazil
where there is a larger demand for our product,
was extremely helpful. It is our business to be
seeking out new contacts and connections so
any support we do get in this area is a bonus ”
SECTION 3
Developing solutions and actions Section 4
• The REAP Scotland team has found that many early
stage entrepreneurs do not appreciate the benefts
of networking, or are very unsure how to set about
building efective connections.
• The stakeholders within this task group were
very supportive of proposals to greatly imprive
networking for the beneft of ambitious
entrepreneurs.
A highly functioning ecosystem would include an
environment where entrepreneurs can quickly and
easily fnd and contact people who can help them
build or grow their businesses. Examples from other
parts of the world (e.g. the Greater Boston area)
show substantial benefts in mixing innovators and
entrepreneurs from all sectors. In some areas such
help is relatively easy to fnd in Scotland, such as
exporting, software development, or taxation, but in
felds such as product development, sales, marketing,
regulatory approvals, or senior human resource
management, answers to specifc issues can be more
elusive.
The REAP team believes that many business
membership organisations and other networks in
Scotland might be able to introduce entrepreneurs
to relevant experts or mentors, but that this potential
is often unrealised either because entrepreneurs are
unaware of the resources available, or because of
a lack of connectivity between organisations. Also,
some business membership organisations don’t see
themselves as primarily providing this function.
There are already many networks active in Scotland,
serving a very wide range of interests. These include
organisations which exist primarily to bring together
people with similar interests or backgrounds, such
as trade associations, university alumni groups, and
more specialist groups such as the Entrepreneurial
Exchange or Informatics Ventures. Other networks
exist as the outcome of another activity e.g. the
Scottish MIT EDP Alumni network and these can
produce very valuable connections. These also
include the networks created in more formal ways
by business incubators, the Saltire Fellows and RSE
Fellows, and events organisers such as Business
Forum Scotland.
Both physical /face to face networking and online/
remote networking opportunities were important.
Many of the actions required to improve information
fows and facilitate more efective connections will be
in the remit of existing networking organisations. To
help stimulate further developments, the REAP team
proposes three simple actions as frst steps.
4.1.2 Priorities for Action
1. Guide to Networking for Entrepreneurs
It is proposed to produce a Guide to Networking in
Scotland for entrepreneurs which could be used
both to inform and educate frst-time entrepreneurs
themselves. This would be an ongoing resource/
reminder for established entrepreneurs and to help
current network organisations to open more doors for
them. The content will include:
• The value of networks both physical and online and
how to get the best out of them
• Networking events – how to fnd and select relevant
events
• Networking organisations – an outline of the main
organisations in Scotland, and what to expect from
them
• Personal contacts – how to fnd the person with the
knowledge or experience you need
• Confdence – some tips for approaching people you
have not met before
• Pitching – how to get your message across when
meeting new contacts
• Further information – websites, blogs, articles and
other sources of relevant material.
2. A ‘network of networks’
The REAP team proposes to initiate a series of
gatherings at which networking organisations can
share information on their activities and discuss issues
relating to the Scottish entrepreneurial ecosystem.
The aim is both to help networks make connections
with each other, and to consider the national dimension
collectively and the part they each play in it. Through
consideration of collective impact, networking
organisations can assist entrepreneurs at all stages of
growing their business to make the right contacts and
broaden their knowledge of the ecosystem.
Participation will be open to all organisations which
28 MIT REAP Team Scotland Initiative
29
can demonstrate the capacity to make introductions to
individuals within their networks. Some of the major
national organisations (e.g. GlobalScots, Entrepreneurial
Exchange, trade associations, etc.) will be encouraged to
form the core of the programme. Participation will also
be open to all bona-fde entrepreneurs who wish to be
part of this national conversation.
3. Online hub or forum for IDEs
Development of an online hub or forum for remote
networking is recommended for sharing of knowledge,
experience, success stories and successful handling
of specifc challenges – all targeting the needs of
IDE entrepreneurs. This should include a message
board to post current challenges and requests for
help or new connections. It could include a database
of entrepreneurs, support organisations, networking
events and updates on risk capital.
4.2 Skills for Growth
4.2.1 Key Findings
Throughout the REAP consultation process, there
has been consensus that continuously developing
skills for growth is a key component of success for
every ambitious entrepreneur. The REAP team has
focused on the skills needed by entrepreneurs
and entrepreneurial teams already in business,
rather than on start-up skills. To drive a successful
IDE, an entrepreneur needs an armoury of start-
up, fnancial, operational, management, strategic,
leadership and creative skills along with vision,
belief and resilience. The availability of high quality
opportunities for entrepreneurs to acquire or refne
their skills is considered essential, and Scotland needs
a comprehensive programme of international standing
if we are to build global competitive IDEs.
Typically, as an IDE grows and employs larger numbers
of staf, the entrepreneur will move from being a
‘jack of all trades’, essentially being responsible
for multiple or all aspects of the business, to being
in a strategic or leadership position, employing
others to enhance business expertise in key roles.
Most entrepreneurs agree that they need a sound
understanding of all aspects of their business in order
to be able to bring in the right people when the time
comes to build, or change, their team.
Nigel Eccles, FanDuel
”After becoming an
entrepreneur at an early age
and growing my business for
some time, I took the decision to
focus on developing my entre-
preneurial skills. Taking part
on leadership programmes and
entrepreneurship development
programmes with MIT allowed
me to think in a more strategic
and global way about my
business, which took us from
strength to strength. I also
realised the key to growing my
business has been access to
‘very good people’ and acquiring
people with the right skill set ”
Michael Laurenson, Blueshell Mussels
“In terms of skills for growth,
there is a great interest in public
sector organisations providing
training in the ‘sexy’ stuff like
strategy and ?nancing but
there needs to be more of a
focus on the very basic stuff
that companies need to do
like providing practical help in
accounting and legal support”
SECTION 3
Developing solutions and actions Section 4
Whilst certain skills are learned ‘on the job’, a
structured approach to building knowledge,
particularly in a group learning environment, where
networking, peer learning and the sharing of best
practice between entrepreneurs, greatly enhances the
learning experience.
A recurring theme amongst successful IDEs is the
importance of hiring people at an early stage who
have previous experience of growing a business to
scale, and skilled individuals are often difcult to
source from within Scotland, as discussed earlier.
In addition, the experience gained from working in
a large company, often a rich training ground for
entrepreneurs and innovators, is frequently obtained
by moving to corporate operations outside of
Scotland. Attracting talent from outside of Scotland
is essential to the growth of IDEs.
Skills in recruitment and talent retention is a core
competency of successful IDEs. A year or two on, a
company scaling up will be very diferent from when
it frst starts to grow signifcantly. The entrepreneur
or entrepreneurial team must be capable of meeting
the challenges the company will face at diferent
stages of growth. Over the course of the REAP team’s
research on the subject of Skills for Growth, three key
areas were identifed as specifc skills requirements
for entrepreneurs and their teams to successfully grow
their business:
• Continuing to build an entrepreneurial mindset,
culture and global ambition
• Key entrepreneurial capabilities and knowledge in
business
• International market knowledge and capability
There is widespread recognition that Scotland lacks
high quality skills development opportunities for IDEs
in the area of sales and in many aspects of fnancing
for business growth. There was strong demand from
those consulted for increased targeted support in
these felds.
4.2.1 Priorities for Action
• Agreement on the composite set of entrepreneurial
skills required for scaling up IDEs across providers of
executive education for entrepreneurs in Scotland.
There is a signifcant role here for entrepreneurs
to be proactive in articulating their own skills
requirements.
• Provision of a coherent, world class programme of
training in Scotland for entrepreneurs, drawing on
industry experience and international best practice.
30 MIT REAP Team Scotland Initiative
“Technical skills or experience is not a must in terms of being
hired in my company. For example, our current Financial
Director did not have any pre-existing technical knowledge
for the role but is smart enough to get the area and has been
a great hire. It is clear that skills for growth can be taught to
the right person with the right capability. You should hire for
personality and ?t with the company culture, rather than for
existing skills”
PJ Darling, Spark Energy
31
Included in this is recognition of “just in time”
learning provided via technology though by massive
open online courses (MOOCs).
• Development of a clear, interactive map of the
entrepreneurship skills development opportunities
available in Scotland. This should be user friendly,
widely communicated and easily accessible for
entrepreneurs at each stage of their personal and
business development.
• Introduction of a new programme to encourage
suitably experienced mid-career managers to return
to Scotland and bring new skills and economic value
back into Scotland.
4.3 FINANCING FOR GROWTH
4.3.1 Key Findings
A key strength in the entrepreneurial ecosystem in
Scotland is the highly developed and highly active
business angel investment community which encourages
and intensively supports early stage IDEs. This is arguably
one of the most advanced business angel networks in
Europe. However, there remain signifcant challenges
in access to risk fnance for businesses in Scotland,
particularly in securing funds for scale-up.
There is a clear perception amongst entrepreneurs
within IDE businesses in Scotland that access to the
levels of risk fnance required to grow their IDEs to
the point of entry in the global marketplace is highly
challenging. Entrepreneurs believe this is the case
even for businesses with clear plans and credible
management teams and often leads to businesses
securing inadequate levels of funding. This contrasts
with an investor perspective that funding is always
available for the most compelling propositions.
We summarise the historical context and current
situation of the risk capital scene in Scotland in
Annex E.
Independently from REAP, an RSE Working Group
in partnership with the Institute of Chartered
Accountants in Scotland (ICAS) and Scottish Financial
Enterprise (SFE) identifed a systemic weakness in
routes for businesses to access follow-on funding. It
is recognised that for some angel-invested companies
an ‘angel friendly’ source of follow-on investment
funding is required possibly through a Venture Capital
Trust and/or pension or institutional investors. The
REAP team supports this view and considers it will be
important to build an evidence base which clarifes
the numbers of companies per year which are in this
‘seeking follow-on funding’ scenario.
“I think there are big gaps in the funding landscape. There
are dif?culties at start up stage and then you hit particular
dif?culties again when you are stuck in the £1M-£5M turnover
mark and try to raise money at this point. I have seen no
change in this in the last 10 years. The visibility of investment
in Scotland is not good. It’s hidden. Any way we can make this
easier in Scotland will lead to a more entrepreneurial society”
Peter Murphy, Simple Audio
SECTION 3
Developing solutions and actions Section 4
While a new approach which enables access to ‘angel
friendly’ follow-on funding should help more IDE
businesses to scale-up, the REAP team also believes
there are opportunities for businesses to explore
a wider range of investment options, including for
example an earlier and more targeted approach
to Venture Capital (VC) funding. Again, the REAP
team believes a stronger evidence base is needed
to understand the scale of funding required by
businesses to realise their ambitions and how the
ecosystem can be developed to accelerate these
opportunities. Connecting with our recommendations
for development of skills for growth, the REAP
team believes entrepreneurs should be assisted
in developing their understanding of all potential
fnancing routes for IDE businesses so that more
informed investment strategies can be developed
by IDE businesses at the outset. This should include
improved dissemination of key funding options
(including assessment of relevant pros and cons),
improved networking infrastructure and advisory
infrastructure to help businesses to target more
efectively the potential investors both in Scotland,
and internationally.
While the angel networks and VCs currently active in
Scotland are the main source of risk fnance for the
portfolio of IDEs in Scotland, there are three specifc
opportunities.
• Firstly, a number of institutions which manage
investment funds are headquartered in Scotland.
This brings important expertise in risk management
and investor opportunities which arguably remain
under-represented in supporting IDE scale-up.
• Secondly, women in Scotland make up only a
small part of the angel investment community,
yet research indicates for many age groups
the wealth of men and women across the UK is
similar
14
. Women investors represent a signifcant
opportunity to release more risk capital into the
system. In addition to funding, private investors
bring vision, resolve and key business skills to
the company – and hence the opportunity, here,
to increase the number of experienced business
women active in IDE scale-up. The UK has the
most favourable tax benefts for angel investors
in Europe, yet this is not promoted widely, nor
well understood as an alternative to traditional
investment options.
• Thirdly, the advent of Crowdfunding introduces
a new form of risk fundraising which has already
proved successful for a number of businesses in
Scotland
15
. It is likely that this will become more
signifcant and greater communication of the benefts
of this as a funding option should be communicated
to early stage entrepreneurs and IDEs.
Before presenting the REAP recommended actions,
further reference to the requirement for evidence
of investment requirements of IDEs, and their
experience, to date is appropriate. The REAP team
takes the view that robust evidence of the level of
demand for risk fnance is necessary to appraise
at national level the scale of the challenge. This
information will help inform entrepreneurs, investors
and policy makers. The REAP team recommends
this information is collected using a voluntary on-
line questionnaire methodology which explores
a company’s IDE growth potential, its investment
requirements and experience to date in securing the
required investment.
4.3.2 Priorities for Action
• Development and dissemination of a strategic
guide document and supporting materials which
help educate and inform IDE entrepreneurs of all
key funding options for accessing risk fnance to
ensure the most efective option is selected from
the outset and is understood.
• Development of a resource, both information and
14
A survey in February 2014 of 2.059 adults by YouGov for Duncan Lawrie Private Bank found that among 45-54 year olds, average
wealth of women was only 5% behind that of men, and that among those aged 55 or older, the wealth of women was on average 5%
higher than that of men. Seehttp://www.templars.co.uk/new-research-reveals-a-17-gender-wealth-gap/
15
Aberdeen based BrewDog raised £4.25m in equity funding in 2013 from its customer base, and Edinburgh’s RunRev raised £473k
in pre-selling licenses and features via Kickstarter. New Scottish crowdfunding sites Squareknot, Bloom VC and ShareIn have been
launched and are actively raising funds for enterprises.
32 MIT REAP Team Scotland Initiative
33
appropriate facilitation, which assists businesses
to target and engage more efectively with
international VCs operating across sectors and
geographies which are relevant to Scottish IDEs. This
should include information on deal fow history and
practical advice on establishing contact and building
mutual interest.
• Better promotion of the advantages of becoming a
business angel to women across Scotland, including
promotion of tax incentives for investors (such as EIS).
• Development of an online questionnaire to collate
evidence of demand by IDE businesses for access to
risk fnance to enable their scale-up.
4.4 Role of Universities
4.4.1 Key Findings
Universities already make a signifcant contribution to
entrepreneurship and the success of IDEs in Scotland. In
developing strategies for the growth of entrepreneurship
in Scotland the REAP team believes there are further
opportunities for the university sector to play a pivotal role.
Many stakeholders identifed and welcomed the
opportunity for the university sector to consistently play
an increased role in the ecosystem. Both the challenge
and opportunity exist for Scotland’s universities to
provide an entrepreneurial experience for students,
staf, alumni members, business collaborators and
customers alike that matches the very best worldwide.
This experience should span inspiration, ambition,
access to skills development and, where appropriate,
direct support for the development of business ideas
which have potential to become successful IDEs.
The REAP team believes the university sector has
the opportunity to play a pivotal role in the further
development of Scotland’s entrepreneurial ecosystem
and an entrepreneurial culture that is open to the world.
In consultation with stakeholders the REAP team
explored areas where specifc actions can help transform
Scotland’s universities to deliver a truly world-class
entrepreneurial experience across the sector and across
all subject areas.
4.4.2 Priorities for Action
• Continuing development of a high level task group
made up of entrepreneurial university professionals
with the objective of implementing a step-change
in the contribution universities make to the
entrepreneurial ecosystem in Scotland.
• Application of the Collective Impact approach to
development and sharing of local and international
best practice across Scotland’s universities. There are
many examples of excellent programmes/initiatives
within Scottish Universities which inspire and support
management skills but these are ‘hot spots’ rather
than the norm. The purpose of applying the Collective
Impact approach is to drive a more sector-wide
implementation of this best practice. It is envisaged
this will be taken forward through practitioner-led
commitments, actions and review – including an
annual conference event.
• Increased focus on leadership training, business
skills and, where desired, entrepreneurship within all
undergraduate and post graduate courses following
the recommendations of the Scottish Science
Advisory Council report on this area
16
.
• Leverage of university alumni networks and
encouragement of alumni mid-career decisions to
build IDEs. This would combine entrepreneurial
aspiration with a supportive environment for new
founders who already have signifcant business
experience. The REAP team recognises that IDEs are
often driven by individuals with business experience
at a mid-career point; university alumni networks
could provide an important route for awareness
raising of IDE opportunity and implementation
support.
16http://www.scottishscience.org.uk/s...e-attachments/Final SSAC Innovation report -
FEB%2013_0.pdf
SECTION 3
Developing solutions and actions Section 4
“I consider the role of universities and their linkages with industry very
important. We purposely placed ourselves near Edinburgh University.
We have a lot of great talent coming out of the Scottish University system,
both home grown and foreign students”
Gareth Williams, Skyscanner
Tommy Cook, Calnex Solutions
34 MIT REAP Team Scotland Initiative
“We ?nd it challenging working with universities, primarily because
our project cycle timeframes are relatively short compared to typical
university cycle times. The specialist nature of our business means,
unsurprisingly, when they have not been involved from the very start,
the university partners can struggle to get out of the ‘catch up’ mode.
If they are engaged from the very start, that could alleviate some of the
pressure. However, this should not distract from the important role of the
universities to act as good feeders of engineers and skilled talent”
35
• Development of a comprehensive set of IDE
performance metrics for the international
benchmarking of the sector and monitoring of
ongoing developments.
4.5 Role models
4.5.1 Key ?ndings
It is widely accepted that contact with entrepreneurs,
whether socially or within a family context, greatly
improves perceptions of self-employment as an
attractive career option. Positive exposure to
entrepreneurs in the media increases general
appreciation of their importance in our economy. As
role models, Scotland’s entrepreneurs can inspire
and advise others as they grow IDEs. As well as
sharing insights into achieving success, explaining
the experience of coping with failure transfers
invaluable knowledge and builds confdence in
others.
Scotland has a tremendous variety of successful
entrepreneurs and entrepreneurial teams across
many felds of industry and commerce, but they tend
to be largely invisible in the Scottish media. Some
of this can be attributed to a belief that their story is
not that impressive or worthy of attention. Scotland’s
people are largely inherently modest, alongside being
very dynamic and versatile in business.
Compared to other occupations and professions,
Scottish society seems to lend limited real credibility
to entrepreneurship as a career or calling. Arguably
cultural factors also contribute to a natural reticence
among those with success stories to share their
knowledge, fearing the accusation they might be
“blowing their own trumpets.”
This is not helped by a national media which regularly
refers to a very small number of older, well known,
largely male entrepreneurs while either ignoring, or
being unaware of, a diverse group of younger and other
business leaders. As a result the general impression
of an entrepreneur can be closer to a caricature, based
upon few individuals, rather than a broad church of
individuals in businesses from across Scotland.
There is a clear need to fnd ways of raising the
profle of our leading, most dynamic and risk taking
entrepreneurs so they are visible, accessible where
appropriate, and frequently inspirational to those who
are driven to follow in their footsteps. Scotland should
also draw in entrepreneurs from across the world – the
rock stars of entrepreneurship – to celebrate the global
nature of business and to reinforce key messages that
our people are every part as capable, dynamic and able
to build international businesses of scale, as any nation
can be.
4.5.2 Priorities for Action
• We need more of Scotland’s entrepreneurs to take
an active part within the ecosystem. We need more
entrepreneurs to ofer to make themselves available
to others, through the wide range of private and
public sector organisations that run mentoring
programmes.
• Wider availability of recent and relevant case
studies. Agencies and organisations with a business
growth focus, or in receipt of public sector business
development funds, should explicitly make available
a regular series of fresh case studies on business
success. Those in receipt of public funds for
business growth should “payback” into the system,
through greater activity in becoming role models
themselves.
• Encouraging female entrepreneurs to step into the
spotlight and encourage other women to become
entrepreneurs and role models. There is a need
for more female entrepreneurial role models of all
ages from Scotland to showcase diversity and to
build critical mass. Young entrepreneurs should also
feature more regularly in business pages, journals
and online publications highlighting Scotland’s
future business leaders.
SECTION 3
Developing solutions and actions Section 4
4.6 Corporate Discussion Group
An additional discussion group was formed
around the theme of “The Role of Large Corporate
organisations in the Scottish Entrepreneurial
Ecosystem”. Input was sought from entrepreneurs in
large businesses because the REAP team recognised
this vital viewpoint was not fully represented on the
team itself and that inclusion of the large corporate
perspective would bring much additional value. The
views of this group are woven throughout the fndings
and recommendations of this document.
4.7 Applying the Collective Impact Approach in
Scotland
Having defned actions which address the identifed
constraints within the Scottish IDE ecosystem we
now turn attention to how key stakeholders can work
collectively to deliver these actions in order to realise
IDE performance improvements. As stated earlier the
Collective Impact approach requires the following
conditions:
• Common Agenda: All participants have a
shared vision for change including a common
understanding of the problem and a joint approach
to solving it through agreed actions.
• Continuous Communication: Consistent and
open communication is needed across the many
players to build trust, assure mutual objectives, and
appreciate common motivation.
• Mutually Reinforcing Activities: Participant
activities must be diferentiated while still being
coordinated through a mutually reinforcing plan of
action.
• Shared Measurement: Collecting data and
measuring results consistently across all
participants ensures eforts remain aligned and
participants hold each other accountable.
• Backbone Organisation: Creating and
managing collective impact requires a separate
organisation(s) with staf and a specifc set of skills
to serve as the backbone for the entire initiative
and coordinate participating organisations and
agencies.
The REAP Scotland team supports the view that
continuous communication between stakeholders
is important to the delivery of this initiative and will
work to ensure a backbone organisation is formed
with capability to support this communications
function.
Further to this, the team has engaged intensively with
stakeholders and is confdent the proposed actions
are mutually reinforcing. The team will work with
the backbone organisation to ensure ongoing and
intensive support is maintained by key stakeholders,
which should include entrepreneurs, investors,
academics, corporate organisations and agencies
of government. We need to continue to harness
the collective resources and commitment of all
stakeholders to maximise the pace of delivery of each
identifed action.
Monitoring of the acceleration of the ecosystem
which results from actioning of the REAP initiative
is important – both in demonstrating the value of
what we are achieving, in maintaining pace, and
in guiding stakeholders in how best to refne the
approach with time. Again, this will be a priority area
for the backbone organisation working closely with all
ecosystem stakeholder groups.
Turning attention to the backbone organisation, the
REAP Scotland team proposes the Collective Impact
approach is supported by an independent foundation,
either new or existing, which operates to a 10 year
horizon and beyond. This should be funded by a mix
of public and private funding, moving to a fully private
sector funding model at the earliest opportunity.
However, recognising the time and attention required
to develop the correct model and achieve collective
impact, the REAP Scotland team will provide
backbone support for this initiative on an interim
basis over the next 9-12 months. The REAP team will
require an efective secretariat function during this
transition phase. We set out in Annex F the proposed
specifcation for the foundation.
36 MIT REAP Team Scotland Initiative
Samantha Faircliff, Cairngorm Brewery
“I consider myself a role model to an extent. Until I get to ease off some
of my workload, I am limited to how much impact I can have 1-2-1 or 1-to
many in the Scottish start up scene. However, I do what I can through
?nancial sponsorship of programmes such as TechMeetup and others.
I meet with some interesting start ups and answer questions where I
can. The greatest impact we are having, though, is showing that a $1bn
internet company can be built in Scotland”
Gareth Williams, Skyscanner
37
“Having mentors and role models in your network can be
hugely valuable. Connections I have made through public sector
training programmes have been invaluable in areas such as
exporting, social media, marketing and IT.. From this and my
own experience of mentoring, what is really important is being
able to ask very basic questions of mentors and get straight-
forward answers. Having an opinion that you can trust gives
you con?dence in your own decisions so you can keep pushing
forward knowing you are doing the right thing”
38 MIT REAP Team Scotland Initiative
The REAP Scotland team set out to understand
how a world-class entrepreneurial ecosystem
functions, and how the Scottish system could be
improved to enable IDEs to grow to scale and
compete globally. The team used a 14 pillar analysis
(GEDI methodology) to establish those areas of
the ecosystem where Scotland performs well and
where we are weakest compared with leading
innovation-driven economies. From this work, and
in consultation with key stakeholders across the IDE
ecosystem in Scotland, we established fve theme
areas which present important opportunities to
improve, signifcantly, the overall efectiveness of the
ecosystem. These fve themes are:
• Efective Connections
• Skills for Growth
• Financing for Growth
• Role of Universities
• Role Models
The REAP Scotland team identifed opportunities
in each of these fve theme areas and through
consultation, identifed specifc priorities for action.
The REAP team frmly believes that intensive and
incisive delivery of these priorities for action,
achieved working collectively with stakeholders will
deliver a step change in both the numbers and rate
of acceleration of IDE businesses across Scotland.
We summarise these actions in the following section
“Calls to Action for stakeholders in Scotland”. All of
these actions require both commitment to the overall
strategic vision and commitment of resources by
stakeholders across the Scottish ecosystem.
Recognising the importance of a backbone organisation in
supporting this Collective Impact approach, we propose a
foundation model which we introduced in section 4.
While the foundation model is being established
over the next 9-12 months, we propose an interim
arrangement whereby the REAP Team provide the
backbone function assisted by an operational secretariat.
We have set out a vision for a highly developed IDE
ecosystem in Scotland which seeks to inspire, nurture
and support the ambitions of our IDE entrepreneurs.
We can achieve this by building on the strengths of
our world leading universities, by developing our
capabilities to access risk fnance, by drawing on
the knowledge and capabilities of our corporate
organisations and in partnership with government
policies and initiatives that truly support the spirit of
IDE entrepreneurship.
Collectively, let’s work to redefne Scotland
as a country of dynamic and high achieving
entrepreneurs who gain and share inspiration,
skills and capability for scale-up from the
supportive and world class IDE ecosystem which we
can, together, build.
SECTION 5
Conclusions and
recommendations
Developing a world-class IDE ecosystem
39
Effective connections
• Production of a “Guide to Networking for Entrepreneurs”
• Stimulation of a connected ‘network of networks’
• Development of an online hub or forum for networking and knowledge exchange of
innovation-driven enterprises
Calls to Action for stakeholders in Scotland
Skills for growth
• Agreement of the composite set of entrepreneurial skills required for scaling up
IDEs across providers of executive education for entrepreneurs in Scotland. There
is a signifcant role here for entrepreneurs to be proactive in articulating their own
skills requirements.
• Provision of a coherent, world class programme of training in Scotland for
entrepreneurs, drawing on industry experience and international best practice.
Included in this is recognition of “just in time” learning provided via technology
though by massive open online courses (MOOCs).
• Development of a clear, interactive map of the entrepreneurial skills development
opportunities available in Scotland. This should be user friendly, widely
communicated and easily accessible for entrepreneurs at each stage of their
personal and business development.
• Introduction of a new programme to encourage suitably experienced mid-career
managers to return to Scotland and bring new skills and economic value back into
Scotland.
Financing for growth
• Development and dissemination of a strategic guide document which helps
educate and inform IDE entrepreneurs of all key funding options for accessing risk
fnance to ensure the most efective option is selected from the outset.
• Development of a resource, both information and appropriate facilitation, which
assists businesses to target and engage more efectively with international VCs
operating across sectors and geographies which are relevant to Scottish IDEs. This
should include information on deal fow history and practical advice on establishing
contact and building mutual interest.
• Increased promotion of the advantages of becoming a business angel to women
across Scotland, including promotion of tax incentives for investors (such as EIS).
• Development of an online questionnaire to collate evidence of demand by IDE
businesses for access to risk fnance to enable their scale-up.
SECTION 3
Conclusions and recommendations Section 5
40 MIT REAP Team Scotland Initiative
Role models
• Encouragement of more of Scotland’s entrepreneurs to take an active part
within the ecosystem. Encouragement of more entrepreneurs to ofer to make
themselves available to others, through the wide range of private and public sector
organisations that run mentoring programmes.
• Increasing availability of recent and relevant case studies. Agencies and
organisations with a business growth focus, or in receipt of public sector business
development funds, should explicitly make available a regular series of fresh case
studies on business success. Those in receipt of public funds for business growth
should “payback” into the system, through greater activity in becoming role models
themselves.
• Encouragement of female entrepreneurs to step in to the spotlight and encourage
other women to become entrepreneurs and role models. There is a need for more
female entrepreneurial role models of all ages from Scotland to showcase diversity
and to build critical mass. Young entrepreneurs should also feature more regularly
in business pages, journals and online publications highlighting Scotland’s future
business leaders.
Role of universities
• Development of a high level task group with the objective of implementing a
step-change in increasing the contribution universities make to the entrepreneurial
ecosystem in Scotland.
• Application of the Collective Impact approach to development and sharing of local
and international best practice across Scotland’s universities.
• Increased focus on leadership training, business skills and, where desired,
entrepreneurship within all undergraduate and post graduate courses (following the
recommendations of the Scottish Science Advisory Council report on this area).
• Leverage of university alumni networks and the encouragement of mid-career decisions
to build IDEs. This would combine entrepreneurial aspiration with a supportive
environment for new founders who already have signifcant business experience.
• Development of a comprehensive set of IDE performance metrics for the international
benchmarking of the sector and monitoring of ongoing developments.
41
ANNEXES
Annex A - The REAP Scotland Team
Annex B - The MIT REAP Programme
Annex C – Workshops, Stakeholder Meetings and Task Groups
Annex D – Stakeholder Participants and Consultees
Annex E – History and Challenges to Risk Capital in Scotland
Annex F – Backbone Organisation
SECTION 3
ANNEXES
Donna Chisholm (Team Leader) is Head of Business
Innovation and Growth Sectors at Highlands and
Islands Enterprise (HIE), Scotland’s economic and
community development agency for the North
and West of Scotland. She is responsible for HIE’s
work in the areas of entrepreneurship, business
innovation, leadership, internationalisation and key
sector development. Before joining HIE in 2007,
for over fve years Donna was project director for
the redevelopment of Eden Court in Inverness,
coordinating the £23million capital project from
inception to completion. Prior to this she worked for
East Ayrshire Council as a service head, and also in
the private sector.
She sits on the board of the Digital Health Institute
and is a member of the Interface Advisory Board.
Simon Grey is the Chief Executive of wave energy
technology company AWS Ocean Energy Ltd.
He also runs the innovation and engineering
consultancy 4c Engineering. He is a chartered
electrical engineer with 29 years’ experience
in power generation projects and business
management of which 24 years have been in the
renewables sector.
Simon founded his frst company Edinburgh
Hydro Systems Ltd in 1988 and since that time
has founded and run several other ventures in
renewable energy. In 2004 Simon founded AWS
Ocean Energy and has led the growth of this new
venture to commercialise leading wave-power IP. In
that time he has secured over £18million of funding
for the company.
In December 2013 Simon joined forces with 4c
Design in Glasgow to form a new innovation,
technology development and engineering company,
4C Engineering. He is now focussed on growing
this new venture whilst also managing the next
investment phase for AWS.
Ian Ritchie is the non-executive Chairman of Iomart plc,
Computer Applications Service, the Interactive Design
Institute, Cogbooks, Blipfoto and Red Fox Media. He
founded OWL in 1984 which pioneered hypertext
application development (a forerunner to the world wide
web) and sold the company to Panasonic in 1989. Since
then he has been involved in over 30 start-up high-
tech businesses, including Digital Bridges, Voxar, VIS
Interactive, Sonaptic and Orbital. He is an active Business
Angel and a member of the advisory board of Pentech
Ventures. He is Honorary Treasurer of the Royal Academy
of Engineering (FREng) and the Vice President, Business
of the Royal Society of Edinburgh (FRSE). He serves on
the board of the Edinburgh International Science Festival
and Chairs the Board of Our Dynamic Earth, Edinburgh’s
Science Centre. He is a Trustee of the Saltire Foundation,
The David Hume Institute and the Nominet Trust. He was
awarded a CBE in the 2003 New Year’s Honours list for
services to Enterprise and Education.
Professor Jonathan Levie is a Professor in the Hunter
Centre for Entrepreneurship at the University of
Strathclyde, Glasgow, where he is Director of Knowledge
Exchange. He has held research and teaching posts
at the London Business School, Babson College (US),
INSEAD (France), and University College, Cork (Ireland).
Professor Levie co-directs Global Entrepreneurship
Monitor (GEM) in the UK. He is also a Research Theme
Leader at the UK’s Enterprise Research Centre, where
he is engaged in research on ambition and venture
growth. With Sharon Ballard, a US-based entrepreneur, he
developed “Supercoach Entrepreneurial Training” a set
of coaching tools and techniques for coaching frst-time
entrepreneurs, and has coached entrepreneurs in a wide
range of sectors from agri-tourism to high technology in
the US, Europe, and the Middle and Far East. His most
recent articles have appeared in Journal of Management
Studies, Research Policy, Entrepreneurship Theory &
Practice, Small Business Economics, and Family Business
Review, among others.
Annex A - The REAP Scotland Team
42 MIT REAP Team Scotland Initiative
43
Jonathan Harris is the publisher and editor of Young
Company Finance (YCF), a monthly review of early
stage high growth companies in Scotland which
focuses particularly on the issues of how to fund
growth.
After graduating from Cambridge, Jonathan joined
Scottish shipping group The Ben Line, and after four
years in Japan worked with the group ofshore drilling
subsidiary Atlantic Drilling Co Ltd, eventually serving
15 years as director and general manager.
During the prolonged recession in the ofshore
industry in the early 1990s, Jonathan left Ben Line
and started working with young companies, in various
roles including adviser and interim chief executive.
He acquired YCF from its founder Gavin Don in
November 2000.
Since February 2011 YCF’s activities in Scotland have
been operated in partnership with LINC Scotland, the
business angel capital association, of which Jonathan
is a director. Besides publishing the YCF monthly
journal and producing the YCF annual conference,
Jonathan has carried out a range of research studies
in the young company sector, including the recent
Risk Capital Market in Scotland 2009-2011 report for
Scottish Enterprise.
Outside Scotland, YCF’s Spinouts UK project conducts
an ongoing survey of all spinouts from universities
across the UK.
Clive Reeves is Manager for Collaborative Funding at
Scottish Enterprise. He has a Ph.D. from University of
Glasgow for research into nano-scale silicon devices,
and has worked for British Aerospace, BBC Television
and IBM’s Research Divison, New York. Before
joining Scottish Enterprise, he was a senior lecturer
in the Department of Electronics and Electrical
Engineering at the University of Edinburgh. His
current interests in economic development focus on
inititatives to support both business innovation and
the development and support of entrepreneurship.
Over the past 2 years Clive has worked closely with
the Scottish Funding Council and Highlands and
Islands Enterprise in developing a £90m programme
to support industry demand led Innovation Centres in
partnership with Scotland’s universities.
Assistance throughout the REAP project was provided
by Kate MacInnes, Entrepreneurial Support Manager
at Scottish Enterprise, and Stephanie Anderson,
Development Manager for Entrepreneurship and
Innovation at Highlands and Islands Enterprise.
”I think there are big gaps in the funding
landscape and that it is very dif?cult
for SMEs. There are dif?culties at start
up stage and then you hit particular
dif?culties again when you are stuck in
the £1M-£5M turnover mark and try to
raise money at this point. I have seen
no change in this in the last 10 years.
The visability of investment in Scotland
is not good. It’s hidden. It’s incredibly
dif?cult for SMEs. Any way we can make
this easier in Scotland will lead to a more
entrepreneurial society. There are lots of
advisors out there, lots of advice but no
matter how good your idea or product is,
it is dif?cult.”
Peter Murphy, Simple Audio
SECTION 3
ANNEXES
The MIT Regional Entrepreneurship Acceleration
Program (REAP) is a two year programme designed by
the Martin Trust Center for MIT Entrepreneurship and
the MIT Sloan School of Management to help regions
accelerate economic development and job creation.
MIT REAP serves to educate, engage, and enable
teams from key regions around the globe in the
development and execution of a well-designed
acceleration strategy, focused on entrepreneurial
activity that can enhance innovation-driven economic
development and job creation.
Learning Experience
The REAP programme enables regional team
members to learn and collaborate with MIT experts,
catalyze regional action, and leverage global best
practice through cross-regional collaboration.
Participants attend highly interactive two-and-half
day educational workshop twice each year. Between
workshops, they engage in signifcant action-oriented
activities in their regions, leveraging faculty coaching
and an online community of practice to enable
regions to more efectively share analysis, execute
action plans, and sustain impact.
Who Should Participate?
Through an application process, the REAP selection
committee will choose eight regions as members of
each REAP cohort. Each region participating in REAP
will assemble an initial cross-functional team of fve
to seven members.
Participants from these sectors will be executives and
decision-makers with:
1. An intimate understanding of their regional
entrepreneurial ecosystem and their sector.
2. The ability to infuence the creation and
implementation of policy and programmes in their
own sector.
3. A demonstrated deep commitment to working
with this diverse core team to impact strategic
change in their regions.
The REAP programme allows participants to:
• Understand key drivers of successful innovation-
driven entrepreneurial (IDE) ecosystems.
• Deploy MIT rigor and use frameworks to assess
their region’s capacities and to evaluate the
current entrepreneurial ecosystem as a foundation
for further analysis, strategy, and implementation.
• Build an interdisciplinary team to create and
validate a vision of their region’s ecosystem at its
full potential.
• Compare and learn from other regions globally
through case studies and cross-regional dialogue.
Connect to an active community of practice and
collaborate with other regions.
• Design a REAP Acceleration Strategy to harness
the power of innovation and entrepreneurship and
accelerate growth in their region’s ecosystem.
Annex B – The MIT REAP Programme
44 MIT REAP Team Scotland Initiative
45
Annex C
Workshops, Stakeholder Meetings and Task Groups
Activity Location Date
REAP Workshop 1 Boston 1
st
February – 3
rd
February 2012
REAP Workshop 2 Edinburgh 30
th
September – 2
nd
October 2012
Stakeholder discussion: Opportunity
perception and internationalisation
Edinburgh 12 February 2013
Stakeholder discussion: Risk Capital Edinburgh 13 February 2013
Stakeholder discussion: Startup skills
& high growth ambition
Edinburgh 13 February 2013
Stakeholder discussion: Product &
process innovation & networking
Edinburgh 26 February 2013
Effective connections Task Group Edinburgh
REAP Workshop 3
Additional Days
Auckland
Christchurch
25
th
March – 27
th
March 2013
27
th
March – 29
th
March 2013
Corporate Discussion Group Edinburgh 21
st
August 2013
Role of Universities Task Group
Discussion
Edinburgh 26
th
August 2013
Skills for Growth Task Group Discussion Edinburgh 27
th
August 2013
Role Models Task Group Discussion Edinburgh 8
th
October 2013
REAP Workshop 4 Boston 24
th
February – 26
th
February 2014
SECTION 3
ANNEXES
Colin Adams (Informatics Ventures, University of
Edinburgh)
John Anderson (Entrepreneurial Exchange)
Stan Arnauld (Weber Shandwick)
Erikka Askeland (Press and Journal)
Alastair Balfour (Company Creators)
Donella Beaton (Donella Beaton Associates)
Steve Beaumont (University of Glasgow)
Tim Bedford (University of Strathclyde)
Johannah Bisset (WEB Rigging Services)
Jim Bonar (Enterprise Fellowship)
Vicky Brock (Clear Returns)
James Browning (Mpathy Medical)
Craig Chatwin (Saltire Foundation)
Gaelle Ciriego (Ipso Facto)
Silvio Clemente (Scottish Enterprise)
Tommy Cook (Calnex Solutions)
PJ Darling (Spark Energy)
Paula Douglas (Scottish Enterprise)
Pete Downes (Dundee University)
Nigel Eccles (Fanduel)
Peter Estibeiro (i2eye Diagnostics)
Steve Ewing (Informatics Ventures, University of
Edinburgh)
Samantha Fairclif (Cairngorm Brewery)
Paul Ferri (University of Strathclyde)
Ronnie Forbes (QikServe)
David Fraser (Fusion)
Mez Glasse-Duf (Saltire Foundation)
Fiona Godsman (Scottish Institute for Enterprise)
Patrick Graham (Business Group Fund)
Ben Gray (DC Thomson)
Colin Hewitt (Float)
John Innes (Selex)
Mervyn Jones (Maple Jones)
Sandy Kennedy (Saltire Foundation)
David Lane (Heriot Watt University)
Michael Laurenson (Blueshell Mussels)
Geof Leask (Young Enterprise Scotland)
Ewen MacPherson (Ideality)
Colin Mason (Adam Smith Business School, University
of Glasgow)
Jim Mather (University of Strathclyde)
Brian McGuire (Entrepreneurial Spark)
Ryder Meggitt (Saltire Foundation)
David Milne (Wolfson Electronics)
Andrew Mitchell (Edinburgh Centre for Carbon
Innovation)
Eleanor Mitchell (Scottish Enterprise)
Simon Mone (Metadigital)
Keith Muir (Cytomos)
Kenny Mumford (MBM Commercial)
Peter Murphy (Simple Audio)
Ken Naismith (Ken Naismith)
Phil Newman (Pergali)
Stewart Nicol (Inverness Chamber of Commerce)
Alasdair Northrop (Scottish Business Insider)
Ben Panter (Blackford Analysis)
Darren Peattie (Inside Industry)
Darren Pirie (Royal Bank of Scotland)
Andy Porter (Aberdeen University)
Beth Scott (Scottish Development International)
Alex Scott-Tonge (The Power of Youth)
Leanne Sherry (Saltire Foundation)
Morna Simpson (fock.edu)
Maurice Smith (TVI Ltd)
Colin Stewart (Citi)
Alan Suttie (FearsomEngine)
Ian Underwood (Scottish Science Advisory Council)
Rob Walker (MonitorHub)
Neil Wilkie (Scottish Enterprise)
David Wilkinson (Institute of Directors)
Gareth Williams (Skyscanner)
Annex D – Stakeholder Participants and
Consultees
46 MIT REAP Team Scotland Initiative
47
The availability of risk fnance for IDEs in Scotland has
changed radically over the last few decades and the
current climate is heavily infuenced by signifcant
UK Government’s tax breaks for business angels (EIS
and SEIS) and the co-investment fund operated by
the Scottish Investment Bank (SIB), the investment
arm of Scottish Enterprise and Highlands and Islands
Enterprise.
The huge loss of capital in the dot.com boom and
bust of 2001, compounded by the fnancial crash
of 2008 when post-2001 enterprises might have
been expected to begin to mature, led to a relatively
poor performance of technology investments. As a
consequence, fund managers no longer regard this as
an investment sector in which they want to engage.
Venture Capital (VC) companies have generally moved
away from early stages towards later stages and
larger investments, or have moved to a private equity
(PE) model where they replace public listings of
companies. Other VCs have exited the market having
failed to raise follow on investment funds.
The Enterprise Investment Scheme (EIS), frst
introduced in 1994 and its early stage version, the
Seed EIS (SEIS) introduced in 2012, provides very
The REAP team propose that a backbone organisation
is founded to coordinate the Collective Impact
delivery of the REAP recommendations. It will have a
relentless focus on improving the ecosystem for IDEs
in Scotland. Its mission will be to foster innovation-
driven entrepreneurship in Scotland through
stakeholder collaboration and engagement. It
will be established with the following principles of
operation:
generous tax breaks for individual investors (the best
such tax support anywhere in the developed world).
As a result the UK has built a strong community of
business angels.
In Scotland, the development of Scottish Enterprise’s
Co-Investment Fund has been very signifcant in the
development of syndicates of business angels. The
Co-Investment Fund accredits investment groups,
syndicates and VCs, following which they can call on
SIB to match their investment on the same commercial
terms. The Co-Investment Fund has been largely
responsible for the development of angel syndicates
- ten years ago there were three syndicates and today
there are nearly twenty.
Because the vast majority of new IDEs in Scotland
need seed funding in the sub-£1m range this system
works well, and many enterprises are now being
funding as a result of this support. Follow-on funding,
however, remains a signifcant challenge, compounded
by the fact that business angels are often reluctant to
encourage their companies to raise Venture Capital
due to restrictions imposed with their tax breaks. This
often leads angels to prefer to sell businesses rather
than grow them, possibly too early.
• Private funded, non-proft
• Government endorsed but private sector led
• Stakeholder representative leadership group
• Major currency is work-in-kind
• Initially supported by HIE/SE but transitioning to
self-sustainability within two years
• Network of stakeholder groups collaborating to
promote conditions for IDE growth in Scotland
• Ambitious - seeks to have signifcant impact.
Annex E – History and Challenges to Risk Capital
in Scotland
Annex F – Backbone Organisation
Collectively, let’s work to redefine Scotland
as a country of dynamic and high achieving
entrepreneurs who gain and share inspiration,
skills and capability for scale-up from the
supportive and world class IDE ecosystem
which we can, together, build.
www.hie.co.uk | www.scottish-enterprise.com
[email protected]
doc_884449905.pdf