Scottish Technology Ecosystem: Review

31st August 2020

Review of the Scottish tech ecosystem by Mark Logan, commissioned by the Scottish Government, with recommendations on how to develop a world-class tech sector.

In May 2020, Cabinet Secretary of Finance Kate Forbes asked Mark Logan, tech entrepreneur and former Skyscanner COO, to conduct a short-life review into how Scotland's tech sector can contribute to Scotland's economic recovery following the COVID-19 pandemic. The review's recommendations are primarily concerned with stimulating and accelerating the maturity of Scotland's "Technology Ecosystem", with a focus on education, infrastructure and funding.

Executive Summary

In May 2020, Mark Logan was commissioned by Kate Forbes, Cabinet Secretary for Finance, to undertake a short-life review into how Scotland's technology sector can contribute to the country's economic recovery after the COVID-19 pandemic. The review's recommendations are primarily concerned with stimulating and accelerating the maturity of Scotland's "Technology Ecosystem". By this we mean the system, in its widest sense, that supports and nurtures technology businesses in Scotland, from the early start-up phase through to fully scaled maturity.

The output of this ecosystem should be a stream of technology start-ups that reach sustained profitability, including a significant proportion that do so at scale; with consequent benefits in

opportunity for our people, in job creation and in tax revenues. The review's recommendations are intended to significantly improve upon current outcomes against this goal; that is to say, our recommendations are intended to increase the creation rate of profitable, scaled tech businesses and to reduce the time taken for viable individual start-ups to reach scale.

Technology ecosystems exist in one of two states. The preferred state is where the ecosystem has passed through a "tipping-point" in its development, which is the point at which the ecosystem hosts a critical mass of viable start-ups and scale-ups. At this point, several virtuous network effects start to spontaneously operate to continually strengthen the ecosystem without further intervention being required. Although there are many positive aspects to Scotland's current technology ecosystem, we identify it as pre-tipping point, where these network effects are not yet operating. Our over-arching strategy, therefore, is to identify a balanced portfolio

of interventions and support that accelerate the ecosystem past its tipping point, after which, support can be tapered-down over time.

The review identifies three fundamental supporting areas upon which the performance of the Technology Ecosystem depends. In each of these areas, improvements are available which we believe would, taken together, accelerate the ecosystem towards its tipping-point and substantially improve its performance. The ecosystem's fundamental dependencies are:

• Education and Talent: at school level, at university (and parallel access paths), and at start-up/scale-up level.

• Infrastructure: including physical co-location environments for start-ups and the social infrastructure required to support a vibrant technology ecosystem.

• Funding: including grant funding, public and private investment regimens. The review conducts a detailed analysis of each of these areas. It then presents a blended portfolio of interventions, combining those that provide immediate performance benefits with others designed to significantly improve the long-term performance of the ecosystem.

It is important that the full portfolio of interventions identified in this document is implemented in its entirety. This is because the interventions identified are mutually reinforcing. Implementing one or two isolated recommendations will yield incremental outcomes only, whereas what is actually required, especially in the context of the country's post-COVID-19 response, is a transformation of our industrial performance in this area.

An important recurring theme in this review is that the value of interventions should be assessed only with respect to their impact on the overall ecosystem’s output, rather than being limited to the scope of that part of the ecosystem in which they are applied. To take one example as an illustration of this point, it is undoubtedly non-trivial to transform how we teach Computing Science at school level. And if we considered this point in isolation of the overall

ecosystem, perhaps we wouldn’t try. But if doing so significantly raises the likelihood of many more successful start-ups later being born and raised to maturity in Scotland, then we must.

Such considerations will require stakeholders to work together to implement the recommendations made here, and to be willing to overcome local implementation difficulties for the betterment of Scotland’s overall technology ecosystem. It will sometimes require us to think about the ecosystem in counter-intuitive ways. To support these imperatives, the review begins by developing a comprehensive model of Scotland’s technology ecosystem,

thereby making it easier to place these considerations in context. It is our hope that all of our committed stakeholders in Scotland’s technology ecosystem can coalesce around this model, or some descendent of it, to better the coordination of our efforts to improve the ecosystem’s performance.

In all, we present 34 specific, directly actionable recommendations. The major recommendations can be categorised and summarised as follows:

• Tech-Scaler National Backbone

Recommendations in this category are concerned with building a national backbone

network of "Tech-Scalers", whose capabilities build upon and extend beyond traditional incubation programmes. Tech-Scalers combine best practice in incubation, intensive founder education in Internet Economy best practice, ecosystem social infrastructure, and integrated funding. Access to all services would be provided both

physically and in a fully-virtualised form, enabling country-wide participation in Scotland’s high-technology economy.

• Foundational Talent Pipeline

Recommendations in this area concern interventions and improvements across the education spectrum as it relates to the teaching of Computing Science and related disciplines. We propose a transformation of Computing Science education at school

level, with the principle that the subject must be treated, from 1st year at secondary school level with the same focus as Mathematics or Physics. We also recommend considerable expansion of extra-curricular support. At university level, we propose specific interventions intended to better equip technical students with internationalclass start-up skills and to improve the success rate and volume of university spinouts.

We also present a number of recommendations to swell the size of the overall talent pool in parallel access paths into technology.

• Social Infrastructure/International Market square

The world’s best technology ecosystems depend on their social infrastructure to facilitate start-up education, propagation of best practice, networking, peer-support and hiring. Recommendations in this area are designed to considerably strengthen our technology ecosystem’s social infrastructure across all levels of scale, from our

small tech meet-ups to our international conferences. A major theme running through the review is the need to learn from international best practice when establishing this "market square" within our ecosystem.

• Integrated Ecosystem Grant Funding

Recommendations in this category are designed to better align public grant funding support to the specific needs of technology start-ups and those of the ecosystem as a whole. The goals here are to realise an improved return on investment and more

effective support for start-ups while avoiding the risk of a dependency mentality forming within the ecosystem. We also propose a novel treatment for assessing return on investment that is better aligned to the ecosystem’s actual value creation process

and which, consequently, should better direct the types of intervention made, and their resulting impact

• Investment Funding

This focal area identifies two problematic areas for Scottish start-ups attempting to access venture funding. These are the Early-Seed and Series A stages. To address them, we make a series of proposals, based on a partnership approach between government

and Scotland’s venture capital community, all recommendations being designed to better support the flow of investment funding to worthy start-ups.

Finally, we recommend an approach to managing the adoption of these recommendations through to full implementation. A mechanism has been sought that provides both the necessary

coordination and the agility needed to evolve our ecosystem at pace.

We thank you for taking the time to consider these recommendations and look forward to working together to make Scotland’s technology ecosystem an outstanding contributor to our

country’s well-being.

Read the full report here

PDF 86 pages