This is how it started….
Andrew Barrie co-founded a global fintech company in 1995. Based from Edinburgh, with offices around the world, it developed risk management software for major insurance and pensions companies. Growth was funded organically, with no loans or external investment until deep into scale up mode when Goldman Sachs became an investor.
It was when the business was sold in 2011 that the seeds of The GEN were sown. Andrew takes up the story……
Edinburgh, Autumn 2011
We were in the final stages of selling our company. After 3 years of planning interested buyers had been whittled to a longlist of 15.
Over an intense few weeks we welcomed all the longlist to Edinburgh. Suitors came from all over the world. Trade buyers, Private Equity, Investment banking. Over dinner conversation invariably went macro. The world was still a scary, uncertain place after the financial crisis and we knew we were selling into a difficult market.
There was one common message we hadn’t anticipated:
“It’s great being in Scotland, but (outside ‘Oil & Gas’) there is nothing to invest in here.”
This didn’t just come from US or European fund managers, it came from Scots (ex pat and local). I dug deeper. What did they mean?
“There is no ambition, no risk takers, no entrepreneurs, no business builders.“
I didn’t get it. Even then I was close to some of the universities who were creating great research, our embryonic angel community that was getting noticed internationally and many, many Scots who had made their careers all over the world.
Was this about mis-perception or was there something in what they said? Courtesy of 3 years gardening leave post-deal, I set out to find some answers and maybe make a difference.
This is where it went…..
2012 was certainly a grim environment for early stage companies. Mainstays of funding such as 3i and the banks had left post financial crisis. There was no institutional investment. Companies shaped ambition on what they could organically afford. There were some pockets of activity. Angel groups such as Archangels supplemented by Government co-investment such as SIB were invaluable.
Beyond investment, support for the hardy few who did aspire to create new businesses was limited.
However, there was a growing realisation of these difficulties and a momentum for change started. Individuals like Ian Ritchie, Jim Duffy, Paul Atkinson, ambitious and passionate about Scotland, were typical of those who, in different ways, were part of a conscious approach to creating and supporting a broader, deeper start up community.
For my own part, it was a fragmented journey of discovery. I was one of E-Spark’s first mentors, member of most angel groups at one time or another, co-authored thought pieces and consultation initiatives. I’ve invested in, hosted dinners for, mentored, chaired early stage projects. It’s been a blast. Met amazing people and had great and humbling experiences. I’ve watched as the desert has found an oasis and the early stage community has grown.
It is incredible how, over less than a decade, concepts such as start-up, entrepreneurship, embryonic industries relating to tech and creative have become so wide spread and so deep. More initiatives, that further diversifying and grow the community are emerging with a geographic or gender or sector or community or even philosophy.
This is where we are…..
So where are we now. What is the health of the start up ecosystem?
I wanted to revisit the issue that started me on this path. Talk to some of the people who were negative about our ambition. Wind them up about their cynicism. I needed to broaden those I questioned to reflect the richer array of players in the ecosystem.
I started with the big investors – those that look beyond the start up scene, for companies with clients, a proven business model and team. After 5 years of ecosystem building they should be seeing some of the more successful investment prospects.
Once again, I was to be disappointed.
“Nothing we would invest in”, “For every 100 business plans we receive, only 2 will go anywhere”, “There is a naivety about valuation” “Nowhere near the amount of business building required for a professional investor to get interested”. “Founders don’t know how to scale, how to build a business”.
The good news was that this wasn’t about ambition or dearth of action – but it reflected something pretty fundamental that wasn’t working. There were other voices with similar concerns.
Don’t get me wrong, scaling businesses isn’t the be all and end all. Far from it. However, it is a kind of barometer for the broader system.
I went deeper, talked to some of the players that have been so transformational. Many are now recognising they need to reappraise the role they play, rethink their strategy and philosophy. Is what worked building the basis of a community appropriate for scaling it and making it more effective?
There is much to be positive about, there is now real interest in creating an entrepreneurial community. However, we need to think hard about the tools and support that builds on these foundations.
Where I can, I want to help that process.