Scotland needs unicorn wranglers

Written by Mark McLaughlin on 4 July 2018 in Inside Politics

Scotland must chase business unicorns like Skyscanner and FanDuel to become a tech hub of the future

Unicorn: Is Scotland ready for the digital rodeo - Michael Gill/Holyrood

Buttoned-up Scottish nationalists recently coined a new term to describe their more zealous tartan-clad chums: ‘unicorn wranglers’.

Anyone who has visited an SNP conference will have seen them, dressed in matching kilt and croc shoes, face covered in woad and topped with a Royal Scots bonnet festooned with badges.

They’re usually carrying a 15-foot high flag and occasionally they actually tug around a giant sculpted unicorn, as seen during the recent march for independence in Glasgow.

This merry band are also known as ‘The Hairies’ in honour of their fulsome beards or ‘The Foam Hand Brigade’, which speaks for itself, by the more sartorially elegant blue-suit-and-lapel-ribbon nationalists who publicly offer thin smiles and wave half-heartedly as they shuffle by on their way to the latest economic fringe meeting, muttering sotto voce that they really should put on a tie.

Many painted unicorn wranglers will have shunned the SNP’s Sustainable Growth Commission for promoting growth rather than offering a blueprint for a Scottish socialist republic, but the latest advice from the SNP’s economic wing is that we should all become unicorn wranglers.

While the report is silent on the impact a market run on woad would have on Scotland’s GDP, unicorns actually feature in the commission’s plan for growth.

“Small economies in Europe have produced several prominent start-ups, from Spotify to Rovio, and Skyscanner in Scotland, and there are several unicorns in the fintech (and) payments space,” it says.

As well as being Scotland’s mythical national animal, a unicorn is a term used in finance to describe a privately held start-up company valued at over $1bn.

Scotland has produced two financial unicorns – the aforementioned travel search engine Skyscanner and fantasy sports game FanDuel.

A delegation from Holyrood’s Economy, Jobs and Fair Work Committee visited Skyscanner in February to meet chief executive Gareth Williams as part of their inquiry on the performance of the Scottish economy. 

Williams described the story of Skyscanner’s success as a “classic tale of plugging away” from its early beginnings as a self-funded start-up, to gaining its first big investor, Scottish Equity Partners, in 2007, followed by a surge of investors in the following decade, culminating in its acquisition by Chinese travel search site Ctrip in late 2016 in a deal valued at £1.bn.

His advice to the committee was that Scotland needs more companies worth more than $1bn to become a big player in the internet economy. In other words, Scotland’s leaders need to become unicorn wranglers.

Williams advised that this would require societal change in Scotland, such as a shift from French and German language teaching in schools to the more global languages of Spanish and Mandarin.

Scotland is already ahead of the game with the latter language, with the highest concentration of Confucius Institutes at universities and Confucius Classrooms in schools – but their influence is becoming increasingly controversial amid the hegemonic battles taking place between Trump’s America and Xi Jinping’s China.

A film entitled In the Name of Confucius was premiered at Edinburgh City Chambers last month, featuring claims from Chinese-Canadian filmmaker Doris Liu that she had to sign a contract prohibiting her from following the spiritual practice of Falun Gong, and to avoid discussions about Tibet and Taiwan when teaching at a Confucius Institute in Canada.

The Scottish Parliament’s cross-party group on Tibet wrote to universities hosting Confucius Institutes seeking assurances that they were not being used to promote Chinese propaganda and received assurances that “academic freedom was paramount and that they would not accept any censorship of topics”.

But the underlying message is clear, that the influx of international finance and languages can be accompanied by political influence that is not necessarily in line with what some may regard as traditional Scottish values.

However, a country the size of Scotland can find it hard to resist the pull of international finance.

Williams admitted that external funding was a shortcut to success but explained that businesses operating in cities around the world struggle with internal funding, aprt from big investment hubs such as London, Berlin and Hong Kong.

He told MSPs that Scottish cities should aim to become world leaders in a small number of specialised areas – citing Boston as the hub for all things medical in the US – like devices and start-ups. 

The University of Edinburgh School of Informatics is a top 15 ranked computer school, but Scotland is not good at retaining its graduates or keeping its companies in-house.

A recent roundtable of business leaders, organised by Holyrood heard that Scotland is struggling to keep hold of some of its own homegrown entrepreneurs, with the most promising start-ups assimilated by Silicone Valley.

Tech entrepreneur Ian Ritchie said: “Tech businesses tend to grow and then get bought, which is natural, but unfortunately, they get bought by the five biggest companies in the world: Microsoft, Google, Amazon, Apple and Facebook.”

Facebook and Apple have been secretly buying up companies in Edinburgh, hoovering up their talent for their own projects and handing founders big pay-outs in exchange for becoming a subsidiary rather than a competitor. The situation is more acute in Silicone Valley, though, and Scotland is still remote enough that a company can grow under the radar.

Williams said Skyscanner would have been “chewed up and spat out” by the bigger players if it had been based in Silicone Valley, but Edinburgh gave them the breathing space to make mistakes and learn from them.

Tommy Laughlin, public sector liaison manager at ScotlandIS, said corporate takeovers can make or break smaller firms, depending on the integrity of the new parent company.

“As long as the acquiring organisation stays true to what they typically say when they take companies over, it can be a success,” he said.

“They always say, ‘We’ll leave the company alone’, or ‘We’re here to provide additional investment to help the company grow’, but that doesn’t always survive beyond the first restructuring.

“In the case of Skyscanner, for example, I think the Chinese acquiring company actually does see them as the leading brand that will take them into western markets, so actually for the growth of the company it appears to be a good thing because it gave them the access to capital they need.

“Many years ago I was in a company that was taken over by a big Japanese organisation, and they said, ‘We’re going to leave you alone and provide funding and investment’, but I’ve also seen the other side of the coin where organisations were taken over and they were swallowed up – so there is no simple answer.”

The Sustainable Growth Commission urged leaders to continue to nurture homegrown talent at universities, building upon the successes of Skyscanner and FanDuel.

“A number of Scottish universities have a global reach, drawing in and developing outstanding talent from around the world as well as from Scotland and the rest of the UK,” it said.

“The mix of university R&D and the supply of graduate talent has one effect in commercialisation activity. FanDuel is one example – initially a University of Edinburgh student start-up – that has ballooned into unicorn status. But there is a much wider effect. 

“The mix of R&D pipeline and graduate skills can become an attractor for entrepreneurship and inward investment…the tech sector in Edinburgh is an example which combines a dynamic tech start-up scene [e.g. CodeBase] with established and now high-value companies [FanDuel, Skyscanner, Rockstar North], and local offices of global tech giants [Amazon, Microsoft, IBM, with Intel and Huawei also now developing Edinburgh operations]. 

“That tech sector would not be there without world-class university research in computer science and the skilled graduates it produces.”

Nurturing innovation is also a top priority for the Scottish Parliament’s Economy, Jobs and Fair Work Committee.

“Entrepreneurial thinking and the commercialisation of ideas should be encouraged by colleges and universities,” it said in a report.

The committee noted the trend for Scottish businesses to be acquired rather than scaled-up, which can have a beneficial impact on the economy if the money is reinvested in Scotland but can also lead to a drain of entrepreneurial role models and experienced managers.

It has called for an audit of acquisitions to discover how much money has been reinvested in Scotland, to find out whether the Scottish economy is actually benefitting from all of the innovation it has spawned.

There is also a need to encourage more female entrepreneurs, with witnesses to the committee indicating that if the same number of women started businesses as men, there would be a £7.6bn prize for the Scottish economy. 

However, the committee heard that “male entrepreneurs are more successful in accessing capital than females” and called for more research to discover the underlying reasons behind this apparent inequality.

Politicians and business leaders agree that there is also, apparently, something ingrained in the Scottish psyche that prevents Scots from dreaming big.

The Economy Committee noted that the scale-up of companies has been a longstanding challenge in Scotland. It mentioned a lack of business confidence to scale up, describing it as a “fear of heights”.

Laughlin said: “There are people with relatively successful business who actually don’t want to grow because the size of the company that they have got, and that hassle factor with the number of staff that they have got, suits them and they are perfectly comfortable where they are.

“If somebody came along to buy the company, they might sell or they might not, but they don’t particularly want to grow or develop.

“But having been in the business for 40 years, what I think has changed is that there are more signs of ambition, there are more people wanting to grow and develop businesses.

“I think in the next five or ten years there will be many more mid-size businesses employing 200-250 people in Scotland.”

Ritchie Somerville, data innovation director at Edinburgh University, said Scotland also suffers from another societal handicap that is impeding business growth: its leaders aren’t “gallus” enough about Scotland’s achievements.

“We clearly have opportunities, but we probably are a bit less gallus about it than we should be,” he told the recent Holyrood roundtable.

Charles Keegan, innovation director at Registers of Scotland, said: “Some of the real problems in the society that I grew up in was the lack of confidence, people saying, ‘You’re thinking above yourself.’

“We just have to get rid of all of that language and think more like our Celtic cousins.”

Trish Quinn, Ireland-born head of digital business models at the Scottish Government, said: “Irish people have no problem telling you how great Ireland is – even when it’s not. There is a sort of attitude of apology here, and I don’t get it.”

There certainly wasn’t a lack of confidence in ‘Scotland’s Future’, the SNP’s original blueprint for independence which was panned by unionists at the time for its overoptimistic estimates of economic growth and is now increasingly being disowned by the blue-suit-and-lapel-ribbon nationalists who have embraced the Growth Commission report as their new bible.

But business leaders believe Scotland needs to retain that confidence as well as a bit of economic realism to achieve its potential as a future tech hub.

Scotland needs to be a nation of unicorn wranglers by nurturing its start-ups towards the $1bn target with a sensible business environment – and just a touch of the ‘wha’s like us’ narcissism of the Foam Hand Brigade to grab the world’s attention. 

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