More than 50 CEO's and founders signed an open letter to the Scottish Government, calling for better support for Scotland's tech startups.
To: Kate Forbes; Cabinet Secretary for Finance, Scottish Government Fiona Hyslop; Cabinet Secretary for Economy, Fair Work and Culture, Scottish Government Steve Dunlop; Chief Executive, Scottish Enterprise Linda Hanna, Managing Director of Scottish Economic Development, Scottish Enterprise
Friday 24 April, 2020
Tech startups have been a rapidly growing part of the Scottish economy in recent years, and will be increasingly important in the future. However, many of Scotland’s tech companies, and the thousands of high value jobs they provide, are under immediate existential threat due to the economic shock from the Covid-19 pandemic. As founders and executives of some of Scotland’s leading tech companies, we are deeply concerned that the current interventions, from both the Scottish and UK governments, will not adequately address the unique needs of high growth Scottish tech companies.
Tech startups will be crucial not only in helping the Scottish economy bounce back quickly from this pandemic, but by nature of their fast growth have the unique ability to quickly create a large number of high value jobs, increasing our capacity to export globally and boosting our economy.
Scotland’s tech economy has grown significantly in the past ten years, but it remains a relatively nascent and fragile ecosystem, with a very limited local venture capital fund presence, meaning a heavy reliance on angel investors in the early years of a company's development.
Like all investors right now, the angel investor community tells us they have significantly reduced capacity which cannot meet the sheer scale of the funding challenges this crisis has created.
High growth startups are often initially loss making, and as such cannot benefit from many of the emergency measures currently available. They also need to keep developing their products and services for future revenue growth, so the current furlough scheme is at best a limited option. For most of Scotland’s tech companies, the only plausible mechanisms are equity or grant support.
In order to protect Scotland’s tech economy, and to make sure the maximum number of startups survive and grow, extremely rapid intervention is needed from the public sector, firstly to stabilise the situation, then to support near-term recovery. The Scottish Government needs to act now to protect Scotland’s entrepreneurial future so we do not lose a generation of high growth startups to COVID-19. As tech business leaders, we stand ready to work with Scottish Government and other ecosystem stakeholders on how best this support should be shaped to protect our economy.
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