Report on "Investment, Innovation and Excellence" Discussion Group
Host: Nicol Stephen, MSP, Deputy First Minister and Minister for the Enterprise and Lifelong Learning
Facilitator: Liz Cameron, Director, Scottish Chambers of Commerce
It was difficult to cover this interesting and varied topic in the hour allocated. The Deputy First Minister, Nicol Stephen, appreciated this and kept his opening remarks brief. He wanted to explore the current position in Scotland in relation to support from the Venture Capital and Financial communities. On R&D, he stressed that this was at the heart of what we as a country need to do to grow companies of scale and generate the growth of local companies and those with Headquarters here.
We probably did not get the opportunity to fully explore these topics but I can assure you there was a wide and varied contribution from those present. I would like to take this opportunity to thank everyone involved again. It had been agreed that the issues raised and discussed in this session would be non-attributable. The following is my report on the discussions which I have tried to address by themes rather than the order they were expressed. It is not a verbatim report and I apologise if anybody feels I have not accurately covered their personal contribution.
Investment
To begin the discussion I posed the question "Do businesses have difficulty accessing venture capital?"
Initial responses from the delegates suggested that there was certainly a difficulty when looking for small amounts of money; it was thought that if you were looking for larger amounts it was less difficult.
Indeed the problem of accessing equity below £5 million was highlighted. Initiatives such as the Scottish Co-investment Fund and the recently introduced Scottish Venture Fund were welcomed in addressing this area.
The particular problem of not having enough successful Scottish companies was also raised as an issue in relation to VC investment here.
One delegate suggested that there were not enough projects being presented and those that were had a poor success rate. We have good ideas but present them badly. It was suggested that businesses should be more ambitious and look at the longer term picture when pitching for VC support.
Another delegate raised the instance of his own company, which hade made the top 10 in a world wide technology award competition, being unable to attract support from the Scottish financial community and which had to go to London. He believed that pressure needs to be exerted to encourage our financial institutions to support Scottish proposals. It is considered that it is less of an effort to do an equity investment deal down South. 3i's decision to all but abandon the Scottish market was also mentioned.
It was suggested that VC's don't understand technology businesses although this could be addressed by better presentation of proposals.
Our VCs seem to be less likely to take a long-term view on an investment, unlike foreign VC's who are more patient. This could be addressed by businesses being prepared to make short-term partnership agreements and being prepared to change funding partners every 3 years.
A delegate also mentioned the regional aspect of equity investments within Scotland, where this is seen as a finance solution in the East but less likely an avenue for companies in the West.
Innovation
If there was one underlying theme that continually arose it was on the need to ensure that entrepreneurship/innovation was taught at an earlier age than currently. One delegate suggested that we expect this to happen when they turn 18. It was highlighted that, in Iceland, innovation education begins at 3 and carries on to 18. We need to be prepared to look to other countries to consider what can be done on this front whilst accepting that the Determined to Succeed initiative is already in place.
Our education system is aimed at equality of opportunity rather than competition and achievement and it was thought that we need a system to identify and nurture skills.
It is important that we become a more entrepreneurial nation and look at countries such as Taiwan as an example of how this should and could be done. We also have very few companies who are prepared to do business in the Far East/India where vast opportunities exist.
Our position in the competitiveness league (we are 61 out of 61) was highlighted as disappointing and it was suggested that this isn't down to lack of good ideas but an inability to present them effectively.
On a positive note Scotland is generally seen as a good place to come from when working abroad.
However, at home, our people tend to lack ambition and indeed failure is seen very negatively and sometimes you are considered a villain if you fail. It was suggested that this can also be the position when you succeed! We need to consider how we can improve national self-esteem.
Excellence
The discussion concentrated on the impact of our universities, one delegate highlighted that academic excellence was the main motivation and not about producing products and new processes.
This was not fully accepted and the Knowledge Transfer support scheme was highlighted as being aligned with the main motivation of getting IP out of our universities faster. Although the question how we go about doing this needs addressed. We need to make a substantial investment in education in relation to IP and Scotland's output; we cannot afford to stand still as other countries are catching up
Legislation was also raised as a particular stumbling block. An example of this was the loss of our competitive edge on wind technology development to the Danes. The Government needs to ensure a level playing field.
The development of our manufacturing base was mentioned and a delegate suggested that, given the expense to manufacture here, we should concentrate on our service sector.
Other areas covered included tax and in particular R&D tax credits, which were seen as particularly complicated. It was highlighted that a business is not able to claim more than their PAYE in a particular year. EIS tax relief was seen as a positive initiative which allows companies to utilise the wealth of Scotland's high net worth individuals. It was, however, thought that current tax breaks were inadequate.
Procurement
This was also raised with one delegate suggesting a competition be run to improve energy storage and the winner given a contract: this would stimulate investment in this particular area.
There was a final word of warning that a lot of the issued raised during our discussions are the same which have affected us for the last 10 years and we need to address these and move on.
Given timing constraints the Minister briefly summarised the discussions and thanked everyone for their contribution.
Liz Cameron
Director
Scottish Chambers of Commerce