Economy and Fair Work Committee
Meeting date: Wednesday, January 11, 2023
Official Report 706KB pdf
Agenda: Decision on Taking Business in Private, Business Investment Outlook, Chief Entrepreneurial Adviser to the Scottish Government
- Decision on Taking Business in Private
- Business Investment Outlook
- Chief Entrepreneurial Adviser to the Scottish Government
Chief Entrepreneurial Adviser to the Scottish Government
Our next item of business is an evidence session with Mark Logan, the chief entrepreneurial adviser to the Scottish Government. Welcome to the meeting.
I have an introductory question. You have been in post for six months. Although you have a longer working relationship with other areas of the Scottish Government, you have been in this particular role for six months. I understand that the post is initially for two years. Do you have a shared understanding with the Scottish Government of what is to be achieved in those two years? Is there a way of measuring the impact that the role will have? If you could say something about that first, that would be helpful.
There is a shared understanding, in the sense that there is a remit for the role.
In order to stimulate a dramatic increase in entrepreneurial activity, we need to think about what we need to do over a five to 10-year period. Ahead of that time, in the next one to two years, we will look at the leading indicators that will show the progress that we are making. We will probably explore some of those during this meeting. Are we overcoming the barriers that stop us being as entrepreneurial as we could be and need to be? What progress have we made in key areas such as education, infrastructure and funding? Are we building networks for and confidence about entrepreneurship in the country? Are we beginning to see the number of start-ups and other signs of entrepreneurial activity increasing? We will see some leading indicators during the time that I am formally in post.
It is much more important that we lay the foundations to create a dramatic improvement in entrepreneurial activity. I am focusing my efforts not so much on achieving a very short-term stimulus to the numbers, but on building, with others, the infrastructure that will give us a dramatic improvement over the longer term.
You have expressed frustration at the level of bureaucracy that exists in Scotland when it comes to making change and have expressed concerns about the Scottish Government’s mindset in relation to focusing on the economy. Your appointment was made by the Cabinet Secretary for Finance and the Economy, but is there cross-departmental work taking place?
There is, and there absolutely needs to be. I am not expressing frustration; it is more the case that I think that the country as a whole needs a sense of urgency in this area. There are two important reasons why increasing the rate of entrepreneurialism in this country matters. One is that every job in this room, outside this room and across the country exists because somebody at some point started something. It should be obvious to all of us—this is not a party-political issue; it should be a universal understanding—that, if we are to have a thriving population of individuals who have fulfilling lives, we need to be starting things more often than we have been doing.
What concentrates that need is the fact that we now live in what I call the exponential age, which is to say that our problems and general environment are changing exponentially and our problems are increasing in severity exponentially. Climate change is an obvious example of that, but there are many other exponentials. Society needs to evolve its activities and the work that people do to match that rate of change, and that happens through entrepreneurialism.
Entrepreneurialism can of course be found in industry and business, but it also needs to be found in Government, so when I express frustration at how quickly we get things done, it is not a party-political point. Historically, Governments have moved more slowly than they will need to move in the future.
There is a concept of speed of iteration: how quickly do you iterate and learn and how quickly does that cycle operate? If you look at an internet economy start-up such as Skyscanner, where I spent some time at its most high-growth stage, our speed of iteration was weekly, at most. We released software to the site multiple times a day. However, the speed of iteration—the decision-making frequency—of Governments is not weekly; if we are being charitable, it is probably quarterly. I do not mean that in a pejorative sense, but that is the nature of the machine.
Governments should move more slowly than businesses, because it is necessary to add some inertia to account for, and to dampen, extremism and so on, but as a nation, a Government machine and a civil service, we need to increase our speed of iteration so that we can make more decisions more quickly and make more speed over the ground to match the exponential age that we live in.
That is perhaps a wider point than today’s focus, but that is my point when I express frustration. For example, when we work on things such as the Scottish technology ecosystem review implementation, we see that Governments are usually faster within departments than they are across departmental boundaries. We must learn how to be faster at running multidepartmental projects, because entrepreneurialism does not respect the departmental boundaries that we put up. We need to be able to work across teams. Those points could be levelled at any Government on earth, but we are in Scotland and have our own problems to solve, so we should focus on our speed of iteration.
I see part of my role—not the major part—as being to provide a constructive provocation on that point to colleagues around this table and in Government. The greater part of my role is in policy development and helping to steer that through to execution, such as with the Scottish technology ecosystem review and some other projects that I am sure that we will talk about in this evidence session.11:15
That is helpful. The post is remunerated—for eight days a month, I think—so I would like us to have a good understanding of what the role involves. That is why I asked about measurable progress. You have talked a bit about influence and your role in providing advice to Government about the way in which Government operates, as well as working within the sector to deliver projects. Do you want to say anything further about what the job entails? I will invite Graham Simpson to come in once you have answered that.
To be concrete and specific, the first piece of policy that I was heavily involved in was writing the ecosystem review for technology. I spend a lot of my time on the implementation of that because it is an on-going programme. I am working with Ana Stewart to co-author the upcoming Stewart review on underrepresentation in gender and among minority ethnic founders in business. That is a major piece of work that will be delivered next month and, again, it is very strong on policy. It is written in the same manner and concrete style as “Scottish Technology Ecosystem Review”.
The Stewart review is trying to address the fact that we still have an appalling imbalance in participation in entrepreneurship that, as a modern society, we should be ashamed of. That does not make us a just society, and it takes a lot of our best potential entrepreneurs out of a much-needed talent pool. As part of the job, I am focusing on how we create more talent that is focused on entrepreneurship. That is one aspect, the ecosystem review was another, and there are more to come, as we will talk about.
On policy development, there is the STER report and the gender review. Beyond those, I am working on a further paper to set an overall strategy for entrepreneurship that puts those other parts in context and that will lead to further policy development, which I will be happy to talk about. The second part of my job is to steward the implementation of that across different groups, then to evangelise on the topic within Scotland and to work to connect groups and build a network of the willing to drive policy forward.
I am glad that you brought up remuneration. It took me six months to write, socialise and discuss the ecosystem review, and I did that for free. I have spent about 400 hours working on the Stewart review this year, and I have not charged the Government a penny for that. I am doing it because I think that it is important. I do not charge for anything like the hours that I work, but nor do I work for free—I am sure that everyone can understand that. I have tried to strike a balance by ensuring that the work that I do is seen to be valued and to give people value for what they pay for, but I do not charge the country for the vast majority of what I do, because it is just something that I want to do on behalf of and for the country. Despite the headlines, I try to take that approach to what I do.
You will be pleased to hear that I am going to come back to remuneration. At the start, you described broadly what an entrepreneur is: it is somebody who has an idea, starts up a business and makes a success of it. What businesses have you started?
I was employee 5 and vice-president of engineering at Atlantech, which was a small start-up that we took through to a $180 million sale to Cisco back in 2000. Two years after that sale, I co-founded a company called Sumerian with David Sibbald and another founder. I stayed at that company for seven years; it was eventually sold but I had left before that. I joined Skyscanner when it had about 90 people and its growth was stalling. I took on the general management of the business and worked with Gareth Williams, the founder, and we took the company to about 1,200 employees and a £1.5 billion exit to a company called Ctrip in China.
Beyond that, I have worked with about 60 start-ups in the past few years, mainly in Scotland but also around the world, in advisory or investment roles or in non-exec roles. I am therefore pretty involved in the start-up world. I have spent about 30 years in the tech sector. That is my experience in a nutshell.
That is useful to know.
You mentioned the Scottish technology ecosystem review, which you wrote. I read that, when you were invited to do that by Kate Forbes, you were sitting in a lay-by on the A9. How were you offered your current role? Where were you? I hope that you were not sitting in a lay-by. How was it offered? Was there an interview process?
I was not in a lay-by—Kate Forbes was in a lay-by calling me. You will have to ask her what she was doing in a lay-by, but I am sure that it was just safe driving practice.
As I understood the role as it emerged, it was seen through “Scottish Technology Ecosystem Review”—which I will call “STER” for short, because it is a bit of a mouthful—to be very valuable to have an industry expert, if I can use that term, to take an independent view of what is needed in a given area of entrepreneurship and to help steward that through to execution. That established the concept of it being valuable to have someone in that kind of position. That was not my decision; that was a Government decision.
I was then asked whether I was interested in considering that role, and I said that I was. My understanding was that there was a process, which I was not party to, to look at a shortlist of other people who were also being considered for that role. I am not sure what process was followed to explore that. After that, I was asked whether I would take on the role. Therefore, I did not sit in a formal interview, but I think that my interview had been over the 18 months before that, when I had shown myself to be a credible candidate for the role. From my perspective, that is how the role came about.
So, essentially, you were asked, “We’ve got this role—are you interested?”, and then you were offered the job. There was not a formal interview.
There was not a formal interview for me. I was aware that a number of candidates were being considered. I do not know who those candidates were. I am sure—and I believe—that discussions took place with them. Discussions took place with me over a period of time because I was working closely with Government, but there was not an interview in the classic sense of my coming in and being interviewed by a panel of three people or anything like that.
I will come on to remuneration. Figures have been published; you can tell me whether they are right or wrong.
You are paid £2,000 a day—is that correct?
That is the official rate. I will comment on that in a second.
You are paid £2,000 a day for two days a week, roughly.
On average, if you were to run it that way.
That equates to £200,000 a year, which is more than the First Minister earns. That is quite a colossal amount. It is a huge amount. It makes you wonder. I do not know whether you are a civil servant or on what basis you are employed, but it is a lot of money. [Interruption.] I could do without chuntering from my left, because it is a lot of money, and we are entitled to know what we are getting for our money.
So, what does £200,000 a year get us from you?
First of all, as I said earlier, I do not charge the Government for the majority of the work that I do, so you are actually getting an awful lot more than eight days of work a month. As I also said earlier, I have spent about 400 hours on the Stewart review—which I think will be a transformational programme for this country—and I have not charged anybody for that. I am not sure how much free work you do for the Government, but I do a lot for the Government.
My second point is that £2,000 a day is typically what a junior consultant at Ernst & Young or Accenture will charge. I have 30 years of experience of supporting the tech sector here in Scotland, so I have a lot of expertise. I have worked with hundreds of companies and employed well over 1,000 people in that task and I know a lot about it. You are therefore getting a lot of expertise for that money.
What else are you getting for the money? The STER has profoundly transformed the policy direction of the tech sector in Scotland, and you are getting my stewarding of that through a complex implementation. For example, we have set up the Techscaler network, which is probably a world first in terms of its combination of incubation, founder education, town-square dynamics, and its provision of a platform on which to build and create a great environment for our start-ups to compete in.
We have set up the ecosystem fund to stimulate the network of entrepreneurs and their confidence in their peer learning abilities. We have set up a number of initiatives in education to dramatically improve our performance in computing science education. We have set up the Scottish Teachers Advancing Computing Science network, which is taking teachers and putting them in the front line of decision making so that they can influence policy, curate best practice and share it with teachers around the country.
We are about to launch the teacher upskilling programme, which will ensure that our teachers are properly skilled and qualified in computing science so that they can make the subject interesting and engaging for students. We have another world first in how that is done through a network of teachers training teachers, so it is quite novel. A whole new set of resources for teachers is going into teaching so that they can teach first-year and second-year students in a better way so that they get more interested.
We are at an advanced stage in defining the entrepreneurial campus that will take our universities from creating tech graduates to creating entrepreneurial tech graduates. That will be transformational and, of course, it has been a lot of work.
We are in the advanced stages of setting up a scale-up fund in Scotland so that we have the ability to supply large-scale capital to scaling companies. It takes an awful lot of time to do that.
There are other things in the ecosystem review, but those are just some of the things that I am spending my time on. The next thing is the Stewart review that I mentioned earlier. If we implement its recommendations, it will have a profound effect on participation rates for women and people from ethnic minorities in entrepreneurship.
Beyond that, I am working to extend those ideas and to use them as a platform to build additional improvement into how we think about entrepreneurship in this country. I am happy to go into detail on that shortly.
There is therefore quite a lot going on and I am working with lots of other people to do it, but I do not feel that it is not directional or valuable to the country. We can argue about what number is the right number, but I think that you are getting value for money in what I am doing. As I have said, the headline rates are not actually what the country is paying for my time, because it is my choice and my decision to do the major reports that I write for free.
The reason I am asking these questions is that it gives you a chance to say all that, which is really useful. I have one more question, if that is okay, convener.
It is okay if it is brief.
You are obviously involved in some other companies, one of which is TravelNest, which has had money from the Government. Is there a potential conflict of interests there?
There is a potential conflict of interests there, which I why I have done two things. First, I have been very careful not to involve myself in those decisions. Secondly, I have resigned the non-executive position to ensure that there is no conflict.
Let me ask you a very obvious question. What do you consider are the barriers to entrepreneurial activity in Scotland?11:30
It is an interesting question. There are a number of proximate causes of that, but I think that we need to look a bit deeper. One of the deeper issues is the question of our culture of entrepreneurship in Scotland. We were once one of the most entrepreneurial nations on earth. I grew up in Clydebank, which was the silicon valley of its age. I think that what happened was that we did not update our model fast enough. We thought that we could stay in the world of building ships in the same way and having our industry work in the way it did. When that was taken away from the country, it caused an enormous confidence shock.
Then, in the 1980s, we thought that we could import a tech sector. We got Motorola, Sun Microsystems, IBM and the rest to turn up and kickstart our tech sector instead of growing our own, and we thought that that would be fine. Then, when all of that went away, it was another shock to the country.
Somewhere down the line, as a nation, we lost our confidence in entrepreneurship to some extent, and we started to build a narrative of dependency in which we were just not entrepreneurial. That affected how we thought about it at the policy level, and it affected the focus that we gave it and so on. Some element of that thinking put us a little bit behind where we could and should have been.
However, I would say that culture itself is a consequence of other things, not the root cause. Culture can be changed easily on the basis of success. If we start—and we are doing this now—to act in a directed fashion with a clear strategy, people will start to see exemplars, the confidence will return and culture will adapt around that. I do not think that we are stuck in any way or that we have any cause to lament or be depressed about our opportunities.
How we move forward from this point directly addresses Colin Beattie’s question about barriers. We have to normalise entrepreneurship as a career path in this country, and it is not fully normalised. It is not the obvious thing that people think of doing. Normalisation is partly about education. We need to be teaching our primary school children, secondary school children and university and college students about entrepreneurship. Tech students at university should be learning how to be tech entrepreneurs, not just technicians.
We need to equip founders of start-ups today with better techniques. This is not just about children and formal education, but about people in practice. If I was to stop a founder on the street in Scotland and ask them about modern growth techniques, they would not always know the answer, but their silicon valley counterpart would. We have to bridge that gap.
As I say, there is an educational element to this and we are making considerable progress there. You will see from the national strategy for economic transformation that there is a big focus on education in this area. The STER review has also brought considerable focus to this area, but we need to do more. The entrepreneurial campus initiative is running, for example. Things are happening.
Although the Techscaler network is an environment containing a network of places to incubate companies, it is first and foremost an education environment in which founders can learn international best practice. Education is important.
The second part is infrastructure, which is the physical and social infrastructure that goes with entrepreneurship. The physical environment is places to have companies where people can go to learn, and the social infrastructure is about building a network of founders and start-up people who can learn and take confidence from each other. We have policies in train to help to build and stimulate that, but more needs to be done.
Funding is a mixed picture. We have pretty good syndicate capital for earlyish-stage seed funding, but we are a bit short in the very early-stage seed funding, and we struggle with the scale-up funding. We need to overcome those barriers.
The biggest of all those barriers relates to attracting people into entrepreneurship. Earlier, I mentioned the Stewart review. The population is split roughly 50:50 between male and female, but only one in five founders is a woman. That means that we are taking a lot of talent out of the system and denying almost half of our population the opportunities that the other half has. If we can make progress in that area, we will be able to significantly increase the talent pool.
Therefore, the barriers that policy needs to address relate to helping to increase the normalisation of entrepreneurship, education, infrastructure and the funding that goes with that. Crucially, we cannot do those things as we have sometimes done them historically, through a set of isolated and unco-ordinated initiatives.
The STER was important because it said that we need to take a systems view: we need to view the entrepreneurial ecosystem as a system. That review was focused on technology companies, but they are only a subset of the system. The value of that approach is that, if we can agree on how the system works, what its inputs and outputs are and what stimuli improve it, we can co-ordinate across different agencies and different parts of the Government to mutually reinforce the various initiatives.
I will give one example of that. Earlier, I mentioned the Techscaler network, which is seven sites across Scotland that provide incubation for start-ups, world-class education and a town square environment in which people can meet up and learn from one another. More than that, it provides a platform on which we can build. For example, with the three development agencies in Scotland, we have talked about how we can integrate grant funding innovatively into that environment, so that a company that is curated for entry into the tech scaler network is curated for grant funding at the same time, and so that we use the skills and knowledge of people in the development agencies alongside those of the people in the tech scaler network. That is a great collaboration that shows what is possible. It is a small example, but we could use the same model to build a vision for Scotland.
The next stage of evolution is to make tech scalers not just tech scalers but scalers by adding other companies of different flavours into them. That is extremely important. I will give a couple of quick examples of why that direction is so important. I think that we have all heard of Moderna, given what we have all been through—you might have had its product in your arm. I could ask whether Moderna is a life sciences company or a tech company. It uses massive artificial intelligence engines to analyse biological data, and massive automated labs are used to turn data back into biology, so it is both. In Scotland, we tend to hold our life sciences, which is a very strong sector, mainly in academia; we do not really expose that sector to the same expectations relating to starting companies as we do, for example, the tech sector.
Another example is Pixar. Is Pixar a creative company or a tech company? You know what I am going to say: it is both. It uses massive AI engines and massive computing power to make movies.
In Scotland, we have an interesting creative sector in that it is pretty strong but is made up of thousands of individual freelancers and small and isolated networks of freelancers. We have some of the greatest schools on earth for the creative industries and so on, but we do not teach those young folks to be entrepreneurial. We do not set that expectation. What if we did and put them alongside people in the tech scaler environment and other incubators? What if we built policy around supporting them together?
Creation happens in the gaps between disciplines. The more we build around the same model, the more we get exponential effects. The biggest barrier relates to coalescing around the same view and working to mutually reinforce various interventions.
I will follow up on two very basic things that you mentioned in your interesting answer. You spoke about there being an endemic lack of confidence in the culture in Scotland. Are there any indications that the situation is improving? Further to that, is it possible to teach entrepreneurship? Could you create a class in school that would teach pupils about entrepreneurship?
Yes, you absolutely can teach entrepreneurship. There are different definitions of entrepreneurship, but I will set one out for the purposes of our discussion. There are three aspects to entrepreneurship: luck—I am here, with my track record, with a bit of luck behind me—mindset and technique. The greatest of those aspects is technique, and you can teach entrepreneurial technique.
Why, for example, does silicon valley come out on top worldwide in every generation of tech? It is called silicon valley because the companies based there were producing semiconductors, although they no longer do that. At every epoch of tech, silicon valley comes out on top. Why is that? The situation is this: a whole bunch of companies start doing something and, even though most of them will fail, the environment is sufficiently large that some will succeed, and they then distil best practice and technique. That becomes a playbook for that generation. Indeed, because people move around companies, that becomes a shared playbook. Eventually, that reaches other parts of the world, including Scotland.
The playbooks are teachable. When you start to understand them, you start to change your mindset. I could ask someone today if they wanted to start a company, but if they did not know how to grow a company, how to hire, how to create virality in a product or how to do any of those things, they would say that they were unsure about how they would go about doing that. If that knowledge is normalised, people’s mindset changes and the culture changes along with that.
The effects of that are exponential. The more exemplars that you have, the more that attracts other people, and the more expertise and successful companies you have, the more successful people there are, which leads to more small start-ups. There is a set of compounding virtuous cycles that start to establish themselves, and that creates more confidence.
The convener asked me at the start of the session what measures we are looking at. If we follow through the policies that we are discussing today, I think that we will see an exponential increase in the number of companies that we have. I will give an example that is close to my heart. When I was involved in Skyscanner, people would ask me what my measure of success for the company was. I would say that it would be Skyscanner spawning 100 other companies. That is the biggest measure of success for Scotland. People go through the journey that we, in Skyscanner, all went through—it was not easy; it was hellish—take that experience and join other start-ups, which creates more companies like Skyscanner and a bunch more employees. Those employees then leave and start other companies. The effect of that is exponential.
I will mention another effect. At Skyscanner, when the company grew to about 500 people, we could not hire a senior vice-president of engineering in Scotland because there were no people at that scale. We were also unable to bring one from London or from silicon valley because, if they had brought their family here and things had not worked out, they would have had to relocate back again, whereas anyone working in London could just walk down the road and get a job at Google or something like that. Once you reach a critical mass of start-ups, though, you can attract talent to stay, because, if things do not work out at one company, they can take a job next door.
The same thing happens with investment. Right now, an investor in London can use the tube to see 10 companies in a day or they can come to Scotland to see one company on a two-day trip. Therefore, they tend to stay in their geographic area. However, once a critical mass of companies is reached, an investor could set up a presence and spend more time here.
From a confidence perspective, our task is to do enough to get sufficient numbers of companies starting up to create those flywheel effects. I think that confidence will follow.
I believe that you can teach entrepreneurship and that you can overcome the confidence gap.
I have one last question. You touched—you did not dwell too long—on Government policy. Are there deficiencies in Government policy? Are there things that need to be done?
There are always deficiencies in Government policy, and that applies to every Government on earth.
I am not a politician, and I am not affiliated to any party. I have been appointed by the Government of the day and I am proud to try to contribute as a citizen. I hope that what I am describing is politically neutral. It should be—I really hope that it is—obvious to everyone that we need to be doing these things.
With regard to policy, given the context that I have just described, I am very pleased that we are focusing on entrepreneurship and that there is someone in this job. There are other people who could do it just as well as I can—I am not claiming that I am a unique individual on this planet—but I am pleased that there is someone in the position of chief entrepreneurial adviser.11:45
I am also pleased that there is a focus on the ecosystem review and its implementation, that the Stewart review has been taken forward, and that the national strategy on economic transformation document, “Delivering Economic Prosperity”, has a chapter on entrepreneurship, which might not have been the case a few years ago. That is all very encouraging, but none of the documents that I have just described are complete. They are simply directional indicators of where we need to go, so we need to keep adding to them.
Deficiencies exist in the sense that we need to do more. For example, the current policy commitment is to do the Techscaler network, followed by the start-up scaler work. I am working on extending that further into the community to address what I call scale deep companies, but that is not a policy commitment. In that respect, there is a deficiency.
I prefer to put it this way: there is a direction of travel that we need to go in, and we need to stay the course. The challenge for you, as committee members, is that the course is longer than the span of a session of Parliament, and it may see different Governments of different flavours come and go. If we keep on ripping up the plan to start again and reassess things, we will not get anywhere, so I urge us to find consensus on the issue as much as we can.
I will give an example. Finland is a country of about the same size as Scotland, with around 5.3 million people. If those people are distributed across its geography, it is the most sparsely populated country in Europe. Estonia is a country of 1.3 million people. From the most recent figures that I looked at, Finland has about 3,381 tech start-ups and scale-ups, and that does not include other start-ups. Every year, it produces a unicorn company—if you are not familiar with the term “unicorn company”, it is slang for a company with a $1 billion valuation that is still private. Estonia has three such companies already. Why is that? It is because those countries have embraced and adopted the policies that we are discussing today, for which I and others are advocating, and they have run with them for an extended period of time. The rewards for their economies are massive. Worldwide, 10 per cent of all exits, as they are called—that is when companies sell or go out to initial public offering—come from Finland. That could be us, in Scotland, but we have to stay the course.
If Maggie Chapman does not mind, I will bring in Gordon MacDonald first, as I think that he has a supplementary question.
I have a couple of quick questions in the same area.
That is fine.
Mark, you talked earlier about the lack of exemplars. In recent decades, we have lost large companies that were headquartered in Scotland, such as Scottish & Newcastle, Diageo, Bank of Scotland and so on. We have also talked about a lack of confidence. Has that been part of the impact of losing those large global headquarters?
Secondly, a lot of companies, including Skyscanner, have sold out instead of continuing to grow to be global companies. In respect of Skyscanner, was the reason for that a lack of financial support or a lack of senior staff, which you talked about earlier? Is there a barrier at a certain point that means that a Scottish company has no other option but to sell out in order to continue to grow?
Thirdly, university research depends a lot on public funds. Is there a need for intellectual property rights to be reviewed so that companies and entrepreneurs can harness that research and help to grow the economy?
I will take the first question first, about when companies leave or sell and how we should think about that. We need to get comfortable with the fact that any one company will take a certain path, and very often a company will move its headquarters, sell up and so on. However, if we had enough companies growing to scale, we would not worry about that. Companies will take an individual path, and there is a natural life cycle for them. Our problem is that we do not have enough companies to get to a statistical critical mass where that does not matter so much.
We have to think of this as a funnel. We need 100 or more start-ups for every Skyscanner; that is the ratio. We need to think about how to create and stimulate more very early stage companies. Some of them will become start-ups, others will disappear. Some of those start-ups will become scale-ups and some will become unicorns. The funnel narrows all the way. Our tasks are to widen the mouth of the funnel by normalising entrepreneurship and then to stop the funnel leaking. Not every company should become a scale-up, but a company that is formed and founded in Scotland should have the same ability to become a scale-up as it would in London.
Because of some of the frictions that we have talked about, we lose a few companies on the way. The ecosystem review asked which interventions would widen the initial funnel. If we do that, we will not have to worry about those cases.
It is important to understand that taking a company from day 1 to being the size of Skyscanner is an extremely difficult task for a founder. It is really tough and has a huge impact on the people who do it. What causes some people to go into business in the first place and keeps many of those founders going is knowing that they can exit at some point. If we were to make selling a company seem like failure, that would be a big mistake. That is not a failure—those founders think that they have succeeded.
The numbers vary, but Skyscanner has created up to 1,500 well-paid jobs and has worked with hundreds of other companies in Scotland. It is feeding new start-ups across Scotland with its talent. It has generated great tax revenues and continues to do so. It is not a failure because it has been sold. The founders feel successful because they sold the company. Selling Skyscanner for £1.5 billion, give or take, has created a huge amount of belief that we can do that kind of thing in Scotland. We should not view those things as failures. Failure is having a sparse environment where you get only one Skyscanner every so often. We must increase the numbers. When you do that, the rest takes care of itself.
After a certain point, it got harder for Skyscanner to grow in Scotland, because we could not attract talent after the company reached a certain scale. We might have gone on for longer independently if we had been able to attract people with great experience in initial public offerings in the tech sector. We had to open an office in London to attract that talent, which meant that not all our hiring was happening in Scotland. That goes back to my point about not having to do that if you have a critical mass of companies and can bring talent to Scotland, because the environment is fertile enough for them to stay, which also ties in with my point about scale.
Your other question was about universities, and relates to research and how well we do spin-outs. Scotland’s university sector is complacent. Back when we were one of the greatest entrepreneurial nations on earth, complacency was our undoing, and our university sector is complacent now. We conflate research with innovation. Research is not the same as innovation—innovation is research that gets turned into products and services that can be scaled to have an impact. That is a different thing and requires an additional set of skills.
The Muscatelli report, which was commissioned to look at spin-outs and that sort of stuff, was published at a time when there were 1,200 spin-outs in Scotland, with an annual turnover of £768 million. That is not success—it comes out at an average monthly revenue of £48,000. We are a bit complacent about our performance. Rather than trading statistics, I like to look at inputs and ask about that. For example, do we expose all our undergraduates to entrepreneurialism? No. Do we have incubators so that our students can launch their own start-ups? No. How many technical entrepreneurship courses are there in our universities? Very few, when Stanford has 165 for technical students alone. Do we regularly seek out best spin-out practice worldwide and implement it locally? No. Do we carefully train our academics who are spinning out to be able to run businesses? No.
I could go on. You mentioned equity stakes. Some universities take a 50 per cent equity stake in our spin-outs. That is the best way to kill a spin-out, because it has already lost half of its equity. I go back to my earlier point about exiting. That is just dumb.
When you look at the situation from an input perspective, you see that we are not yet world class. However, we have great research institutions. The question is how we capitalise on that asset in Scotland before it stops being an asset. There is a need to shake that up, and the entrepreneurial campus that I referred to when I was talking to Graham Simpson is one of the ways to enliven it. I do not want to suggest that all universities are the same. Some are far ahead and leading while others are far behind. However, we must take that asset and leverage it in a way that we are not doing.
Thank you for your comments so far and for joining us. I hear what you say about support in response to Colin Beattie’s question. We should all support entrepreneurialism and it should be politically neutral. However, some of the consequences of how we do that are clearly not politically neutral.
I am interested in some of what you said in response to Colin Beattie and Gordon MacDonald about scale, geography and the distinction between entrepreneurialism and innovation and, as part of that, the expectations on growth. I do not disagree that having a start-up grow and selling it off is a measure of success but not all entrepreneurs necessarily want to do that. In some cases, the company evolves in a way that it can carry on being innovative at a certain size and not continue to grow. I am interested in how we ensure that we get a spread of types of company. Do we think of growth just in financial terms or in innovation terms as well?
Given what you say about the need for that ecosystem and to have the expertise—the skills, knowledge and know-how—in a place, how do we ensure that people can be entrepreneurs all over Scotland, not just in the central belt where lots of people gather anyway?
That is an extremely important point. It is easy for us in such discussions to focus on what I would call scale-ups, because there are obvious advantages to having them—we have touched on some of those—and we would like to have them in Scotland. However, we also need to think about what I would call scale-deeps.
Think of scale as a spectrum. Scale-ups bring tax revenues and employment. They create exciting stories that attract people into entrepreneurship. That is all good. There are other benefits, too. Scale-deeps tend to be companies that will not scale. They have, perhaps, two or 10 employees. They are typically far more distributed around the country. Importantly, their product or service tends to directly benefit the community where they are located in a way that scale-ups’ services or products do not.
Bringing more focus to scale-deeps is extraordinarily important from a societal perspective. I am sure that we have all noticed that Scotland has a lot of post-industrial apocalyptic-type towns. A big part of addressing that is bringing focus to entrepreneurship in those areas. That includes social entrepreneurship. I do not distinguish social entrepreneurship from other entrepreneurship. It is about innovating to solve problems and address opportunities. If we could really stimulate scale-deep businesses, we would reduce our social security bill and make quality of life a lot better for our people.
There is a symbiotic relationship between that and everything that we have just talked about. I mentioned that scale-ups attract people into entrepreneurship, and that is good. However, if you want to have more Googles and Facebooks—or even another Skyscanner, which is not that big a company—you have to accept that you cannot grow giant redwoods in the desert. You have to tend the forest floor. If lots of people in this country are confident about starting a business, do not fear failure and are properly supported, you will see people who will scale up and found companies emerging from their ranks, in addition to the direct benefits of scale-deeps.12:00
Over many decades, our industrial policy has kind of flip-flopped in that regard. There have been times when scale-ups and tech have been in vogue, and other times when that has not been the case and there has been more focus on community entrepreneurship. We have to embrace the fact that those things are symbiotic, and we must develop policy that focuses on both elements. I believe that we can do that.
I go back to the point that I made earlier about connecting domains. You can think of a horizontal domain, which involves connecting different types of entrepreneurship, and a vertical domain, which concerns scale. All of the activity in those domains can exploit the same platforms and entrepreneurial infrastructure, if you co-ordinate things properly. The challenges that early stage entrepreneurs have are the same regardless of whether they scale-up, so why not use the same infrastructure?
The question is, how do we take the emerging infrastructure that we are building and extend it to properly support the scale-deep concept in relation to rural entrepreneurship, social entrepreneurship and so on? In the upcoming Stewart review, which I am anxious not to pre-empt, because it will be published soon, there are ideas that will significantly extend some of the ideas that we have talked about today to do just that.
I will give you a great example. One of the many ways in which it is difficult for women to participate in entrepreneurship is that our society is pretty sexist. A consequence of that is that we expect women, generally, to be the primary carer and home manager, which carries an enormous cognitive burden. That means that—on average; this does not apply to everyone—it is much harder for primary carers to, for example, access the city-centre incubation spaces that other people can. They tend to live within a certain radius. They drop the kids at nursery, go to the doctor’s surgery and the shopping mall and they do not have time to travel into the centre. To address that, we could make part of the scaler network mobile, through pop-ups that we can take to the places where primary carers are. That idea has been tried successfully in certain parts of the country, and it is just one example of the things that we can do.
In summary, we have an opportunity to think about the infrastructure that we are building and enabling to evolve over the next three, five and 10 years as a platform that represents a general solution, and to focus on scale-ups and scale-deeps, because doing that does not require twice the effort but will deliver 10 times the benefit.
Your question contains many other important points about limits to growth, what we mean by growth and what we are going to do to decouple growth from environmental and other damage. Those are all interesting questions, but we do not have time to address them today. We have big questions in front of us, but scaling up a social enterprise successfully is a great example of how we can deliver growth and, at the same time, solve those kind of problems. We tend to think of social enterprises as charities. Because of that, when the money runs out, they run out. What if we gave them the same support and incentives that other founders have? How big could they get? How many societal problems could be solved without having to put more money in? Those are the opportunities that are available to us.
Good morning. Over the course of this discussion, you have teased us a few times about the Ana Stewart review and, like you, I do not want to steal her thunder, because I know that something is coming out soon. Thinking about your role, I am heartened to hear how closely you are working with her, because, while looking at the key areas in preparation for today’s session, I picked up on the fact that there does not seem to be anything specific about actively encouraging female entrepreneurs, which, in my opinion—probably unsurprisingly—is a huge gap. Can you confirm that you see that squarely as part of your role?
Secondly, can you give us a flavour of the themes that you hope to see in relation to female entrepreneurs? What does an ideal Scotland for female entrepreneurs look like?
Sure. I will be careful about how I do that, because, as you said, no one wants to pre-empt the report.
On your first question, it is extraordinarily important that we address the appalling gender imbalance that exists in entrepreneurship. It just seems obvious that we see that as a priority and a category 1 issue. Why should we do that? I think that we all want a just society in Scotland. We do not want more barriers in front of one gender than in front of another, which is the case today. Do we feel okay about that? I do not. In effect, it removes a whole bunch of talent that we desperately need in a tiny country such as Scotland.
We must de-anchor ourselves from the idea that normal is okay—it is not okay. In my earlier career, I was in sessions in which a director would proudly boast that they would increase the number of female directors in the company by 10 per cent over five years. However, 10 per cent of 10 per cent is only 1 per cent of the whole. We have to ask ourselves whether we want incrementalism or whether we want to do something more dramatic. I believe that dramatic change is possible.
Let us talk a little bit about the Stewart review. A lot of good initiatives have come along that are aimed at addressing this problem—they do good. However, the structural problem is the same. Five years ago and beyond, the gender gap in entrepreneurship was more or less the same. The gender gap in tech is related. A lot of high-growth companies are in tech and, if women are to all intents and purposes excluded from, or find more barriers in, the tech sector, that has a compounding effect on the problem in entrepreneurship that we are discussing.
When we try to find solutions, we often look at proximate causes. We say things such as, “Women don’t get as much investment as men, so we should have a women-only fund” or, “Women don’t feel comfortable in incubator environments; we should have a female-only incubator”. The problem is that those and other examples are not the actual causes of underparticipation, so the solutions are temporary and get undermined by the deeper causes. If we want to properly address the issue as a nation—there is a huge opportunity to lead on it and get the benefits of leading—we must look at the full tree of cause and effect. When we examine that tree, we find that part of it is that our society is sexist. It has embedded gender stereotypes and an embedded authority gap. We have to start asking ourselves how to address those root causes and, while we are doing that, what mitigations we can put in place in the meantime. It has to be a portfolio response.
That is the nature of the report. I suspect that it will, to some extent, polarise people. Some people will find it too controversial and provocative, and others will say that it does not go far enough. It tries to set a direction and to present a different narrative on the issue from the one that we have had in Scotland before.
Ana Stewart and I are keen that we move away from the idea that we have to find a way to fix women so that they are more entrepreneurial—if only they were more confident and all that.
Yes. The last time that I was physically in the Parliament, when I was doing a session similar to this one, I spoke to someone at the end who said that her company was sending its women managers on a course so that they could be more aggressive, more this and more that—more like men. Why was the company not sending the men on a course to be more like women?
We must stop trying to fix women in order to address their entrepreneurial underparticipation; we have to fix society and mitigate the consequences of its current unfixed state, and those mitigations must be more profound than they have been in the past. We can do that—I am not naive about it—but there is no point in having another review that says, “Let’s set up a confidence course for women”, and then just moving on. There is no longer time for box ticking.
I made comments at the start of the evidence session about the crisis that we are in. This country, this species and this planet will experience exponential change that will be bewildering. If we cannot put our best minds at scale on to those problems for this country and for humanity more widely, we will be in big trouble. Those post-industrial apocalyptic wastelands that I mentioned will look tame in comparison with what is coming. That requires us to have all our best people involved in this, and a big part of that is ensuring that women who want to follow entrepreneurial career paths have the same access to those paths as men do.
I very much look forward to reading the review. I have one more question, which takes us back to where we started. The first thing that you mentioned was culture. Thus far, you have not reflected much on attitudes to risk and our cultural perception of failure. Will you give us your reflections on that? I know that you said at the beginning that culture can be changed easily, but it seems to me that our appetite for and attitude to risk is deeply ingrained, as is how we perceive failure, which, of course, in business terms, is simply learning. I would like some finishing reflections on that.
Certainly. I do not know how valid this statistic is, but it is probably in the right ball park—on average, successful founders have five failures before their sixth company, so you can see that, if we do not tolerate failure, we will not tolerate success. A fear of failure comes through in the data on how entrepreneurial Scotland is—it is a cultural thing.
How do we address that? I apologise, because this is anecdotal, but I guess that you could say that it is anecdotal at scale. When I say what I am about to say, I do not mean to disregard older founders—I am older than I was once, but I still want to be part of the debate. A generation of founders are coming through who have grown up in a different age. They do not remember all the shipyards in Clydebank and everywhere else closing down. They do not believe that they should grow up with a policy of managed decline, as was the case when I grew up. They live in an internet age in which every customer on earth is adjacent to them in a way that was not the case when we were struggling to maintain our steel industry and those kind of things. Every competitor is adjacent to them, too, so they have to be good founders, but every customer is available.
The internet has widely propagated exemplar founder stories and narratives about companies that have succeeded or failed. Younger founders are much more comfortable with the idea that they might not succeed first time, because that is what they see in their peer group. Where do they see their peer group? It is not in Scotland; it is international. The founders that they admire did not succeed first time, or they made big mistakes and recovered from them. They do not have the same fear of failure.
The more successful Scottish companies that we have and the more we hear those founders talk about failure, the more that failure becomes okay. For example, there is an organisation in Scotland—I will not say its name because it is a rude word—F, star, C, K up nights—that runs events in which people stand up and say, “Here is how I screwed up, and this is what I learned from it.” People talk about those stories, which makes others less and less scared of failure. That is happening, and we are making progress. I see good young founders failing and then getting back in the saddle and trying again.
I always believe that networks trump hierarchies. Whatever we in the Government think we can do, or whatever people in my position say to encourage people, people actually get reference points from their network—the people who are like them and who are experiencing what they are experiencing. If they see the network experience failure at greater scale and recover from it, they will be better equipped to deal with that, and that is starting to happen.
We need to switch the narrative in Scotland from why we cannot do stuff to how we can do stuff. That is important, because what we say affects people. For example, rather than talk about barriers, I want to talk about things that we can do, and we are starting to do them, which is creating that network effect. That creates a common voice, a common belief, a common direction and more exemplars, and those will feed the engine. We are on the right road.12:15
I have a number of questions, some of which have already been covered by my colleagues, as is always the way. However, I have other questions on the economy and on regional stuff. I want to follow up on your answers to earlier questions from my colleague Graham Simpson. You wear a number of hats: you were involved in the review, but you are now the chief entrepreneurial adviser. What is the nature of your role with the Scottish Government? Are you a contractor who is paid either directly or through a company; a civil servant or a special adviser who is subject to a code of conduct; or are you employed directly? What is the nature of your relationship?
I am employed through a contract. I have a company that is my consulting vehicle. I am paid via that vehicle, by contract.
On the questions that were asked earlier, you spoke about the process of your appointment and about having 30 years—decades—of experience in business. Would you have employed someone without having a formal interview process?
Sometimes, yes. If I had in front of me a person who was ideally qualified, they would be interviewing me. That is common in the world of scale-ups and start-ups, where the important thing is acquiring talent.
I cannot—and will not—speak to how the process works; that is for others to do. I can tell you what my involvement in it was, though. I could view my interview process as being about my experience, the STER and my work on the intense follow-up of that review. There were discussions about the role. I am aware that there were other candidates, so the process certainly was not all about me. I do not know the nature of those other discussions; I can only tell the committee about what I saw. Some people will take the view that my appointment was a good decision; others that it was a bad one or that the process was wrong. However, I would have to direct you elsewhere for an answer on that.
I suppose that we will find out at the end of the period. You are saying that you are confident that the Government knew you well enough from its experience and the like.
I want to ask about two areas. In an interview in August 2022, you said that
“there’s still not enough focus on the economy”
from the Scottish Government. That was only a few months ago. Has anything changed, or is that still your concern?
I would like to see increased focus on the issue. You might expect me to say that, and I am conscious that in my position I do not have the responsibilities of Government. I do not have to address other issues such as fair pay, which is difficult in the current climate, and I do not have exposure to a whole bunch of other aspects.
From my perspective, I would always like more. If you were to find me saying, “Do you know what, Jamie? I think that we have enough focus on this”, you should be concerned. To be more specific, a really exciting direction in entrepreneurship is under way. Frankly, I am grateful to the folks who I work with in Government that they are giving it time and attention. I am grateful to the cabinet secretary Ms Forbes that she commissioned the STER. I think that everyone in the tech sector is grateful that that happened and that she has supported so closely what we are doing.
I was not saying that there is a catastrophic lack of focus: good things are happening. However, I want initiatives to be implemented as quickly as possible. I realise that that goes into a wider difficult process. You will always hear me saying that, because we can always go faster in this area. If we do so, we create more tax revenues, better wellbeing and more jobs for people, all of which help with problems in the nearer term, which is why I consider it important. I am always restless, but I think that I should be restless about the issue.
We have talked about matters such as the work that is done by the Scottish National Investment Bank. However, how important in encouraging entrepreneurs is the business support that is provided by regional enterprise bodies such as Highlands and Islands Enterprise and South of Scotland Enterprise? Support can be given in many areas, but how important are those bodies? What do you see as being their role in the future?
In summary, they are a great asset. Our agencies do a lot of work that they cannot brag about on social media—they would be criticised for it—but that is very much appreciated by the companies that they work with. Again, I am sure that they could move faster and so on, but they are doing a lot of good work. I have recently been working closely with Scottish Enterprise—the biggest of the agencies—and I have been very happy with the level of collaboration that I have seen, which Adrian Gillespie and his team are leading, on how we can embrace and amplify the work that we are doing in STER, for example. Our agencies have an important part to play; there is a lot of expertise in them, which sometimes goes unnoticed but is appreciated on the ground.
I do not have any great criticisms of what I am seeing; I am delighted that good engagement exists. We can always do more together, but I like the fact that, as a whole, our agencies and our other bodies are starting to coalesce around the same system model, to which I referred earlier, so that we can start to reinforce one another’s implementations. I am pretty happy that we are starting to go in the right direction.
You have talked about confidence. Scotland has a great entrepreneurial past; I am from the northern isles, and I think that we still consider ourselves as entrepreneurs, with companies such as Kyloe Partners in Kirkwall. On the point that you have made to Maggie Chapman, it is vital, as you said, that we do not just focus on the central belt, the north-east or areas that perhaps have traditional bases.
What do you see as the barriers to your delivering an entrepreneurship agenda across the whole of Scotland and, in particular, in remote areas?
It is important to remember that, in a rural population, proportionally more people are entrepreneurial—partly from necessity in that environment. It shows us that entrepreneurialism is innate; the reason why we are all still here as a species is that our ancestors had entrepreneurial solutions to survival problems. We have that latent potential.
It is important that we do not see rural entrepreneurship as a problem to be fixed and, instead, we see it as an opportunity to be leveraged. It is easy to fall into a model that says that we have an alpha city in Edinburgh—relatively speaking—and that the rest of the country is a problem to be fixed. We have to see rural entrepreneurship as a network that we can strengthen, which will require us to natively design policies to work for our entrepreneurs—I have talked about things such as incubation, founder education, building a network of like-minded individuals, the right type of funding and so on. I believe that doing so will also work for city dwellers, whereas doing it the other way around often does not work for the rural entrepreneur.
I do not want to overindex on that point. However, I will provide an example, which we have all heard of, of how we can design and bring to rural communities a resource that has previously been considered to be static and based in city centres: we can add a mobile component to the scaler network so that it can take expertise, digital marketing and business skills, and appropriate microgrants to rural areas and bring people physically together in a network. I am working quite a lot with Jackie Brierton and GrowBiz to understand her thinking about that issue.
The interesting thing is that, if we do that, the same solution will work for primary carers, for example, who cannot always be in the same places. It is another example of how the same solutions can work for multiple entrepreneurial categories if we think about them systematically.
I suppose that infrastructure—be it broadband, transport or homes—can often be a big barrier. We have issues in city centres, too, around housing, but infrastructure issues can often be a major barrier to somebody choosing to build their business on an island, for example.
The requirement for very high-speed broadband across the country has been well reviewed and discussed, probably by the committee and in other areas. It is, of course, extremely important.
We also need to think about the fact that rural entrepreneurship and entrepreneurship in disadvantaged city areas often have the same problems, including lack of access to basic infrastructure such as good internet connectivity and incubation facilities. There is a lot of lost talent in those areas, so we must ensure that we solve that in a layered way.
The provision of internet connectivity is not really a capital spend issue. It seems that we can always find capital spend, but who is going to pay the internet bills every month? That is not capital spend. If the answer is that no Government department or anyone else wants to do that, the capital spend will amount to nothing.
We can solve the problems and we have to start solving them. We owe it to our citizens to find ways through the logistical challenges. I return to the point that, if we solve them for rural entrepreneurship, we will probably also solve them for inner city entrepreneurship and people who are in more fortunate positions.
Graham Simpson has a short supplementary question.
It will be very short. Thank you for what you have said today, Professor Logan. You have come across really well. Are you going to produce progress reports for the Government and this committee?
Yes. I am currently producing reports not against my work, but rather through the work that I am doing. For example, we have just published the STER two-year progress review. That came out in November or early December. I am very actively involved in that programme. Likewise, I expect that we will do the same with the Stewart review, which I am close to.
If, in addition, members would like a report on all my activity across individual things, I am very happy to consider producing such a report regularly.
Thank you. That is helpful. The clerks and I will discuss how we develop the future relationship. Thank you very much for the evidence that you have given this morning and for being so generous with your time. We now move into private session.12:27 Meeting continued in private until 12:51.
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