Here are my Hot Takes on the new report by Mark Logan ( @Mark_Logan1) on Scotland’s tech entrepreneurial ecosystem, or as I call it: Logan’s Run of Really Good Points But a Few Things I Differ With https://www.gov.scot/binaries/content/documents/govscot/publications/independent-report/2020/08/scottish-technology-ecosystem-review/documents/scottish-technology-ecosystem-review/scottish-technology-ecosystem-review/govscot%3Adocument/scottish-technology-ecosystem-review.pdf

Most importantly, the report gets what a system is. That success creates feedback loops that helps everyone. Fundamentally, this is the most important realisation for policymakers.

Just as importantly, it understands the many short term and long term factors impacting the overall ecosystem. It recognises that there are many policies that aren’t politically palatable because the ROI isn’t measurable or take too long to appear.

The report absolutely nails the importance of education at all levels, both in terms of STEM skills and business skills, along with reducing barriers for girls in pursuing computer science education. And it identifies the importance of education outside the school/uni system.

It also highlights the many problems we have in Scottish universities in promoting entrepreneurship. The messed-up system of university regulation and incentives makes it near-impossible to set up interdisciplinary entrepreneurship classes.

The recommendations are largely on point. Particularly around the importance of improving Scotland’s ability to attract and retain migrants and immigrants, from early-stage workers all the way to senior managers.

However, I have three major bones to pick with the report. The first is its framing about the ‘tech’ ecosystem rather than high-growth entrepreneurship in general. I doubt this is Logan’s fault, but rather the brief he was given.

Scotland has lots of high-growth firms outside the ‘traditional’ zone of internet-based tech. BrewDog is in theory the latest addition to the Scottish Unicorn Club. Food and Drink, Oil and Gas, Tourism. These are all critical sectors that can and have produced high-growth firms.

After SkyScanner, NuCana and TCBiopharm, the largest recipient of VC investment from Edinburgh is the Isle of Harris Distillery (my data’s a bit out of date and only looks at the east of Scotland, but the point still holds).

There’s nothing in the report outside of the importance of computer science education that doesn’t apply to firms outside the tech sector. I just hope that the framing of the report doesn’t minimise the importance of entrepreneurs outside the tech sector.

Second, the report frames the fundamental goal of the ecosystem as producing unicorns. After all, it is Scotland’s national animal.

But that’s not the goal of the ecosystem, at least from a policy perspective. The goal is to improve overall social welfare by creating jobs and prosperity.

There’s an increasing body of evidence (by @ndrlee @rodriguez_pose and others) that tech unicorns by themselves don’t actually produce benefits for the rest of society. While they create good jobs, there are few local supply chains so the investment and profits don’t spillover.

It would have been good to mention the growing movement towards zebra firms ( @Zebras_Unite) — prioritising the much larger population of moderate-growth firms (say, 10 - 100 million in value) and those that produce social benefit. Mittelstand for the win!

But the biggest issue I had with the report is its tendency to look to important Silicon Valley. There are 18 references to SV in the report and some of the recommendations are bringing in Valley successes to help train and inspire Scotland’s entrepreneurs.

It’s not that these are bad ideas, it’s just that they’ve been tried here and elsewhere, and they haven’t been that successful. What works in SV works because of particular institutional, economic, and cultural contexts. Scotland has very different context.

Scotland will never have as a dense concentration of talent, investment capital, or R&D activity (or sunshine) as Silicon Valley. That’s not a bad thing, it’s just a thing. And we need to plan with that in mind rather than replicate what worked there.

For example, as I’ve pointed out before, in 2016 Edinburgh had the third highest per-capital rate of unicorns in the world, just behind SV. But at that time Edinburgh had 2 Pointy Bois while I counted 60 in the Bay Area.

Despite the areas of contention, this is a good and important report. It will hopefully build a cohesive narrative around Scotland’s entrepreneurial ecosystem and produce some policy goals we can work towards.