Today the annual Engage Invest Exploit conference took place in Edinburgh. Described as “Scotland’s premier annual investor event, showcasing the best companies spinning out of Scotland’s world class universities and start-ups from our wider entrepreneurial eco-system”, the event was significantly larger than previous years.
There were two keynote talks during the event – Sir Tom Hunter (Scotland’s first home-grown billionaire businessman) and a later keynote from Sherry Coutu CBE (see post here). I wrote a liveblog during the event on the MBM Commercial Startup Blog. I’ve reproduced the notes here as there are some valuable points made by both speakers – apologies for the length but I’ve not spent any time tidying this up yet.
EIE’13 Keynote: Sir Tom Hunter
Tom started by stating that it was an honour to be at EIE13 today for one simple reason: the entrepreneurs who start, grow and build businesses are his heroes. Since he sold his Sports Division business back in 1998 he’s become an ‘entrepreneurial anorak’. He loves entrepreneurs and to work out what makes them tick – because quite simply we need them to succeed. If the entrepreneurs in the country succeed, Scotland succeeds
Back in 1998, Tom sold his first business but he’s more interested in talking about something different today. In that year, a beautiful G4 gulf stream airplane landed at Edinburgh. On board was one of the world’s best technology investors, Eric Schmidt (back in the pre-Google days). And the point is that he had travelled to Scotland to visit a Scottish tech company because he felt that it was worth it. The internet was a very different place back in those days. Remember, back at the time of that visit in 1998, there was no Google (which started on 4th Sept 1998); iTunes didn’t start until 2003; Facebook didn’t start until 2004.
Eric Schmidt was visiting Orbital Software which, when it listed, made its then CEO, Kevin Dorren, the youngest CEO to ever IPO. Orbital was of course subsequently swallowed by a technology giant. If you listen to many people, they will claim that this was a failure. Tom is adamant that this is not the case. The reason? After making the cash from the successful exit, both founders may have travelled to seek education but they then came back to Scotland and – importantly – brought their knowledge back to the country to help others build businesses and to create opportunities. Both along the way have created hundreds of sustainable jobs in Scotland.
Small to medium sized businesses are the lifeblood of our economy – and indeed of any economy. We need to foster and build as many successes as possible. The media will often tell us that selling out the business to a foreign acquirer is a ‘bad thing’. But this is so far from the truth because entrepreneurs have it in their blood to go again – to pay their taxes, to repeat it, and by doing so, to make the economy flourish.
If we look back at the example of Orbital, it proves a number of things. First, in Scotland, we can build globally acclaimed tech businesses. Second – we can attract the biggest and best investors. Thirdly, our entrepreneurs are serial in nature, and by virtue of their successes, they are delivering the much-needed tax.
Remember that back in 1998, some people at the time didn’t think the internet was going to continue. A sizeable proportion of of folk thought that it would collapse catastrophically – after all, who was ever going to buy goods over the internet, read news on the move etc. Yet on Tom’s last trip to Rwanda, Tom noticed fishermen using their web-enabled mobile phones to check the best prices and locations for them to sell their catches. The mobile phone is the single most powerful thing in the mobile world – it’s being used to increase trade, prevent civil unrest and getting people out of poverty.
Eric Schmidt’s predicts in his new book that the 2 billion users on the internet who grow – in the short term – to 7 billion. That is explosive growth and will allow a designer in Madagascar to compete with Edinburgh firm – or as Tom prefers to think of it, a designer in Edinburgh to compete with one in Madagascar.
The Head of Goldman Sachs has personally told him that he views SME’s as by far the most important sector for any economy. Similarly, the Chairman of a major music company has told him he now insists on spending 50% of his time in Silicon Valley as he is determined that he will never again be caught out again by an upstart grabbing control of music distribution. And then you have Sergey Brin telling everyone that is not the tech behemoths such as Microsoft that he worries about. It’s the guy in his bedroom. So why not someone in his bedroom in Scotland? If some of the brightest people in the world can identify this as a source of the next big disruptive business, why should we not?
Tom talked about his frustration when he hears entrepreneurs moaning. Don’t moan about the barriers (there’s just no funding, support organisations are useless etc). He just doesn’t accept that that is a valid reason. In Scotland, 4 of our universities are in the top 100 universities globally – for a 5 million country, we’re punching way above our weight. Another trend: look at some companies that are now choosing to leave the Valley to return to the UK to seek funding. Shazam, for example has returned to the UK precisely for that purpose).
Entrepreneurs have an incredible chance to succeed and they remain the lifeblood of our economy. Scotland’s history is unbelievably rich and our endeavour is almost unparalleled
We’re also on the cup of getting the support right for startups. There is a marked improvement in collaboration – look at the various organisations involved in today’s event which has grown significantly this year. The Scottish Government is, in his view, listening – something to do with the Referendum next year, perhaps, but make the most of it.
One of the key stipulations that Tom gave RBS when they went into Entrepreneurial Spark was that they had to commit to actually embedding their managers into the hatcheries for one simple reason – it would teach the bank managers to adopt a far more entrepreneurial mindset. Entrepreneurs can only depend on one thing though – themselves. If you’re going to worry about referendums, tax or a myriad of other external factors – forget it. Go and be a politician
As you continue or consider building a business, note that SME’s account for almost 50% of all UK’s economic output and 60% of employment. Yet startups only get about 6% of available finance! So we need to innovate in funding models. A great example is Brewdog in Fraserburgh. Founded in 2007 founded, it has now become Scotland’s largest independent brewer, with global exports. When they couldn’t get finance, they innovated – crowd funding raised £3 million. But even more importantly, it turned every investor into a loyal customer. They even had 2000 people turned up to their AGM in Aberdeen! Not to harangue the board (perhaps the free beer helped…) but because they loved the brand.
Another of his gripes is common: every business plan that he’s ever seen shows a line that goes straight up and to the right. None ever tells the truth – a tough year in Year 1, a catastrophe in Year 2, back to beg for more cash from the investors in Year 3! The only people that Tom is interested in investing in these days are the ones that come up to me and show me how they’ve dealt with adversity. Fail fast, fail cheap and do it again.
When Tom came into his wealth from the sale of Sports Division, he had to work out what to do, at the ripe old age of 37. So he knocked on the door at Carnegie Corporation to see the President
and received some fantastic advice. He was told that the great wealth that had come into your hands was not actually his and he was challenged by the question – what is your legacy going to be? Tom didn’t understand this at the time but now he’s worked it out and he hopes everyone else in the room today will do so as well.
So what is your legacy going to be for Scotland, for the Uk, for us all. If you are an entrepreneur, we simply need you to flourish. And if you do, we do.