Scotland Should Cut the Unicorn Obsession and Continue to Build Strong Companies
Peter Proud, CEO of Cortex Worldwide, believes that Scotland having ten £100 million-valuation companies generating profit and good jobs is better than focusing on one unicorn.
As Scotland continues to cultivate a reputation as a hive of tech innovation and attract ever-more companies, the sector must avoid falling into the trap of focusing too heavily on the superficial and material, says Peter Proud, CEO of Cortex Worldwide.
Instead, he believes companies must focus on substance and avoid a Silicon Valley-style, high-octane cash culture.
Scotland’s technology sector is experiencing somewhat of a renaissance. There are a plethora of companies scattered throughout the country developing great products, selling them to global markets and raising eyebrows across Europe and further afield.
In August, a report from Tech Nation showed that technology companies had raised more than £43 million in funding to that point in 2019 – and that number has likely increased since. Additionally, throughout the entirety of 2018, tech firms in Scotland raised a grand total of £182.6 million in funding.
While those numbers make for great reading, are a real confidence booster and showcase the growing strength of the scene, it pales in comparison to some other parts of the globe. But that’s nothing to get down about, Proud insists. Focus on building great companies and great products – don’t chase the money and seek to emulate sectors elsewhere worldwide.
“People in the US think that $100 million is a small investment,” he says. “I speak to some of my peers with companies of the same size and they’ll say ‘we’ve only raised $100 million so far’ – and if that were in Scotland, then that’s a lot of money.
“But, then again, what makes Scotland a great place to start a business is the cost base is much lower. They will need that $100 million because the property costs are what, five times as much? The salaries are probably four times as much as well, so, therefore, we’re in a very good place here.”
Scotland has a global appeal, but it also wrestles with the question of just how loud the country should be shouting about itself. Let the world know Scotland has it all; the culture, the location, the pricing, the infrastructure.
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“In Scotland, you’re kind of central or halfway in the time zones between Asia and North America,” he says. “Property prices and the cost of offices even in the centre of Edinburgh is cheap comparatively if you want to do something in New York or Seattle or London.”
“If you’re entering a product to a global market, why do you care where you’re based? “We’re charging the same for our products as the guys who are building in the Valley.”
Sometimes to its detriment, Proud suggests, the sector continues to highlight companies such as Skyscanner as an example of what the country can produce. This is due to a Silicon Valley-type culture that slowly festers in the collective minds of entrepreneurs and founders.
When looking elsewhere, envy can creep in and fuel a desire to replicate previous successes – this leads companies to think they must grow rapidly without fully considering the impact it could have upon the company or its longevity
While the Skyscanner example is a huge positive for Scotland and sets the benchmark, Proud insists the sector must collectively place greater value on scaling companies and generating revenues, rather than seeing firms achieve a certain ‘status’.
“What people need to start understanding is that they’ve not raised money and they’ve not raised investment; they’ve sold a part of their business to be given cash,” he explains. “You’re slowly and surely selling your company away by doing this and raising money. People need to realise that somebody has not given you a gift – you’ve given up a percentage of your business.
“If you have companies that go and sell themselves cheap by giving away lots of equity to raise money and shout about being a unicorn – without generating anything for the local economy – then that’s a bad thing.
“I would rather see ten £100 million-valuation companies that are turning over £20 million a year and giving good jobs to people in Scotland. That’s a far better path to follow that focusing on one unicorn here or there.”
So far, Cortex has avoided the perilous venture capital path and, instead, has chosen a more organic route. In 2014, the company began with just five staff. Today, the company has grown significantly with 36 staff and, looking forward, Proud has global ambitions.
This method has enabled the company to build solid relationships with clients, bring in the right talent and implement a strong product focus – something which he says companies often neglect to “chase cash”.
He adds: “I think sometimes companies get dragged away to chase cash and they do lose focus, but what you’ve got to do is be very disciplined with yourself; make sure that if you’re doing services for other people, that this is actually contributing to your thinking about what a product looks like.”
- Peter Proud, CEO of Cortex Worldwide, is taking part in a panel discussion titled ‘Selling the Future’ at ScotSoft, hosted by ScotlandIS.