Scaling up: Building a vibrant ecosystem for a thriving economy

Scotland’s path to a thriving economy lies in scaling up its innovative SMEs, leveraging academic excellence, and fostering a dynamic investment ecosystem.

As Co-Chair of the New Deal for Business Group (NDBG) with Deputy First Minister and Cabinet Secretary for Economy of Scotland, and an investor and academic entrepreneur myself, I envision an exciting horizon where Scotland’s economy thrives through innovation, entrepreneurship, investment, and internationalisation.

Small and medium-sized enterprises (SMEs), which make up 99.3% of all private sector businesses in Scotland (as of March 2023), are crucial to this vision. To reshape our economic landscape and positively impact lives globally, SMEs evolving into scaled-up ventures and successful tech businesses is key, adding more Unicorns to the UK’s roster.

Our universities stand as towering beacons of scholarly knowledge, research, and invention. With ambitious leadership, an inspiring entrepreneurial culture, business-friendly infrastructure, and a supportive policy environment, they can be powerful catalysts for excellence. They have the potential to drive and generate new waves of high-tech SME companies and innovation from their epicentres.

How can universities drive high-tech SME innovation?

Innovation is the lifeblood of economic growth, distinguishing leaders from followers. In the UK and Scotland, universities are hubs of groundbreaking research and development, producing world-class ideas from renewable energy technologies to advanced healthcare solutions. For example, the University of Strathclyde excels in quantum technology, the University of Edinburgh leads in artificial intelligence, the University of Glasgow pioneers in space sector research; and the universities of Dundee and Aberdeen are at the forefront of life sciences and drug discovery.

More than half of all business growth stems from innovation, making it crucial to adopt an informed approach to maximise benefits. The challenge lies in translating innovations into market-ready products and services. This requires technical expertise and a supportive, vibrant, and inclusive ecosystem encouraging experimentation and risk-taking. Sector-specific incubators and accelerators must back innovative spinouts and startups with skilled enterprise personnel, niche resources, access to experienced entrepreneurs, diverse role model leadership, industry mentorship, and the right investment capital to scale.

Entrepreneurship drives innovation to market, and Scotland’s universities and colleges play a crucial role in fostering this mindset among students and researchers through skills training and incubation. Scottish Enterprise supports this by providing unique training, grant and equity funding, and networking opportunities for high-growth spinouts.

However, fostering entrepreneurship extends beyond supporting startups. We need a people-centric culture that celebrates success, views failure as a learning opportunity, and encourages risk-taking. This can be achieved through increased university-industry collaborations, allowing students, researchers, and founders to hone entrepreneurial skills, tackle real-world problems, and develop solutions for global society.

What is the role of investment in scaling up Scottish businesses?

Investment powers innovation and fuels entrepreneurship. Scotland boasts a vibrant investment landscape with several venture capital firms and angel networks. However, to truly scale our companies, we need more substantial, diverse, inclusive, and sustained investment.

Enhanced fair investment in women and underrepresented ethnic minority entrepreneurs is crucial. Scottish National Investment Bank’s public sector investment and Scottish Enterprise’s co-investment funds and applied awards, such as SMART grants, incentivise and de-risk capital for private investors. Yet, broader private sector involvement is needed, including unlocking new sources like pension funds via the National Wealth Fund (£7.3bn) and Mansion House Reforms. Attracting global investors and encouraging local investor syndicates to take larger risks, investing fairly and early on and in key sectors (despite revenues being distant, such as in MedTech and life sciences) would support sustained and high growth.

How can policymakers and industry collaborate to support Scotland’s scaling ventures?

To drive Scotland’s economic growth, a coordinated effort is needed. Policymakers should increase funding for R&D, focusing on high-potential sectors like renewable energy, health/life sciences, biotechnology, and AI. Creating tax incentives for investors who fund scaling ventures would encourage more private sector involvement. Supporting business incubators and accelerators associated with universities and TechScaler is crucial. Additionally, leveraging international leadership experience through assets like SDI and networks such as GlobalScot is essential.

Academia must enhance entrepreneurship education, integrate it across all disciplines, promote industry collaboration to solve real-world problems, and streamline the commercialisation process and intellectual property (IP) and spinout frameworks. Industry needs to invest more in university research, offer mentorship and resources to startups, and participate in joint ventures, especially with a focus on supporting diverse and women founders.

The future of the UK and Scotland’s economy depends on our ability to drive innovation, foster entrepreneurship, attract international investment, and successfully market our business solutions globally. By leveraging our world-class academic institutions and promoting collaboration between policymakers, academia, and industry, we can create a vibrant ecosystem of scaled-up ventures. These ventures would generate new ideas, develop innovative products, protect IP, create jobs, increase tax revenue for better public services, and drive sustainable economic growth. Let’s seize this opportunity to shape a prosperous and impactful future together.

Dr Poonam Malik FRSE, Co-Chair, New Deal for Business Group; Board Member, Scottish Enterprise and Skills Development Scotland; Chair and Co-Founder, Microplate Dx Ltd; RSE Economy and Enterprise Committee and Diversity and Skills Panel member.

This article originally appeared in ReSourcE summer 2024.

The RSE’s blog series offers personal views on a variety of issues. These views are not those of the RSE and are intended to offer different perspectives on a range of current issues.