Part 1 – Then – What has endured
Introduction
When I started my accounting practice and freelance Finance Director service for technology companies in September 2002, it was a turbulent time.
Scotland was still reeling from the dot com boom and bust and Motorola had recently announced the closure of their Bathgate plant, which was the latest setback to a policy of encouraging inward investment which had led to the central belt being called Silicon Glen – electronics manufacturing in Scotland had grown to the extent that Scottish factories made 3 out of every 10 personal computers sold in Europe and two thirds of Europe’s cash machines were manufactured in Dundee. But with the downturn, these jobs were the first to disappear.
Scottish Enterprise was also in the process of reorganising away from local enterprise companies (LEC’s) for each region to the national organisation that it is today. LEC’s became wholly owned subsidiaries of Scottish Enterprise in 2000 and were subsequently wound up.
The aim now was to create higher value, home grown jobs instead.
In Part 1 of this blog, I look at what from that time has worked and endured to this day.
The Investment Scene
Archangels was the only Angel Syndicate then that is still around now and, according to the book “The Archangels Share”, it is the oldest operating angel syndicate in the world – it set the model for others to follow.
The Scottish Co-Investment Scheme, where Scottish Enterprise matched investors’ investment, started in 2003 and helped attract more investors to Scotland and increase the funding accessible to Scottish tech companies.
Both have underpinned the growth in the investment community that I have seen since starting my business.
R&D Tax Credits
R&D Tax Credits were introduced in 2000 for SME’s and a Large Company Scheme was introduced in 2002. From 2003, SME’s were also able to access the Large Company Scheme to claim R&D tax credits on grant assisted projects and subcontracted work.
R&D Tax Credits have been a vital source of funding for our tech companies – more about what has changed in this area to follow in Part 2, as recent developments on this subject are very concerning.
SMART:Scotland Grants
These grants provided through Scottish Enterprise have helped validate tech companies’ technology to investors. The up-front nature of the grant payments has aided cashflow, while the need for matching funding has encouraged investment into early stage companies.
I consider these another vital factor in how our tech sector has grown.
I have not been able to get a definitive list of all of the SMART Scotland recipients but my best estimate is that at least three quarters of the 80 tech companies that we have worked with since 2002, have been SMART grant winners.
Enterprise Investment Scheme (EIS)
The EIS scheme was introduced in 1994 to replace the Business Expansion Scheme and was targeted at start-ups and early stage businesses where the risk to the investor was greater. Over the years, the emphasis on risk and on companies undertaking research, development and innovation has increased, as has the tax relief on offer.
In 2012, the Small Company Enterprise Investment Scheme was introduced, offering even greater tax incentives for investors for investing in earlier stage companies.
We have seen at close hand the difference that SEIS and EIS has made to tech companies’ ability to raise investment as almost all of our clients now seek SEIS/EIS investment.
Young Company Finance
I cannot conclude this list of what has endured since 2002 and contributed to the Scottish Tech Sector without mentioning Young Company Finance.
Subscribing to YCF in January 2003 (Issue Number 49) was a key part of our success, as the February issue included a list of SMART grant winners and, from calling the winners, I recruited three of my first tech company clients.
The June 2003 issue mentions the first YCF conference to be held at Stirling University in September that year. These conferences have also been invaluable networking opportunities and last week I attended the 2023 event.
Accountech
I started my business as Stephen Gibbens CA – but later incorporated and changed the name to Accountech.
It started as just me, with my wife helping with the bookkeeping, but now we have a team and a network of subcontractors.
We still help clients with getting ready for investment, R&D Tax Credit Claims, SMART Scotland grant applications and claims and EIS advance approval and advice, and I still read Young Company Finance every month and attend their conferences!
To be Continued
This is what has worked and what has endured since 2002.
The list of what has disappeared is much longer as you can see from the attached list of companies and support organisations featured in the 2002 issues of Young Company Finance – how many can you recognise or remember?
In Part 2, “Now – What has Changed”, I will look at what has changed and how much better placed Scotland’s tech sector is now than it was back then.
Who could have foreseen in 2002: a banking crash, the UK leaving the European Union, artificial intelligence, climate change and a global pandemic?
