AS I SEE IT: Scotland shouldn’t worry about selling its tech stars, says TERRY MURDEN
The sale last week of a tech company from Scotland’s burgeoning tech sector has sparked yet another tantrum from those who feel local businesses are too eager to take the money and run away . It’s a long-standing debate that tells us more about the size and ability of the Scottish economy to support growth businesses than any short-termism on the part of entrepreneurs.
Current Health, which was acquired by US-listed company Best Buy for what is described as a “significant” sum, has grown rapidly since its inception just six years ago by Chris McCann, a dropout from the University of Dundee. He and his business partners have developed software for remote patient monitoring that can change the doctor-patient relationship. Its platform is used by many of the world’s largest health systems, including the Mount Sinai Health System, Geisinger Health and the UK National Health Service.
During the pandemic, when remote services were the clear winner, the company saw an impressive 3,000% increase in revenue and 400% expansion in its customer base.
No wonder it has attracted a lot of attention from domestic and foreign investors. Edinburgh-based private equity firm Par Equity has conducted six investment rounds, and in April of this year the firm raised $ 43million (Â£ 31million) in one round Series B financing led by the American company Northpond Ventures.
Oddly enough, the story of its sale last week was not reported by the rest of the Scottish business media who also failed to pick up on April’s substantial fundraiser. However, our story has attracted some comment on social media, especially from those who regret the loss of another Indigenous business to a foreign buyer.
Such a criticism is understandable as any nation needs a solid stock of home-based headquarters that attract policymakers, investors, advisers, R&D, and supply chains.
However, Mr McCann, who has already focused his business in Boston, has welcomed his new major shareholder, not only because it will make him a rich man, but because he believes that being part of a large American company will accelerate. his growth plans. , allowing it to evolve in a way that would be more difficult if it remained a small Scottish company.
I remember once again a phrase coined 25 years ago by Frank Blin, a former partner of Coopers & Lybrand / PwC, who said that Scottish growth companies would inevitably hit a ‘tartan ceiling’; in other words, they could only grow to a certain point before they had to sell to take the next step. This has happened several times over the years.
On the negative side, this can be interpreted as a lack of ambition, but in part it can be attributed to a lack of actors capable of providing this higher level of financial support. Even vaunted investment highs tend to deal with fairly modest funding levels at first, while banks – who speak well of supporting SMEs – feel more secure in offering loans, which means they can offload part of the risk onto the entrepreneur and hope to get their money back.
This leaves many growing companies to rely on business angels, an IPO, or a commercial sale to a partner with deep pockets. Among those who have opted for the latter route are BlackCircles (acquired by Michelin) and Skyscanner (acquired by the Chinese firm CTrip).
Is it a bad thing that we see so many of our rising stars rushing into the arms of alien suitors? In addition to the points raised above regarding the need for a strong indigenous business base, we need to support internal acquisition as it provides funding for growth that Scotland is unable to provide.
Scottish Enterprise and the new Scottish National Investment Bank are among the largest institutions that are supposed to ’empower’ the next generation of businesses, but they also have their limitations. For entrepreneurs, however, they often use their big payday to fund their next big business.
In the case of BlackCircles, founder Mike Welch started an online fashion retailer and another tire business in the United States. Gareth Williams of Skyscanner has become an angel investor in other startups (including Current Health). Chris McCann will remain with his business and will plan for his newly developed business to take a large chunk of this rapidly growing remote patient monitoring market. But don’t be surprised if he launches one or two more businesses in the near future.
Terry Murden has held senior positions at The Sunday Times, The Scotsman, Scotland on Sunday and The Northern Echo and is now editor of The Daily Business.
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