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NEWS & INSIGHTS | article

Scottish entrepreneurs accelerating Net Zero

19 August 2022 7 minute read

According to current government targets, in just over two decades – to be exact, by 2045 – Scotland will have achieved net zero. But there’s currently a problem: a good bit of the technology required is still emerging or at research and development stage.

This is clearly a challenge for those tasked with getting us to that point, but it also presents a massive opportunity for innovators and start-ups in Scotland and beyond. If they can design and develop the required solutions, and have them adopted, the market for clean energy technologies will be huge and prosperity, jobs and a stronger economy will be created.

However, many of these fledgling companies require support in order to turn their plans and ideas into action. Building high growth start-ups is something of an uphill task in Scotland compared to other countries.

According to the Scottish Government, we lag behind comparable economies when it comes to indicators of entrepreneurial dynamism, particularly in business survival rate – 57 per cent of Scotland’s start-ups survived to three years and 42 per cent survived to five years, which is much lower than other advanced economies.

There is also a distinct gender gap when it comes to start-up founders in clean energy as well as other sectors, resulting in an undoubted constraint on ingenuity.

Scotland’s Net Zero Technology Centre (NZTC) aims to boost the energy transition by helping high-potential, diverse start-ups grow and flourish through its TechX Clean Energy Accelerator programme.

Mark Anderson, NZTC’s TechX Director, describes the organisation’s accelerator programme as being a “bootcamp for start-ups”. Participating companies are provided with a generous grant of up to £100,000, 15 weeks of expert mentorship and two years of specialised growth support to help them to progress further towards eventual commercialisation and beyond.

“Scotland’s future entrepreneurial landscape and net zero goal is dependent on innovation and start-ups in particular tend to drive this, accelerating new technologies that will enable us to cut back on greenhouse gas emissions. That is why support for emerging start-ups is essential during the transition to net zero; their ingenuity, passion and stamina will help us reach our goals.”

More often than not, start-up founders demonstrate a high degree of tenacity and commitment. Many take on significant personal risk and may forgo an employee’s salary in order to follow their passion and grow their business.

Lawrence Ellison, co-founder of Oracle, struggled to make the business a success initially, mortgaging his house to keep the firm afloat before it became one of the most successful technology companies in the world. Challenging, to say the least, as for every successful idea there are thousands that fail. But all this does is stimulate innovation; the need to discover something new that can leave lasting positive change.

Reid Hoffman initially created the long forgotten SocialNet, an online dating and social networking site that lacked focus and clear purpose, and with no market appeal at the time, the site ultimately failed. Taking learnings from this, Hoffman went on to co-found LinkedIn which would revolutionise how business professionals and job seekers network and converse.

The lesson, entrepreneurs may fail fast, but they learn fast too, innovating until they find success. “Developing a new idea into a successful business can be really tough” says Mr Anderson. “It takes time, money and a lot of resilience. It’s a slow burn.
“Founders often have a lot to learn and need the right support. From deciding on their business model, developing a technology that works, to discovering more about the needs and demand from potential customers. Building the right team is essential, as well as enticing equity investors to fund the business sufficiently.”

Equity investment secured by Scottish businesses increased 36 per cent to £690 million in 2021, up from £509 million in 2020, and strong growth was seen for start-ups in deals under £10 million. While many investors still favour later stage companies, this encouragingly demonstrates that more early stage businesses are being seen as investable propositions by angel networks and venture capital firms.

Delivering through diversity

“At NZTC our TechX Accelerator programme is looking for start-ups with their own defensible technology,” Mark Anderson says. “And we need to be convinced by the founder and the team – investors aren’t just looking at the technology solutions, they are investing in the people.

“They need to be credible and have what it takes to grow the company. If they don’t have the right skills, they need to have a plan to bring them onboard, which could present an opportunity to ensure diversity in their teams.”

Evidence shows that while currently only 21 per cent of SME business are led by women, women-led businesses contribute more than £5 billion towards the Scottish economy. The gender gap in Scottish entrepreneurship presents a real need to increase the number of female company founders.

“For this year’s accelerator cohort, we set an aim for 30 per cent of shortlisted start-ups to be led by women, as CEO or another senior leader with an equity stake in the company. This led to over 40  per cent of the cohort being represented by female leaders or co-leaders. And as part of our programme, we offer a dedicated session on the tangible benefits of having a diverse team,” Mr Anderson says.

Having a gender diverse company helps to widen viewpoints, it allows ideas to be developed from different perspectives, and it increases productivity.
Hiring people from a range of backgrounds increases the likelihood of employing the right person for the right job. Staff working as part of a diverse workforce tend to feel respected and valued, and are more likely to stay with the company, reducing recruitment and retention costs.

It has been documented that venture capitalists find higher returns on investment in women-led start-ups, with female-led companies generating 63% more value for investors than those male-led.

“The gender gap in entrepreneurship, and particularly in the clean energy space, is not just a Scottish issue, but a global one”, says Mr Anderson. “In clean energy it comes back to education and the ratio of men and women in careers focused on science, technology, engineering and mathematics (STEM), subjects that are typically more male dominated. More focused support is required for female founders and minority groups in energy.”

Scotland is combatting this issue with the launch of a range of initiatives, including the likes of Mint Ventures, a women-led business angel investment club and network which works closely with Women’s Enterprise Scotland, and who are democratising angel investment for women.

The Scottish Government has also recently agreed to award £42 million to Codebase to establish seven ‘Tech Scaler Hubs’, centres for teaching entrepreneurship. Companies led by women will be prioritised for entry to the incubators, and given extra support.

Scotland’s Cabinet Secretary for Finance and the Economy Kate Forbes has recently stated that “we cannot achieve our goals without entrepreneurs. New businesses are an important source of innovation – something that will be vital if we are to raise prosperity, while also addressing the climate crisis and other key issues.”

As recognition sinks in that start-ups will be pivotal to Scotland’s future prosperity, and indeed, the future of energy, Scotland is following suit in offering a foundation for growth.

Anderson says there is an opportunity to bring more than 12 companies a year through NZTC’s TechX Clean Energy Accelerator programme. “We feel more companies can grow through accelerator initiatives such as ours. We see first-hand the results. We have supported a range of game-changing technologies that can help enable clean and affordable energy, reduce carbon emissions and help Scotland achieve its goals.

“After graduating from the programme, most TechX start-ups benefit from an enhanced network, allowing them to grasp more opportunities such as field trials, securing partnerships and further investment that fast-track their growth.

“Clean energy start-ups will bring economic benefit to Scotland and significantly help in the fight against climate change. As a country, we have an opportunity to become a clean energy powerhouse, and start-ups have a key role to play in this.”

Read the full article published by The Herald here.

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