Entrepreneurial Campus: report

2 Background

I. Foundations in the Scottish Technology Ecosystem Review (STER)

In May 2020, Mark Logan was commissioned by Kate Forbes, Cabinet Secretary for Finance, to undertake a short-life review into how Scotland's technology sector can contribute to the country's economic recovery after the COVID-19 pandemic. The review's recommendations are primarily concerned with stimulating and accelerating the maturity of Scotland's "Technology Ecosystem". By this we mean the system, in its widest sense, that supports and nurtures technology businesses in Scotland, from the early start-up phase through to fully scaled maturity.

The attributes described in this addendum ("The Entrepreneurial Campus | The Higher Education Sector as a driving force for the Entrepreneurial Ecosystem") align with the guiding principles laid out in Chapter 5 of the main STER report:

• Improve ecosystem output
• Address all three dependencies: education, infrastructure, and funding
• Accelerate towards a tipping point to achieve virtuous network effects
• Avoid artificial stimulation of start-ups that should be allowed to fail
• Target global ecosystem optimisation over the local optimisation of its parts
• Measure the ROI of interventions in relation to the overall ecosystem
• Our ecosystem must learn from outside of itself
• Focus on core horizontal capability, avoid over dilution of support
• Have a balanced portfolio of interventions across early and later stage companies
• Build out a world-class backbone of core capability.

Within the Foundation Talent Pipeline section of the STER, the report referred to the need to evolve our universities and colleges (referred to in this document as "institutions") into "Post-16 Entrepreneurial Campuses". To encourage this, the original STER report made the following recommendations:

Rec. 9. Adjust university incentivisation and funding to improve tech-entrepreneurial focus.

Rec. 10. Increase university funding to create more local software engineers.

Rec. 11. Adjust university incentivisation to improve spin-out scale and quality.

Rec. 12. Relax other KPIs in the overall university KPI portfolio to accommodate the new KPIs.

Rec. 13. National, pan-university Tranzfuser-style summer-school.

Rec. 14. Increase the number of start-up internships available to students.

We have taken the above guiding principles and recommendations and have looked more broadly at examples of "entrepreneurial campuses" across the globe in order to collate a set of attributes and recommendations that we believe will help us achieve our goals in terms of the entrepreneurial impact of our post-16 institutions.

We have also considered how "entrepreneurial campuses" will connect with the overall Tech ecosystem as outlined by the STER report so that our recommendations align with the report's wider recommendations (see below).

II. Alignment with the National Strategy for Economic Transformation (NSET)

In March 2022 the Scottish Government published its National Strategy for Economic Transformation (NSET). The aim of NSET is "to establish Scotland as a world-class entrepreneurial nation founded on a culture that encourages, promotes and celebrates entrepreneurial activity in every sector of our economy".

At the heart of this are the Scottish people and their ability to take advantage of opportunities that are presented, whether that is solving global challenges or creating solutions that enhance our overall standard of living. Our colleges and universities play a pivotal role in achieving this and are the subject of this report. Our educational institutions' ability to inspire, educate and innovate resulting in the creation of the talent that can found, lead and staff sustainable high growth start-ups and scale-ups is essential for our economic success.

This report examines what it takes to create an entrepreneurial mindset and capability in students and staff across our higher education institutions and the communities.

NSET lays out a three-pronged approach to achieving this:

Increase the total number of new businesses created in Scotland

Dramatically increase the percentage of start-ups and existing mid-sized businesses that grow to scale

Build entrepreneurial mindsets right across the economy.

Our tertiary educational institutions do, and will, play a critical role in this approach.

The Scottish Government's Programme of Action lists the following that will be directly or indirectly supported by the development of Entrepreneurial Campuses across Scotland:

• Embed First Rate Entrepreneurial Learning Across the Education and Skills Systems
• Create a World-class Entrepreneurial Infrastructure of Institutions and Programmes Providing a High Intensity Pathway for High Growth Companies
• Attract and Retain the Very Best Entrepreneurial Talent from at Home and Abroad
• Build an Entrepreneurial Mindset in Every Sector of our Economy.

We have taken the above ambition and used it in shaping our thinking to ensure that we continue to align and channel activity in a common direction. NSET has a broader focus than STER. For the purposes of this paper, we have used the evolution of the tech ecosystem as a backbone to our thinking, but we recognise that many of our comments are applicable in the wider sense of entrepreneurship outside of tech entrepreneurship.

We recognise the links to Scotland's emerging "National Innovation Strategy" and have reflected some of the key themes raised in that draft document across our proposals. Some of these include:

• Alignment of activities across regions, key sectors, and technology clusters
• Adoption of an investor mindset in supporting our scaling businesses
• Identifying ways to increase the rate of adoption of new innovations across our economy with the aim of increasing socio-economic impact
• Recognising the need to collaborate across public and private sector to enable change
• Recognise the need to measure impact.

III. Where do Entrepreneurial Campuses (ECs) fit in the overall Tech Ecosystem model?

ECs do, and will continue to, form a key component of the overall tech ecosystem in Scotland.

ECs play a significant role in the creation of the pipeline of talent that will help found, lead and staff scaling businesses as well as in creating IP itself behind the start-up businesses that will hopefully continue their growth journey in our emerging Techscaler network (see wider recommendations of STER).

The role of ECs is critical as they have the potential to deliver many of the attributes required for a successful and scaling tech sector outlined in STER.

One of the key findings of STER is that the start-up stage of the overall eco-system needs to be populated by many vibrant early-stage companies that – critically – are given the right levels of high-quality support. When discussing the funnel from 'pre-start to unicorn' STER notes:

Naturally, the funnel narrows from left to right – not all start-ups become scale-ups and not all scale-ups become unicorns, nor should they. So, there's a minimum narrowing rate of the funnel that it's impossible to improve upon. But, in most ecosystems, the rate of narrowing is much faster in practice than this natural rate. This is certainly true of Scotland's ecosystem. The difference between these two rates is the opportunity available to us.

We assert that the difference in these two rates is due to deficiencies in the local ecosystem's support environment for start-ups and scale-ups. One aim of this review is to make recommendations that close the gap between our current rate of funnel decay and the natural rate.

Student start-ups and university spin-outs commence their journey on a university or college campus – undertaking what is potentially the hardest part of their company life cycle. STER makes the point that while the creation of new companies is key to the growth of the Scottish tech ecosystem, the final outcome of the hard, early-stage work will often not be fully realised for many years after that, and may often be realised completely outside of the environment in which the early-stage interventions were made.

Furthermore, even with companies that do not go on to grow, there is real value delivered indeed, founders and employees from early-stage companies in the funnel that fail will take those hard-earned lessons to other start-ups, thereby strengthening them.

This is what's known as an antifragile ecosystem – stresses acting on the system actually make it stronger. It's a highly desirable feature of our target ecosystem.

If these companies are to start their life on campus, then they need the support that we see in other successful programmes (such as Civtech) in order to increase the chances that they thrive and reach scale. This includes access to facilities, funding as well as mentors and experts who have "been there and done that" and are experienced in starting and scaling technology businesses.

We see from the above therefore that ECs are not synonymous with "Techscalers" (although some aspects of the Techscalers may incorporate university/college capabilities and resources).

However, our ECs play a foundational role in developing the start-ups and talent that will populate and enable our tech ecosystem by (amongst other things):

• Inspiring students and staff to consider their potential as tech entrepreneurs
• Teaching and providing co-curricular opportunities for students and staff to learn and experience how to succeed as an entrepreneur
• Providing a launchpad with wraparound support for student Start-ups
• Supporting academics with technology spin-outs
• Facilitating access to funding for early-stage start-ups/spin-outs
• Developing skills for workers who will staff the start-ups and scale-ups
• Representing the heart of our communities and regions across Scotland. ECs are a location where we can bring together emerging technological talent with creative and entrepreneurial talent
• Nurturing cross-faculty learning and research, rooted in solving global issues (often enhanced by combining with regional economic focus)
• Promoting and teaching social entrepreneurialism
• Creating a melting pot where we can align the ambitions of big business with the priorities of academic research with the aim of driving innovation (See MediaX example)
• Providing a pathway to our emerging Techscalers
• Our colleges provide vital pathways for students in terms of:
  • a route into university for students where they might progress their entrepreneurial pathway (note c.one third of students in Scottish Universities articulate from our college network)
  • the creation of the talent that will be needed by the scaling businesses that are created as a result of the EC programme
  • providing an education that might lead to the establishment of their own enterprise - subsistence or innovation driven enterprise (IDE)
• Facilitating the support of professionals focused on making it "stupidly simple" for feasible start-ups to form and scale
  • Alumni
  • Professionals e.g. IP lawyers, corporate finance
  • Mentors
  • Business leaders relaying practical experience in overcoming barriers as well as challenging ideas.

We will examine these and other areas in more detail throughout this paper.