Technology ecosystem review - Towards the Tipping Point: progress report

4. Addressing Barriers of Entry

We understand that our work to transform the Scottish tech ecosystem creates opportunities to dismantle long-standing barriers to entry and opportunity, creating a tech sector that truly recognises and supports everyone’s talent.

We know that people from disadvantaged backgrounds face structural barriers in trying to get their start-up ideas off the ground. For example, people with lower household incomes have fewer resources to develop and invest in their ideas.^[4]

With the pandemic and cost of living crises worsening these inequalities, it is even more crucial that entrepreneurial support is accessible in every sense of the definition. So, as we introduce internet economics and the ‘Silicon Valley Playbook’ to our ecosystem, we must also ensure that we do not repeat mistakes made elsewhere.

Some of the issues found across the UK include:

• 42.72% of UK venture capital invested at seed stage between 2009-2019 was invested in founding teams with at least one member from an elite educational background. Elite was classified as Oxford, Cambridge, Harvard, Stanford and their respective business schools.^[5]
• The UK’s Black and Multi-Ethnic communities comprise 14% of the UK population, yet all-ethnic teams received an average of 1.7% of the venture capital investments made at seed, early and late stage between 2009 and 2019. In the UK, over the past 10 years only 38 black entrepreneurs have received venture capital funding,^[6] and
• One-fifth of all UK tech investment went to just 10 scale-up firms in 2020.^[7]

At the same time as we are seeing these challenges and barriers, it is also clearer than ever that more diversity makes tech more profitable and more innovative.

Research carried out by the management consultancy McKinsey has found that companies with the most gender diversity in their executive teams are 25% more likely to experience above-average profitability than those with the least.^[8]

Furthermore, recent research by Tech Nation has found that boards with gender diversity experience a £70,000 turnover premium and that there is 453% higher investment for directors sitting on internationally diverse boards.^[9]

The Ana Stewart Review on women’s entrepreneurship

The Scottish Government has launched a review of the entrepreneurship landscape for women in Scotland.

This work is necessary and important because we already know that women struggle to get the right funding and support, that there is already a recognised gender gap in business participation in Scotland - and that this gap is widening.

Women in Scotland are around half as likely to be early-stage entrepreneurs as men and research has shown that there has been a statistically significant decline in the number of women-led SME employers in Scotland from 20% in 2015 to 14% in 2019.

In order to unlock the ambitions of female entrepreneurs in Scotland and ensure they are able to reach their full potential, in February 2022, Kate Forbes, Cabinet Secretary for Finance and Economy, commissioned an independent whole system review of women in enterprise that would examine the barriers facing female led businesses.

This Review is currently underway, led by experienced entrepreneur and investor, Ana Stewart with support from Chief Entrepreneur Mark Logan.

The Stewart Review will identify the root causes of the continuing under-representation of women in enterprise and propose specific actions required to address the needs of female-led businesses in Scotland.

The Scottish Government is committed to responding to the recommendations of the review following publication, which is expected in early 2023.

Support for everyone through our TechScaler network

Our national TechScaler network will support more diverse founding teams while promoting diversity, inclusion and accessibility throughout the Scottish tech ecosystem.

The process for entry to TechScaler will have diversity and inclusion at its heart.

Applications by companies led by women and minorities, who are currently significantly under-represented among tech start-ups, will be prioritised in order to help remove the barriers to participation which people from under-represented groups often face.

These companies will also get extra support in recognition of the greater challenges they currently face in raising investment, and developing peer networks.

Access to TechScaler will be offered both online and offline to improve accessibility and to ensure people with different working patterns and caring responsibilities are able to participate.

Recruitment processes have been redesigned to be more inclusive, for example, application review processes are anonymous to prevent unconscious bias and job adverts changed to remove masculine-coded words.

CodeBase has partnered with Radiant and Brighter, an organisation that promotes diversity through education, inspiration and changing perceptions, to help ensure that diversity and inclusion is embedded in every aspect of TechScaler.

This includes plans to connect regional and national stakeholders, and connecting our ecosystem with international start-ups.

Next Steps

• Publication of the Ana Stewart review. The Scottish Government is committed to responding to the recommendations of the review once it has been published later this year.
• Strengthening TechScaler’s role in building a diverse and inclusive tech ecosystem; including through supporting organisations working in this space.