Naked Ambition

Market turmoil and consolidation has led to further questions about the ability of Scottish-based companies to grow to global prominence. Being the acquirer not the acquired.

There is much debate over the ambition of Scottish companies and how this is tempered by banks, investors and professional advisers. While accepting that only a tiny percentage of start-ups will go on to achieve significant growth [20% or less], those companies with a drive to expand, may have their wings clipped unnecessarily by those that fund and advise. Take the fundraising experience of a small but ambitious Scottish consumer products company. It was already heading for 50% turnover from international sales and was therefore surprised to hear some investors ask ‘why are you bothering to export’. This despite the company’s stated ambition to be the market leader globally. While familiar with the oft quoted mantra of ‘sort out your home territory first before embarking on any international adventures’, this particular company was already the UK market leader while freely acknowledging that it could do more on its doorstep. Crucially however, its customer base was present in every country in the world and the company had already targeted those territories with the most promise [and in fact was already exporting to 20 such countries across North America, Europe, Asia and Australasia]. The distinct impression given was one in which venturing outside Scotland and the UK was too risky and scary. As it was the company raised its finance on the premise of continued export growth. Indeed, if the Directors had acquiesced and retrenched their export activity, the company would now be dead, given the state of the UK economy. While accepting that exporting is difficult and expensive, the lesson here is that it should not form a barrier to growth and expansion.

As well as scale, there are debates over the nature and type of growth. Having an international outlook is one thing, but defining where the boundaries of growth lie is also something to consider. This brings in the nature of an exit for the founders of the company. Discussions about the nature of company growth and exit, normally boil down to either a strategy of ‘build it up then sell to another company’ or ‘build it up and go for an initial public offering’. There can be a reticence to go for the latter option and even if this path is chosen, it may be because other sources of funding have dried up. Do investors and advisors steer companies away from an IPO because their influence and control is diluted? Is an IPO portrayed as being too difficult? Thankfully, such arguments have clearly not deterred some notably successful Scottish companies from taking this route to growth and vastly expanding their investor base.

Whether a company remains private or opts for the public markets, we still return to the question of ambition for the company and those involved. Clearly at some point in the future, the company may well go bust or be bought by someone else, however, in the meantime how big should and could the company get. If the basic offering is a suitable platform for growth there is absolutely no reason why a founder of Scottish start-up could not create a multinational behemoth that devours other companies and operates globally and swims within the public markets. This may mean raising huge amounts of money through private or public placements, but so be it, if the god of ambition is to be assuaged. It has been done by drinks, transport, engineering, financial and energy companies, although with a few notable exceptions, the Scottish technology sector has lagged.

Regardless of the sector, business is of course inherently risky and founders will face a multitude of challenges, particularly in the very stages of turning an idea into a commercial reality. Leaving aside grant funding, the private investment route is now even more important for Scottish start-ups, given that the banks are pulling back from those who are not cash positive. So when faced with revised risk models and investor scepticism, company founders can do worse than start from a position of naked global ambition, which will at least provide a standard around which those involved can rally.

So, how best to proceed for the putative Scottish multinational. Ignore turmoil in the banks – their corporate governance was shot to pieces so they have taken their ball back, for the moment. Question investors and advisors capabilities, particularly those who baulk at an export strategy and portray a quick trade sale as the only option. Close ears to a perceived lack of confidence – remember the Empire of the Scots! It would be a shame if new and ambitious Scottish companies allowed themselves to be cowed by the baggage of others. Go on you thrusting entrepreneurs, be ambitious, be avaricious, be multinational – think behemoth!