National Software Strategy for Scotland : Scotland's Potential In Software : The Potential for Increased Scottish Supply

Venture Capital Exploitation

Scottish software firms - like European firms in general - have not been able to emulate the US venture capital phenomenon. Our consultations with Scottish software firms showed that this is not due to limited venture capital availability but, rather, is constrained by:

• limited business angel activity and other seed capital (not withstanding SDF’s heroic efforts);
• a shortage of non-executive officer skills;
• low growth aspirations of individual firms; and
• a cultural reluctance to forego or dilute equity that does not benchmark favourably with US (or Israeli) practice.

Figure 3.4: US Venture Capital in Software and IT Companies

Source: VentureOne via The Economist

As a result, presentations and communications with venture capitalists are low in effectiveness and low growth firms encounter difficulties with venture capital and lack funding.