2021 Year in Review: Tech Sector

A good place to start our 2021 Year in Review is to have a look back at the predictions and observations we outlined in our 2020 Year in Review. So, how accurate were they?

Dealmaking

Well, 12 months ago back in December 2020 I forecast that our Corporate Finance team would have a busy year in 2021 with mothballed deals coming back to life. Well, that certainly came true. And our activity as a firm was mirrored by the investment landscape in Scotland as a whole. Business Insider quoted VC fundraises for Q3 2021 of £197m, more than the previous 2 years combined (Q3 2020: £71.6m, Q3 2019: £32m).

A significant portion of these were Tech deals and whilst we’re not denying that the 21-month period since the first lockdown in March 2020 is a complete outlier, there is huge momentum building in the Scottish Tech scene.

You could argue that these are just numbers of course. But in a 2^nd study published this quarter, Barclays Eagle Labs and Beauhurst report that Edinburgh is ranked 2^nd best city in the UK behind London for the number of high growth businesses. This study looked at universities, accelerators and sources of investment. We already know that many people also chose Edinburgh for their companies as it’s a great place to live too! It therefore came as no surprise when it was announced that ex-Fanduel execs had managed to raise the largest ever Seed round in UK history ($21m) for their new venture BetDex. Big things are happening in Scotland!

Incubators and accelerator programmes

The second subject we discussed back in December 2020 was the increasing prevalence of business incubators and accelerator programmes here in Scotland. The aim of these programmes is to bring the necessary skills and experience together to help founders make good decisions. 2021 saw AAB’s Tech team entering into two significant sponsorships with STAC and the HALO, as well as signing up to help other cohorts such as University of Edinburgh AI and TechX.

Sadly, there are some fantastic business ideas that simply fail to get off the ground, whether that be to do with lack of investment or struggle with management skills. On top of this, due to the pressures caused by COVID, for many it has been difficult for businesses to achieve their growth targets. That’s why innovation hubs and accelerator programmes are more important than ever, with these hubs in Scotland taking inspiration from successful programmes in the US, Canada and Europe.

Marie Macklin, the driving force behind the HALO often talks about the huge difference good quality legal and accounting advice can make to companies and wishes she had access to such advice much earlier in her career! We’re delighted to support this venture and other programmes to support tech talent in the country.

Global Trends

Tech features heavily in all global trends like People; Climate; eCommerce; Banking. In the post-Trump era and following on from COP26, climate change has continued to top news headlines. With pressures to reduce carbon, become net-zero, move to electric cars, it will be innovation in tech that makes all of this possible.

Looking to 2022

So what does 2022 have in store from a Tech perspective? Instead of predictions, we’re going to share a couple of concerns and make a wish at New Year that they be addressed in 2022. We can check in December 2022 whether we’ve made any progress! Firstly, we have a huge gap in the ecosystem for a fund structure willing to invest relatively small seed amounts for total rounds < £250,000. We are still not getting pound notes in founder’s pockets quickly or early enough. Our other great concern is finding the available talent. Scotland needs more human resource to fuel these scaling companies. Let’s allay these concerns in 2022!

If you would like more information or guidance on the tech sector, please contact Brian McMurray, Head of Tech at AAB

Find out more about AAB’s tech team here.