What are the challenges & concerns of a tech start-up founder right now?

The Tech sector in Scotland has received a great deal of media coverage in the last 6 months, albeit at a macro level. Records being broken for exits, fundraises and the fairly recent announcement from the Scottish Government that Codebase…

Blog13th Oct 2022

By Ian Marshall

The Tech sector in Scotland has received a great deal of media coverage in the last 6 months, albeit at a macro level.

Records being broken for exits, fundraises and the fairly recent announcement from the Scottish Government that Codebase in Edinburgh has won the £42m Tech Scaler contract alongside their partners; Google for Start-ups UK, Barclays Eagle Labs and Reforge. 

This announcement comes after the appointment of Scotland’s first Chief Entrepreneur, Mark Logan, in July.

These developments are great and I’m so happy that the sector is gaining the recognition it deserves alongside real financial investment. Who wouldn’t want to ‘make Scotland one of the most tech start-up friendly places in the world?’ 

But at a micro level, what are the challenges and concerns of a tech start-up founder right now? Our work with STAC, Tech X, University of Edinburgh AI, amongst others, puts us in a great position to comment and frankly, to help. 

First things first. I met with one of Edinburgh’s serial non-Execs this week and his first question was, ‘what are your clients doing about the cost of living crisis and employees’ energy bills this winter?’  

Thankfully the clients that I have spoken with about this are making efforts to ensure their employees are not dragged into fuel poverty. They observe that many of their employees will be living in 1-2 bedroom flats and will now be expected to pay £300pcm. I’m seeing both a monthly bonus for the next 6 months being discussed as well as a change to the timing of an annual bonus. There is a place for employers to step in and help with this. 

In other news, I think it is still too difficult to raise money in the £0-250,000 range. I see founders spending many hours per week researching grants and filling out forms to get their companies off the ground. The Tech sector should be at the forefront of inclusivity – but clearly those without wealthy friends or family, savings and/or a partner willing to pay the rent/mortgage need not apply! 

Getting back to accounting, it’s my belief that a fundraise can’t be successful if any of these three elements are missing: A good founder, a good slide deck and a good financial model. And in parallel it’s just as important to understand just how quickly the business can start selling things. Where financial models are concerned, there are simple 12-month cash flow projections and then there are 3-5 year integrated financial models. I think it’s a good idea to understand what you need. 

Moving onto the thorny subject of tax. The world is a big place and we’re increasingly being asked about VAT (or GST to the rest of the planet – Goods and Services Tax) and how to stay compliant in multiple markets. My thoughts are to always take professional advice early and not to set yourself up to fail. It’s important to understand and take seriously the rules in different territories. It may be that there’s a software solution that can summarize your activities too. 

People and human resource are a permanent headache for companies in our sector. And it’s not only recruitment but also retention that is important. Companies are now as a matter of course offering remote work for employees. International remote work can bring compliance and payroll requirements for both the company and the individual. It’s a good idea to make sure everyone is complying! 

If you would like to know more about how we can support and advise businesses in the technology sector, contact Ian Marshall, or any of our Tech team.

By Ian Marshall

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