How Should a GovTech Start-up Raise Investment?

Scotland has seen a surge of innovation and entrepreneurship in GovTech – technology companies aimed at providing services and solutions for governmental agencies and the public sector. As these Scottish GovTech start-ups seek to expand and scale their impact, a key priority becomes raising investment and financing to fund growth. However, the Scottish ecosystem has its own unique combination of opportunities and challenges for GovTech founders looking to attract backing. Based on research into the Scottish funding landscape, here are some of the most promising avenues a Scottish GovTech founder should explore.

Tap into Scottish Government schemes and grants – The Scottish Government runs an array of initiatives to provide funding, grants and loans to high-potential tech start-ups, many of which would apply to GovTech ventures. These include the £23 million Digital Development Loan fund for digital sector businesses as well as broader schemes like the Scottish Edge competition, which provides funding awards and business support. While government funds will rarely fully finance rapid expansion plans, the non-dilutive capital can be invaluable for early-stage testing and validation.

Leverage regional hubs and resources – Scotland hosts tech-focused hubs and campuses in cities like Edinburgh, Glasgow and Dundee which aim to nurture start-ups, including through investment programs. For example, the CivTech Accelerator in Edinburgh.  CivTech helps start-ups develop digital solutions and services for public sector organisations in areas like health, education, transport and more. It provides intensive support through a 9-month development program and has strong links to Scottish Government departments. Tapping into this broader ecosystem can help unlock access to finance.

Look beyond Scottish VCs to London and international – While Scotland’s venture capital sector is growing, it remains small compared to the scale in London. Furthermore, VC interest specifically in GovTech remains relatively nascent in Scotland. Therefore, Scottish start-ups shouldn’t restrict themselves to Scottish VCs and investors alone. Expanding their search into English and overseas funds can substantially widen the pool of potential backers focused on high-growth GovTech.

Sell the value of product-market fit – Investors will want evidence that a GovTech product has found a real fit with customers and end-users, given the niche focus on public sector and regulated markets. Scottish start-ups should emphasise pilots, trials and initial revenues to demonstrate traction and demand from government agencies, health services and other clients. This can help overcome limited sector experience amongst investors.

Talk up Scottish innovation and engineers – While there are challenges around smaller funding sizes and local investor expertise, Scottish start-ups can talk up some genuine strengths, including the technical talent pool coming out of universities in AI, healthtech, civic tech and more. Promoting Scottish innovation and top-tier graduate talent can help spark interest from VCs and other backers.

The Scottish GovTech landscape shows encouraging signs of growth and vibrancy from both emerging start-ups and government economic agencies. However, for fast-growth ventures with global ambitions, finding sufficient investment necessitates being creative and persistent around the funding mix. Following the above playbook can help Scottish founders access the capital needed to drive the next wave of GovTech innovation.

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