Firms Flourish at Incubator Site

A PIONEERING incubator for Scottish technology companies, based near Glasgow, is on target to leverage 10 times its original public sector investment, and will be replicated in a second venture in Livingston.

Research by PricewaterhouseCoopers, the accountants and management consultants, has revealed that the 106 companies that have occupied the Hillington Park Innovation Centre have added £4.79m to the economy since opening five years ago at a cost to the public purse of £3.2m.

Lorraine McMillan, chief executive of Scottish Enterprise Renfrewshire, will tell its annual public meeting this week that this figure will rise to £18.6m over the next two years as the centre and its tenants mature.

Based on this evaluation, SE forecasts that by 2010, it will have supported 190 companies contributing £40m to the economy.

"This is an excellent return for the £3.2m invested by Scottish Enterprise," McMillan will say. Speaking last week ahead of the meeting, she said original estimates had been for fewer companies and a lower return.

"Nothing on this scale had been tried before," she said.

Since the centre opened in October 2000, close to Glasgow airport, the 106 fledgling companies have employed more than 1,000 people in a range of skills from software engineering to web design.

About 70% of these companies are investing in research and development - well above the Scottish average.

Tom Ogilvie, the centre's chief executive, said initial forecasts had been for a steadier rate of growth and lower occupancy levels, but it was averaging 85% to 90% occupancy.

Particularly encouraging is the low level of failure - only 14% of companies have gone bust over the five years since it opened. "In the technology market this is very low indeed," Ogilvie said.

Scottish Enterprise is investing a further £1.87m over the next five years to maintain the rate of growth, and has also disclosed plans to replicate the Hillington project by converting part of the Alba Centre at Livingston and in building additional premises.

The Alba Innovation Centre will be a £3.5m development by SE and Alba Campus Ltd, the SE-Miller Developments joint venture company that owns the site. Work is already under way with four tenants signed up, and completion is expected by next September, providing space for up to 30 tenants.

Innovation Centres (Scotland) will manage it alongside the Hillington centre, which presently houses 47 companies.

The progress made at Hillington is in stark contrast to Ogilvie's warnings two years ago that tenants faced going bust as sources of funding dried up. Only two tenants received funding in the whole of 2002 as investors shied away from start-up technology companies following the bursting of the dot.com bubble.

Many of those who got their fingers burned remain on the sidelines and most of the established venture capital companies no longer invest in early stage companies, preferring to wait until they have a more stable track record.

The market is now dominated by business angels - wealthy individuals - and in Scotland by two big syndicates: Braveheart Ventures and Archangel Investments.

"The market is still volatile," said Ogilvie. "Venture funding has almost disappeared and we have seen 3i closing its Glasgow office [revealed in Scotland on Sunday last week]."

He said that since the centre opened, the type of company moving in had become less varied and was now focused on a narrower range of software, e-business and telecommunications firms. He believes the management team has also become more experienced at looking out for potential winners.

Two firms - one of which was the software arm of a southern company - have floated on the Alternative Investment Market. The centre's chairman is the entrepreneur Chris Gorman, who takes an active role in its development and in the progress made by tenants. By its nature, it provides short-term accommodation to companies, and so Ogilvie has to encourage those that are outgrowing it to move on.

"We do provide a bit of a comfort blanket but we need that churn, so we do help companies to leave," he said. "That is a measure of success for them and for us."

TERRY MURDEN

BUSINESS EDITOR Scotland on Sunday