What can we learn from recently created technology companies?

Company Connecting has completed a major piece of research on Scottish technology companies formed between September 2014 and December 2017. We based our research on the Scottish companies registered at Companies House with a SIC code classification  which indicated some sort of IT, software or telecoms activity. This article complements our previous article on the nature of dissolved companies.

 

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We researched almost 5,000 companies and have created a database with a considerable amount of data which we use to gain insights into these new Scottish tech companies. The next step will be to tag all the companies according to their skills, size, sectors and competency. We expect to complete this activity in February. These insights are useful to anyone with an interest in the tech market as well as private or public sector organisations who want to have a thorough understanding of the Scottish technology market. We carry out similar activities for other geographies
 
This research adds to the current Company Connecting database of information on Scottish tech companies. We have expanded this to include other parts of the UK as well as high tech countries like Estonia.
 
Over the next few months we will publish articles and infographics by skill, geographical area and a variety of other factors. If you would like more information on the tech scene in Scotland or would like to find companies to work with then please get in touch via the contact details below.
 
The following are some of the Company Connecting insights into our research and findings on IT and telecoms companies in Scotland.

SIC Code Insights

Out of the 10 SIC codes we researched, by far the most used SIC code was 62020 - Information technology consultancy activities. It accounted for 45% of the new companies. However, only 8.8% of the companies formed with this SIC code were ‘real companies’ i.e. companies with a website and offering some form of IT / tech services and products to multiple clients. This SIC code also had the highest % of freelancers i.e. those companies that have been formed to enable people to contract with organisations. We also observed that many of these freelancers, particularly in Edinburgh, were working for banks. Perhaps many of the people who were previously employed banks were ‘let go’ during the banking crisis and returned as contractors? 

Geographic Insights

The greatest number of companies (24%) were created in the City of Edinburgh council area. However only 12% of these were actual companies.
Overall, we identified that 17% of all the companies formed were freelancers. The areas with the largest number of freelancers were:
 
25% West Lothian
25% East Renfrewshire
23% Midlothian
 
The table below provides a summary of the number of companies formed by council, along with the % of the overall total number of companies.
 
Scottish Tech Companies  Created by Council Area Graph

Timeline Insights

We also looked at the creation of companies by quarter – the number of companies created and the number of ‘real’ companies. The graph below shows that overall there is an underlying increase in the number of companies registered by quarter. The next step would be to review the information in more detail to see the categories of the companies, number dissolved after a year, and the number that are ‘real’ companies after at least a year.
 
New company Vs 'real company' by quarter chart
 
 

Category Insights

We developed our own means of categorising companies and collected further information to support the categories. We found no information for 43% of the companies. It is easy and cheap to set up a company in Scotland and the UK. The most recently formed companies are too early stage to have financial records registered with Companies House.  Given that 20% of companies are dissolved, dormant etc., it is highly probably that many of the ‘no information’ companies have been set up for future use and may never be used. We also assigned a ‘no information’ category to companies that could be contractor vehicles, but we couldn’t be sure.
The overall % of ‘real companies’ is quite low. This may increase over time as owners build websites and get their businesses up and running. The key is not to read too much into numbers of companies formed as a statistic for growth in technology companies. Any numbers taken directly from Companies House, need to be further qualified in some way, hence the reason for developing the Company Connecting classification.
 
Companies by Category pie chart
 
 

Dissolved companies

Almost 20% of the companies registered since the end of September 2014 are already dissolved, dormant or have an active proposal to strike off against them on Companies House.
The graph below provides information of the companies created and dissolved by quarter. In the next tranche of research, we will take a closer look at dissolved companies. 
DC% refers to the % of companies dissolved / those created in a month. Q4 2016 was a peak time to dissolve companies.
 
Dissolved Companies chart
 
We hope you have found the information informative. Company Connecting has detailed information on more than 5,000 technology companies of which around 3,000 are in Scotland. Of you would like to know more about our research and what we do then please contact us via the details below:
 

First published on www.companyconnecting.com January 2019

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