The valley of death: why Scotland's best startups stall before they scale

Recently, The Scotsman sat down with CodeBase to talk about twelve years of building Scotland's tech ecosystem, and where the next chapter is heading. The conversation covered a lot of ground, but a few threads stood out as genuinely worth pulling on.

‍

The real bottleneck isn't formation

Scotland has always been fairly good at starting companies, so that was never really where the trouble began. Where things tend to fall apart is further down the road, in what CodeBase calls the "valley of death", the stretch between early traction and the kind of durable, repeatable growth that lets a business stand on its own. It's a stage where otherwise promising companies quietly stall, often while still looking healthy from the outside, propped up by founder heroics rather than anything more sustainable underneath.

The numbers behind this are a story unto themselves. Scotland's scaleups make up just 0.52% of SMEs, yet they generate a third of all SME turnover between them, which gives a sense of just how much value gets created once a company finally breaks through. Closing that gap could mean 138,000 additional high-value jobs and £22 billion in extra annual revenue, a scale of opportunity that's easy to say and harder to picture until you consider how much of it is currently sitting unclaimed.

Part of what makes the valley of death so hard to cross is simply the landscape founders have to navigate while they're trying to get through it. More than 150 organisations operate across Scotland's entrepreneurial support ecosystem, and every hour a founder loses to figuring out who does what is an hour they're not spending on their company, a tax that tends to land hardest on the founders who can least afford to pay it.

‍

Jon Hope's case for dropping vanity metrics

Jon Hope, CEO of CodeBase, brings a strategic lens to where he thinks support could work harder for founders. His starting point is a "stage-and-dimension" matrix, mapping capital, customer access and operator-led guidance against a company's actual stage of growth, from ideation through to scale. Rather than funding standalone programmes, he'd like to see commissioning bodies test every intervention against one question: does this deliver genuine value to a founder at the moment they need it?

‍

"That reframing should be paired with an honest audit of everything currently being funded and mapped against that matrix. We expect that to surface uncomfortable findings, support pitched at the wrong stage, and duplication. This is not an argument for cutting budgets, but for redirecting them toward the growth stage, where failure rates are highest and support is thinnest." — Jon Hope, CEO, CodeBase

‍

It's a reframing rather than a criticism, one aimed at making sure existing investment lands where it can do the most good. On measurement, Jon argues in favour of moving beyond headline figures like capital raised or jobs created, numbers that can be skewed by a handful of outlier companies, in favour of tracking how many founders actually move from one stage to the next.

‍

What actually moves the needle

CodeBase points to three things, delivered at the right stage, rather than another generic support programme: operator-led guidance from people who've actually built and scaled companies, capital that's matched to the business rather than whichever option happens to be most visible, and market access that means real customer introductions rather than another discovery workshop.

That support also has to bend around where a company is actually headed. A durable small business, a growth-scale company, and a venture-scale outlier all need fundamentally different things, and treating them the same is part of what's broken.

‍

AI raises the bar, not lowers it

There's a version of the AI story that suggests building a company has simply gotten easier. CodeBase's read on it is more measured than that. Small teams can now ship products that once required far larger head counts, which means a two-person team in Glasgow is competing on execution speed with a two-person team in San Francisco. The competitive bar has become global rather than local.

As building gets cheaper, traditional moats are eroding faster too. Technical complexity and first-mover advantage no longer hold the way they once did. What's left standing is data, domain expertise and trust, the elements software alone can't manufacture, which is why operator judgement, the ability to identify which opportunity is genuinely worth pursuing, becomes more valuable rather than less.

‍

What's next

That widening gap, between operators who build AI deeply into how they work and those who treat it as a bolt-on, is part of why CodeBase is focused on recruiting Entrepreneurs in Residence who can credibly guide founders through this shift. It's one thread in a broader transformation already underway: a new period of change under fresh executive leadership, with a sharper focus on diversifying into European and private sector opportunities. Twelve years after CodeBase first opened its doors, the mission hasn't changed: Back founders at the exact moment they need it most with the support that would benefit them best, and the rest tends to follow.