THE head of software strategy at the United States-based IBM Venture Capital Group is warning Scottish companies not to get too carried away with huge technology business valuations.
While Linkedin and Groupon have achieved multibillion- dollar stock market flotations and Facebook snapped up Instagram for $1 billion, Deborah Magid suggests entrepreneurs have to be realistic about how much their business is worth.
Ms Magid, who is addressing the Informatics Ventures Engage Invest Exploit conference at Edinburgh University today, said: "These large valuations are a good and bad thing.
"People get unrealistic expectations as there are not that many companies like that but they do get a sense of what is possible.
"Technology – internet, social media, analytics – has changed the way companies do business in several ways.
"We are at a point in time now it is easier to start a new company if you do the right thing.
"The problem is that a company, when they are fundraising or looking to be acquired, can place too high a valuation on the business.
"They really need to be realistic about this."
Ms Magid believes Scotland has a "pretty good" start-up scene with a decent level of local investors and support from universities.
While she admits it can be difficult for firms to find growth finance to help them scale up, she believes this is a problem around the world.
She said: "There is a funding gap between seed money – which is pretty readily available in most places – and getting the businesses to grow past a certain stage.
"One of the things IBM do is programmes to support entrepreneurs so they can get more of a jump start in the market through mentoring from experienced people in the community and IBM executives.
"I think one of the things which is helpful for young companies is to be coached by people with experience and to get advice on what needs to be done to grow a company past a certain size."
However, she insists there is no major need for Scottish businesses to decamp to Silicon Valley to achieve their growth ambitions.
She added: "Some firms do go but it tends to be more true of ones which have a very small local market.
"Scotland is a little different as it is part of the European community so there is more opportunity for them to grow while they stay at home as long as they do the outreach to other places.
"There is money to be had in Europe."
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