“This report illustrates the importance of supporting young, growth-oriented Scottish companies, and to ensure we maintain a healthy risk capital market, we are proactively seeking new investment partners to co-invest in the next generation of ambitious Scottish companies,” – Kerry Sharp, Scottish Investment Bank
Risk capital investment in Scotland could be approaching an all-time high if the latest figures revealed by First Minister Nicola Sturgeon are anything to go by.
Not only is the country the most profitable part of the UK outside of London, but Sturgeon has revealed that its risk capital investment was up 20% to £244 million in 2014 – representing a five-year growth of 90% not far off the highest recorded level of £250 million back in 2001.
The figures, which Sturgeon disclosed to around 80 prominent figures from the Scottish and London business communities as she opened trading at the London Stock Exchange recently, are taken from a new report published by Scottish Enterprise (SE).
The Risk Capital Market in Scotland (2014) study – which was carried out by Young Company Finance on behalf of SE – revealed that 2014 was a record year for business angel investment in Scotland, with the overall investment totalling £26 million and 31 new companies benefiting.
It’s the latest in a series of studies from SE designed to provide a comprehensive analysis of the early stage risk capital market in Scotland
Key findings from the 2014 report include:
While not unique to Scotland, 2014 was characterised by a number of very large investments, with the top three deals accounting for 34% of total investment.
More companies continue to secure later stage investment above £2 million. In 2014 there were 66 investment deals in which international VCs and other institutional investors participated, compared with 37 in 2013 and 38 in 2012. International investors in 2014 included Sofinnova Ventures, Morningside Ventures, and IKEA Greentech.
While investment into existing investee companies continued to grow, investors are also backing new ventures: 52 companies received investment for the first time during 2014, compared with 41 in 2013 and 30 in 2012.
The ICT (Information and Communications Technologies) and Life Sciences companies attracted the highest overall amounts of investment, illustrating the strength of these sectors in Scotland.
The First Minister said: “These figures show that Scotland continues to be a great place to invest and confidence in our ambitious industries is growing.
“We have established ourselves as the most prosperous part of the UK outside of London and the south east – but London is still a key driver to help growing our business north of the border.”
Jonathan Harris, editor of Young Company Finance and director of Research and Communications at LINC Scotland, added: “Levels of investment in early stage companies are very volatile – not just in Scotland, but worldwide – and the totals are highly influenced by a relatively small number of high value deals. However, the underlying trends in Scotland are up across the board, and have been so for some time. This gives hope that Scotland’s young companies will continue to be able to access a widening range of funding sources, offering finance in all market sectors and at various stages of company development.”
Kerry Sharp, head of the Scottish Investment Bank, the investment arm of Scottish Enterprise, said: “Having a strongly-performing risk capital market in Scotland helps companies to grow to a level where they can attract international investment to successfully compete in global markets. This report illustrates the importance of supporting young, growth-oriented Scottish companies, and to ensure we maintain a healthy risk capital market, we are proactively seeking new investment partners to co-invest in the next generation of ambitious Scottish companies.”