Broomielaw Tradeston Bridge, International Financial Services District (IFSD), Glasgow

Scotland's risk capital market

Latest figures show that more ambitious Scottish companies are accessing growth finance. Find out how we can help you secure investment from different sources.

Back in 2012, TVSquared (“TVS”) was an ambitious Scottish start-up with a vision to change the way advertisers measure and optimise TV. Today, with funding from a wide range of sources, including the Scottish Investment Bank (SIB), the young company has grown to 90 employees with offices around the globe. Boosted by £15 million ​of risk investment, TVS is making its presence felt internationally. 

TVS’s coming of age is a timely reflection of the recent history of the risk capital market in Scotland. It was also around this time in mid-2012 that the team at SIB was contemplating how to prepare information on the recent performance of Scotland’s risk capital market.

The task was far from appetising - Scotland’s investment total for 2011 had just plummeted by 30% and, for the first time since 2005, was languishing at £90 million. Whilst hunting for any signs of positive market signals among 2011 datasets, the team could not contemplate that in 2017, only six years on, Scotland’s risk capital market would treble in size, reaching £538 million.

Deals and investments into Scottish companies 2012-2017

A strong feature of the growing market after 2012 is the introduction of £10 million plus deals.   

To present the underlying health of the market in 2017, we can, for the moment, leave aside these few, yet impressive deals of over £10 million and consider Scotland’s record totals of some 370 deals and over £250 million of investment, boosting the growth prospects of ambitious companies. That’s close to 100 more companies than ever before securing equity support in a calendar year.

By then introducing the six deals in 2017, that were each worth over £10 million, the result is a doubling of that £250 million to over half a billion and another new peak for the risk capital market in Scotland. 

Where is investment coming from?

To offer a glimpse into who is providing this investment, Scotland’s business angels are transacting more deals than ever before and almost three times as many as during 2012.

Outside of London, Scotland has the most active angel investment market in the UK.

Through new syndications, business angels are now contributing to much larger rounds including data protection company ZoneFox’s impressive £3.6 million deal (who were recently acquired by US based Fortinet) and the £3 million raised by imaging company NC Tech.

We can see that Scotland’s business angels have their eyes firmly fixed on the potential of Scotland’s most ambitious young firms.

While Scotland’s business angels are doing most of the deals and, at the same time, encouraging a pipeline of more Scottish growth companies, it's VCs and corporate investors that are providing the welcome firepower and almost 60% of the total market investment in 2017.

How does Scotland compare with rest of the UK?

Our benchmarking evidence shows that regional disparities continue, and London’s role as a global investment hub is growing, securing 60% of the UK’s total investment and 50% of deals.

London has a unique mix of businesses, concentration of international VCs and corporate investors and world class universities that are not easily replicated.

Over the last year Scottish companies have benefited from this proximity, attracting an increasing proportion of investment from London based investors.

While London is a dominant force, other areas across the UK are performing well when it comes to attracting investment.

Our 2017 data tells us that Scotland, the North West of England and South West of England have all been successful at securing high levels of investment in companies at various stages of their development.

Scotland's big successes

With talented and skilled people, supported by an energetic investment system, it's not surprising to find Scottish headquartered companies like Skyscanner and NuCana hitting the investment headlines.

In late 2016, Skyscanner proved that investment can travel internationally into a Scottish business, becoming the biggest UK acquisition of the year.

NuCana was clinical in its efforts to raise growth finance via the NASDAQ Global Select Market, becoming the UK’s largest IPO for 2017.

Scotland can do investment

While Scotland’s risk capital market may be coming of age, there's no suggestion that any of us participating in the market can sit back in admiration of these achievements.

In common with the rest of the UK, our shared challenge is to increase the number of exits. These exits can move businesses on to a new growth platform that provide returns to patient investors to improve liquidity and opportunities to re-invest in Scotland’s next wave of ambitious young companies.

Overall our market evidence tells us that Scotland can do investment; resulting in a maturing market place that's coming of age through its international networks, with companies able to attract VC and corporate investment and support from closer to home business angels.

How can we help?

Unclear how to go about securing funding or investment to expand your business in the UK or overseas? Knowing where to start can be daunting, but we can help.

Find out more about accessing finance

Read the full Scotland Risk Capital Market Report 2017 (PDF, 1MB)

Read the Investment Benchmarking Analysis Report 2017 (PDF, 1MB)

 

Ask an adviser

If you want to find out more about the risk capital market in Scotland, or how we can help you identify the type of growth finance appropriate to your business, get in touch.