£400 million secured by innovative young Scottish companies

The figures, which are announced as part of the enterprise agency’s annual review of its investment activity, reveal that since being established in 2003, SE’s equity funds have invested £138 million (part funded by ERDF/Scottish Government) and leveraged a further £280 million through private sector partners.

Public funding though the co-investment approach has been recognised as pivotal in helping bridge the early stage funding gap for Scottish companies with demand for SE’s equity funds steadily increasing over the past five years.

Enterprise Minister Jim Mather said “Investing and supporting innovative growth companies is a key component of the decisive action being taken across the public sector to support and sustain recovery and strengthen economic growth.

"This review shows our continued focus on improving the level of investment deals is paying off, with Scotland now having one of the most active early stage risk capital markets in Europe – a market which experienced growth over the last two years against a near 40 per cent drop in activity across the UK as a whole.

"We are committed to further developing Scotland’s early risk capital market through the Scottish Investment Bank, which will include SE's suite of equity funds; introduce a new loan fund to support growth and exporting companies; and continue to develop the investment market in Scotland through close collaboration with the private sector."

By April 2010, 335 companies had benefited directly from co-investments via SE’s range of funds which span investments from £100,000 up to £2 million and the enterprise agency continues to build relations with business angels, venture capitalists and corporate investors to encourage an essential flow of capital for Scotland’s most promising technology companies.

Lena Wilson, chief executive at Scottish Enterprise said “In the UK as a whole venture capital fundraising reached a ten year low last year with private sector investors continuing to be cautious. In contrast we have bucked this trend with our investment funds helping to maintain investment activity and go some way in sustaining confidence in the investment community.”

According to a recent NESTA research report on Venture Capital, public funds accounted for 56 percent of all early stage deals and 40 percent of venture capital deals compared to hardly featuring at all in the dot.com era.

Investment continues to be a key component of the Scottish Government and Scottish Enterprise’s efforts to tackle and expedite economic recovery for Scotland.

With increasing budgetary pressure on the public sector and ongoing caution from the private sector, successful exits from investments have been recognised in recent years as crucial to the recycling of funds and continued success of Scotland’s risk capital market.

Lena continues “The average exit from early stage investments is now taking around seven and a half years which means reprofiling of when we can expect to exit from investments has a direct impact on availability of funds.”

In recent weeks, Scottish Enterprise has concluded two exits from investments, including one from mobile ticketing company, Mobiqa and one from Mpathy Medical Devices, in conjunction with one of its longest-standing co-investment partners, Archangel Informal Investments.

Lena continued: “Recent exits are obviously encouraging signs of SE’s investment portfolio maturing and we are now looking to the future with the establishment of the Scottish Investment Bank.

“The Scottish Investment Bank will continue to manage existing investments, introduce new products such as the Scottish Loan Fund, which will assist mainly more mature export based Scottish companies in realising their growth ambitions, and look at the best ways in which to reinvest funds for the benefit of Scotland’s economy.”

In 2009/10, Scottish Enterprise helped to secure £100 million of risk capital - £32 million from Scottish Enterprise and £68 million from its private investment partners.

Industries where Scotland’s boasts a competitive advantage continue to feature high on the list of successful companies accessing equity investment funds from Scottish Enterprise.

Life Sciences companies such as Lab901, Sistemic and Novabiotics benefited from investments in the past year with a total deal value in excess of £21 million, whilst £48 million in total was invested in companies in the Digital Media and Enabling Technology markets.

Companies active in the Energy sector, attracted almost £7 million of Scottish Enterprise funds, resulting in a total deal value of around £19 million.

Lena continues “Scotland continues to produce some exciting innovative young companies with emerging technologies that boast global potential, and its’ thanks to our investment partners, for their participation and commitment to Scotland’s risk capital market that we can continue to make best use of available resources and maximise the contribution to Scotland’s economic growth.”