Commentary: Scottish Investment Bank annual results 2017/18

I’m delighted that the Scottish Investment Bank (SIB) continues to play an important role in Scotland’s early-stage risk capital market, supporting more companies to secure growth funding than ever before during 2017/18. Whilst increasing the availability of, and access to, growth funding continues to be a strong feature of our efforts, so does delivering a range of support and guidance through our Financial Readiness Service to companies raising finance.

Our Financial Readiness Specialists help companies prepare and refine their funding proposals and business plans, and then identify the most appropriate source(s) of finance - whether equity, debt, alternative finance or grant support - for those companies.

We augmented the financial readiness service this year to reach a greater number of companies through delivery of events, new online guides and short videos which cover a wide range of subjects linked to fund raising activities; whilst also working with companies on a one to one basis to provide specialist funding advice.

To further support companies with the increasing range of investment options open to them we also secured specialist corporate finance advice to help prepare investment ‘teasers’ as well as training for companies making that all important pitch to new investors.

Our 2017/18 annual review showcases some of the exciting and innovative companies the team have supported over the year, including the transformational and highly successful NASDAQ listed investee company, NuCana, which raised $114m on IPO at a valuation of $550m - a great example of a highly innovative Scottish company with world-leading technology raising substantial levels of international capital to fuel its growth plans.

A Growing Market

During the period of our review, the market itself exhibited sustained growth with total investment into ambitious high-growth companies exceeding half a billion over the course of the (2017 calendar) year - a record since we started capturing this data in 2003. Two features of the market particularly stood out for me. Firstly, the strong growth of investment in new and earlier stage deals - double what we saw 5 years ago, demonstrating that collectively we are making a significant difference to the investment landscape in Scotland. Secondly, the increasing number of companies successfully securing larger amounts of investment, often from international investors seeking the best global opportunities.

The levels of investment we are witnessing is testament to the strength of the Scottish entrepreneurial and investment eco-systems and the highly innovative companies at various stages of development that are flourishing here in Scotland.

Building our Global Networks and Scotland’s attractiveness to Investors

Scotland continues to stand out as one of the most consistently high performing regions outside of London in terms of both total investment and deal numbers. However, we need to continue to harness and co-ordinate our efforts if we’re to maintain and improve this position in future years – there are a few regions hot on our heels.

In 2017-18, we continued our focus on establishing and building new relationships with international investors.  To support more companies in attracting greater quantums and later stage investment capital, we launched the £200m pilot Scottish-European Growth Co-Investment Programme – an innovative, first of its kind partnership with the European Investment Fund (EIF). With commitments of £50m from each of Scottish Enterprise (via the Scottish Government’s Scottish Growth Scheme) and the EIF to leverage £100m plus from EIF accredited investment funds from across Europe, the Programme helps bring new international capital into Scotland to support our most ambitious growth companies looking to continue their growth journey and scale internationally.  Since launching the Programme, we have focused our efforts on market awareness, building an investor ready pipeline of opportunities as well as engaging and establishing relationships with appropriate fund managers. I am delighted with the interest shown from fund managers interested in Scotland’s track record of growing successful companies and hope the programme will have a positive impact on the future funding landscape.

Building Sector Capability

SIB supported several clean energy projects in 2017/18, through the Renewable Energy Investment Fund (REIF), which we deliver on behalf of Scottish Government, leveraging significant levels of public and private sector funding into these projects thereby supporting Scotland’s carbon reduction targets of 42% reduction in greenhouse gas emissions by 2020 and 80% by 2050. I am delighted that SIB now delivers the successor fund to REIF on Scottish Government’s behalf – the Energy Investment Fund. This Fund will build on the success of REIF, providing flexible commercial investment for energy projects that will play a key role in Scotland’s transition to a low carbon economy.  The fund will focus on increasing community ownership of energy projects in Scotland (including community stakes in commercial developments) and accelerating the development of commercial low carbon energy projects.

What’s coming up in 2018/2019

So, what is in store for the year ahead?

By building on our efforts to date, I am confident we will continue to support and stimulate an international, innovative and inclusive growth economy for Scotland. Working as part of Scottish Enterprise and in partnership with our colleagues in Highlands and Islands Enterprise, Scottish Government, and partner organisations in particular British Business Bank, we will continue to deliver a comprehensive package of financing support and funding advice, helping more companies fast-track their growth, fulfil their international ambitions and attract new investment into Scotland.

Specifically, we will continue to deliver our private sector led equity funds, the Scottish Co-Investment Fund and the Scottish Venture Fund, designed to provide patient gap funding in the start-up and early stage investment space where evidence supports the continued need for public sector intervention. We will continue to support Scotland’s scale-up agenda by capitalising on the progress that has been made with the Scottish-European Growth Co-investment Programme by making substantial levels of investment available through the Programme to ambitious Scottish companies. We will deliver the Energy Investment Fund in support of Scotland’s low carbon agenda and promotion of community ownership. We will continue to work intensively with companies through our Financial Readiness Service whilst expanding our digital offering to reach a greater number of growth companies; and we will continue to launch new support mechanisms for our investee companies such as delivery of corporate governance workshops and exit readiness masterclasses.

2018/19 will see an acceleration of efforts to establish the Scottish National Investment Bank. The creation of the new Bank will be a tremendous boost to Scotland’s competitive and investment landscape and will be key to accelerating the Scottish Government’s ambitions for the economy. The new entity will build on the significant achievements of SIB to date, providing ongoing and new sources of strategic, patient capital to a range of companies in Scotland as well as a focus on infrastructure and mission led finance. I look forward to continuing to work closely with Scottish Government colleagues and other stakeholders in the months ahead, turning the plans for the Bank into reality.

2017-18 was a busy year for SIB and the risk capital market in Scotland in general. We have an ambitious programme for the year ahead and are already making good progress on various fronts.

I hope you enjoy looking back at some of our key achievements from 2017/18.