Scotland’s risk capital market weathers the economic storm

Equity investment in Scotland’s most promising companies has continued at a steady pace despite the economic downturn, according to the Scottish Investment Bank’s annual review, launched today, 14 November 2011.

At a time when investors across the UK show restraint and the angel market has declined by 25%, Scotland is continuing to buck the trend with steady investment levels in recent years, evidencing the key role which the Scottish Investment Bank plays in stimulating private sector investment through its co-investment approach.

The review reports that the Scottish Investment Bank has delivered a solid performance during 2010/11 investing £23 million in 109 Scottish companies and leveraging £53.7 million of private sector investment. The recent investment figures reveal that more than £422 million of risk capital has been raised for Scotland’s early stage technology businesses since the equity funds were introduced by Scottish Enterprise in 2003.

The Scottish Investment Bank was created as a division of Scottish Enterprise in December 2010 to help introduce new financial products and services that can support both exciting early stage companies and established companies with growth potential.

Scottish Enterprise chief executive, Dr Lena Wilson, said: “Improving access to finance is critical and we are working with Scotland’s private sector SME funding market to ensure that both early stage and established businesses with growth and export potential have adequate access to growth capital.

“Since our equity funds began, more than £422m has been invested in some of Scotland's most promising companies and our co-investment model has been widely recognised as stimulating and supporting the market in this challenging economic climate.

”It is an extremely challenging climate for risk capital and we are undoubtedly having to work harder to maintain investment levels for Scottish companies, however, these latest figures are encouraging and demonstrate that the appetite for equity investment is steady in Scotland.”

The Scottish Investment Bank currently operates three equity investment funds, the Scottish Seed Fund, Scottish Venture Fund and Scottish Co-Investment Fund and is a partner and the cornerstone investor in the independently managed Scottish Loan Fund, which was launched earlier this year to help support SMEs with growth and export potential.

Encouragingly, the past year has also proved to be the Scottish Investment Bank’s most fruitful year to date for generating income from the portfolio, with a total of seven exits, helping to produce £10.8 million in returns for the organisation.

Dr Wilson continued: “Scotland continues to produce exciting innovative young companies with emerging technologies, products and services that boast global potential and our equity funds continue to drive further investment and confidence in those companies.”

“We are eager to explore new opportunities and routes to increase access to finance for Scotland’s business sectors and will continue to work closely with the private sector to bring new products and services to encourage economic growth.”