Scottish Investment Bank to raise the stakes for early stage innovators

The Scottish Investment Bank has boosted the upper limit of its Scottish Seed Fund to £250,000 to increase access to finance for innovative young companies seeking equity investment.

In a move designed to increase investment levels at seed stage, the change will result in a total public and private sector combined potential deal size of £500, 000.

Head of the Scottish Investment Bank, Gerard Kelly, said: “Improving access to finance is critical if we are to emerge from the recession in a strong position. Recent market and evaluation evidence has demonstrated that by boosting the threshold of the Scottish Seed Fund, we have the potential to increase availability of risk capital for Scotland’s seed and start up stage companies.”

The Scottish Seed Fund was established by enterprise agency, Scottish Enterprise in 2006 to improve the availability of finance for start-up and young growing companies in Scotland. It invests between £20,000 and £250,000 alongside matched private sector investment, on an equity basis, in early stage businesses demonstrating high-growth potential in terms of launching new products, entering new markets and increasing employment.

Since inception, the fund has invested £8.4 million in Scotland’s most promising seed stage companies and levered an additional £15.6m million from private investors equating to a total of £24 million of investment.

Recent NESTA research suggests limited involvement of business angels and venture capital funds in seed stage investments and that early stage technology companies, where successful and provided with the necessary finance, are most likely to generate significant increases in employment and GVA.

The latest Scottish Risk Capital Market report identified that while Scottish Investment Bank funds are meeting an important need in the market and helping both established investors and new entrants, there is clear evidence of equity gaps at early and development/expansion stages with the gap is most acute at the seed/start up stage.

Mr Kelly continued: “Scotland continues to produce exciting innovative young companies with emerging technologies, products and services that boast global potential. By increasing our Seed Fund to £250,000 we hoped to further boost investment and confidence in those companies with the capability to drive forward Scotland’s economy.”