The risk capital market in Scotland 2014

The purpose of the report is to provide a detailed and comprehensive analysis of the early stage risk capital market in Scotland for 2014. The report is intended to improve the understanding of the scale and characteristics of the early stage risk capital market in Scotland.

The research methodology consisted of two stages: data collection; and analysis. Data collection was based on a list of known investment deals contained in listings from Young Company Finance (YCF), LINC Scotland, and the Scottish Investment Bank. The investee companies from this list were supplemented by identifying other known companies, similar in nature, which were not known to have secured investment. The companies were then approached to establish whether they had secured external investments which were not on the first list. Companies House database was also searched for confirmations. Key early stage investors were also identified in order to ascertain whether or not they had made investments. For all metrics covered in the report formulae were created and the resulting information was charted to give a visual representation of trends as the basis for the commentary given in the report.

The study found that following increased investment in the last three years, there has been a further steep increase in the total investment in this market, with the amount invested up by 20% and the number of deals in 2014 increasing 45% compared to 2013. The report also highlighted that the top few deals continue to account for the majority of investment, with the top 20 deals accounting for two thirds of all investment. The middle investment band has seen substantial consolidation and venture capital (VC) and institutional investment more than doubled. Business angel groups, networks of investors who combine their investments in a company, invested in a record number of new companies, favouring the already highlighted ‘middle investment band’. Across the period the number of companies securing investment for the first time has increased, however this has not been matched by the amount invested, which has dropped slightly. The ICT sector saw an increase in investment, as did other sectors such as life science companies. Energy (excluding renewables) was the only sector to see decline in investment levels. Geographically the east of Scotland dominates the market, securing more investment than all other regions combined.

The report makes no recommendations as this was not within the remit of the study.