Investment Benchmarking Analysis: Annual Report 2017

This report has been commissioned by Scottish Enterprise (SE) to set the performance of the risk capital market in Scotland in the context of other UK regions and the Republic of Ireland. The report analyses data on risk capital equity investments during 2017, in companies based in the UK and the Republic of Ireland.

The methodology consisted of: data analysis, including from Young Company Finance’s (YCF’s) lists of companies and investment deals and the Companies House record (for Scotland); desk research and direct approaches to all investors known to have invested in the companies on these lists; and website analysis. For the UK, data was drawn from the database of start-up and scale-up companies across the UK created and maintained by Beauhurst, and for Ireland, the study used deal listings prepared by TechIreland. Deals below £100k are excluded, to make the volume of deals more manageable to analyse. Data from 2016 allows comparisons to be made with the performance of the overall UK market, the UK regions and Republic of Ireland in 2016.

The report found that 2017 was a strong year for risk capital investing globally, and this is reflected in the market trends across the UK. Overall, the UK saw a 41% increase in deal numbers and a 95% increase in the total investment made between 2016 and 2017. The UK 2017 total reached £10.9bn of investment across 3,579 deals. The main increases were in high value deals – deals over £10m accounted for 4% of all deal numbers in 2017 but secured 64% of the investment. Investment in deals in the range £50m to £100m increased by 176%, and investment in deals over £100m increased by 692%. Most of the deals over £100m were ‘one-off’ deals, with investors making a single investment (not regularly investing in this market). The ‘golden triangle’ regions – London, East of England, and South East, dominated the market securing 73% of all deals, and 80% of all investment. After the golden triangle, the regions that secured the most deals were Scotland followed by North West and South West; in terms of investment levels the order was North West, Scotland and the South West. Investment in the Republic of Ireland was down by 20% but was still a substantial amount at £553m. Scotland continues to see a substantial number of deals, across all ranges of investment bands, and has a diverse investor base active in the market.

The report concludes that work should continue to be done to raise awareness of the range of finance options available to companies, and that companies need to look beyond the investor making current investments and look to a wider group to obtain the investment that they need. It is challenging to replicate the conditions that contribute most to improving the performance of the risk capital market. The report concludes that it is important to build on local strengths and to encourage a diverse investor base alongside a pipeline of growing companies.