Investment Benchmarking Analysis: Annual Report 2018

This report from Scottish Enterprise (SE) sets 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 equity investments during 2018, in companies based in the UK and the Republic of Ireland.

The report includes investments which have been announced publicly, as well as those which have not, but been found through Companies House records. Data in the report comes from Young Company Finance, Beauhurst and TechIreland databases. Deals below £100k are excluded, to make the volume of deals more manageable to analyse.

The report found that 2018 was a strong year for risk capital investing globally, and this is reflected in the market trends across the UK. Overall, the growth of the UK market fell back slightly but was still close to record level investment with total investment of £10.3bn, compared with £10.9bn in 2017. However, deals increased by 8% between 2017 and 2018 to 3,868. The ‘golden triangle’ regions of London, East of England, and South East, dominated the market securing 73% of all deals and 79% of all investment. The market is characterised by investors of different types focusing on the investment market, but there is a ‘long tail’ of investors completing only a single deal in the year. Investment in the Republic of Ireland was up by approximately 50%, with total investment of £837m. 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 it is not possible to replicate the investment success of one region to another and that the risk capital market is a complex system, affected by the local and macroeconomic environment and history, as well as the presence of universities and research institutes, availability of talent, location of target markets and the presence of different types of investors. Regions are likely to be most effective at attracting risk capital by building on their existing strengths and utilising their own ecosystems. The report demonstrates the importance of looking at the whole market rather than focusing on a particular investment size band to determine the overall health of the market.