Business angel investment in Scotland reaches new heights

Business angel syndicates in Scotland participated in deals which invested over £100 million in young entrepreneurial companies in the financial year to end March 2020.

Business angel investment in Scotland reaches new heights

This is a record for the business angel syndicates, which are members of LINC Scotland, the national business angel association.

LINC Scotland’s figures show that in the year from April 2019 to March 2020 its member groups invested in 114 deals, raising a total of £103m for 87 separate companies, a few of which completed more than one investment round in the period.

Although most portfolio companies need several follow-on rounds before they can reach profitability or an exit for their investors, the syndicates have continued to make investments in new companies; in the year to end March 2020 these represented 31% of the total number of deals, and 28% of the investment value.

The syndicates usually co-invest with other investors, both to spread their own portfolio interests and to increase the size of investment rounds. In many cases, two or more syndicates join together to co-invest, and in most deals they have co-investment from Scottish Investment Bank funds on a matched funding basis.

Over the past year, syndicates have also been able to bring in other private investors from a wide range of backgrounds, including venture capital and corporate funds, universities, and early-stage specialists such as Foresight and Techstart Ventures, both managing funds under the Scottish Growth Scheme.

The first quarter of 2020 was the busiest quarter of the business year for the angel syndicates, with 30 deals raising £27m investment.

Although the coronavirus pandemic may impact angel investing, the syndicates are working with their portfolio companies to help them through the crisis, and remain determined to continue investing in promising start-ups and scaleup businesses in Scotland.

Niki McKenzie, joint managing director at Archangels, commenting on the syndicate’s investments in four companies in the first quarter of 2020, said: “Each of these businesses is a shining example of home-grown Scottish innovation that is succeeding on a worldwide stage. We are both proud and willing to offer our continued support to these businesses as they scale up.

“These are difficult and uncertain times for all of our portfolio companies, but we remain confident that businesses like these – led by change makers and entrepreneurs – will play an important role in driving the Scottish economy forward when the time comes. Archangels remains committed to supporting Scottish businesses and I would encourage any early-stage companies in the technology and life sciences space to come and share their ideas and aspirations with us.”

Fraser Lusty, director at Equity Gap, commented: “Equity Gap continues to invest in new opportunities, as well as providing significant scale up funding to our existing portfolio. In response to coronavirus, we have been working with our portfolio companies to help them identify how to minimise business risk and leverage any opportunities.”

Par Equity’s business angels also had a busy year, as partner Andrew Noble explained: “The Par Investor Network is the backbone of our investment activity and collectively it has invested in 19 Scottish companies in the last year alone. One of those leading the charge is portfolio company Current Health – a provider of remote patient monitoring devices - which raised a further £9m in November.

Kevin Grainger, chairman of Eos Advisory, added: ”At Eos we firmly believe that some of the best early-stage Scottish businesses have the potential to make a significant impact on some of the key issues facing the world today, such as healthcare, climate change and food and water security. It is these innovative businesses that Scotland nurtures so well, and that Eos looks to invest in and support.

“Whilst all businesses are being affected by the current situation most of our portfolio are coping well and indeed some, such as ILC Therapeutics, have significant opportunities to contribute to the fight against COVID-19. We see these innovative early-stage businesses not only as good investments in their own right, but also invaluable to support the growth of high skill jobs and the economy in a world adapting to the pandemic.”

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