The latest Nations & Regions report released by the British Private Equity and Venture Capital Association (BVCA) last month highlighted company investment across Scotland, identifying the nation as a growing hotspot for private capital activity.
Our report showed that £895m was invested into Scottish businesses by private capital firms in 2021, a strong increase on previous years, with £213m and £271m invested in 2020 and 2019 respectively.
This investment is powering SMEs across Scotland, with nine out of 10 businesses supported here employing 250 or fewer people. While these are welcome developments, Scotland currently suffers from a gap in support for scale-up businesses – those with strong, often global, growth potential.
There’s no doubt that Scotland provides an ideal eco-system for start-up businesses. Through public sector organisations such as Scottish Enterprise and our universities’ incubator hubs, there is strong support to help drive forward innovative business ideas and encourage their growth trajectories.
We do, however, often struggle to provide the right environment that will help the best of these businesses ascend to a higher level and achieve global potential.
There are, of course, some notable exceptions.
Scottish-founded companies such as Skyscanner and FanDuel have, in recent years, achieved unicorn status before respective sell offs to Chinese and US interests. Both do, however, continue to provide a strong economic impact in Scotland, with Skyscanner maintaining its headquarters in Edinburgh, while FanDuel’s base in the capital employs several hundred people.
Scotland’s life sciences sector is also experiencing scale-up success, with companies like TC Biopharm and Current Health making huge strides forward along their global growth journey.
Both of these innovative companies have benefitted from the support of Scottish Enterprise and local business angel consortiums.
While these businesses have achieved global status, we must also recognise that many revenue-generating Scottish companies with significant scalability continue to falter in their pursuit for growth. Accessing the level of investment required to get them there is often the key barrier preventing success.
As a result, many of these businesses will either fail to reach their full potential or be sold off to an international rival, which is better resourced to develop their innovation. Either way, we often lose out on the associated economic benefits seen when scale-up businesses retain their headquarters, and much of their workforce, in Scotland.
While scale-ups in London and the south east of England tend to do well, access to investment is also an issue which extends to other parts of the UK. Last year’s Scale Up Institute Review reported how many areas were failing to close the market access gap.
This lack of growth investment, coupled with growing skills shortages across many of our key sectors, is holding back many scalable companies and, here in Scotland, it’s impeding economic growth.
How we address this issue is a key challenge going forward.
Last month’s first-ever Invest2Scale event held in Edinburgh, which I was honoured to address, is a welcome initiative which seeks to put a greater focus on Scottish scale-up companies by connecting them with venture capital firms and other investors.
The gathering was conceived by a group of private sector corporate operators which included MBM Commercial, Chiene + Tait, Eden Scott and business angel organisation LINC Scotland.
Through their collective networks, and working in conjunction with groups like BVCA, the event brought together some of Scotland’s most scalable companies with business growth experts and other key figures from the UK and international investor community.
The significant growth of investment into Scottish businesses, as highlighted in our recent report, underlines the strong the potential of entrepreneurship in Scotland.
Helping get the best of these businesses to the highest level is a challenge we need to embrace if Scotland is to maximise the economic opportunities they offer.
Michael Moore is director general of the British Private Equity and Venture Capital Association
