Angel investment in Scotland hits record £146m

The angel investment market in Scotland rebounded in 2021 as deals led by angel syndicate members of LINC Scotland secured a record £146 million funding for young companies with high growth potential.

This was almost double the amount raised in 2020, and 70% higher than the previous record set in 2019.

LINC Scotland is the national association for business angels in Scotland with a membership that includes over one hundred investors.

Several of the LINC member syndicates reported their busiest year to date.

Archangels made 11 investments totaling £23.7 million, an increase of 44% over 2020.

Par Equity more than doubled its investment, deploying £25 million, up from £12 million in the previous year, with six new investments and follow-on finance for 21 companies.

This took Par Equity past the £100 million benchmark of capital invested since it started in 2008.

Equity Gap reached a £25 million investment milestone following its most successful year to date, leveraging additional funding of over £100 million for investee companies since its launch.

These investments have helped create over 500 high quality jobs in Scotland.

The LINC Scotland membership includes 21 syndicates, which together invested 50% more in 2021 than in 2019, with contributions averaging £470,000, about 80% higher than in 2019.

The syndicates were very successful in bringing external co-investors into their deals – corporate investors, venture capital firms, other angel groups, and other institutional investors, many from outside the UK.

These co-investors contributed 54% of the total amounts raised in 2021, with an average investment of £1.7 million, almost double the 2019 level.

Support from public sector investors, chiefly Scottish Enterprise, stayed constant throughout this period, at approximately 20% of the total.

LINC Scotland said its syndicates benefited from two “exceptional” exits.

Par Equity exited its investment in Current Health in October when the company was acquired by US-listed Best Buy Inc. for $400 million.

Par led Current Health’s first external investment round in 2016, and ultimately achieved an 80% internal rate of return (IRR) for the syndicate.

And the trade sale in December of Spoonfed to 365 Retail Markets, backed by Providence Equity Partners, delivered returns for 31 of Equity Gap’s members, including seven of the original founder members.

Mark Sterritt, UK Network Director, Scotland at the British Business Bank, said: “There is a huge amount of momentum in Scotland’s angel investment market – that the volume of investment almost doubled on 2020 and is up around 70% on 2019’s record reflects the strength and depth of the sector.

“The exits of Current Health and Spoonfed will help bring further liquidity into the market and hopefully result in further investments later this year and beyond.

“Angel investment has historically been concentrated in London and the South East of England, but the sector is growing in importance in Scotland and has been very beneficial in supporting some of the country’s key sectors.

“To help reduce imbalances in access to early-stage finance for smaller businesses, British Business Investments, a commercial subsidiary of the British Business Bank, established our £100 million Regional Angels Programme in 2018.

“In the October 2021 Spending Review, an additional £150 million of funding for the Regional Angels Programme over three years was also announced.”