Fast-growth businesses in Scotland attracted £506 million of venture capital (VC) investment in the first half of 2022, despite investors becoming more cautious globally, according to the latest figures from KPMG UK.
There were 45 investments completed in Q2 of 2022, raising over £325 million for Scottish scale ups.
In the previous quarter, 41 deals worth £181 million were recorded, taking the total for the first half of 2022 to £506m.
For the whole of last year, a total of £626 million of VC investment was raised by Scottish business.
However, KPMG suggest that a strong first half of 2022 may not be replicated in the second half as investors become increasingly cautious.
The lion’s share of Scottish VC deals in Q2 2022 involved businesses in Edinburgh (24), followed by Glasgow (7), Aberdeen (3) and Dundee (2).
“Standout deals during Q2 include Edinburgh based start-up Rooser, which aims to speed up fish sales transaction and cut waste through an online platform for traders,” said KPMG.
“It secured more than £17 million from investors in April.
“Resolution, a biopharmaceutical company developing cell therapying collaboration with the University of Edinburgh Centre for Regenerative Medicine to treat advanced liver disease also raised a £10m extension to its Series A financing from Syncona.”
Amy Burnett, KPMG Private Enterprise Senior Manager in Scotland, said: “The value of investment in Scottish businesses continued at a healthy pace in Q2, despite global levels stalling.
“That’s great news for Scotland as we continue to see hot sectors such as FinTech and HealthTech attract the biggest investments, but we need to be mindful that investor behaviour is likely to change in the second half of the year.
“Companies that may have attracted funding from optimistic investors in the past, will likely face more challenges and require stronger business cases and paths to profitability to attract funding over the next few quarters.
“There are already some red flags on the horizon as the volume of UK deals being done in the first half of 2022 is down more than 11% year on year.
Graeme Williams, M&A Director, KPMG UK, explains: “The drop off at a UK level is a strong indicator that there continues to be a reasonable amount of dry powder in the market, with investors poised to spend.
“With our burgeoning tech and life sciences markets, Scotland offers attractive alternative options for investors looking to diversify their portfolios given global uncertainty.
“And as VC firms start to take a more cautious investment approach, activity from non-traditional investors could increase in niche areas of investment.
“Heading into Q3 22, we could see some high-net-worth individual investors stepping in to help fund Series A and Series B deals that might have been funded by institutional money in previous quarters.”