Scale up investment in Scotland at record £623m

Amy Burnett

KPMG’s latest Venture Pulse Survey showed that investments in fast-growth Scottish businesses cooled over the summer.

Scotland’s scale up firms attracted £117 million of venture capital (VC) investment across 41 deals in the third quarter of 2022.

That’s 40% less than was invested during the same time in 2021, and volumes were down by 28%.

However, a record breaking £623 million has already been invested in the first nine months of this year, almost surpassing the £626.9 million total invested in the whole 2021.

The bulk of Scottish deals in Q3 involved businesses in Edinburgh (18), followed by Glasgow (8), Aberdeen (4) and Stirling (3).

Most deals were late-stage VC (19), with nine seed round, seven early-stage VC and six angel investments taking place.

Standout deals during the quarter include Stirling-based Integrated Graphene, which announced plans to invest up to £8 million to scale its manufacturing process for the commercial production of graphene, which is used in human diagnostics and energy markets.

Edinburgh-based pureLiFi secured £10 million from the Scottish National Investment Bank. The optical communications firm plans to target a global roll out of its wi-fi compatible technology.

“While the second half of 2022 looks set to be far quieter, a record breaking £623m has already been invested in the first nine months of this year, almost surpassing the £626.9m total invested in 2021,” said KPMG.

“Compared with Scotland’s steady Q3 performance, VC investment in the UK fell dramatically during the summer with the volume of deals at its lowest since Q3 2016.

“However, the volume of VC investment into scaleups outside of London outpaced the capital for the first time in eight years during Q3.”

Amy Burnett, KPMG Private Enterprise Senior Manager in Scotland, said: “Despite strong fund-raising activity in the first half of the year, global economic turmoil has seen VC investment decline across all markets, including in Scotland where the value and volume of completed deals fell slightly in Q3.

“As the cost-of-living crisis deepens, investors are increasingly turning away from those sectors that rely on consumer spend to drive growth and doubling down on investments in those sectors where technology is addressing big macro trends such as health tech and ESG.

“With an abundance of these businesses being nurtured outside of London, it is good news for Scotland’s deep tech and health tech firms.”