Venture capital investment in Scots firms falls 49%

Graeme Williams, KPMG Head of Corporate Finance M&A for Scotland

The new KPMG Venture Pulse Survey has revealed that venture capital investment in Scottish firms dropped from a record high of £707 million in 2022 to £359 million in 2023.

In 2021, £628 million of venture capital investment in Scottish firms was recorded.

A total of 115 Scottish firms received venture capital investment during 2023.

Standout deals during the period included:

  • Alternative meat start-up ENOUGH, which raised £31 million in equity to help bring more plant-based chicken, mince and dairy products to supermarkets and fast-food chains
  • Manus Neurodynamica, which develops and markets products and technologies for neuromotor assessment. The company closed a £2.6 million funding round to support the commercialisation of its NeuroMotor Pen .
  • Fintech firm DirectID, which provides data to optimise credit and risk decisions. It attracted a £7.69 million minority investment from IKEA’s investment arm, Ingka Investments

Graeme Williams, Head of Corporate Finance M&A for Scotland at KPMG UK, said: “It is fair to say that figures for 2023 have revealed a slowdown, especially when compare to the record breaking results of the previous two years.

“After two years of exceptional activity, the market has reached a more stable point and what we are seeing not just in Scotland but globally is caution for investors who are little more wary of the types of deals they commit to being part of.

“Looking ahead, it’s likely that venture capital investment will remain stable at the very least in the face of challenges such as geopolitical complexities.

“However, from the deals that we have seen take place, there is evidently still strong interest in Scottish firms and investing in them.”

Amy Burnett, KPMG Private Enterprise Senior Manager in Scotland, said: “We continue to see investors focus on new emerging technologies such as Cleantech, AI and wider Life Sciences including Medtech – all strong areas in Scotland where we are seeing IP rich businesses spun out of universities.

“I am hopeful that this knowledge and expertise sets Scotland in good stead for 2024, and beyond, when it comes to our talented businesses raising venture capital.

“There is no doubt that there has been a re-levelling in the markets, but I am hopeful that the renewed focus of investors on sustainable and profitable business models will be welcomed by our Scottish founders, who have historically taken a canny approach growing their businesses, and to fundraising.”

KPMG uses PitchBook as the provider of venture data for the Venture Pulse report.