Investment in Scottish start-ups by business angel LINC Scotland is returning to pre-crisis levels, the group's chief executive has said.
Angel investment through LINC's 19 syndicates - which account for around one-third of tech start-up support in Scotland - fell from £31.3 million in 2012 to £27m in 2013. The figures include co-funding from Scottish Enterprise and its investment arm, the Scottish Investment Bank.
In the half-year to June 2014, LINC syndicates invested £15.8m, compared with £12.5m for the first half of 2013 and £15.5m for the first half of 2012.
According to LINC executive director David Grahame, the 2014 figures show activity "within a whisker" of a pre-crisis peak in 2008, when investment in the first six months of the year reached an all-time high of £17.3m and full-year investment was £31.9m. Grahame said that the recent dip reflected the lower quality of opportunities last year.
Although he acknowledged a small tailing off of angel investment since 2009, Grahame said his members had been largely unaffected by the credit crunch and subsequent recession as they generally invest their own capital and do not borrow to invest.
LINC syndicates collectively contain 1100 investors and mostly invest in unlisted start-ups or new companies in the life sciences, IT or alternative energy sectors.
Average return on business angel investment is typically around 22% a year, Grahame said, "comparable" to the return on venture capital investments. The high failure rate for many start-ups is compensated for by "ludicrously good" returns on the small proportion of companies that grow to become major companies, he said.
In return for putting money into a high-risk sector of the economy, investors don't pay tax on capital gains on such investments through the Westminster Government's Enterprise Investment Scheme and the Seed Enterprise Investment Scheme. Investing through syndicates also allows business angels to dilute risk.
Founded in 1993, LINC Scotland is the national association for business angels, representing members in Edinburgh, London and Brussels. It was a founding member of the European Business Angels Association and the World Business Angels Association.
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