Investment in smaller Scottish technology businesses surged last year according to new research which shows that the amount of equity raised in the first nine months of 2021 surpassed that for the whole of 2020.
Life sciences was the most popular sector for equity investment as the Covid pandemic raised interest in healthcare technology, according to the analysis from the British Business Bank. In addition, money going into “clean” technologies quadrupled in the build-up to the COP26 summit in Glasgow.
Using Beauhurst data that tracks equity flows into high-growth businesses, the bank found that investment in Scotland’s smaller life sciences companies reached £61 million during the nine months to the end of September 2021. That was 42 per cent higher than the £43m for the whole of the previous year.
During the run-up to November’s COP26 summit, smaller businesses in the clean technology sector attracted £24m of investment, up from £6m for the whole of 2020.
Across the smaller tech sector as a whole, Scottish firms raised £163m by the close of the third quarter, 36% higher than 2020’s total of £121m. Life sciences represented 37% of the total, while software firms accounted for a 23% share.
Mark Sterritt, Scottish network director of the British Business Bank, said access to funding is critical for businesses with the potential for high growth. The state-backed bank, whose remit is to support economic development throughout the UK, is preparing to launch a new £150m regional fund for Scotland.
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“It is highly encouraging to see a significant increase to equity investment in Scotland’s smaller tech businesses,” he said. “These are the high-growth, innovative companies that will help drive the wider economy in the years ahead and that they are looking to equity as a way of funding recovery and growth points towards a renewed sense of optimism after a highly challenging 2020.”
The findings follow the bank’s Small Business Finance Markets report which recently found that total equity investment in smaller Scottish businesses from all sectors reached £403m during the first three quarters of last year, exceeding the total of £279m for the whole of 2020 by 44%.
“Although there are clear headwinds in the form of cost inflation, supply chain pressures and geopolitical tension, 2022 will hopefully see a return to more normal trading conditions as the year progresses,” Mr Sterritt added.
“With that, we would also hope to see more companies switch to focus on growth, having understandably been in survival mode for much of the past two years.”
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