Scottish firms secure record-breaking £705 million of venture capital despite end-of-year slump
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Scotland’s performance during 2022 also bucked global and UK trends, according to KPMG’s latest Venture Pulse Survey, with investment volumes growing by 12 per cent year on year. By comparison, venture capital (VC) investment in the UK fell by 30 per cent in 2022. The strong showing north of the Border came despite investor activity dipping in the final quarter of last year.
Scotland’s scale-up businesses attracted some £82m of VC investment across 34 deals in the fourth quarter of 2022 - 15 per cent less than was invested during the same period in 2021. Despite the sluggish finish, 2022’s overall investment total of about £705m surpassed 2021’s £626m which was the previous highest level on record. Experts noted that 2022’s figure was more impressive given the volume of deals was down by 5 per cent year on year.
Standout deals during the final quarter include Forres-based spaceflight company Orbex securing £40.4m for its Series C funding round, led by a new investor, the Scottish National Investment Bank, as it counts down to the first vertical launch from UK soil. RoslinTech closed an £11m Series A capital raise, led by life sciences investor Novo Holdings. The investment aims to fuel the company’s next wave of growth in its mission to become the leading provider of animal cell lines to the cultivated meat sector.
Amy Burnett, KPMG private enterprise senior manager in Scotland, said: “2022 cemented Scotland’s reputation as a place where exciting young companies are born and where investors are backing promising start-ups. Unlike the rest of the UK, Scotland posted record-breaking VC volumes in 2022. While certainly not recession proof, Scotland’s breadth, and depth of scale-up sectors did provide some cover during a challenging 2022.
“Globally investors have increasingly turned away from sectors that rely on consumer spend to drive growth and are instead doubling down on investments in those sectors where technology is addressing big macro trends such as health tech and ESG [environmental, social and corporate governance]. With an abundance of these businesses being nurtured outside of London, it is good news for Scotland’s deep tech, clean tech, and health tech firms.”
Graeme Williams, mergers and acquisitions (M&A) director, KPMG UK, added: “As expected VCs did become increasingly cautious and invested funds into less risky asset classes during the final quarter of the 2022. Most investments in Q4 across Scotland were for later stage funding, suggesting that investors backed more established firms to shield from risk. We know there is still dry powder out there waiting to be deployed, and while we’re expecting a quiet start to 2023, the Scottish market is likely to see soft growth especially if a recession is shorter than expected.
“Soaring energy costs sparked a significant uptick in VC investment in new energy alternatives, electric vehicles and cleantech last year. Heading into 2023, the acceleration of investment in energy alternatives is particularly exciting as such investment is critical for meeting the world’s climate change targets.”