Scotland accounted for almost one-fifth of all UK equity deals involving university spinouts in 2023, according to new figures from the British Business Bank.
Published today, the Bank’s annual Small Business Equity Tracker also places two of Scotland’s universities among the UK’s top five for spinout deal activity. A total of 12 deals in 2023 involved businesses with roots at the University of Strathclyde, while another dozen were associated with the University of Edinburgh. Only Cambridge, Oxford and the University of Bristol accounted for a higher number of deals.
Overall, 24% of deals in Scotland were classified as spinout deals in 2023 – the second highest proportion in all UK regions and other Devolved Nations. Chemify, a University of Glasgow spinout, and Prothea Technologies from the University of Edinburgh were among the high-growth potential businesses to secure equity funding during the last 12 months.
In Scotland as a whole, there were 169 equity deals in 2023, with a 21% year-on-year decline bringing activity back in line with 2019’s pre-pandemic levels. The total investment value in Scotland was £402 million, which was 50% less than in 2022. Both of these annual declines were in line with trends seen across the wider UK market.
While the UK’s equity market has seen two consecutive years of contraction, overall investment values have increased by 182% over the last 10 years, with deal numbers 42% higher.
Edinburgh also ranked among the top UK cities for European venture capital investment, achieving the fifth-largest share of capital outside of London between 2014 and 2023. Businesses in the Scottish capital secured £1.3 billion of European venture capital investment, with life sciences among the most active sectors thanks to the strength of the city’s universities.
Last year, the British Business Bank launched its £150m Investment Fund for Scotland to increase the availability and supply of finance to all parts of the country. The fund offers loans ranging from £25,000 to £2m and equity investments up to £5m and is part of the Bank’s commitment to fostering sustainable economic growth by supporting businesses across Scotland.
Susan Nightingale, director UK network, devolved nations at the British Business Bank, said: “Scotland has world-leading research facilities and top talent coming out of its universities, making it an ideal place for spinouts to establish roots. It is highly encouraging to see businesses backed by cutting-edge research spinning out of universities and securing a high proportion of UK equity funding.
“As has been the case globally and across the UK, 2023 was a tough year for the equity finance market in Scotland. However, despite the continued challenges of higher interest rates and fewer exit opportunities, it is encouraging that investment now looks to be stabilising and returning to a pre-pandemic norm.
“For high-growth businesses looking to scale up, knowing that finance is available is key. The Investment Fund for Scotland was established last year to address regional imbalances in access to finance and unlock new opportunities for smaller businesses, wherever they are based.”