The Scottish Investment Bank has revealed plans for a market consultation exploring how the public sector investor can help tech firms seeking access to seed capital. The SIB, which is the investing arm of Scottish Enterprise, will go out to the sector in Q3/Q4 this year to discover how it can better assist tech firms needing finance to expand.
Currently, the SIB takes a sector neutral approach when it invests in companies in Scotland, although it has given some specific support to life sciences and renewables. “We have a digital technologies team who from a sector point of view are constantly trying to work out what that sector needs,” says Kerry Sharp, head of the Scottish Investment Bank. “From an investment point we’re not taking a different approach to our generic co-investment funding because we’re not sure it’s needed just now but it is one of the areas we are about to consult with the market on what’s happening.”
She adds: “There’s still lots of money flowing in [into tech] but is it enough? And if not do we as the public sector need to be doing something else to finance it? I know there are a lot of individuals out there who think something more should be happening and that’s what we do, we keep our ears to the ground. If we find that people feel there might be something, then that’s when we go into a wider consultation; if it’s anecdotal it’s difficult for us to do too much about it.”
The consultation is likely to be driven by Scottish Enterprise, initially with key market players, and Sharp echoes the investment community’s call to try and encourage more outward investment into Scotland. “We just want to make sure there’s not a glass ceiling there or that there are still more companies not getting the funding because it’s scarce. So we’re trying to work out whether there are other responses that we need to do like trying to encourage other VCs to move into Scotland, or whether we need to encourage funds to set up here that we can invest into.”
In terms of risk capital the SIB runs two investment funds – the Scottish Co-Investment Fund and the Scottish Venture Fund, although it is more active in the former where it partners with many of the most established investors from the angel community. The model is built around joint public-private sector investment.
Sharp says the SIB deals with more than 100 investors and recent analysis has shown in the last three years that 40% of investment has come from outwith Scotland. Sharp wants to increase that to 50 or 60%, giving Scotland’s economy the benefit of scale as well as international experience and knowledge; although she is cautious about not wanting companies to be “grabbed out of Scotland, and moved elsewhere”. “Although acquisition can be good for a company, and it allows them access to additional capital and allows them to grow, we want them to do that in Scotland.”
SIB HAS INVESTED IN:
CLEAR RETURNS – software for retailers – £175,000
CLOUDSOFT CORPORATION LTD – cloud application management – £1.5m
SUMERIAN EUROPE LTD – IT capacity planning – £3.2m
ADMINISTRATE LTD – Training company software – £900,000
BIG DATA FOR HUMANS – Customer analysis software – matched funding with Techstars incubator
IMETAFILM – Digital film – secured £217,000 funding package from Kelvin Capital and SIB
BLOXX – real time Internet and email filtering – exited after shareholder sale to US-based Akamai Technologies Inc in October 2015.