A little more analysis on Scale-up funding in Scotland vs UK.

Following up on the Annual Risk Capital Report by Scottish Enterprise I enlisted the help of my 14 year old son Charlie to lift some of the PDF’d appendices into Excel so we could manipulate the data to give us a clearer understanding of the Scottish Funding landscape vs that of the UK. Helpfully, the analysis looks at deals < £2m in value (ie Pre-seed, Seed and Angel), deals £2m to £10m (ie. late Angel, Series A) and deals > £10m (ie Series A and beyond).

The report lists Total Investment Value and Number of Deals so Charlie thought he’d dig in a bit to see what Average deal size looks like when looking at different deal size categories.

Here’s what he found:

When looking at the volume of deals we can see that the Scotland picture is largely similar to that of the UK. Deals < £2m make up the majority of deals (in terms of volume) with deals > £10m being around 5% of all deals in the UK and c. 3% of deals in Scotland. Scotland tends to have a slightly higher percentage of deals in the £2m-£10m space in the last few years making up 19% in 2023 whereas this size of deal was only 15% for the UK overall.

If we look at total investment across these areas in a similar way we see this:

When considering the total £ investment in Scottish businesses we can clearly see that the majority of £ investment has been in the £2m-£10m space in the last year, whereas in the UK, late stage investments (>£10m) is consistently around 60% of the total investment levels.

So, Scotland and the UK are broadly aligned in deal value but very different in terms of actual £ investment. This only leaves Average Deal Size for us to consider.

The results are as follows:

For early stage <£2m deals, the UK and Scotland picture is very similar with the average cheque size being marginally higher in Scotland.

 For mid stage deals in the £2m-£10m space, the comparison between the UK and Scotland is again similar. Over the last 6 years, the average cheque size in this space for the UK and Scotland has been £4.2m and £3.8m respectively.

It’s great to see this gap closing to £4.3m (UK) vs £4.2m (Scotland) in 2023. I know the businesses will need and appreciate the extra £400k!

Which brings us to the final chart which looks at the average cheque size for the late stage (>£10m ) investment category.

The picture here is a little more challenging albeit we need to consider that the deal volumes are small in Scotland and so the numbers can be lumpy.

The headline is this:

Over the last 6 years the average cheque size for a late stage UK business has been 46% higher than for a Scottish late stage business.

In 2023 (the most recent year), the average late stage investment in a UK company was £35m and only £20m for a Scottish company. Over the reporting period, the average UK and Scottish investment (>£10m) has been £39m and £27m respectively.

So, Scottish companies at this stage have on average £12m LESS to invest in their scaling up and market expansion.

Charlie’s question to me “Why?”.

My response, “Don’t get me started Charlie or you’ve got a long and boring summer holiday ahead!” 😊

Thanks for reading and wishing you a great summer break.