With public sector budgets under increasing pressure, Scottish Enterprise’s knack for leveraging private sector investment to boost its backing of high growth potential Scottish businesses has never been more crucial.
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The figures speak for themselves as, over the past two decades, Scottish Enterprise, Scotland’s national economic development agency, has invested £868 million, which has leveraged £2.3 billion of private sector funding via their co-investment approach – a first of its kind when first developed in 2003, and now widely replicated in many countries across the world.
Kerry Sharp, director of entrepreneurship and investment at Scottish Enterprise, says that she and her team are focused on maximising the impact of the money it has available.
“This next year will be interesting as public sector budgets are under continued constraints, but we’re facing into these challenges with a laser focus on the unique role we play, targeting the early stage gaps and leveraging in as much additional capital into Scotland’s early stage businesses as possible.”
Scottish Enterprise encourages co-investment activity
Scottish Enterprise’s current investment portfolio is made up of 336 companies valued at around £478m. With many of these, it will have been the first point of call for early stage backing alongside angel and other early stage investors, with later funding rounds then bringing in venture capital and increasing amounts of international investors as they see Scotland as an interesting and dynamic market creating some world class technologies.
The purpose of this co-investment activity is to grow the availability of risk capital in Scotland – with an eleven-fold increase in the market over the past 20 years this has certainly been the case, and much of this growth has been underpinned by Scottish Enterprise’s investment activity. “Our role is to target the market gaps, providing the opportunity for investment at the earliest stages,” explained Sharp. “The model is to share risk with private sector investors but we are also looking to share the returns of the commercial successes.
“We aim to unlock deals that investors wouldn’t do on their own, ensuring more deals happen and more funding is secured.”
This focus of finding and investing in high-growth Scottish start-ups dovetails with the strategy of the Scottish National Investment Bank, which can come in to provide larger sums at a later stage into Scottish Enterprise-fostered firms.
“Ever since the creation of the bank, we’ve been developing relationships, referring companies both ways and sharing market insights,” stated Sharp. “The overarching goal for both organisations is to help Scottish companies to grow to scale and we have complementary roles as part of that endeavour.”
It’s not all about money either. Scottish Enterprise provides tailored, specialist support and advice to entrepreneurs and start-ups as well as supporting companies on their scale up journey.
Scottish Enterprise backs sustainable businesses
Other priorities for the entrepreneurship and investment team when considering investing in companies include a focus on diversity, equity, inclusion and net zero – which are not mutually exclusive to their commercial focus as having a sustainable business and a sustainable business model is key to future viability and success, according to Sharp.
“We want to bring every company on the journey,” she commented. “We want companies to be future focused and competitive on a global scale, and we know companies that have diverse employees and management teams, engage effectively and pay employees well reap the benefits in their performance. And companies that are facing into and adapting to respond to the climate challenges and opportunities will stay ahead of the competition.
Helping businesses move towards better practices has long been a part of the process, but even more so as Scotland’s energy transition ramps up. Sharp pointed to companies Scottish Enterprise has supported – such as Logan Energy, Hydrasun, Proserv and Verlume – as exemplifying the bottom-line-led shift from targeting oil and gas contracts to dedicating more and more time and energy towards renewable technologies.
“We are keen to support companies moving away from fossil fuels to renewables, securing new projects, which, in turn, create new jobs in places that have traditionally been dominated by carbon-intensive industries,” she added.
Scottish Enterprise focuses on improving productivity
Another key focus for Scottish Enterprise is improving productivity, which Sharp admits has long been an area of weakness for Scotland with historical under-investment in businesses and assets. “From a company perspective we want to help attract significant amounts of capital investment to create well paid, high quality, skilled and rewarding jobs – increasing income and standards of living. Realistically, the capital needed to make a step change means that this is about unlocking external capital to Scotland.
“Our focus is on supporting companies in their thinking on how to increase their productivity and then assisting them in finding the right funding at the right time – taking the next step in their journey, giving management the confidence to lean into opportunities,” she added.
As part of Scottish Enterprise’s recently published Focus on Economic Transformation, the organisation is focusing on the sectors where Scotland has a competitive advantage and where there is global potential. This means supporting emerging sectors like space, hydrogen, photonics and quantum technologies, as well as more established industries such as energy, fintech and life sciences.
“On many metrics – such as risk capital – Scotland punches well above its weight, but we know we need to do better on more fronts if we want to compete with the best-performing regions and nations. These are sectors we believe are capable of delivering the greatest economic impact for Scotland which is why we will target our support and funding in these areas,” concluded Sharp.
How can Scottish Enterprise help your business?
Scottish Enterprise is Scotland’s national economic development agency, supporting businesses to innovate and scale to transform the Scottish economy.
Putting businesses at the heart of everything it does, Scottish Enterprise is focused on the areas where it can make the biggest difference – innovation, investment and internationalisation.
It provides a range of services including business development and advice, innovation support, export and international market support, targeted capital and inward investment that align with economic opportunities and tailored advice and investment for early stage, high growth potential companies. It supports businesses to adopt net zero, fair work, equality, diversity and inclusion practices.
Scottish Enterprise offers investment in projects that support regional innovation capabilities and infrastructure. Its experts provide real insight into emerging market opportunities and access to a professional support network that has been helping Scottish businesses to leverage their strengths and build on their capabilities for more than 30 years.
Visit Scottish Enterprise today to find out more.
