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Scottish Venture Capitalists Underline Start-up Funding Gap

Scottish technology firms were responsible for the majority of all venture capital raised north of the Border in the first three months of 2018, new research has shown.

The venture capital sector is an important part of the economy, where start-up companies get a much-needed boost. With businesses preoccupied with Brexit anxiety and the so-called retail apocalypse, gathering finance for start-ups has been neglected. The venture capitalists within Scotland, however, have not allowed economic instability to dominate their priorities, and new research has revealed the encouragement this could deliver to the overall economy.

Figures from KPMG’S Venture Pulse report has revealed that £6.3 million was raised by businesses in Scotland’s tech sector. With general business investment hurt by late payment and political instabilities, it is encouraging to see the Venture Capitalist sector pick up the slack.

When start-up businesses are in need of finance, traditionally they have approached high street lenders for bank loans and financial advice. However, recent institutional scandals amongst both the Royal Bank of Scotland and Lloyds Bank have diminished public trust in bankers and alternative finance platforms have sprung up in response. It is important to offer small businesses a range of choices, from banking, alternative finance, venture capital and credit management.

At the Credit Protection Association, our debt recovery services free up cash flow for all our Members, whether they are start-up businesses or larger firms. If we are to compete with rival economies, it is important that our start-up businesses have the capital to pursue the most courageous and bold opportunities.

In Scotland, the 2017/2018 period saw £2 million raised by tech outfit Mindmate, and Lendingcrowd, the peer-to-peer investment platform, which raised £3m.

The latest figures reflect findings from KPMG’S 2018 Global Technology Innovation report, which revealed that the UK is the fourth most promising market in the world for innovation, disruption and technology breakthroughs – behind only the US, China and India.

Sam Subesinghe of KPMG in Scotland warned that investment was starting to show signs of slowing down, with investors focussing on smaller numbers of later stage deals.

“Brexit is cited as the main reason for this, but while overall investment has dropped, the tech sector continues to grow. Scotland’s tech scene attracts investors as it is well established and goes hand-in-hand with a strong financial services sector.

Sam Subesinghe of KPMG in Scotland said: “Additionally, the country’s university infrastructure means there is a strong supply of highly-skilled graduates emerging. Investment in the tech industry will continue to play an important role in the UK’S growth strategy.”

Venture capital financing is an important way of getting start-up businesses off the ground. Start-up businesses tend to be braver and more innovative than older firms and do not have the history and links to traditional concepts that hinder the more established.

These businesses may have the enthusiasm and ambition to tear down barriers, but many are without the capital to fund it. Some business owners end up using their own personal savings to establish themselves, and some struggle to garner financial aid ever after.

High street lenders have become more reluctant to approve bank loans for smaller businesses, and many have suffered a multitude of rejections from a multitude of financial platforms. It is a positive move to see Scotland’s venture capitalists fund start-ups, but the responsibility still lies within the business community. Nevermind their size, if businesses want to survive the long-term, they need to scrutinise their finances.

At the Credit Protection Association, our Members come in a range of different shapes and sizes. Whether they are start-ups or large blue chip companies, they need to ensure their finances will not only survive the next week but for the next decade. Our debt recovery services purge our Members of late payers, residual debt and anything else that could punch holes in cash flow. This will allow start-ups to innovate the present, as well as the near and distant future.