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Concern as investors waver

Slowdown in venture capital funding as uncertainty spreads

James McIlroy EnteroBiotix

James McIlroy of Enterobiotix, one of the big recipients

Deal volume involving venture capital in Scotland rose in the last quarter while the value fell as investors show signs of becoming increasingly risk averse, according to new analysis.

The data reveals investment into Scottish start-ups was more than £23.8 million, a drop of £16.8m compared to the first three months of the year, while the number of businesses attracting funding support rose from 14 to 16.

The bulk of funds spent on technology and healthcare businesses, according to KPMG’s Venture Pulse Survey.

The figures, compiled by Pitchbook, show nine tech or pharmaceutical businesses receiving more than £16m, including Aberdeen-based Enterobiotix, which attracted over £2.4m in seed funding to help it develop pioneering new medicinal products to restore health and prevent bacterial infections.

The bulk of VC investment this quarter focused on Edinburgh, with eight businesses attracting support. Elsewhere, funding was provided to five companies in Glasgow, two in Aberdeen and one in Dundee.

UK-wide, VC investment was also down with 279 deals, valued at £2 billion, completed during Q2, compared to 324 in Q1, valued at £2.4 billion.

Commenting on the data, James Kergon, head of deal advisory at KPMG in Scotland, said: “While it’s reassuring to see such a wide range of Scottish businesses attracting VC investment from around the world, the dip in funding levels is slightly concerning.

“Whether they’re early-stage start-ups, or long-established businesses, every one of the 16 companies is doing something innovative and, in some cases, truly pioneering. The success of the Scottish economy relies on a diverse ecosystem led by entrepreneurial companies at the forefront of technology and product development.

“However, there is hope on the horizon. While investment is down, it’s clear to see that, despite deepening economic uncertainty, venture capitalists remain attracted to Scotland’s tech savvy, globally-focused start-up community.”

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