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Rise in deals

Venture capital investors defy slump to back startups

Amy Burnett: resilience

Venture Capital investment in Scottish scale-ups remained robust and resilient in the second quarter of 2020, despite growing economic and political uncertainty.

The latest data from KPMG Private Enterprise’s Global Venture Pulse Survey reveals there were 22 VC deals in Scotland between April and June against 18 in the first quarter, with a combined value of at least £62 million, almost double the £32m invested in Q1.

Growth-hungry scale-ups based in Edinburgh were the biggest beneficiaries of funding this quarter, with 13 deals, though the largest deal involved Aberdeen-based NodThera.

It received almost £44m to support clinical studies and continued drug discovery efforts in the treatment of diseases driven by chronic inflammation.

Amy Burnett, manager with KPMG Private Enterprise in Scotland, said: “The scale-up sector in Scotland has been flourishing for some time, but growing political uncertainty driven by Brexit, and the sudden arrival of the Coronavirus pandemic, threatened to completely halt investment.

“The latest set of data reinforces the resilience of the country’s growth-hungry tech scale-ups and the confidence investors have in the Scottish market.

Both scale-ups and investors appear committed to weather the storm

– Amy Burnett, KPMG

“While the figures are reassuring, there’s still a strong degree of nervousness about what lies ahead.

“We’ve been warning for some time that early and seed stage deals could be the biggest victim of future uncertainty, which would have far reaching consequences for long-term growth and innovation. However, the mood right now is generally positive, both scale-ups and investors appear committed to weather the storm.”

Across the UK, there were 355 deals, with a combined value of £2.6bn, compared to 472 deals at £2.8bn in the first quarter of 2020. The drop represents the lowest number of deals completed since Q2 2013.

Tim Kay, director in KPMG Private Enterprise Emerging Giants team, said: “In a quarter that saw global lockdowns, economic contractions and a unique health crisis unfold, the expectation was that investment would have been hit hard, but Europe, and specifically the UK venture capital market remained remarkably buoyant.

“While off the peaks of 2018, the half year numbers for 2020 compare favourably to those in 2019 with almost $63bn invested across the globe, although deal numbers continue to fall with COVID-19 accelerating the trend to later stage, larger deals across the globe.”

“E-commerce, cyber security, enterprise software and healthcare have all seen increased demand and pipelines. This isn’t a short-term response – the normalisation of disruptive technology is here to stay.

“A positive in an incredibly challenging period. The remainder of 2020 will undoubtedly be tough as the economic fallout continues but venture capital has so far remained remarkably upbeat, and long may that continue.”



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