One of Scotland’s most active venture capital firms has cautioned that many technology companies could be overvalued, creating a seller’s market.
However, Scottish Equity Partners (SEP), which has backed flight search engine Skyscanner and hospital billing software maker Craneware, said its market opportunity remains “very positive” as it revealed it had completed investments totalling £99 million in the year to June.
SEP managing partner Calum Paterson said: “The technology sector is especially buoyant right now but we have been there before and history has taught us to be very selective in terms of new investments.
“While there are undoubtedly some very attractive opportunities, many of the companies we see may ultimately struggle to justify their lofty valuations. Exit conditions are good right now, however, and this is arguably a better time to be selling than to buying.”
During the year, SEP led a $22m (£14.2m) funding round for language learning app Babbel and completed an exit from energy services business Anesco, selling its majority shareholding in the Reading-based firm to mid-market private equity house CBPE Capital.
The Glasgow-headquartered investor also raised £135m for a clean energy infrastructure fund under a deal that saw it buy a gas transport business, since renamed as Indigo Pipelines, from Perth-based SSE for £52.7m.
Paterson added: “Since setting the firm up back in August 2000, we have grown our team significantly, evolved our investment approach, and diversified our business model through the addition of secondary and infrastructure funds.
“We have remained firmly committed to investment in Scotland, but have extended our investment reach throughout the UK and into Europe. Fundamentally, however, we have continued to back high quality and entrepreneurial management teams and to support high growth technology companies across the information technology, healthcare and energy sectors. Our market opportunity remains very positive.”