Healthcare firms take lion’s share of £100m VC funding

The booming healthcare technology sector accounted for almost half the £100 million invested in Scotland by venture capitalists last year, according to new figures.

James Kergon, head of deal advisory at KPMG in Scotland, described the results as 'encouraging' given the uncertain backdrop for investors. Picture: Contributed

Patient monitoring firm Current, formerly known as Snap40, and imaging business Dysis Medical were among a clutch of firms in the sector that attracted a total of £47m during the year, KPMG’s latest Venture Pulse report shows.

Although the total raised by Scottish firms during 2018 was down on the record-breaking £112m achieved in 2017, James Kergon, head of deal advisory at KPMG in Scotland, described it as an “encouraging” result given the uncertain backdrop for investors.

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However, the figures also show a sharp fall in investment in the final three months of 2018. Scottish companies raised just £9.8m in the fourth quarter compared to £42m the previous quarter and £57.6m in the final quarter of 2017.

Kergon said it was as yet unclear whether this was just a “natural drop-off as investors plan for 2019, or a sign of investors growing cautious as we edge closer to the EU exit”.

The biggest deal in Scotland was the £18m in funding secured for Edinburgh-headquartered Dysis Medical, which designs and manufactures systems to detect conditions. CareSourcer, a digital platform matching care seekers to care providers, raised £8.4m and £6.2m was raised by Current.

Kergon said 2018’s figures are testament to the “robustness of Scotland’s innovation ecosystem”. He said: “While the overall figure was lower than 2017’s record-breaking year, reaching the £100m mark is encouraging, considering the current climate for investors is less than perfect.

“Scotland’s healthtech industry fared particularly well, a symptom of the country’s strong reputation in the sector. Global investors continue to be attracted to good quality businesses across the UK, and overall, activity has remained healthy.”

Other technology firms to secure funding included Optoscribe, the Livingston-based photonic components company, which was a spin-out from Heriot-Watt University.

Separately, data provided by The Scotsman by PitchBook, the private capital market data provider, also highlighted how compassionate companies seeking to tackle societal problems also saw significant ­venture capital investment during the year.

They included Faraday Grid, which develops electrical networks to enable greater use of renewables, 3F Bio which is developing a sustainable source of protein, and Scotland’s first social enterprise letting agency, Homes for Good. PitchBook’s figures also showed that BrewDog continues to hold the record for the largest venture capital transaction ever in Scotland with some £50m raised in 2016.

The KPMG figures showed that across the UK just under £6 billion was invested by venture capital firms in UK start-ups over the course of 2018, ahead of expectations.