Scotland's business angel scene needs strong VC offering for firms to thrive, says expert

The Scottish business angel sector would benefit from better access to venture capital, increased cross-Border investment, and a more diverse investor base to help burgeoning firms prosper, an expert in the field has stated.

Tooth is an angel investor herself and is focused on building the community in the UK. Picture: contributed.

Jenny Tooth leads the UK Business Angels Association (UKBAA), which looks after about 15,000 business angel investors – and £1.9 billion was invested in nearly 3,000 companies last year across the UK.

She told Scotland on Sunday that in Scotland there are nearly 20 investment syndicates such as Archangels, Par Equity, Equity Gap and Investing Women. “There are some great, great groups out there,” said Tooth - who has more than 20 years’ experience of facilitating small and medium-sized enterprises' access to investment. “You have got very strong foundations in Scotland to build on in the year ahead.”

Angel investing in Scotland needs a strong venture capital environment to enable businesses to 'stay and grow and scale', Tooth believes. Picture: contributed.

She also cited Skyscanner entrepreneur Gareth Williams investing prolifically in local start-ups - with Ben Spigel, senior lecturer in entrepreneurship at Edinburgh University Business School, having praised the "ripple effect" of such global success stories.

Tooth said a “huge” amount of angel investment in the UK is focused around the London-Cambridge-Oxford “golden triangle… but after that the next biggest amount of investing in the whole of the UK is in Scotland”.

The sector north of the Border has benefited from a co-investment fund provided by the Scottish Investment Bank and Scottish Enterprise – “an incredibly useful driver in helping to build and grow the angel ecosystem” - while she also highlighted the positive contribution of angel capital association Linc Scotland.

Venture capital

Angel investing involves injecting about £100,000 to £1.5 million, with venture capital a logical next step. But the latter is still relatively lacking in Scotland – and a more connected ecosystem between the two types of investing is required to enable businesses in Scotland to “stay and grow and scale”, Tooth added.

Otherwise, such firms will either go south, or to other global markets such as the US, to look for the investment they need - as was the case with FanDuel.

As for the overall appeal of angel investing, Tooth said money is not top of the list - key drivers are putting back something into the local economy, helping foster the next generation of entrepreneurs, as well as tapping into their own experiences and "help them hopefully avoid some of the mistakes they may have made themselves".

Tooth would also like to see more diversity among business angels, with women only comprising about 15 per cent of the whole investment community, for example.

Additionally, the right backdrop is key. "We hope the government will continue to be incredibly supportive of the tax breaks that angels have benefited from over the last 25 years," she stated - singling out the enterprise investment scheme.

"We do hope that this new government will continue to show strong support for that scheme. There are still a few issues with it that could be improved, and I hope that we can get some of those improvements. I [also] hope that co-investment funds will continue to be on the table."

She also hoped for "stability and certainty" politically and economically, encouraging angels to see the opportunity to back more entrepreneurs in 2020.