Scottish venture capital market faces uncertain period after 'resilient' first quarter

Scotland’s venture capital market faces a “tough” second quarter after a resilient opening three months of the year.

Amy Burnett, manager in the KPMG Private Enterprise Emerging Giants team.

More than £35 million of venture capital was invested into Scottish start-up businesses in the first quarter of 2020, ahead of the coronavirus lockdown, according to KPMG’s latest Venture Pulse survey.

The figures, compiled by Pitchbook, reveal that 18 deals were secured during the period, valued at just over £35 million in total, with the majority in Edinburgh and east central Scotland (13) and five deals secured in the north and north-east of the country.

Activity in the first quarter remained relatively consistent with the same period in 2019, when a total of 14 deals were secured, valued at more than £40m.

Across the UK, venture capital investment in UK scale-ups in the first quarter was £2.6 billion, compared to almost £2.7bn in the record-setting opening quarter of 2019.

The volume of deals dropped from 558 to 301 over the same period.

KPMG said that during the current, second quarter the venture capital market would likely face a tough time due to Covid-19, although digital services, educational technology, health and biotech companies, and certain business-to-business and business-to-consumer firms should “remain attractive”.

Amy Burnett, manager in KPMG’s “Private Enterprise Emerging Giants” team, said: “While it’s reassuring to see a positive set of results for the first quarter, we’re now in a period of completely unchartered territory.

“The economy is entering a deep recession with many businesses facing an incredibly uncertain future, and this will naturally create a more cautious funding environment,” she added.

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