Digital technology is Scotland’s fastest-growing sector for inward investment. For venture capital (VC) investors interested in startup, early-stage, and emerging companies, this country could provide lucrative tech investment opportunities.
Based on KPMG’s latest Venture Pulse report, the value of VC investment in Scottish startups increased 14% in the final quarter of 2024, with £92.3m being raised by startups from October to December, an increase of £11.4m compared to the third quarter.
These figures suggest that Scotland is receiving significant, growing interest from VC investors, but what makes the country’s burgeoning tech sector such an attractive investment opportunity? The strategic advisor and business expert, James Disney-May, explains:
Growing tech industry
As reported by Futurescot, Amy Burnett, the emerging giants lead for Scotland, KPMG in the UK, said: “The tech industry is growing at one and a half times the overall economy; it now includes close to 15,000 firms and 400,000 employees.”
With this rise of technology firms across Scotland, including key cities like Edinburgh and Glasgow, there’s plenty of opportunities for VC investors to get involved in areas such as cyber security, biotech, data, fintech, games, software and IT.
Rapid growth and disruptive innovations in the industry also offer investors potential for high returns on their investment – whether that’s capital, mentoring expertise, or network connections.
Lower operating costs of start-ups
With an increase of 21% in new technology companies incorporated in Scotland in 2023 compared to the previous year, the thriving tech startup environment in Scotland is only getting stronger. Thanks to compact teams, smaller scale operations, and fewer physical assets, startups also tend to have lower operating costs.
For VC investors, these lower operating costs can be particularly attractive as they often result in higher profits, better financial performance, and provide greater opportunities for money to be reinvested back into the business or distributed amongst shareholders.
Government support
To encourage innovation and attract investment in this area, Scotland’s government offers a wide range of support and benefits for VC investors as well as startup tech companies.
Alongside direct funding and tax relief schemes, the Techscaler business accelerator programme, which is specifically aimed at helping tech startups to access mentoring, training, and introductions to both potential investors and customers, has reportedly raised more than £118 million of capital investment over a two-year period.
With the Scottish Venture Fund, investors can also access VC gap funding of up to £2 million, while a variety of tax relief schemes, including the Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS), have been specially designed to help startups secure venture capital investment.
Source of talent and innovation
Home to a number of prestigious universities, the country benefits from world-renowned educational facilities including the University of Edinburgh, Glasgow, and St Andrews.
With many of these universities adopting a strong focus on new, innovative, and emerging technologies such as AI, data science, green tech, and quantum computing, the hub of Scotland-based tech start-ups are perfectly positioned to attract this talent.