Scotland’s ancient universities are still punching well above their weight in terms of turning research into spin-out companies, according to new research.
By academic institution, spinouts from Cambridge University raised the most deals in 2024, a total of 34 deals. But this was followed by both the University of Edinburgh and University of Oxford raising the joint second highest number of deals, with 18 deals. University College London (UCL) raised 11 deals while the University of Glasgow raised 10 deals.
This is further evidence that Scotland’s Central Belt and the Golden Triangle of Oxford, Cambridge and London are leading UK areas for producing breakthrough technology companies.
However, the geo-political economic uncertainty has increased investor caution when it comes to financing SMEs (small and medium sized enterprises).
According to British Business Bank SME survey, there were 201 deals in Scotland in 2024, an increase of 13.6 per cent from 2023, with the average combined investment value £507m, a rise of 28.3 per cent. This meant Scotland was the second highest region of the UK outside of London, which recorded 965 deals.
While Scotland experienced the largest percentage increase on a deal numbers basis, the largest percentage increase in investment value occurred in the West Midlands, which saw an increase of 142 per cent to £301m in 2024. This was largely driven by a £200m funding round for housebuilding company Harper Crewe.
The value of exits from UK VC-backed companies totalled £6.9bn in 2024, which was an 8.1 per cent increase in comparison to 2023 levels. Three large exits during the year were the £2.4bn acquisition of London based biotech company EyeBio, a £1.6bn listing of Rezolve AI on the NASDAQ stock exchange, and a £730m acquisition of Cambridge-based cybersecurity company Featurespace.
The UK Government’s recent announcement that it is transforming the capabilities of the British Business Bank to deliver the UK’s modern Industrial Strategy and boost economic growth is a note-worthy development. This will include an increase of the bank’s total financial capacity to £25.6bn, enabling a two-thirds increase in investments to around £2.5bn a year. This extra firepower allied to existing investment groups should be able to deliver transformation of several of the key sectors.
Angel investors continue to be a significant source of equity funding for start-up and early stage businesses. The British Business Banks’ report survey of around 250 UK angel investors finds that 70 per cent of angels invest in early-stage ventures. Funds raised via the Enterprise Investment Scheme (EIS) – indicates that business angels invested £1.6bn in 2023/24, though this was a 20 per cent fall from 2022/23.
UK business angels made an average of around three investments a year over the past three years, and an increasing number of angel groups also reported making between six to ten investments. However, the proportion making no investments was also higher than the previous survey reflecting a more cautious investment environment.
The most important factor in angels’ investment decisions is the skills and experience of company founders, followed by commercial traction and the potential wider impact of the investment.
The bank’s programme of investment includes the Investment Fund for Scotland (IFS), a £150m investment fund covering the whole of Scotland. IFS is the first solely UK Government backed investment fund for smaller businesses in Scotland. The fund provides equity investments of up to £5m.
In 2024 equity funding for UK smaller businesses fell by 2.5 per cent to £10.8bn, while deal numbers declined by 15.1 per cent to just over 2,000 deals. There were signs of recovery during the first six months of the year with £6.8bn invested, the highest total since the first half of 2022.
382 equity deals were recorded in the first quarter of 2025 at a value of £2.3 bn.
The average deal size in the UK equity market was £5.74m in 2024, a 15 per cent rise from £4.98m in 2023. The number of seed and venture stage deals fell by 14.5 per cent and 17.2 per cent, respectively, while growth stage deal volumes were down by 11.5 per cent.
This decline in early-stage funding was a global trend in 2024, with other leading nations also experiencing this challenge.
UK VC investment now represents 0.68% of gross domestic product (GDP), based on the latest three-year average for 2022-2024. This is slightly below the equivalent proportion in the US of 0.73%, meaning that the US deploys 1.1x (or 10%) more funding on a GDP-adjusted basis.
This investment gap continues to be driven by a lack of finance in R&D intensive sectors. Companies in these industries, such as deeptech start-ups, are more capital intensive and generally require higher levels of funding over a longer time period to scale up successfully.
