The Scottish Investment Bank (SIB), Scottish Enterprise’s investment arm, has relaunched its co-investment funds, with the aim of investing up to £75million into companies across Scotland over the next three years.
By streamlining its co-investment funds from four to two and widening the investment parameters, SIB is increasing flexibility and accessibility for businesses and investors who will now be able to easily identify and seek to access the appropriate investment fund where there is a funding gap and request for SIB investment.
The enhanced funds – the Scottish Co-Investment Fund (SCF) and the Scottish Venture Fund (SVF) – remain focused on providing opportunities for Scottish growth businesses, co-investing alongside private sector investors who bring deals to SIB.
Both funds are widening their deal parameters, with investment starting from £10,000 up to £1.5million through the SCF and up to £2million through the SVF in deal sizes up to £10million.
The difference between the two funds is in the role of the private sector investor. Investment through the SCF is alongside Accredited Partners who are experienced investors, vetted by SIB, and subject to the terms of the SCF partner agreement. Following successful accreditation, the investment partner can lead multiple investment deals alongside SIB, with fast track access to matched funding across a wide investment range into eligible deals.
Whilst still led by private sector investors, investment through the SVF does not require an accredited partner. This approach makes it more accessible to a wider range of private sector investors, unlocking more risk capital funding for businesses.
New private equity market data collected for the Department of Business, Innovation and Skills found that reported equity investments in SMEs increased from £1bn in 2010 to £1.6bn in 2013 due to strong seed activity. This trend is also visible in Scotland, with reported equity investment increasing from £116million in 2012 to £244million in 2014 (more than doubling over the two year period). This shows strong evidence of the increasing demand for equity finance and SIB’s role in facilitating access to finance for Scotland’s ambitious companies.
Kerry Sharp, Head of the Scottish Investment Bank, said: “We’ve been monitoring the market and listening to our investors, and the message was clear that companies increasingly need funding to be more flexible than ever before. That’s why we’ve widened the investment parameters and simplified the criteria to benefit both the private sector investors we work with and the companies we invest in. This greater flexibility to invest across a broader range of businesses will enable us to support more companies to reach their full potential, which in turn helps the Scottish economy to grow.”
Isle of Harris Distillers is a company that has previously secured co-investment funding. Ron MacEachran, Director, Isle of Harris Distillers, commented: “Our project has benefited from the interest Scottish Investment Bank showed from the start of the fundraising process. Individual investors had increased confidence as a result, enabling us to leverage £5.65m in private sector investment. SIB also helped us align the economic and commercial impact objectives of the project's equity investors and grant funders. It further helped us identify professionals with the relevant knowledge and expertise needed at critical points in the project. It’s been decades since this level of investment has come to the Isle of Harris and we are looking forward to the next chapter in this exciting opportunity.”
John Waddell, Chief Executive, Archangels, explained: “The relationship we have built with the Scottish Investment Bank since the co-investment model launched 12 years ago is one of trust and confidence. They have acted as the link between public and private sector funding to find solutions for Scottish SMEs in order to help them grow and move forward. This strong mutual understanding between SIB and private sector investors on what is needed to deliver a track record of success is the foundation of the co-investment model.”
See Kerry Sharp, Head of the Scottish Investment Bank discussing the changes here.