In Scotland, so much has changed, and continues to change, in our funding landscape.
We’ve seen phenomenal growth in our Scottish business angel and equity investment scene over the last few decades; we now have an angel investment and co-investment ecosystem, all supported by a network of initiatives and programmes that are second to none, and the envy of most other nations.
My own involvement with initiatives such as the Gateway to Investment Programme, the Converge Challenge, Civtech and the Codebase incubator to name just a few, serve as a constant reminder of the incredible support and access to equity finance available for our early stage and high growth companies.
However, our weakest link in recent years has been our banking sector;– and specifically the availability of debt to fund growth.
This is so important, as our angels provide the perfect combination of equity and expertise to address the challenging, higher risk requirements in the early years. However, once the product has been proven, the team formed and the market attack planned, it’s working capital that is needed to fund sales and business growth. Our banks once excelled in debt funding, but the crash and crunch have left us woefully short of options.
The Government announced plans a few months ago, to launch a pilot revenue growth fund, which sounds very promising. The concept was a fund, (in many ways much like our angel co-investment fund but providing debt finance), specifically for sales growth, possibly paid for through a royalty on sales achieved. The concept was bold, innovative and adapted from similar structures operating very successfully in the west coast of the US.
Sadly, progress with the pilot seems to have faltered, possibly having conflicted a little too much with the Scottish Investment Bank’s new loan fund launched at much the same time.
Although perhaps a little more conventional, this new debt fund is still a hugely welcome and much needed addition. Alongside other innovative and disruptive solutions like Edinburgh’s own LendingCrowd, it is hopefully the start of access to debt which is more of a match for and a complement to our rich and abundant angel equity.
I’m not giving up hope on that revenue growth fund though….
By Gareth Magee is a partner with accountancy firm Scott-Moncrieff