Private Equity and Venture Capital lead the way in market growth

2021 has been a year that has seen appetite for investment from both Private (PE) and Venture Capital (VC) investment firms reach significant levels, with a wall of capital ready to invest in strong businesses. Market momentum was seen early in the year as investors looked to actively utilise capital that had not been deployed in 2020, and paired with the return of investor confidence following the easing of COVID-19 restrictions, we have seen an influx of investment within the market, with no signs of this easing. 

Investors are starting to have an increased interest and focus on Scottish opportunities as we see a surge in exciting startups and innovative tech scale ups continue to emerge out of Scotland. Investors are recognising the significant growth potential of these businesses, with Edinburgh alone closing out 47 venture capital rounds according to Dealroom.  

However, with the increase in the number of new innovative businesses comes an increase in competition to secure investment. At AAB we regularly work with new startups, as well as the PE and VC funds who are looking to deploy capital, and therefore have the hands-on experience and knowledge of what investors are looking for, and what really makes a business stand out from the crowd. Securing investment to turn an idea into a viable business is no easy feat, but from our experience the following factors play a major factor into catching the eye of the investor.  

Strong Management Team – A credible team with strong experience in the given sector, having no issue to admit a lack of expertise in given areas and to look for outside guidance to fill skill gaps. 

Robust Business Plan – Investors will want a comprehensive business plan outlining the investment proposition including history of the business, robust financial projections, funding need, and what funds will be used for.  

Solution to fill a market gap – It is key for the investor that they can clearly see what the company’s product/service offering is and how this differentiates from existing companies within the market.  Is there an aspect of the market that is not currently being tapped into?   

We are hopeful that the levels of investment activity in 2021 sets a precedent for the year to come and expect to see a flood of investment into the Scottish market.   

If you are considering raising equity finance, and would like to discuss the process or any of the above points in more detail, please do get in touch with our specialist Corporate Finance team.

By Chris Thompson, Corporate Finance Senior Manager, as featured in the Press & Journal M&A supplement.