This marks the highest quarterly value since Q2 2022 when £325m was recorded over 45 deals. The rebound contrasts with the overall decline in Scottish VC investment this year.

The value of the first three quarters of this year stands at £335m, significantly lower than the same totals for 2021 (£529m) and 2022 (£623m), when the market was extraordinarily busy following the pandemic. KPMG attributes the Q3 spike to a few large transactions.

Standout deals in Scotland during the quarter include alternative meat start-up ENOUGH which raised €40m (around £35m) in equity to help bring more plant-based chicken, mince and dairy products to supermarkets and fast-food chains.

Elsewhere, Glasgow based chemistry pioneer Chemify secured £36m of Series A funding to develop its technology to make complex molecules on demand. And Oban based Oceanium secured $2.6m (around £2.1m) in funding to scale up its technology to meet market demand for its seaweed material.

Graeme Williams, head of Corporate Finance M&A for Scotland at KPMG UK, said: “Q3 has been an outlier for VC investment in Scotland this year, mainly due to a handful of higher value deals taking place.

“Given the uncertain environment including concerns about valuations, potential returns, the lack of exits, high interest rates, and other factors, the time to complete VC deals has slowed considerably across most regions of the world this year.

“Investors are adopting a more cautious approach, conducting additional levels of due diligence, and seeking companies with well-defined paths to profitability. However, businesses with a proven product, market fit, and strong customer data will continue to attract attention of investors.”

Amy Burnett, head of KPMG Private Enterprise Access at KPMG UK, said: “Scotland remains an attractive destination for VC investors, especially given our diverse ecosystem of innovators and high performing sectors including healthcare, energy and tech.

“Investment is also finding its way beyond the central belt and north east of Scotland, with significant investments taking place in Oban, Dundee and Perth in the latest quarter. Scotland still has a glut of exciting scale up businesses which are continuing to push themselves to grow despite a tougher market.”

Ms Burnett added: “Support is there for Scotland’s innovators, including the announcement of a new £150m fund from the British Business Bank to support start-ups.

“Scottish VC fund, Par Equity, also launched a new £100m northern start-up fund earlier this year and Foresight has its own £60m fund.

“These are new avenues of funding which are undoubtedly being used, meaning the year’s final quarter could well result in a higher volume of VC deals as a result.”

UK-wide, the value of VC investment into businesses remained stable in Q3 2023, despite the volume of deals falling by over a third quarter on quarter, according to KPMG’s Global Venture Pulse report.

A total of £4.17 billion was invested in UK businesses between July and September, down marginally on the £4.49bn raised in Q2 2023. Deal volumes however, continued to fall with 469 deals completed during that period, down 34% on the 713 deals completed in Q2 2023, and 44% down on the same period last year (845 deals).

Half of the VC investment made into the UK during Q3 2023 ($2.6bn or around £2.1bn) flowed into businesses based outside of London across 219 deals.

Heading into Q4 2023, VC investment is expected to remain relatively soft given ongoing uncertainties in the global VC market and a heightened level of investor caution. Energy, cleantech, and AI, however, are expected to remain highly attractive to VC investors across much of the world.

The major question heading into the end of the year is whether there will be any additional IPO activity in the wake of the three IPOs in late 2023. Although a dramatic reopening of the IPO market is not expected, additional exits could spark a renewal in IPO activity heading into the first half of 2024.