Amy Burnett

Between July and September of this year, VC deal volume decreased from 22 in Q2 to 17, but the combined value rose from at least £62 million to 1.6m. The data, compiled by PitchBook, also compares favourably to the same period last year. In Q3 2019, there were 13 deals valued at more than £32m.

For the second quarter in a row, Edinburgh’s booming scale-up community took the lion’s share of funding support, with nine deals with a combined value of at least £56.5 million. The quarter’s largest deal involved the games developer Everywhere, which is planning to develop a new game under the same title.

Based in the capital, the company raised £32.7m of venture funding from NetEase, Makers Fund and Galaxy Interactive, putting its pre-money valuation at £111.4m Other deals including funding for a raft of innovative new products from biomedical developments to clean energy solutions.

Amy Burnett, senior manager with KPMG’s Private Enterprise Emerging Giants team in Scotland, said: “Despite facing an unprecedented period of economic challenge, the latest set of data reinforces the resilience of the country’s growth-hungry scale-ups and the confidence investors have in the Scottish market.

“However, the slight dip in deal volume suggests that investors are, understandably, slightly more cautious, investing in late-stage deals, which could have a long-term negative impact on entrepreneurial businesses and founders that require investment and support to take their products and operations to the next level.

“There’s undoubtedly more uncertainty ahead, but the mood right now is generally positive with both scale-ups and investors appearing committed to focusing on long term growth.”

Across the UK both deal volume and value are down, with a total of 294 deals valued at £2.3 billion in Q3, down from 355 valued at £2.6 billion in Q2. However, despite the drop, industry observers believe the market has remained resilient in the face of unprecedented challenge.

Bina Mehta, Emerging Giants Centre of Excellence and KPMG UK board member, added: “With more than 50% of funding coming from outside of Europe, low interest rates combined with the current exchange rate makes UK assets good value for global investors at a time when the UK has a strong global reputation for building innovative and disruptive businesses.

“While we’ve recorded a significant decline in deals, the businesses that have been able to secure funding stimulus throughout this period show there is plenty of capital to be deployed for later stage firms, with investors demonstrating a strong preference for well-established businesses with long track records.

“As CVCs expand their reach and product offering it will be interesting to see where trends begin to emerge – likely around deeptech which we are seeing early signs of across Europe.”