One of these is Dr Niall Mackenzie, who joined the University of Wales from Cambridge University five years ago before leaving to go back home to a lectureship at the Hunter Centre for Entrepreneurship at Strathclyde University.
Niall has been undertaking a number of research studies since he arrived back in Glasgow and possibly one of the most influential has been his analysis of the performance of Archangels, Scotland’s oldest business angel group.
Business angels – those private individuals investing in unquoted companies - have received growing attention and recognition for their activities in the UK in the last 25 years. Their investments typically involve receiving equity that is reduced with further rounds of financing for investee companies.
As would be expected with such transactions, angel investment involves a risk of failure but the promise of ‘winning big’ on a minority of deals is one of the drivers which convince angels that such risks are worth taking. In fact, research shows that around 9 per cent of deals generate ten times the original investment and these ‘holy grails’ are what drives many angels to invest in fledgling ventures.
Angel groups are formed when business angels come together to jointly invest in new businesses. These groups have been responsible for ensuring that Scotland possesses a highly developed and active business angel environment that is now embedded into the Scottish entrepreneurial ecosystem.
Since Archangels was established as the first group of Scottish business angels back in 1992, the industry in Scotland has developed rapidly with more than 1100 active single investors and around 20 different groupings of angels currently engaged in supporting early stage businesses.
It could be argued that this growth has been largely driven by the fact that the UK has the most favourable tax benefits for angel investors in Europe via initiatives such as the Enterprise Investment Scheme which offers significant tax benefits for high net worth individuals to invest in businesses.
Yet this in itself does not in itself explain why angel investment in Scotland has grown at a far higher rate than many other parts of the UK including Wales.
Some have suggested that this is largely due to the creation of LINC Scotland as the national association of business angels in 1993 and its support in establishing and supporting new angel groups.
Others point to the ongoing close relationship LINC Scotland has with Scottish Enterprise (the Caledonian equivalent of the Welsh Development Agency) which has helped improve awareness of, and support for, angel activities. More importantly, angel investment has come to be seen as critical part of business support, something which is certainly not the case here in Wales.
Finally, the creation in 2002 of the Scottish Co-Investment Fund (SCF) to provide matched funding of up to 50 per cent to business angels investments has also encouraged the industry.
Not surprisingly, this growth of angel groups in Scotland has resulted in a growing number of investments in new ventures and between 2000-2014, LINC Scotland members did a cumulative total of 854 deals with a total value of £274 million invested i.e. an average of around £18m invested in an average of 57 companies per year.
Of these, Archangels is seen as the driver of the angel industry in Scotland and its role in supporting early stage, high-risk companies was critical in persuading Scottish policymakers to support angel investors in Scotland in order to ensure innovative companies were given every opportunity to survive, thrive and grow. In fact Archangels is the longest, continuously operating angel syndicate in the world and has managed £92m of investments on behalf of over 200 investors into 80 companies across Scotland.
Indeed, Archangels pioneering role’ has resulted in the creation of a number of high-impact Scottish technology companies that are active in the global marketplace and contributing significantly to Scottish economic growth. In contrast, Angel funding from xénos – the business angel network owned by Finance Wales - remains stuck at around £2 million per annum. This is well behind what is happening in Scotland and significantly below what would be expected in our economy.
Certainly, the public-private partnering in supporting early stage, high-growth potential companies by business angel groups has made a major contribution to the Scottish economy and we could do worse than looking closely at how organisations such as Archangels have helped to create a vibrant and enterprising economy in Scotland.