Inside how British Business Bank chose to invest £10 million in Scottish projects including dog cafe

Mark Sterritt is director of nations and regions funds at the British Business Bank and has spoken about the funding milestone and how economic development organisation expects 2025 to pan out.

Can you tell me about the wider impact the fund has made for the Scottish economy in its first year?

Since launching a year ago, the fund has had a significant impact and has now exceeded £10 million of investment. We’ve hosted countless events covering the whole of Scotland from Aberdeen and Inverness to Dundee, Dumfries, and everywhere in between. Alongside our fund managers, we’ve been out speaking to hundreds, if not thousands of SMEs over the course of the year.

From a standing start, the fund has established a good profile. We have made strong connections in the business support ecosystem and it’s been welcomed by local stakeholders. Overall, it’s been a really positive first year and we are starting to see the full impact of the investments made to date. For some, it has meant expanding teams and hiring new staff, while for others it has supported growth ambitions and a new overseas presence.

Can you share some examples of the investments made and the difference that funding has made for the businesses involved? Are there any trends or themes emerging?

The fund itself was designed to be sector agnostic, covering all geographies, and we’re pleased to see investments made across the whole of Scotland. From Highland Hilly Huts in the tourism industry near Inverness, to Carcinotech, a medical technology business expanding into the USA, and Sip & Bark, a dog-friendly café in Edinburgh’s Stockbridge, it’s been a real mix.

The common theme is that each of the businesses we have supported have clear ambitions and want to grow. It’s a fund for founders who have goals to scale and expand. For some of the smaller firms especially, it’s about pursuing passions and getting something off the ground that they might not have been able to do otherwise, which is fantastic.

Scotland has a really strong and vibrant life sciences sector, as well as hospitality and tourism industries, where we’ve seen several deals so far, but the pipeline for next year also shows we are continually reaching new markets.

How is the fund helping to plug a funding gap?

As part of the research we undertook when setting up the fund, we identified a significant funding gap in Scotland. There is already an established vibrant and active funding scene, but we knew there was space for more. The fund has been carefully structured to create something new to plug the gap, rather than just repeating what was already on offer via other funders, providing funding options for those that may not otherwise have secured investment.

We’re already seeing parts of that gap begin to close but it doesn’t happen in isolation, it’s a collaborative effort and we’re working with other funders to make that happen. Our local fund managers have also been working closely together to ensure there is a funding option available to suit the needs of each business, whether that is equity investment or larger or smaller loans.

Among the deals done so far, we’ve supported several female founders and other underrepresented groups, which is another imbalance that the Bank as a whole is keen to address. Our research showed that in 2019, for every £1 of UK venture capital investment, less than 1p went to all-female founder teams. Thankfully, several initiatives are helping to make progress, including the likes of the Investing in Women Code, but we realise there is more work to be done.

What has been the experience so far of co-investing with others and encouraging further investment?

The Investment Fund for Scotland has a huge role to play in working with others and, by investing as part of syndicates, we can help to provide scale and ensure businesses can access the full amount of funding they need.

We’ve also seen successes already in terms of securing further investment for the businesses we’ve worked with. There is a whole range of different funders within Scotland, but we’re also helping to attract new funders to start doing deals here. And that goes beyond the fund, they are now exploring the marketplace and getting an appetite for doing more deals independently, which is great.

What is the outlook for next year?

It’s been a great start for the fund and we’re really pleased with the progress so far. Next year, it’s about doing more of the same as we look to accelerate the pace. The focus of the last 12 months was about launching the fund, building its profile, and making sure the market understood the role that we could play in supporting businesses, and that has gone well.

Now, we’re well established and on the back of the strong start we expect to see more activity, more lending and even more businesses supported in the year ahead. We understand that there may be challenges, but we want to support ambitious businesses with their plans and we’re here to help in terms of funding. For the businesses already in the portfolio, we look forward to seeing them achieve their growth ambitions and perhaps return to us for further funding down the line.

Our work will continue across the whole of Scotland and involve founders at all stages of their growth cycles, taking in all sectors. It’s an Investment Fund for Scotland in every sense, not just in name.