Expansive growth in Scotland at a cost of £704m, underpinned by questionable foundations
Scotland's venture capital market experienced a significant surge in 2024, with a record-breaking £704 million in total investment, a 19% increase from the previous year. However, a worrying trend emerged as women-led ventures secured only 16 deals, a 57% deal crash compared to the previous year, and women innovators in the west faced compounded exclusion due to regional underinvestment.
The Scottish Enterprise's Investing in Ambition report highlighted a two-speed economy, with a gender disparity in investment. The report suggests that the very roots from which future 'unicorns' could emerge are struggling to take hold, particularly for ventures led by women, ethnic minorities, or from underrepresented regions.
The investment landscape in Scotland saw a shift towards the east coast, with Edinburgh seeing a 62% boost in investment to £420 million. Cities like Aberdeen and Dundee's Tayside region also saw growth spikes, but their low deal counts show a success that's dangerously reliant on a few key deals. In contrast, the west, including Glasgow, experienced a 46% decrease in investment, totaling £126m.
The investment glass ceiling creates a vicious cycle, limiting high-potential ventures, particularly early-stage start-ups where women often operate. Early-stage start-ups received only 3% of the total investment pot, or £22 million. Mega-deals of more than £10 million accounted for more than half the year's total investment, with 17 such transactions. Unfortunately, investment in the underlying market, the deals below £10 million, crumbled by 17% to £331 million.
To address these imbalances, several targeted measures have been suggested. These include co-investment programs for early-stage ventures, mentorship for female founders, and incentives to channel investment into underserved regions.
One of the key approaches is the Pathways Forward Programme, which aims to drive positive change with practical, collaborative actions across the entrepreneurial ecosystem. The initiative includes engaging ecosystem organizations via the “Pathways Pledge,” encouraging them to adopt their own gender equity actions, with institutions like the University of Strathclyde committing to ongoing education on Equality Diversity Inclusion (EDI) issues relevant to entrepreneurship.
Another approach is education and awareness. Universities and entrepreneurial support organisations run regular events to raise awareness about gender-related challenges in entrepreneurship and venture capital, improving understanding among stakeholders who support founders.
Scotland also offers specific support designed to help female-led SMEs grow, including assistance in entering international markets. This helps address the documented gender export gap, where women-led businesses currently export at significantly lower rates than male-led ones.
Lastly, cultural and policy interventions are crucial. Research highlights that cultural factors influence women's entrepreneurial participation. Therefore, policies must not only provide funding but also dismantle cultural barriers and promote inclusive venture capital practices, ensuring women entrepreneurs have equitable access to resources and networks.
By combining these strategic efforts—government policy backed by ecosystem collaboration, education on EDI, tailored export and funding support, and cultural change—Scotland can create a more inclusive venture capital environment that better supports female founders and early-stage start-ups. This holistic model targets both supply-side barriers (e.g., access to capital and networks) and demand-side challenges (e.g., cultural biases), fostering systemic change in the entrepreneurial landscape.
Understanding and acting on these trends will be critical to Scotland's economic future and its standing in the global innovation landscape.
- The Investing in Ambition report revealed a worrying trend in Scotland's economy, showing a gender disparity in investment, particularly for ventures led by women, which could impact the future growth of potential 'unicorns.'
- To foster a more inclusive venture capital environment, Scotland is taking a multifaceted approach, including co-investment programs for early-stage ventures, mentorship for female founders, incentives to channel investment into underserved regions, and cultural change to dismantle cultural barriers.
- By combining strategic efforts like government policy, ecosystem collaboration, education on EDI, tailored export and funding support, and cultural change, Scotland aims to create a more inclusive venture capital environment, supporting female founders and early-stage start-ups, and improving its standing in the global innovation landscape.
