SCOTLAND’S biggest business angel syndicate has highlighted the huge contribution its investments make to the country’s economy, pointing out that every £1 it has put into companies has generated £8 of economic output.
Investment by Edinburgh-based Archangels has helped create nearly 3000 jobs since its formation by entrepreneurs Mike Rutterford and Barry Sealey in 1992, research has found.
And the syndicate, credited with pioneering business angel investment in Scotland, insists it has strong pipeline of opportunities, notably in its preferred life sciences and technology sectors.
Chief executive John Waddell said Archangels remains hungry for deals and said plenty are continuing to emerge in Scotland. Mr Waddell, who will shortly step down from his role after 10 years, said: "Every day we are looking at stuff, and there is lots to go for - we are not running out of things to back.
"What we look for is businesses in Scotland that have international reach and some kind of defensible intellectual property. Not necessarily patents, but some kind of defensible IP."
He added: "The market remains buoyant."
The economic impact made by Archangels, which has 200 historic and 70 current investors, was highlighted by a study carried out by the Hunter Centre for Entrepreneurship at the University of Strathclyde Business School.
The research, published yesterday, found that 2,995 jobs have been created by companies backed by Archangels in the last 23 years. Those companies, including such high-profile Scottish tech successes as Optos and Touch Bionics, have generated turnover of around £1.31 billion since 1992, the report found – a multiple of 14.34 for every one pound invested.
Through its partnership with the Scottish Co-Investment Fund, which the syndicate was instrumental in setting up in 2003, Archangels has been able to increase the number and size of investment it makes, now making between 10 and 20 per year.
Archangels, which has invested in more than £90m in 80 Scottish companies since 1992, leverage £27m of co-investment from Scottish Enterprise.
The report, unveiled at Strathclyde University’s Technology & Innovation Centre, noted that Archangels has exited from 18 companies, including Optos which was acquired by Nikon of Japan in a £259 million deal earlier this year. Archangels exited when Optos floated for £164m in 2006.
Archangels, a long term investor which takes eight years on average to realise a return, has made more than £100m from successful exits from £36m invested, the report found.
Twelve of the companies it has exited have remained in Scotland and brought further benefit to the Scottish economy since Archangels’ original investment, generating further revenues of £587m and creating 240 more jobs since its stake was sold.
But while the syndicate has had success, nearly one in every two (44 per cent) of companies it has backed in the last 23 years have failed.
The failures, which represented 14.9 per cent of the cash invested, have been an inevitable part of the journey.
Mr Rutterford said: “One statistic that people like is that 44 per cent of our companies have gone bust, but we have only lost 15 per cent of our money. Can I tell you, it felt a lot more than 15 per cent of our cash. Some of that statistic is the really early stuff that Barry and I did [and] investing in companies that with hindsight you think, why on earth did we do that. But at the get go it felt fine.”
Mr Waddell added that, even with the benefit of knowledge and experience, the prospect of failure in angel investment is an “ever-present risk”.
“No matter how good you get at it you are going to make mistakes,” he said. “Otherwise you are not doing it right.”
While Archangels has generated plenty of press coverage for doing major deals, Mr Rutterford said the door is very much open for smaller opportunities. “Archangels, despite our title, are not elevated above the stratosphere. What we are really interested in is to encourage and promote smaller fledgling businesses to approach us that might only need £50,000 or £100,000.
“We want a flow of smaller deals as well.”
He added: “One of the smallest amounts of cash we invested [12 years ago] was £25,000 to do a proof of concept in what is now Touch Bionics. We then put in £400,000, £700,000 and we have now got £10m in it. But it was just tiny at the start [with] no employees.”
Mr Rutterford said Archangels had given Mr Sealey an opportunity to “put something back” into Scotland after their own successes, noting that in backing companies such as Touch Bionics and Optos they have been able to transform and save lives.
“Because we are based in Edinburgh, a lot of the stuff we do has a life sciences spin,” he said. “One of the benefits which we never foresaw at all was the good we have done for mankind, in a way.
Mr Rutterford added: “Touch Bionics... has transformed the lives of many people who have lost a limb or an arm. Optos has not only saved people’s sight, it has saved peoples’ lives.”
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