THE Scottish National Investment Bank has revealed its maiden deal, announcing £12.5 million of backing for M Squared Lasers on the day the new institution formally opens its doors.

SNIB chairman Willie Watt said Glasgow-based M Squared, which develops photonics and quantum technology that can be applied to a range of sectors, represents the type of business in Scotland that the bank is looking to support through its long-term, patient capital model.

The bank was established with £2 billion of funding from the Scottish Government, which it will look to deploy to firms in Scotland that meet its “mission-led” criteria – innovation, tackling inequality and supporting the drive towards net zero.

Mr Watt, who formerly ran Martin Currie and the 3i investment company in Scotland, said M Squared had completed the journey from start-up to established small company, noting that the backing from the bank would help its push to become a “world leader in laser technology”.

He said: “They are world leaders in what they do. If you are going to build innovative companies based in Scotland, they need to be globally competitive. And we believe M Squared is globally competitive in its niche.”

Mr Watt added: “We are really pleased to put a 10-year investment in with them, because it gives them that insurance to be able to think long term about their growth plans.”

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Graeme Malcolm, chief executive and co-founder of M Squared, said: “Science and advanced technologies have a major role to play in Scotland’s future economic prosperity. By increasing investment in research and development with a mission-based approach, Scotland has a real opportunity to actively tackle climate change and benefit from the coming quantum revolution.

“We are delighted that the Scottish National Investment Bank has invested in M Squared as its very first business – our shared commitments to society and the environment makes this an ideal partnership that will in frontier technologies.”

Mr Watt said the bank can support business with a range of tools, including the provision of loans, equity, investment in shares, and project finance. It has taken a stake in M Squared through debt and equity investment, but would not confirm the size of the stake.

Mr Watt said: “There are lots of interesting companies in Scotland, and hopefully, over the years, there will be lots of opportunities to do investments like M Squared Lasers.”

While the Scottish Government has provided “seed capital” for the bank, Mr Watt said the bank is keen to raise capital from outside investors, to invest alongside it and to leverage its own balance sheet.

“That will give the bank more firepower than the government’s seed capital,” he said.

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Mr Watt said the bank is compliant with EU rules on state aid, but noted circumstances may change depending on the UK’s exit from the bloc.

Should any business in Scotland require intervention to safeguard its survival, he said the Scottish Government has mechanisms to do so.

Mr Watt said the national investment bank is focused on providing “strategic, long-term growth capital”.

He added: “We are going to be investing over five, 10, 20 and 30 years, so the return of capital is not envisaged to be a quick fix.

“The return of capital will be back-end loaded, but also what we want to do is reinvest in the people of Scotland, so the development bank we are creating will become a bigger and more important institution in 10 years’ time.”