The value and volume of funding deals for start-up companies in Scotland plunged in the second quarter of this year, creating further barriers to reviving the struggling economy.

The latest Venture Pulse report out today from accountancy giant KPMG shows a total of 28 deals worth a collective £63 million from April through to the end of June, marking an 80% drop compared with the same period last year when £325 was invested across 45 deals.

The total for the first half of 2023 now stands at £133m – significantly down on the £332m raised in the first six months of 2021 and the £506m raised in the first half of last year when the market was "extraordinarily busy" following the pandemic.

READ MORE: More UK interest rate rises opposed by 47% of Scottish firms

Graeme Williams, head of corporate finance in Scotland for KPMG, said, said the downturn in Scotland is part of a wider trend globally.

“After two years of exceptional activity, the market has reached a more stable point," he said. "However, there is a noticeable sense of caution prevailing, with VC investors more wary about committing to bigger deals. The smaller investments in seed, angel, and series A stages are holding steady.

“Looking ahead, it's likely that venture capital investment will maintain its stability in the third quarter of 2023. Despite ample funds, well-known challenges including geopolitical complexities, and the potential for further interest rate rises will persistently influence the volume of deals taking place.”

READ MORE: University of Glasgow spin-out Chemify raises £36m

The second quarter's largest VC investment went to Chemify, a spin-out from the University of Glasgow, which is aiming to "digitise chemistry" in a bid to speed up the development of new medicines. 

The company's technology is based on research from Cronin’s Digital Chemistry Laboratory at the University of Glasgow, which was founded in 2019 by Professor Lee Cronin, Chemify's chief executive. His research spans the digitisation of chemistry including the use of artificial intelligence in chemistry to explore chemical space with the trillions of possible combinations of natural elements.