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Angel investment giving extra shine to Scottish economy

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Scottish business angels are outshining their rivals in the US when it comes to boosting their nation’s economy.

A new study of Scotland’s biggest business angel syndicate Archangels by the company itself, and Strathclyde University’s Hunter Centre for Entrepreneurship, discovered that every £1 it puts into its portfolio of Scottish-based life sciences and technology companies results in a contribution of between £7.08 and £8.94 to Scotland’s economic output.

Niall MacKenzie of the Hunter Centre said that the multiple generated by Edinburgh-based Archangels is more than double the average of the US venture capital community, where there is a return of $6.27 for every $1 invested.

“The results of this study underline the significant contributions Archangels makes to Scottish company growth, regional competitiveness and economic development,” MacKenzie said. “Our findings should be of particular interest to policy-makers and others seeking to better understand the economic impact arising from early-stage investment.”

He hopes to extend the research into the sector’s economic contributions with data from other angel syndicates in Scotland.

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Mike Rutterford, co-founder of Archangels, said he was surprised by some of the findings especially that although 44 per cent of the companies backed by Archangels have gone bust, this cro accounted for only 14.9 per cent of cash invested. “That is quite an arresting statistic,” Rutterford said. “I can assure you it felt like much more at the time.”

The study found that Archangels companies have created 2,995 jobs since it was formed in 1992. The companies, including Optos, have generated a combined turnover of £1.31bn over that period.

Of the 18 companies from which Archangels has exited, 12 remain in Scotland, three have moved overseas and three subsequently dissolved. Those that stayed in Scotland have generated further revenues of £587m and created an additional 240 jobs since being sold.

Current firms in its portfolio, which has a combined book value of £37.9m, include timber frame manufacturers Oregon, security software outfit ZoneFox and Hand Arm Vibration firm Reactec.

Archangels’ chief executive John Waddell said it was hungry for more deals and that there was plenty to go for in Scotland. “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. The market remains buoyant.”

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