Valoran y reconocen la importancia de la puntualidad en

£’000

Total jobs Total turnover in £’000 Investment per job £ Investment £ per £1,000 turnover SCF 24,447 709 157 34,481 156 Sigma Innovation 2,225 158 26 14,082 86

Sigma Sustainable Energy 3,200 184 6.4 17,391 500

Genomia 327 60 1 5,450 327

WSLF 8,500 5,429 43 1,566 198

DSL 1,000 n/a n/a n/a n/a

SEBSED 796 554 n/a 1,437 n/a

Source: Monitoring returns

8.6 The investment per job, or per unit of turnover, does not take account of additionality or deadweight, or of the investment returns of the various funds. We consider additionality below and investment returns in the following chapter.

8.7 For the larger funds, full or partial additionality20 _{at SCF appears to be over 90% and}

at WSLF of the order of 70%. Application of these additionality figures to the investment per job would increase the WSLF investment per job from £1,566 to £2,237, and for SCF from £34,481 to £38,312. It is understood that the investment per job by SCF is relatively similar to comparable funds in England. However, application of additionality estimates does not materially change the relative investment per job between the loan funds and the equity funds.

Costs per Job or Unit of Turnover

8.8 Unlike traditional grant schemes, the investment per job or unit of turnover does not reflect the costs per job. The cost per job or unit of turnover must also reflect the investment returns of a revolving fund. This is of course the basic rationale for setting up a revolving fund rather than a grant scheme.

8.9 Unfortunately, outcomes cannot be known until the investment cycle of a VCLF is complete. But it is of course possible to use forecasts of outcome to adjust the costs shown in the table above.

8.10 We can first consider the loan funds and the bad debts and other costs of the loan funds. For WSLF, as shown in Table 5.5 above, for 2005, the annual bad debt write-off represented about 6.5% of the value of loans. Comparable amounts for DSL are 13% to 14%,

20 _{Includes respondents who said that they could not find other funding at all, or could not find sufficient other} funding

and for SEBSED 2.7%. If we consider the largest fund, WSLF, in more detail, each loan is normally repaid in an average of between one and two years. Taking into account the rate of annual write-off of 6.5%, there is a recovery rate of the order of 90% of loans. However, it is also necessary to take account of interest received and of administration costs. Overall, the profit and loss account of WSLF (set out in Appendix E) shows that the company approximately breaks even before allowing for grants receivable. In effect, interest receivable (including interest on cash balances) approximately equals the costs of administration and bad debts.

8.11 On this basis, the fund is fully maintained and there is no cost per job at current investment levels. If investment levels increased and interest on cash balances reduced, the fund would not be maintained and there would be a cost per job – but it would be a small percentage of the unadjusted figures shown in the table above. A similar argument applies to SCF. If the fund’s financial targets are achieved (the target is an IRR of 20%), than there would be no cost per job and returns would be strongly positive. But it is of course far too early to estimate outcomes with any certainty.

Venture Capital Effect on Investee Companies

8.12 As part of our survey of SCF investee companies, we asked about the increase in turnover and jobs, about the effect on the companies concerned, and about the effect of the fund on their business. Almost 85% of companies said that SCF had a very positive effect on their business.

Table 8.3 - Changes in turnover/employee numbers since SCF invested in business

Option Change in turnover Change in employees

Number % Number % Reduced 1 3 1 3 No major change 11 27 11 27 Increased by up to 25% 6 15 4 10 Increased 25% to 50% 4 10 7 17 Increased 50% to 100% 4 10 4 10 Increased by over 100% 14 35 13 33 Totals 40 100 40 100

Source: CSES survey of SCF investee companies

This analysis may be slightly skewed by the exclusion of companies no longer trading, but it does appear that there is a good rate of growth amongst many investee companies of SCF. 8.13 We carried out telephone interviews with some companies to obtain a more detailed picture of how the companies were affected. Summaries of the discussions are shown below.

Adventi Group

The Adventi Group is an IT service and solutions company with annual sales of £15 million. Adventi received an investment from the Archangel Network and SCF totalling £1.2 million. SCF’s investment was £499,999. Adventi work either as an entire IT department or as part of the existing in-house team, and they offer a comprehensive IT support service. They have forged strategic partnerships with companies such as Microsoft, BT, DNS and O2, among many others. Adventi was named "Most Entrepreneurial Young Company 2004" by the Edinburgh Evening News.

Adventi commented that the ‘hands off approach’ adopted by SCF was both appropriate and helpful. The investment has facilitated a steep rise in turnover and employee numbers have increased. It has also assisted in product and service diversification and expansion into other geographical market and the equity investment also levered debt funding from the bank.

Axeon Holdings plc

Axeon Holdings plc is a Scottish group providing highly advanced green energy solutions for the automotive and industrial markets. Axeon is seeking to capitalise on the burgeoning sustainable/renewable energy agenda. At the Northern Star business awards in October 2006, Axeon Holdings were presented with the award for Commitment to Research and Development, in recognition of their strong commitment to R&D in the area of energy and energy-related technologies.

Axeon commented that the investment by SCF was pivotal in securing the future of the business. SCF facilitated other investments as the ‘first mover’ and without SCF targets would not have been reached. Axeon listed on AIM in the Summer of 2005. Turnover has risen from a £400,000 base at that time to £2.8 million in 2006. The original office in Aberdeen now includes a manufacturing site in Dundee and a sales office in Germany.

B1 Medical Limited

B1 Medical Limited is the second company to be spun out of NHS Scotland technology. B1 Medical focuses on the commercialisation of intellectual property in the field of orthopaedics from the NHS Grampian, the University of Aberdeen and the Robert Gordon University. In addition to an initial portfolio of eight product ranges, B1 Medical has a ten year exclusive right to commercial intellectual property in the field of orthopaedics as it is developed by these three institutions. The product lines range from implants for joint replacements to an automated vibration exercise apparatus for rehabilitation. The combined portfolio will target US and European markets worth a total of £565 million a year and is expected to generate an annual turnover of nearly £40 million by year five of operation. Each of the institutions has taken a 33% shareholding in the business. NHS Grampian cannot hold its share of the equity directly, so has done this through Scottish Health Innovations Limited (SHIL), a private company established to commercialise innovations from NHS Scotland.

They commented that the funding is helping the commercialisation of its first products. Funding has facilitated the development of prototypes and a product launch is envisaged in the second half of 2007.

Biopta Ltd

Biopta Ltd is a specialist contract research organisation (CRO) and instrument manufacturer, with expertise in human tissue in vitro pharmacology. The Company was formed in 2002 and is based at Garscube Estate near Bearsden. Biopta is a spin out from Glasgow Caledonian University.

Biopta’s inception in 2002 was the result of an innovative idea for testing drug candidates before they progressed to clinical trials. The company has developed a unique method of testing compounds in vitro with great accuracy, and was set to launch its first automated in vitro pharmacology instrument in August 2006. Biopta's patented platform technology range, Perf-Exion, has been awarded numerous grants, including a Scottish Enterprise Proof of Concept Award, a regional John Logie Baird Award and a Scottish Government SMART Award. It allows analysis of tubular structures such as blood vessels.

Biopta praised SCF for their product and approach. The SCF process was extremely easy and the ‘hands off’ approach adopted by SCF greatly appreciated. The investment team at SCF “couldn’t have been more

helpful. Management time was not lost to the diligence process as Braveheart and SCF handled everything. An area where Scottish Enterprise could be of more assistance is in brokering introductions to VCs and prospective stakeholders who would not normally engage with an SME.”

An example of an investment by Sigma is shown below:

Nandi Proteins

On 13 February 2006, the Sigma Technology Venture Fund (STVF), managed by Sigma Technology Management Ltd, completed an investment round in Nandi Proteins (the renamed Nandi Biotechnology) of £660,000. STVF invested £300,000 as lead investor alongside the Scottish Co-investment Fund, which invested £300,000 and a group of individuals including the chairman who invested £60,000.

Nandi Proteins is a development stage biotechnology company that spun-out of Heriot-Watt University in 2001. The company has developed modified protein technology for use in the food and drink production industry.

Loan Fund Effect on Companies

8.14 Similar positive results have been seen from companies who received loans. We asked companies who had received loans from WSLF about the effect on their business. Similar responses were seen from the other loan funds.

Table 8.4 - What has been the impact of this funding on the operation of your business?

Options Number %

It has contributed very substantially to our development 41 70

It has been useful to our development 18 30

It has been helpful but not vital 0 0

Total 59 100

Source: CSES survey of WSLF companies

Summary:

The principal findings of this section are:

• Initial calculations of investment per job and investment per unit of turnover show that there appears to be a concentration on turnover by the venture capital funds, and on jobs by the loan funds. This is in line with their investment policies.

• Calculations of jobs and turnover increases in a short period do not reflect fully the expected results of long term investment in high tech companies.

• The investment per job by SCF is similar to comparable funds but may be thought high in relation to other regional development instruments.

• But investment per job (or per unit of turnover) is only a partial analysis. In revolving funds, the key determinant of costs per job or unit of turnover is the rate of return or the fund legacy. If the venture capital funds obtain a positive return (as is planned), then there is no cost per job.

• A similar analysis for loan schemes also shows that there is no cost per job for WSLF at current investment rates, because the fund breaks even. If the investment rate was to rise, and the interest on uninvested cash was not available, there would be a small cost per job.