Start-ups missing out on £20m

The report is the first of its kind in Scotland

A survey has found £20m earmarked for investment in start-up companies in Scotland is lying unclaimed.

The study, the first comprehensive analysis of its kind, focused on the activities of Scotland's business angels.

Business angels are business people who have money to spend and want to invest in new ventures.

The research, by Paisley University's business school, has been welcomed by the Bank of Scotland, Local Investment Networking Company (Linc) Scotland and the Archangel investment syndicate.

Funding is a major obstacle for start-ups

Sandy Paton, the bank's director of external affairs, said: "In the present climate of financial uncertainty for businesses we felt it valuable to have a clear, factual picture of the views of Scotland's business angel community and we were surprisingly encouraged by what we found."

The report suggests most business angels have up to £100,000 each to invest, with some super angels offering in excess of £1m.

However, researchers say they have nowhere to put it.

The report's authors also suggested the £20m figure could be just the tip of the iceberg.

Linc Scotland puts businesses and potential investors in touch with each other.

The organisation's David Grahame said: "Even today, the main barrier to increasing angel investment is the lack of suitable opportunities.

"More than two-thirds of angels believe Scotland is a good place to start a business."

Conditions are tough in Scotland at present

The Paisley research comes on the back of a recent government study which found a major obstacle for start-up companies was "cash constriction".

Stuart Paul of Paisley Business School, University of Paisley, said: "A key finding of the report is the need to make entrepreneurs more investor-ready.

"This should be a priority area for Scottish enterprise.

"One of the most effective ways to improve Scotland's business birth rate is to arrange more marriages between angels and entrepreneurs.

"There's lots of money around, plenty of ideas, but still they don't come together."

Business angels, defined as informal private investors who fund individual firms in return for an equity stake in the company, are seen as an important source of money.

The research reveals the majority of angels make more than one investment and prefer to support local entrepreneurs.

Scotland is seen as a good place to do business

It also suggested most of them were men and aged over 50, and that a quarter of them had been self-employed at some stage.

Their occupational background is most likely to be in finance, marketing and sales, or the manufacturing sector.

Mr Paton, added: "The report contains some good news for the Scottish economy.

"Business angels say that Scotland is a good place to start a business.

"These angels are a good resource for the Scottish economy, as they are men and women who have done well from Scotland and now want to give something back.

"Their experience can be the difference between a new business succeeding or failing."