Scale-up funding needed to bring Scotland's clean tech sector to maturity

Far greater levels of scale-up investment are required if businesses operating in Scotland’s clean tech sector are to have a chance of contributing meaningfully to the net-zero transition.

On day two of Holyrood magazine’s COP26 Fringe Festival a panel of experts discussed how it is relatively easy for Scottish tech start-ups to get backing for their ventures, but that many stumble when it comes to commercialising their ideas.

Marc Strathie, head of research and policy at ScotlandIS, noted that there was more investment in Scotland’s clean tech sector in January 2021 than in the whole of 2015, but that companies are forced to seek funding from a limited pool of investors.

“The trajectory is moving forward but we need more venture capital and more private investment,” he said.

“The landscape is limited towards public finance – Scottish Enterprise, the Scottish Investment Bank – and we need to diversify that.

“It’s a bit niche in terms of where clean tech companies can go. We’d be in a better place if we could accelerate that.”

Strathie said that at the moment businesses can generally only access angel and seed finance, with more needing to be done to ensure they can access the kind of funds that will allow them to scale their start-ups into viable operations.

“Scale up is the next challenge,” he said. “That’s the one area in Scotland that’s the biggest challenge. How do you retain the climate tech Skyscanner? How do you get the clean tech unicorn?”

While some funders are nervous about backing very early-stage businesses over fears their investment will be lost, Beverley Gower-Jones, managing partner of the Clean Growth Fund, said the “commercialisation journey derisks technologies as they come through”.

The problem, she added, is that technologies cannot be commericalised without initial investment but investment is hard to come by until technologies have been commercialised.

“Funding for the first commercial demonstration is hard – everyone wants to do project two, three or four,” she said.

Matt Kennedy, associate director at professional services firm Arup and advisory board member of the UN’s Climate Technology Centre, said a mixture of public and private finance will be required to bring the sector to maturity but that politicians would need to take action before private investors get comfortable enough to make those investments.

“Ultimately the financial sector is looking for policy certainty – they are investing and they want a return,” he said. “That could come in 15 years or 20 years but they want a large scale return and they want to know the rules of the game.”