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Beyond the Capital with Scottish angel network Archangels

Image credit: Archangels

Edinburgh-based Archangels has “deep pockets” and “a lot of patience”, says David Ovens, joint managing director of the business angel syndicate.

The syndicate has been investing in Scottish tech and life science for more than 30 years, starting with an £80,000 investment into medtech company Optos in 1992. The company later floated on the London Stock Exchange with a market cap of £165m in 2006 before it was sold to Nikon for £259m in 2015.

Fast forward to today and Archangels has a network of 120 angel investors, the majority of whom reside in Scotland.

A recent analysis by the University of Glasgow determined that Archangels had invested £161m and helped to grow the Scottish economy by £1.4bn.

Archangels typically invests in seed-stage startups and makes follow-up investments at Series A and beyond. Investments range between £5m to £10m over the course of 5-10 years.

It maintains close relations with the companies it invests in, says Ovens.

“Things will inevitably go wrong and when they do go wrong, you want to be quite close to the company so that you can visit,” says Ovens, adding that this is the reason why the firm only invests in Scotland-based companies.

Despite being Scotland-based, all of its portfolio members aspire to operate internationally.

Scotland’s emerging tech hub

Whilst a lot of action happens in Edinburgh and Glasgow, Archangels’ managing director believes there is somewhere else that is demonstrating prowess as a technology hub.

“Dundee is a city that’s really going through a strong process of regeneration,” he says.

The “understated” city is a “very strong breeding ground” for R&D and has two key strengths gaming and medical expertise, says Ovens.

It is home to 4J Studios, which was responsible for porting Minecraft to gaming consoles and handhelds, along with St. Andrews University nearby.

‘Sensible valuations’

As a result of the VCT rule changes that meant venture capital firms had to “invest in riskier assets”, Ovens says that it led to a “significant uptick” of outside capital coming into the country.

More recently London and US investors have paid more attention to Scotland because of the valuations of tech businesses in their own regions.

“We’ve seen an abundance of capital coming into the market over the last couple of years, looking for sensible valuations because we’re Scottish” and have always remained “sensible at how we value things”.

Current investments inside the Archangels portfolio include Hearing Diagnostics, health tech PhysioMedics and space SaaS company Earth Blox.

“I think fundamentally data, predicting with data, harnessing data and processing data is going to be the theme that continues to drive what we see over the next few years,” says Ovens.

Scottish scaleups

For Ovens, there are two areas where the Scottish ecosystem could be improved. One is that the majority of businesses in Scotland are not transitioning from a startup to a scaleup due to a lack of scaleup funding.

However, this is slowly turning around, says Ovens, citing exited company Blackford Analysis to Bayer in January for an unknown sum.

He also hopes that this scaleup funding gap will in part be helped by the introduction of the Scottish National Investment Bank, which was established in 2020.

Beyond the Capital, an interview series with tech investors and venture capitalists based outside of London, is published monthly. Last month UKTN spoke with Lincolnshire-based investor Haatch.