The Scottish Government has pledged to invest more than £328 million to transform the country’s bleeding-edge research into commercial success, a huge cash outlay which the SNP hopes can power new businesses, products and services – making the country an “innovation nation”.

Publishing its first progress report on public sector support for research commercialisation, the government details exactly how that cash is being spent – including £80 million for life science hubs in Aberdeen and Dundee, £25 million for a Knowledge Exchange and Innovation Fund, and £7 million dedicated to a spinout pipeline.

But throwing cash at endless R&D projects is the easy part, the real question is how that translates into the economic impact that ministers are banking on.

Leaping from Lab to Market

Foundational to Scotland’s ambitions are its universities, the source of more than 240 active spinouts, with the report finding that R&D spending from these institutions has resulted in over £5.3 billion in output and £3.2 billion in GVA.

Over 2023/24, the report found that the number of active spinouts from Scottish higher education institutions (HEIs) spiked by 9% compared to the year before, with the number of active spinouts having increased by 56% since 2016/17. 

It is clear that the government is hoping to see more unicorn firms leap from lab to market, with the report highlighting the £2.2 billion IPO of Dundee Uni spinout Exscentia, and stressing that the country is the best-performing region for spinout investment outside the Golden Triangle.  

That success, however, is dependent on public sector support. Following a recent pilot, the Scottish Government said it now aims to re-launch its £3 million Proof of Concept Fund to support early to mid-stage commercialisation activity, de-risk technology and attract follow-on investment.

The government said this will help to address a key remaining barrier, namely that although Scotland’s entrepreneurial ecosystem is growing, there is a dearth of seed and pre-seed capital for high-potential, yet risky businesses, especially those within deep-tech and deep-science.   

Meanwhile, the Scottish Funding Council will provide another £3 million via a Research & Innovation Shared Services Collaboration Fund to find ways of supporting collaboration between Scottish universities, aiming for maximum efficiency and sustainability in a challenging financial climate that threatens many of these institutions.

More exciting, over the next year, Scottish Enterprise will pilot a new “Venture Creator”, bringing together elements of commercialisation with global market opportunities – aiming to reduce the time to translate research into commercial opportunities, and embed business skills and talent into founding teams.

The report notes that, as spinout founders can often lack the entrepreneurial and professional skills to scale their research into viable businesses, training and skills development like this is essential to long-term sustainability.

Scotland’s GDP Generators

Growing these companies from seed to scale, the report notes that Scottish Enterprise’s High Growth Spinout Programme is currently supporting 46 spinout projects to turn them into high-impact businesses. 

The government is keen to support more budding businesses in their plan to scale, mostly because of the enormous economic benefits these firms bring.

On average, the report found that, despite representing just 1.7% of the country’s business base, scale-ups generate £558,000 turnover per employee, more than double the national average, introduce innovation at twice the rate of large firms, and employ over 206,900 people.

Dubbing these firms “GDP generators”, the government said that the total turnover generated by Scottish scaleups is £67.6 billion, and eight out of 10 expect to grow again this year.

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Unsurprisingly, the SNP has thrown its weight behind these companies. The Scottish National Investment Bank, for example, is leading on the developing a Scottish Innovation Fund, a dedicated investment initiatve focused on early stage, IP-rich startups.

Scottish Enterprise, meanwhile, will work to stimulate private sector investment into life sciences, with a £35 million support package having already been announced, a plan which will help to address a critical lack of infrastructure, especially lab space, constraining the growth of firms.

In reality, it is still too early to estimate the impact any of these measures have had. Writing in the report’s foreword, Scotland’s Chief Entrepreneur, Ana Stewart, said that the next year will be key as the government moves from strategy into delivery, implementing its plans and deploying new funds.

However, with the next update not due until 2031, the public is in for a long wait to see whether all of this investment truly pays off.