The fund, named Par Equity Ventures 1, aims to nurture early-stage startups located in northern regions of the UK, including Scotland. 

The fund’s target size is set at £100m, and its initial close currently stands at an impressive £67m.  Par Equity Ventures 1 will direct its investments toward technology companies with promising “high-growth potential,” particularly with a focus on businesses that possess robust intellectual property (IP), as well as opportunities in climate technology, industrial technology, and health technology.

The move comes on the heels of the company committing to redistributing early-stage funding more evenly across the country. Historically, the tech ecosystem has been heavily centred in London, with the city, along with Oxford and Cambridge absorbing 80% of all venture capital investments.

“People often forget that the North of the UK is a big market in its own right. Worth around $1 trillion GDP, it would be the eighth largest economy in Europe, but is still largely overlooked by investors,” said Andrew Noble, partner at Par Equity.

This new effort will be concentrated on areas north of the Midlands, and will be managed by Par Equity’s central Edinburgh office. The fund is done in partnership with  the Scottish National Investment Bank, British Business Investments, and received additional support from the Strathclyde Pension Fund.

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“The Bank’s cornerstone investment will enable significant access to crucial scale-up funding to drive growth in the Scottish tech sector, delivering real impact by catalysing innovation and supporting the critical development of the locally-based venture capital industry,” said Jimmy Williamson, executive director at Scottish National Investment Bank.

“Accelerating innovation and talent in this part of the UK is an absolute priority for us and we believe that this fund can be a positive catalyst for the local tech ecosystem. Not only are we uniquely delivering capital to scaleups in the region, but we hope this fund will trigger a mindset shift to encourage and enable our very best and brightest companies to shine on the world stage,” added Paul Munn, managing partner at Par Equity. 

Par Equity has already demonstrated its commitment to supporting startups, having deployed over £160m in capital, which has benefited 77 startups and resulted in 30 realisations, including follow-on investments.

“In Scotland, early-stage start-ups are relatively well-served by the country’s strength in angel syndicates. And scale-ups that have crossed the (start-up to lar scale-up) chasm will attract investor interest regardless of geography. It’s when they are between these two stages that regional start-ups have relatively more difficulty in attracting scale-up capital, compared to those in larger start-up ecosystems such as London or Silicon Valley,” said Mark Logan, chief entrepreneurial advisor to the Scottish Government and former COO of Scottish Unicorn Skyscanner, in a LinkedIn post on Tuesday.

According to him, this is because VCs tend to cluster in big ecosystems, making startups in those clusters more likely to get funding, and maintain relationships after an investment. Additionally, Logan points out that most regional ecosystems like Scotland have trouble attracting attention before at scale up stage, keeping the ecosystem in a “pre-tipping point state.”

These factors contribute to what Logan calls a “funnel collapse,” where there are a large number of early stage startups but disproportionately few scaleups.

“Of course, on its own, scale-up capital is not enough to accelerate Scotland’s ecosystem towards its tipping point. But it’s a hugely important element in the nation’s wider start-up ecosystem strategy,” he said about the new funding by Par Equity.

“I can’t recall a time as vibrant, with so much start-up activity, supported by such a rapidly evolving support environment. This week’s announcement is another major step in that development.”