Graeme Malcolm photo

In a press release, M Squared founder and CEO Graeme Malcolm said the firm was “delighted to now be working” with its new funding partners toward “a shared goal to innovate and scale.” [Image: M Squared]

The photonics and quantum technology firm M Squared, based in Glasgow, Scotland, U.K., has announced what it describes as “a significant new financing” of £32.5 million (US$43.4 million), to be used both for a strategic equity repurchase and to advance the company’s R&D effort. Interestingly, in addition to £20 million in debt financing from the finance firm Santander UK, the funding includes a £12.5 million capital stake from the newly formed Scottish National Investment Bank (SNIB)—making M Squared the very first company to be backed by the SNIB.

Mission-led investment

The SNIB, a “mission-led development bank” set up by the Scottish government as an operationally independent commercial entity with £2 billion in government funding, aims to focus on investments in three broad areas: supporting the country’s transition to net-zero emissions; promoting community growth and equality; and “investing in innovation and industries of the future.” Quoted in an M Squared press release announcing the financing, the SNIB’s CEO, Eilidh Mactaggart, characterized the company as “a great fit” with the bank’s missions by virtue of its position “at the cutting edge of innovation.”

One particular area of focus for M Squared is the commercialization of quantum technology and quantum computing. It is leading and coordinating DISCOVERY, a £10 million research program funded in part by an Innovate UK Challenge fund from UK Research and Innovation (UKRI), that seeks to overcome technology barriers to commercial quantum computing. It has also forged a £4.6 million quantum technology partnership with the University of Strathclyde.

But M Squared asserts that its work contributes to all three of the SNIB missions, as its technologies address “global scientific and technology challenges in fields as diverse as climate change, healthcare, quantum computing and virtual reality.”

Funding targets

The £12.5 million capital investment from the SNIB—a 10-year equity stake, in accord with the bank’s long-term, “patient capital” funding model—will, according to M Squared, be used to “further advance its research and development,” particularly in “upscaling its pioneering work in quantum innovation alongside its technologies to help tackle climate change.”

The synchronously announced £20 million in debt funding from Santander UK, meanwhile, will go toward refinancing some existing debt, and also toward a strategic buyout of part of an existing equity investment from the U.K. investor group Business Growth Fund (BGF). In the release announcing the funding, Patrick Graham, BGF’s head for central Scotland and Northern Ireland, noted that M Squared has received total BGF funding of £6.4 million in the past eight years, during which M Squared has grown tenfold—“catalyzing a strong return for BGF.” Notwithstanding the partial buyout, BGF will retain what M Squared describes as “a meaningful stake going forward” in the company.