Leading figures from the venture capital and fast growth business world have come together to announce a set of ‘ambitious’ proposals aimed at kick-starting the UK IPO route for companies.
The changes will reportedly feature reformed rules on free float, eligibility criteria and reporting requirements.
Among the changes, technology firms may be able to reduce the free float, the proportion of shares available to buy, from 25 per cent to 10 per cent.
While the process will not allow growth businesses to achieve a premium listing, it is described as a ‘launch pad’ for those seeking one.
David Willetts, minister of state for universities and science, says the government is firm in its desire to make London the high-tech capital of Europe.
He adds, ‘This bold action will send a signal to entrepreneurs and investors across Europe that London’s public markets are throwing open their doors to high-growth companies.’
The new route is targeting companies which are achieving what are traditionally higher revenues than average Alternative Investment Market (AIM) companies.
Speaking at the launch of the proposals on the fourth day of Seedcamp at Google’s London campus in the east of the city, Robin Klein, venture partner at investment firm Index Ventures, said that while the issue of capital for early companies has been tackled through schemes such as the Seed Enterprise Investment Scheme (SEIS), companies moving beyond that stage should be looking at the London Stock Exchange and not NASDAQ or the NYSE in the US.
He added, ‘For some years there has been a debate about why we can’t create big global companies like they can in Silicon Valley.’
Klein believes it should be a case more missionary than mercenary, giving fast-growing companies another option rather than just selling out.
As well as creating an easier way for growth companies to access the public market, the government is also planning on investigating the current regulatory rules that may be deterring investors from funding growth companies.
Figures from Nesta show that 800 companies received investment from UK VC funds raised between 2006 and 2009. A further 2700 companies received investment from European funds raised over the same period.
However, only ten per cent of firms that received investment from UK or European VC funds raised between 1990 and 2005 went on to make an IPO.
Also in attendance at the launch of the initiative was Michael Acton Smith, founder of London-based venture capital-backed business Mind Candy.
Smith says that while he is not considering a float for his company, in days gone by he would not have considering London as a location for a listing despite the fact he would prefer to.
While he says the new government discussion is a step in the right direction, he says it is not a ‘silver bullet’ solution.