56 per cent of UK tech founders expect that their business will sell for £50 million or less, but 80 per cent want to re-enter the tech ecosystem and support it post-exit.
This according to new research from VentureFounders based on Beauhurst data, which surveyed 100 tech CEOs and co-founders, along with interviews with 20 of the UK’s leading founders and VCs for qualitative data. Respondents included Funding Circle’s James Meekings, DueDil’s Justin FitzPatrick, and SwiftKey’s Jon Reynolds.
Topics ranged from their intention to IPO, to the role of investors to help founders take money off the table so they can run their businesses for longer and not sell earlier.
The research reveals a lot about the mindset of today’s scale-ups. Most UK tech founders are intending to exit within two to five years, despite recognising the risks of exiting too early. If founders think they will sell for more than £50 million, it would be to an overseas buyer; a trend made evident by Softbank’s acquisition of ARM Holdings, and Ctrip’s acquisition of Skyscanner, for example.
The longer a company has been generating revenue, the lower the valuation they expected on exit.
James Codling, CEO and co-founder of VentureFounders, believes that despite the £50 million figure, there is no ambition gap among UK tech founders. “Our report highlights the challenges faced by scale-up entrepreneurs and how critical it is for the UK to continue to nurture the scale-up ecosystem. While UK founders do expect to exit earlier, 80 per cent of them want to go back in to the ecosystem and support it, after they’ve exited their own business. We hope the government’s Patient Capital Review will address some of the key findings from this report,” he said.
“We are also commissioning a further piece of work to look at the cost to scale a business in the UK and the funding gap that businesses experience. On the back of this, we expect to make a number of policy recommendations.”
For Beauhurst CEO, Toby Austin, this marks the start of a huge shift. “At Beauhurst, we have observed what I suspect are the beginnings of a shift in the funding landscape. Late-stage companies have been able to find the support and capital they need in the UK recently, although much of the money has come from foreign investors,” he said. “The findings of the report support my belief that the UK is brimming with exciting, ambitious businesses and the ecosystem simply needs to catch up — hopefully it has already started to do so.”