Should Interest Rates Interest Tech Investors?
In July this year, it emerged that food delivery company Deliveroo was in advanced talks with the likes of Softbank Vision, Apple and possibly Sharp with the view of raising a next round of funding that could take the value of the business to over $1.5bn. That would put Deliveroo firmly in the mythical unicorn camp of those newly minted tech companies that have grown to be worth more than $1bn.
More recently, shareholders in the Golden Triangle based chipmaker Imagination Technologies approved a £550M takeover by Canyon Bridge, a Chinese backed private equity firm. The valuation is interesting as Imagination was a rock solid rising start well on its way to unicorn status – until Apple announced that it would not longer use its chipsets. What Canyon Bridge has realised is that the Intellectual Property and expertise within Imagination can be exploited in any number of ways – and they may believe that Apple will come back to them by one route or another anyway.
What these two examples shows is that at the exit side of the pathway, there are no signs of activity slowing down – but what about at the start, where early stage investors are active?
A recent study by equity analysts Beauhurst, quoted in The Times, reveals that equity investment across the UK has recovered from the slowdown seen in 2016. Further, figures for Q3 17 show that activity was actually the highest recorded since figures started to be collected in 2011. A total of 397 deals were completed in the 3 months, a quarter on quarter growth of 12%.
Further, it’s not just early stage investment as growth stage deals also expanded, with deals worth more than £10M almost doubling.
What all these figures show is that against a background of concern over the wider economy and low interest rates, the opportunities offered by high growth companies are perhaps being brought into even sharper relief. As ever, a lot of capital is chasing a return. Early stage investors can take advantage of this appetite but picking enough likely winners remains key.
It is said that innovation never goes out of fashion – it’s just that not every new design makes it off the catwalk.
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