Directorzone

MARKET: Equity Markets to Space Tech

Published by Directorzone Markets Ltd on June 1, 2017, 9:00 am in Knowledge, Market Info

Ends

Wednesday January 1st 2020

 

 

UK in Outer Space | Fast Track hits 20 | SME collaboration | Equity markets: Seedrs + Nex | Female founders U.S. bound | ES awards shortlist | Chinese check in | Silver start-ups | Engage Invest Exploit (Scotland) | Lawtech | Social tech investments | Barclays fintech space

 

Digest of news and trends in the GRID marketplace in May 2017:

 


UK in OUTER SPACE

UK start-up aims to provide super-sharp images of planet | Peggy Hollinger, FT. May 29


The UK government has said the space sector will be a priority in its soon-to-be launched industrial strategy and is hoping to claim 10 per cent of the global market by 2030. This would mean increasing the sector’s annual turnover from £13bn to £40bn in the next 13 years.


The UK has launched a competition to determine the best business proposal for satellite launch capability. Bids have been submitted by consortiums in Scotland, Wales and the south west of England.

 


FAST TRACK HITS 20

Face it, we’re addicted to growth | Kiki Loizou, The Sunday Times. May 28

 

FAST TRACK is celebrating 20 years of recognising this country’s most successful start-ups ….the Oxford research team that monitors this country’s fastest-growing private ventures via league tables in The Sunday Times. Of the 1,400 companies featured on the Fast Track 100 list to date:


• 800 are still privately held
• 40 have listed on the public markets
• More than 300 have merged with others or been acquired
• 220 have gone bust.

 

The first list of the UK’s top 100 companies boasted collective sales of £1.6bn from firms that employed more than 15,000 people.Today, revenues made by the Fast Track clan stand at £3.3bn. The businesses employ almost 20,000 staff.

 

In the early years, half the companies listed were founded by individual entrepreneurs working alone. Today, 70% of the ventures are started by teams.

 

…female entrepreneurs. Just seven made the list in 1997 — last year there were 16.

 

Last year, 42 of the businesses listed were backed by venture capital investment. On the first list there were 21.

 

Notable failures include Land of Leather, the furniture retailer that went bust in 2009 while making sales of £232m, and novelty gift business the Gadget Shop, which went under in 2005. Clothing chain Officers Club and IT services provider 2e2 are also among those that grew fast only to collapse.

 

Most valuable Fast Track companies over 20 years:
• ARM £24bn
• Markit £14bn
• Carphone Warehouse £3.7bn
• B&M Retail £3.6bn
• Euro Garages / Intervias £2.3bn
• Net-a-Porter £2bn
• Fever-Tree £1.8bn
• Moneysupermarket.com £1.8bn
• Card factory £1.1bn
• Travelex £1bn

 

… the up-and-coming stars : The LOUNGERS chain … BREWDOG, the brewer based in Aberdeenshire, recently valued at £1bn after a £213m investment by American private equity firm TSG Consumer Partners. ….NANDO’S restaurant empire, Manchester-based fashion retailer MISSGUIDED and fitness chain PUREGYM ….OAK FURNITURE LAND, founded by Lancastrian entrepreneur Jason Bannister in 2004. He now has 75 stores and revenues north of £300m, and is reported to be selling a stake in his company for £100m. …..RAPHA, the upmarket clothing brand for cyclists. Last year, the London business saw revenues rise by more than £10m to £63m and profits increase from £1m to £4.5m. Rapha was making sales of £7m when it first hit the Fast Track list in 2010.

 


SME COLLABORATION


Corporates spend more on SME collaboration than R&D | Zen Terrelonge, Real Business. May 23

 

Law firm BOND DICKINSON has released data that shows SME collaboration is high on the priority list for corporates. The trend of SME collaboration, which has seen large firms make an increasing number of deals with smaller businesses over the past three years, fell by 28 per cent for 2016/2017. Comparatively, the number of deals sat at 1,326 in the 2013/2014 and rose to 1,536 in 2015/2016.

 

That said, SME collaboration is still a major priority for corporates. Large businesses spent £21bn across 1,111 deals over the last tax year – that’s 31 per cent more than the £16bn that was spent on R&D, which shows the value placed in SMEs. Elsewhere, between 2013/2014 and 2016/2017, large firms have made 5,447 SME collaboration deals, accounting for over £102bn – significantly more than the £62bn spent on R&D.

 

On the back of Blair’s comment about a hiatus, Bond Dickinson cited ONS figures, which found business investment declined 1.5 per cent in 2016 in line with Brexit. Cebr, meanwhile, has predicted a 3.4 per cent fall in 2017.

 

According to the law firm firm’s findings, financial services is the industry where large firms are most eager to embrace SME collaboration, for both volume and value of deals. Some 1,864 financial services SME collaboration deals were made in the past four years, an investment of £31bn – 34 per cent of the national total. ….75 per cent of financial services firms bought minority SME stakes, compared to the national average of 44 per cent.

 

Simon Pilling, corporate partner, Bond Dickinson: “…. fall in deals with UK SMEs. Negotiations are being strung out as corporates continue to work out how the final EU deal, or lack of one, will affect them. Yet fortune favours the brave, and this slowdown creates a window of opportunity for strategic acquisitions. Added to an incredibly strong startup ecosystem, first rate universities and a tech talent pool to rival Silicon Valley, there might not be a better time to secure the perfect innovation partner.

 


EQUITY MARKETS: SEEDRS + NEX


Placing trades. A British firm plans a secondary market for crowd-funded shares | The Economist. May 20

 

…. the big venture-capital (VC) firms do not usually raise money from small investors. And some entrepreneurs complain that it is hard to get noticed by the hotshots in the VC industry. Hence the enthusiasm for crowd-funding, where small investors can buy a stake in startup companies. But there are two big problems with crowd-funding:

 

1. it is risky: most startups fail.
2. investors have to wait so long to sell their shares ….investments tend to be illiquid—shareholders have to wait for a takeover or a stockmarket flotation to recoup their investment.

 

SEEDRs, a British crowd-funding firm, was set up in 2012, and has backed 500 firms so far, raising a total of £210m ($271m) from more than 200,000 users.

 

Seedrs is trying to solve the illiquidity problem by setting up a secondary market, where buyers and sellers can exchange shares. The new market will start operating this summer, and will allow trading for a week every month, starting on the first Tuesday. The price at which investors can deal will be set by Seedrs itself, based on a valuation mechanism in line with industry guidelines. But there are some restrictions: only current investors in a firm will be allowed to buy shares. And, to the extent that investors make a profit on a sale, Seedrs takes a 7.5% cut of the gains.

 

Crowd-funding might be even more attractive if investors could at a click assemble a diversified portfolio of small stakes in 20-30 companies rather than just one—just as those who put money into peer-to-peer lending can spread their risk across a range of borrowers. The next challenge will be to build on early efforts to offer the same to investors in shares: ie, mutual funds for crowd-funded startups.



Look beyond AIM for the Nex generation of small-cap markets | Anthony Hilton, The Evening Standard. May 9.

 

… the world’s most famous investor, Warren Buffett, at last weekend’s annual meeting of his company Berkshire Hathaway, … observation that the most successful companies of today — businesses such as Apple, Google and Facebook — do not need large amounts of capital from outside investors in order to keep growing. They are quite different from the leading businesses of the past in not needing capital and in not much needing outside investors either.

 

Economist John Kay in his review a few years ago pointed out how little market activity had to do with raising capital for business, and how it was much more focused on finding ways for investors to extract capital from businesses. The bulk of what takes place is secondary trading — the buying and selling of existing shares between investors.

 

That, however, is a legitimate function, and meets a real need — witness the decision announced yesterday by crowdfunding site SEEDRS. Its primary role is to raise capital for start-ups and small expanding businesses by running a platform through which it puts those with money in touch with those who need it. Seedrs wants to make it easier for investors to sell if they have to, and for others to buy more if they want to. It has therefore announced plans for an exchange which it hopes will become a marketplace for the shares in the companies for which it has raised capital. This will obviously provide a service to existing investors and — to the extent that it can create a secondary market — obviously widen the appeal of the platform to others.

 

Another effort to use stock markets to meet a genuine need is under way at the NEX Exchange, the spin-out of the markets infrastructure business which used to be hidden inside Icap. Patrick Birley ex-head of Carbon Trading Exchange, … runs Nex and … and is looking to build a market where small companies can get a listing and raise equity capital for expansion without having to pay a fortune for the service.

 

Alternative Investment Market … most people think Aim has lost the plot: it is simply too expensive. By way of comparison, Birley says that whereas an Aim listing would typically cost £350,000 he could do it on Nex for £75,000. The follow-on listing fees will also be just a fraction of what Aim companies generally have to pay.

 

He also believes that many private firms do not want to raise money but do want a listing, and for the same reasons identified by Seedrs — that there are always some who for one reason or another want to buy or sell. He sees a major part of the service as simply providing such a public price at which transactions can take place.

 

London’s history is littered with failed efforts to create a cheap efficient stock exchange to provide a service to small companies and most have failed because they could not get enough business to cover their costs. Nex is different in that it has affluent backers — including Michael Spencer — and because technology is making these things much cheaper to run. Investing in new private companies is attractive too because, at a time when tax is high and will rise further whoever wins the election, it can, if properly structured, provide very generous tax reliefs.

 


FEMALE FOUNDERS U.S. BOUND

15 of the UK's fastest growing startups founded by women are heading to Silicon Valley on a trade mission | Lynsey Barber, City A.M. May 19.

 

Entrepreneurs from 15 female-founded super high-growth companies looking for investment, or eyeing expansion to the US west coast, will meet with executives from Apple, Google, Instagram and LinkedIn on a fresh trade mission:

 

• AZOOMEE
• BABY2BODY
• CENTURY TECH
• EPORTA
• LUXTRIPPER
• MR & MRS SMITH HOTELS
• MRS WORDSMITH
• MUSH
• NUROLE
• OLIO
• OPPORTUNITY NETWORK
• OUTCOMES BASED HEALTHCARE
• PIVIGO
• RAREMARK
• SETTLED

 

It comes as new research reveals how businesses led by women are driving the economy, adding £3bn over the past 12 months. The number of female-run firms with a turnover of as much as £250m grew by 14 per cent and they are growing on average by more than a quarter each year, according to the figures from LinkedIn and Founders4Schools.

 

The firms heading to Silicon Valley', which include high-end hotel website Mr and Mrs Smith, data science firm Pivigo, health startup Raremark and property startup Settled, are growing at an annual rate of 118 per cent.

 

Deputy mayor for London Rajesh Agrawal will also head to the states to promote London as Europe's top tech hub and encourage investment in the UK. Well-known entrepreneur and investor Sherry Couto will lead the mission with London and Partners, the mayor's promotional agency. Coutu is founder of Silicon Valley Comes to the UK (SVC2UK) with Ellen Levy and Reid Hoffman, the founder of LinkedIn.

 


ES AWARDS SHORTLIST


Small firms with big ambitions: London’s next superstars in the hunt for our awards | The Evening Standard. May 18

The Evening Standard Business Awards, in association with HSBC and supported by Ballymore, will be held at Banqueting House, Whitehall, on June 29. For more information visit: standard.co.uk/businessawards …shortlist, which will be judged by our panel of top business leaders:

 

SME OF THE YEAR

 

• LUCKY GENERALS: Having been feted as the coolest ad agency in town for almost all of its nearly three-years …rewarded in February when New York giant TBWA took a 60% stake. Lucky Generals had amassed accounts from corporate titans including Twitter, Paddy Power and Amazon, as well as left-field campaigns for Hostelworld and Pot Noodle. Its ads are funny, irreverent and effective, and have underlined the UK’s reputation for making brilliant advertising.


HOTEL CHOCOLAT: Who would have thought there was a market for luxury chocolates through the post? Hotel Chocolat, has consistently rewritten the rules of retailing, and of financing, in building its 24-year-old upmarket confectionery business. With its own cocoa plantation, 92 shops, 11 cafés and a luxury hotel in St Lucia … rapidly growing digital sales and recurring revenues from founding a club for discerning chocoholics. Profits were up by more than a quarter at the half year at almost £12 million … huge export potential.


• HIRE SPACE: From the Tate Modern to the Jewel House at the Tower of London, you can hire many of the capital’s landmarks for private use from Hire Space, the online venture started with £350,000 six years ago. It’s free for a venue to list and Hire Space takes a 10% commission on bookings through their site. They’ve quickly become the first port of call for corporates looking for interesting spaces for an event or away-day, but still appeal to private individuals looking for something different. The company has also launched in Manchester, Birmingham and Liverpool and now has more than 5000 venues and has processed more than 65,000 enquiries. Started as a way for underfunded schools to generate more income, Hire Space has ambitions to become the foremost venue marketplace in major cities worldwide.


FASHION ENTER: Started by Jenny Holloway, a former Marks & Spencer buyer, Fashion Enter is a not-for-profit social enterprise that makes fast-fashion for the major chains from its factory near Finsbury Park. As well as promoting “made in Britain”, it also helps to showcase fashion talent. Its on-site academy is now the biggest provider of technical fashion apprenticeships in the country, with 675 people having taken its courses. With seed funding from Asos, the company produces between 8000 and 10,000 garments a week for the likes of the online retailer, M&S, Tesco, Jigsaw and New Look.

 

TECH START-UP OF THE YEAR

 

DARKTRACE: …one of the UK’s fastest-growing businesses. ..was founded when tech entrepreneur Mike Lynch brought together Cambridge mathematicians and spies at GCHQ, the UK’s intelligence agency. The Cambridge-based tech company, where Nicole Eagan is chief executive, uses artificial intelligence to identify abnormalities occurring in a company’s IT infrastructure that might be an attack. It scored a coup last July when US private equity giant KKR invested £50 million, used to continue Darktrace’s rapid expansion overseas. …Lynch has hinted that it is the fastest-growing company he’s ever worked with. The roll-call of blue chip clients — more than a 1000, including the likes of BT and Network Rail — shows how important the business is in protecting UK Plc from a threat that keeps growing.

 

• CITYMAPPER: This travel app is so ubiquitous now that some are using its name as a verb. A star across Europe, where commuters rely on it daily to get across town on different modes of transport, Citymapper is now in 40 cities around the world. Founder Azmat Yusuf says it will begin to make money this year, after its own five-year journey. Last week it even launched its own free bus service on a route in the capital and says the insights it has gained from its app show it just where other “smart” bus services could be of value.


• POD POINT: is providing the infrastructure for electric vehicles that will revolutionise the way we drive. The company has installed more than 30,000 reliable public charging points for electric cars across the country and, in Norway, they can be turned on by an app, without the need for membership. It is also the UK’s leading supplier of home-charging points and works with workplaces and commercial landlords. Founded in 2009, … one of the big success stories of crowdfunding website SEEDRS. Having just completed a £9 million funding round that brought in Barclays as an investor, its next stop on the journey is likely to be a launch in another Nordic country.


• MONZO: Nicknamed the budgeting secret of millennials, Monzo is a mobile-only bank that was started in 2015 when it crowdfunded £1 million in 96 seconds — a record fundraising. It has now raised £35 million and has 200,000 users clutching its eye-catching orange cards — and a waiting list to join. It offers a prepaid MasterCard debit card, which users can top up from their current account. The firm has just got its full banking license and existing customers will be switched to the full current account by the end of the year. Founded by Tom Blomfield — the entrepreneur behind fintech startup GoCardless — and chaired by Baroness Denise Kingsmill, a City grandee and former deputy chairman of the Competition Commission, Monzo is the banking app which is making the biggest buzz.

 

 

CHINESE CHECK IN

London-based VC firm Silk Ventures backed by China's SASAC has just raised its first $500m fund to invest in Europe and US startups | Lynsey Barber, City A.M. May 15

 

SILK VENTURES …venture capital firm backed by the Chinese government …is eyeing up investments in "deep tech" startups in Europe and the US with potential to expand in China, including areas such as artificial intelligence and robotics, the Internet of Things (IoT), fintech and medtech.

 

The UK is becoming increasingly attractive to Asian firms looking to scout out the latest in technology development. China Equity Group and Hanxin Capital last year launched COCOON NETWORKS with £500m to invest in European startups and a 70,000 sq ft tech incubator in east London with University College London. Chinese conglomerate KUANG-CHI intends to make more investments in UK tech after taking a £30m stake in a Dorset-based maker of jetpacks. And Japan's SOFTBANK chose the capital to base its $100bn meg-fund.

 


SILVER START-UPS

Start-up bosses are old enough to know better | Kiki Loizou, The Sunday Times. May 14

 

Entrepreneurs over 50 can exploit their experience and bulging contacts books. Despite the over-50s perhaps being more risk-averse, it seems entrepreneurship is becoming more attractive to the older set. While their age might suggest they will struggle to raise money from serious investors, some schemes are still ready to hand out cheques.

 

The START UP LOANS COMPANY, which lends state cash, saw a 65% increase in the amount it lent to people aged 50 and over last year. Since its inception five years ago, it has signed off loans worth £35m to this age group — £13m last year alone.

 

But elsewhere, support for older entrepreneurs has retreated. In 2014, PRIME (the Prince’s Initiative for Mature Enterprise) wound down its start-up course, merging it with BUSINESS IN THE COMMUNITY, another of the Prince of Wales’s charities, after a decision to focus more on employment and less on entrepreneurship. It was thought to be the only programme of its kind in the UK.

 

Emma Jones, founder of the small business network ENTERPRISE NATION, has since seen increasing numbers of over-50s signing up to her workshops.

 

 

ENGAGE INVEST EXPLOIT (SCOTLAND)

So which start‑up is going to be the next Skyscanner? | Kiki Loizou, The Sunday Times. May 7

 

On Wednesday, investors from across the world will gather in Edinburgh for the Engage Invest Exploit (EIE) conference, which will see 60 start-ups pitch for funds. Competition to pitch to the 700-strong delegation is fierce.

 

Entrepreneurs in Scotland are feeling chipper right now — …Edinburgh’s SKYSCANNER, which was sold to Chinese travel giant CTRIP for £1.4bn, and Aberdeenshire craft brewer BREWDOG, which has received a £213m investment from an American private equity firm. Meanwhile, FANDUEL, a $1bn (£774m) fantasy sports site, is merging with its largest rival, DRAFTKINGS.

 

Christopher McCann, 27, who started Edinburgh-based SNAP40 and ..has just raised £2m from early-stage investor PAR EQUITY

But fundraising is not the only issue facing Scottish start-ups and scale-ups. The Informatics survey found that 44% of entrepreneurs in Scotland are more worried about the impact of Brexit than a possible vote that could see Scotland wave goodbye to the rest of UK. More than 40% of those surveyed said that attracting and retaining talent was their biggest concern.

 

 

LAWTECH

Artificial intelligence closes in on the work of junior lawyers | Jane Croft, FT. May 4.


…investors sense an opportunity in lawtech. According to CB Insights, a data intelligence platform, there were 67 deals last year investing $155m into lawtech start-ups. Many lawyers are abandoning traditional firms to pursue entrepreneurial opportunities or join in-house teams, as the once-unthinkable idea of routine corporate legal work as an automated task becomes reality.

 

After more than five years at a leading City law firm, Daniel van Binsbergen, 32, quit his job as a solicitor to found LEXOO, a digital start-up for legal services in the fledgling “lawtech” sector. Lexoo does not automate legal work, but it does cut out the traditional law firm by using data and algorithms to match prices from experienced and self-employed lawyers with work for mid-size companies. Solicitors with appropriate skills quote a fixed price for a piece of work.

 

Law firms, which tend to be owned by partners, have been slow to adopt technology. Their traditional and profitable model involves many low-paid legal staff doing most of the routine work, while a handful of equity partners earn about £1m a year. But since the 2008 financial crisis, their business model has come under pressure as companies cut spending on legal services, and technology replicated the repetitive tasks that lower-level lawyers at the start of their careers had worked on in the past.

 

“The 2020s will be the decade of disruption,” says Professor Richard Susskind, co-author of The Future of the Professions: How Technology Will Transform the Work of Human Experts. He believes there is growing demand from executives who control corporate legal budgets to cut costs by taking advantage of the savings offered by technology. … a wave of lay-offs is to come — law firms are still experimenting with AI instead of rolling it out across their offices. About 114,000 legal jobs are likely to be automated in the next 20 years, a 2016 study by Deloitte predicted.

 

For their part, law firms are gradually introducing technology. At BERWIN LEIGHTON PAISNER, a UK firm, for example, staff use an AI system when they work on certain property disputes. The system was developed by RAVN, a legal technology start-up, which extracts data from official title deeds produced by the UK Land Registry. The software checks these details so they can serve legal notices on the correct property owners in real estate cases. In the past, BLP would have pulled together a small team of junior lawyers and paralegals at short notice, then put them in a room to extract that data manually from hundreds of pages — a process that could take weeks. The Ravn system reviews and extracts the same information in minutes. Ravn was set up in a London living room by four friends, none of whom had worked as lawyers.

 

Ravn’s technology searches largely unstructured data to retrieve and summarise specific information. The legal sector was a perfect customer, says Jan Van Hoecke, its co-founder, because it was “document-intensive — and has very expensive people looking at documents”.

 

LINKLATERS, the global law firm, uses LINKRFI, a technology program that sifts 16 UK and European regulatory registers to check client names for banks. It can process thousands of names in hours. A junior lawyer would take an average of 12 minutes to search each name, according to the firm.

SLAUGHTER AND MAY, another London firm, uses AI technology from LUMINANCE, a start-up backed by Autonomy founder Mike Lynch to help its mergers and acquisitions lawyers plough through thousands of documents they have to review when analysing target companies in deals. Luminance’s machine-learning technology means, at a keystroke, lawyers can see all the governing law in clauses within global sales contracts, for example, and identify legal wording that differs from the norm. Sally Wokes, a partner at Slaughter and May, says Luminance can halve the time spent on due diligence.

 


SOCIAL TECH INVESTMENTS


'Tech for good' ventures awarded share of £375,000 funding to improve lives | Alys Key, City A.M. May 2

 

Eight 'tech for good' ventures have been awarded £375,000 between them in the NOMINET TRUST's seventh social tech funding round. ….companies working on projects related to social issues including healthcare and the justice system. ..such as :


• innovative wheelchair designer DISRUPT DISABILITY
• JUST TRANSCRIPTION ….uses speech recognition software to transcribe court proceedings. Co-founder Rachael Mpashi-Marx: "Just: Transcription ….has so much potential to open up the justice system and reduce the numbers of people who are currently struggling to access justice.”
• Glasgow-based MEDIA CO-OP received funding to develop an app to log incidents of stalking.

 

Three of the projects combine gaming with healthcare:


• NEUROFENIX's Gameball Platform helps stroke survivors with rehabilitation
• TINY MEDICAL APPS has developed Learnable, a gamified app for teenage asthma sufferers.
• Manchester-based CORPORATION POP has created a game that demystifies the hospital process for patients.

 


BARCLAYS FINTECH SPACE


Barclays ramps up fintech ambitions with the launch of Europe's largest co-working space for financial technologies in Shoreditch | Rebecca Smith, City A.M. May 2

 

Barclays is … opening of its flagship innovation site RISE LONDON in Shoreditch, which it says will be Europe's largest co-working space specifically for financial technologies. Rise, Barclays' fintech innovation arm, has seven workspaces around the world, including the likes of New York, Cape Town, Mumbai and Tel Aviv.

 

Rise London, spanning 30,000 square feet of workspace, will be home to more than 40 fintech firms, including simulation platform SIMUDYNE and FLUX, which provides automated receipts and rewards to phones.


The space will also house banking and tech teams from Barclays, and will host more than 200 hours of learning, workshops, hackathons and networking every month.