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Peer2Peer Finance News | November 21, 2017

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Most UK tech founders expect to sell for £50m or less

Most UK tech founders expect to sell for £50m or less
Suzie Neuwirth

UK TECH entrepreneurs are looking to exit their businesses too quickly and cheaply to achieve substantial scale, but the majority are keen to stay in the tech eco-system, new research has found.

A report from equity investment platform VentureFounders and research company Beauhurst found that 56 per cent of UK tech founders expect that their business will sell for £50m or less, corroborating Chancellor Philip Hammond’s previous observations that companies are less likely to grow to maturity here in the UK.

The majority of respondents were shaping their business for exit within two to five years, despite recognising the risk of exiting too early.

However, this is due to the challenges that UK entrepreneurs face, rather than a lack of ambition, the report argues.

Read more: Put your money where your mouth is! Angels want to see founders invest first

When asked about their plans post-exit, 80 per cent said they expect to return to the start-up eco-system by starting or supporting new ventures.

“If an ambition gap does not exist, then a funding gap must,” the report said. “In order to reduce early exits in the UK we need to ensure effective mechanisms are in place to support UK founders throughout their entrepreneurial journey.”

100 tech chief executives and co-founders were surveyed for the report, including James Meekings of Funding Circle, Justin FitzPatrick of DueDil and SwiftKey’s Jon Reynolds.

Additional interviews were conducted with 20 of the UK’s leading founders and venture capitalists, on subjects ranging from intention to float to the importance of investors enabling founders to take money off the table, so they can run their businesses for longer and not sell earlier.

Read more: Entrepreneurs defy Brexit with 3,000 new business registrations

“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,” said James Codling, chief executive and co-founder of VentureFounders.

“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.”

Read more: Female entrepreneurs outperform male peers in crowdfunding campaigns

“At Beauhurst, we have observed what I suspect are the beginnings of a shift in the funding landscape,” said Toby Austin, chief executive at Beauhurst.

“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. 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.”