1 year ago

The Deal


Five years on. We’ve

Five years on. We’ve taken a look at every company that raised equity investment in 2011 and followed their progress in the last five years. What can their successes and failures tell us? Exits and Failures from 2011 Cohort Stage of Evolution at Time of Acquisition EXITED SEED 15% 134 ACTIVE 72% VENTURE 31% 11 9% 36 GROWTH 60% 658 69 DEAD 13% 114 24

15% of the businesses that raised equity finance in 2011 have exited: this means that 134 businesses have either been sold or listed on a stock exchange. IPOs Of the 2011 cohort 18 companies – 2% – floated on public stock exchanges, predominantly AIM. The two largest IPOs, however, were on to the LSE main board. Between them these 18 companies raised a total of £940m across their initial public offerings. It will come as no surprise that all but two of the companies were strongly Technology-based. More strikingly, however, a third of the companies that listed were operating in the Life Sciences space. As drug development processes are extremely capital intensive, it makes sense that these businesses would turn to public markets for the funding they need. Acquisitions 13% of the businesses that raised equity money in 2011 have since been acquired: some were acquired by private equity funds, and some were acquired by other companies. The most common types of acquirer were UK companies, followed by US companies. The majority of businesses were acquired when they were at the growth stage, which makes sense: by that point they were large enough for their acquirer to notice them. The largest acquisition was that of Skyscanner, acquired by Ctrip for £1.4bn. It is reassuring to see so many and such valuable acquisitions, but the real question is whether there are more to come – and how many? On average the 116 businesses in the 2011 cohort that were acquired raised £12.3m of funding before being acquired; whereas the average amount raised by the whole cohort is £8.5m. Similarly the acquired companies had been incorporated for 10 and half years before being bought, whereas the average age of each company in the cohort is just over 9 and half years. The 658 companies that are still going will need to raise a little more money and trade for a little longer before they can expect to exit in this way. Valuations How are the 658 businesses that haven’t exited faring? On average, where we’ve been able to calculate a valuation, they were worth £2.97m in 2011. They’re now worth £12.7m, an increase of 328%. Whilst valuation growth doesn’t substantively prove that the underlying businesses are doing better, it shows that investors are confident enough in their prospects to pay more for a stake in them. The failures Above we’ve focussed on the successes, the growths, the exits. But what’s the story when we look at ventures that didn’t go quite as planned? Below we look at the companies that have died: this is when a company has gone into liquidation and eventually ceased trading. As we often hear, 90% of all startups fail, but what does receiving investment do to these odds? Are there certain sectors that are more vulnerable to failure, even once they have received equity backing? In the same cohort of companies that raised equity in 2011, 12% are currently classified as dead. But this 25

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