Tim Bunting, General partner at Balderton Capital
A FUNCTIONING initial public offering (IPO) market is essential for the venture community and the technology ecosystem. Going public generates liquidity for investors while also allowing management teams to retain a degree of control over their businesses.
So it is a pity that when we decide where to float the domestic technology companies Balderton has helped to grow, London isn’t always management’s preferred option.
Technology-driven companies can succeed on the London Stock Exchange. Asos, Ocado, Autonomy and Arm have performed strongly, while a handful of new hi-tech companies, such as Monitise, have seen their share prices climb in the last few months as investor confidence returns. But in almost every case their road has been complex with huge volatility and huge stress.
UK investors and analysts spend little time trying to understand new software business models, and how to value and trade technology stocks. There is nothing like the same volume of analyst coverage here as in the US. There is little analysis of how technology is changing existing business models.
As a result technology shares traded in London are volatile and tend to be traded by investors who trade market momentum. British investors favour strict corporate governance and can lack faith in youthful management teams, so common in the sector.
The UK has never had a stronger pipeline of tech companies. The number of tech companies valued privately at $250m-plus (£159.2m-plus) in the last two years is larger than the total number in the last five years. Yet Europe could lose companies worth as much as $15bn if its 20 or 30 biggest technology firms that have yet to go public were to list in the US. This is a grim prospect.
At the moment, listing in New York is a no-brainer for many technology companies.