Monday 21 June 2021 2:00 pm

Old guard of the Square Mile must change their attitude towards loss-making, high-growth tech companies

Manish Madhvani is Co-founder & Managing Partner of GP Bullhound

Towards the tail end of 2020, investors were gleefully rubbing their hands looking ahead to a year like no other for London’s public markets. Rumours of multi-billion pound tech floats from the likes of Deliveroo, Darktrace and Wise began to swirl around the City.

By late March this year, the hotly anticipated Deliveroo IPO led to the company losing nearly half its value on its LSE debut – leading to a barrage of cynical headlines.

Many criticised Deliveroo’s chief executive for opting for the new dual-class share structure, prompting fears the CEO would retain control over a significant tranche of the business for the next three years.

However, we have seen this many times in the past, particular in the US. With Facebook, for example, the founders retained control with structures not dissimilar to dual class shares, and these have been central to innovation and delivering strong growth over time.

It’s crucial we take the long view. Deliveroo’s choice to opt for an IPO in London was undoubtedly spurred on by Chancellor’ commitment relax the listing rules. We should welcome this commitment from the government – after all, we need it now more than ever.

The reality is the old guard of the City are a dwindling force. Technology is catching up with the traditional industries that used to dominate the LSE such as heavy industry and banks. We must change our mindset towards loss-making, high-growth companies, or we risk losing valuable business to the US and Asian markets. Backing tech companies and retaining talent here in the UK is essential to our future growth.

At long last, the Square Mile is changing its attitude. A maturing London tech ecosystem, and the successes of micro hubs such as East London’s Silicon Roundabout has primed the LSE for a bumper year of floats.

As we look ahead to the newly announced Wise IPO in early July, we need to veer away from unhelpful pessimism. Britain now stands on the podium with tech behemoths China and the US, and is home to some of the most phenomenal tech businesses in the world.

With rapid momentum behind London’s tech ecosystem and record levels of tech investment, the city should not be written off as a risky option for a tech company looking to go public. Quite the opposite – this is the premier destination for ambitious businesses looking to take the next step in the growth journey.

It goes without saying that we need to always maintain a watchful eye over swelling valuations, and avoid a bubble burst akin to the early 2000s – but the future is bright and the pipeline of tech success stories has never been stronger.

If we are to mould London as a top destination for tech listings, we need to start boosting investor confidence, increase our risk appetite and ensure that we solidify the UK’s position as a tech leader. Our ecosystem is maturing at a rapid rate, and a vibrant public markets environment is the final piece of the puzzle for the UK. 

We’ve seen incredibly impressive growth in the tech sector, not least in the past year, and we owe it to all the entrepreneurs and innovators to build an IPO culture that rewards risk, and ensures high-growth businesses stay here for the long-haul.

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

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