Make or Break of 2018/2019
Seeing how some of the UK’s fastest-growing businesses have succeeded is so important to anyone in business. It helps you gauge success, see what strengths one needs to succeed and what truly works. We can honestly learn so much from each other. Beauhurst tracked such businesses in 2011 and then six years later re-looked at them to see where they were now and this is something we had to share. In 2011 1,545 companies raised money to fund their business, this gives good scope to see success versus failure rates.
It has been found that 18% of the companies have gone on to a successful exit, of these 25% ( 2% of the total received investment) have gone on to complete IPO. Just under half of these operate in the life science industry. As Beauhurst mention in their last post, drug development processes are extremely capital intensive, so it makes sense these companies should look to public markets for funding, as opposed to venture capitalists or angel networks.
Here are the top IPOs from the cohort, by amount raised:
Just Eat £360m
Adaptiummune $191m (£123m)
NuCana $114m (£85.1m)
Horizon Discovery £68.6m
16% of the total number of startups have since been acquired. These include household names such as Addison Lee, Shazam, DeepMind and Skyscanner. Acquirers include American tech giants such as Apple and Google, alongside private equity firms such as The Carlyle Group. The largest acquisition to date is still Skyscanner, and by quite a long way, at £1.4b. Please see below:
Addison Lee £300m
Swiftkey $250m (£173m)
According to Beauhurst, the average amount of money raised by the companies which had either IPO’d or been acquired was £13.4m. Their average pre-money valuation at exit was £27m. Interestingly, the remaining companies that have not died, but are yet to exit, have a slightly higher average pre-money valuation. This could be due to the increasing tendency for companies to look to private funding to fuel late-stage growth before they consider exiting.
Of the 2011 cohort, 15% are now dead. A further 4% have entered “zombie stage”, suggesting
that they are undergoing noticeable difficulties. So together, 19% of the initial companies have
failed in some regard. An additional 10% have failed to grow beyond seed-stage.
At the other end of the spectrum, just 5% of financial firms which raised equity in the same period died, whilst 21% have exited. This makes sense in the country which has become the fintech capital of Europe.
Enigma Diagnostics raised £82.4m in equity finance, and £2.45m through grants, before it entered liquidation in March 2017. Its remaining IP assets were sold the following month. This company had developed “MiniLab Platforms”. These were essentially small, portable diagnostic kits, which could be used to test for a range of diseases in under an hour. These tests could be carried out locally on-site, cutting out the lengthy off-site analysis process. heir main backer included Shanghai Debay Capital, a China-based VC firm which invested $50m into the company in 2014. Other significant shareholders at the time of death were Porton Capital, a Cayman Island registered entity referred to as P-Ksa Spv Inc and Ploughshare Innovations. Some controversy currently exists over the involvement of Porton Capital (also registered in the Cayman Islands).
Enigma’s turnover peaked at £14m in 2012. However, even in that year the company did not manage to turn a profit, and revenues slumped to mere thousands in the following years.
So, it’s a mixed bag for our cohort of yesteryear startups. Over a quarter have gone on to fail or stagnate, representing nearly £700m in lost capital. However, 18% have gone on to successfully exit, either through IPOs (2%) or acquisitions (16%). This is a considerable amount, especially when you take into account the oft-quoted statistic that 90% of startups fail. This suggests that raising equity either bestows some advantage upon startups, or that startups that pass the due diligence processes of investors are more likely to succeed than those that do not. However, it is by no means a golden ticket.