Tortoise v. Hare

When attracting external investors, we tend to buy into the notion of a 3-5 year investment time horizon before an exit event is expected. But how realistic is that I began to wonder?

Staffware, which I co-founded and led also took 13 years coincidentally before its revenues reached the not-dizzy heights of only £4 million before we naively floated on the AIM in 1996 – but then hit £45 million an 11-fold increase, circa 40% compound growth over 8 years post IPO.

‘Left alone’ to grow ‘naturally’ without an exit being forced on them are there other Blue Prisms and Staffwares out there? I know a sample of two is not statistically valid so we plan to conduct a survey to tease out if there is an underlying phenomenon here. Are shareholders better off waiting longer, maybe until an IPO? Staffware early shareholders had returns of 50-100x their original investment for instance. Blue Prism floated at a valuation of circa £50 million, now showing an increase in excess of 20 times that valuation.

| Read more about Blue Prism’s journey to success here.

I am writing this as topically ActiveOps, established 20 years ago too has this week IPO’d on AIM at £120 million – a 6x increase to when I joined in 2014 as their ‘Founding Chairman’.

This development should allow Richard Jeffrey their co-founder and CEO to continue to lead the business successfully for some time to come, whilst early investors have the choice to remain as shareholders or otherwise. To my mind, this is an ideal outcome and the noises that the UK Stock Exchange is going to make listing a little less onerous and more benign for such founders is all good news as far as I am concerned.

So unlike others carping about lack of ambition in the UK, I believe the desire for liquidity by investors is the biggest single obstacle to such businesses remaining independent – and becoming role models for their peer group. This in turn would help to restore a much-needed technology base in the UK rather than the majority being sold off prematurely.

At ScaleUp Group our experience is that getting ‘Series A’ funding, involving as it does a rigorous grilling of a business’s fitness to take on external Institutional investment, is an excellent first step along the path of potentially a public float. An alternative to going public is to ensure a minority investment by a Private Equity house subsequently, allowing for Founders to continue their journey – subject as ever to performance measures of course.

We at ScaleUp Group ensure prospective investors have the requisite information in order to make a rational investment decision. We apply this with rigour so that our clients are one of the 10% who gets the investment they are after rather than the 90% who do not. Regrettably, Staffware did not have this ‘dress rehearsal’ before we lurched onto AIM. We would have avoided some tears in our debut year if we had done so, I can tell you!

ActiveOps I know is a well-run organisation with appropriate good governance and underpinned by the much less volatile SaaS business model than Staffware had, so early day tears would be a big surprise in my humble opinion. (I am no longer on the board of ActiveOps and  not an insider in any sense anymore so these are an outsider’s viewpoint please note.)

But I will claim some reflected glory unashamedly as in my 4 years there with my active (pardon the pun) encouragement Richard Jeffrey hired my ex Global Head of Sales; acquired their Australian franchise; he personally relocated to the USA and he looked at AIM as the next step in their journey. (Oh and I invested too when joining!) It should also be mentioned that I invited Alastair Bathgate to speak at one of ActiveOps Strategic sessions, a clear case of birds of a feather coming together as well as suggesting you have the ‘Midas’ touch Alastair!

So here’s to the tortoises like Blue Prism, ActiveOps and Staffware – maybe not as glamorous sounding as unicorns, nor as eye catching as fleet footed hares, but delivering tremendous value for all stakeholders nevertheless!