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Three characteristics of a successful growth journey in technology
The Deloitte Technology Fast 50 UK 2022 has once again highlighted the fastest-growing technology companies in the UK. This year, mobile games company Tripledot Studios snatched the top spot after recording an astonishing average three-year growth rate of 69,387%. Our CEO, Andy Gregory, shares his thoughts about what makes a successful growth journey for a UK technology business.
Of all the sectors BGF invests in, technology accounts for the largest single share – well over 100 out of a total of more than 500 companies backed. These tech businesses are a diverse group, solving a variety of problems. In my time overseeing investments at BGF, there have been a few clear themes among those that have navigated a successful growth journey.
The first is that they are alive to the transformative potential of equity funding. We’ve seen numerous good companies set up and built using a classic bootstrapping model, i.e. they use savings and loans from friends and grow organically while keeping costs to a minimum. What turns them into great companies is that they seek out investment to accelerate that growth. One example out of many would be cloud services provider HeleCloud, which we backed from 2018 until its exit last year to Swiss multinational SoftwareONE. Founder Dob Todorov (below) says he achieved in four years what it would have taken 15 years to do without our support.
That’s a story that has been repeated time and again across our portfolio. And I would argue it’s a story that is particularly pertinent to technology entrepreneurs, who operate in such a fastmoving sector. Time is of the essence with technology. If you are slow to market, you may find someone else has got there first.
A second quality that successful technology leaders share is a willingness to take advice. Even the most plugged-in technology entrepreneur will admit it’s hard to stay on top of every new trend. Yet it’s crucial for a growing business to understand its place in the market, its competitors and the needs of its customers. We find that this kind of objective view or sounding board is often well delivered by a non-executive, ideally someone with extensive relevant experience who can share the fruits of this experience with the management team.
Introducing experienced non-execs to portfolio businesses is a key part of what we do at BGF. Over 400 appointments have been made to company boards with our help. I could point to many in the technology sector, but one example would be Irish cybersecurity business Edgescan (pictured below with BGF Ireland team), which appointed former senior IBM executive Bernie Waldron as non-executive chair, bringing a wealth of industry experience to help guide the company’s strategy.
Finally, I would say that a successful growth journey depends on ambition. The kinds of businesses we work with – and which are successful in securing funding from us – have big ambitions (backed up with evidence and credentials). How that ambition manifests itself varies, but one example is growth by acquisition. Technology companies are often well positioned to grow rapidly by acquiring other companies in their sector. One example is Miss Group, a web hosting provider that we began supporting in 2018. The company made seven acquisitions while we were a shareholder. Indeed, it grew so fast that in this instance we exited our investment about 18 months after signing the initial cheque, at a 100% internal rate of return. BGF is a long-term investor, meaning we can partner with companies over many years, but when I talk about equity investment accelerating growth, this is kind of speed that is possible.
As I mentioned, the technology companies in our portfolio are a diverse group. They include app developers such as Dundee-based Waracle, autonomous vehicle businesses such as Oxford-based Oxbotica, and payment infrastructure businesses such as London-based Paddle, led by founder and CEO Christian Owens (below), which recently achieved ‘unicorn’ status with a valuation of over $1 billion. Technology remains an incredibly exciting sector and I look forward to backing many more innovative tech businesses in the years ahead.
Andy’s thoughts were published in the Deloitte Technology Fast 50 UK 2022 report, pages 49-50.
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