Stuart McKnight told the MBM Commercial ‘Series B and Beyond’ gathering at the Merchant’s Hall, that the Edinburgh-based firm’s £175m investment by KKR, Google Capital and Time Warner in July is way ahead of second placed Funding Circle, which raised £101.5m.
The other investments are WorldRemit (£65m), Farfetch (£58m), Fenergo (£48m), Wahanda (£47m), Deliveroo (£45m), Secret Escapes (£38.4m), Transfer Wise (£38.3m) and Made.com(£38m).
“The top ten deals so far this year have accounted for 44% of all the funds invested in UK high-growth firms.” Mr McKnight, managing director of Ascendant Corporate Finance, which has recently opened an office in Edinburgh, also pointed out that Scotland had financed many more tech businesses than Cambridge and the Thames Valley (Oxford +) combined this year dispelling the widely held view that these two areas are where most technology is developed in the UK. “Scotland is without doubt the most active region outside of London. We would like to see more larger deals being done as the volume of financings over £5m is lower than London and the Thames Valley.”
Stuart Hendry, senior partner of MBM Commercial, said: “This shows that Scotland is still a very healthy environment for deals. Scotland has done 43 deals this year, although only a small number of them have been more than £5m. The challenge in Scotland is to now focus on building businesses of scale with Series B funding once they have a proven product. There seems to be too much on start-ups which are at a much earlier stage where they are still trying to develop their product or business model.”
Meanwhile Cally Russell, the chief executive of Mallzee, took time out from Black Friday online frenzy – his busiest day of the year – to speak at the event. “Everyone needs clothes – and online shopping is rubbish,” was his opening gambit. Mallzee, one of Scotland’s exciting high-growth businesses, is making its mark as ‘Tinder for fashion’, using sophisticated algorithms to push fashion you like onto your mobile.
The firm employs 24 and has just become the Number One non-retailer shopping app in the UK. His advice to those looking for investors: “We’re not fund-raising just now, but that doesn’t mean that we’re not thinking about future rounds. We’re having a lot of coffees with investors we hope will work with us in the future. The conference heard how Mallzee had used corporate venturing with the Royal Mail Group to great effect, bringing benefit to his emerging firm. He mentioned that this included an introduction to a potential customer with a billion dollar revenue.
Kenny Mumford, head of corporate at MBM Commercial, who worked with Mallzee on their £2.5m deal with Royal Mail Group, said the whole sphere of corporate venturing is taking off in the UK. “It gives bigger companies access to technology, innovation and new thinking. The high growth firm get the kudos of working with an established corporates.”
Speaking earlier at the conference, Gerald Brady, managing director of Silicon Valley Bank’s venture capital group, said: “UK companies have been slow in adopting corporate venturing, partly as a belief that they don’t need it and their own in-house R&D is going to provide what they need.” He cited firms such as life sciences giant GSK with SR1, their corporate venture group, John Lewis’ JLab, and Tesco as leaders in corporate venturing, however many in the retail sector are still not waking up to the possibilities. “The UK has some big industries and major companies, yet these firms have been late to do this because they see it as a toy and don’t believe they need it.” He says German companies, such as Siemens, take a longer term view. “Germany has a lot more corporate incubators and corporate venture groups than in the UK. The UK has been shy about doing this and only in the last few years have they woken up to the fact that world they are in is changing dramatically.” He said Silicon Valley is many years ahead and that Asia was also a hotbed of corporate venturing. “It is about access to external innovation. Companies in the UK need to wake up to the fact that they can’t invent it all themselves.”
Rob Palfreyman, CEO of Sensewhere mentioned that as part of concluding their significant Series B investment and global licensing deal with China’s largest internet provider, Tencent, you need to be on the ground near your corporate partners. As a result they are opening three offices in China to be close to Tencent and he told the conference that Scottish Development International had been very helpful with this process. He said you also need to use the right advisors and Sensewhere were delighted with the support received from MBM Commercial on the transaction.
Tim Lafferty, MD of Global Corporate Venturing said that corporates don’t want to be the next Kodak and their investments are generally just strategic. They know that they need to keep innovating.
Shane Corstorphine, chief financial officer of Skyscanner told the conference that you need to understand investors as part of raising investment. In particular US investors have a much more aggressive mindset than in the UK and they are generally much more confident and forward than UK investors in letting you know that they want to invest. He explained that you need to communicate with US investors differently and more regularly. Interestingly Stuart McKnight highlighted that for any UK company raising £5m to £10m of investment then the odds were very much stacked against you raising this from a US investor and you are much better targeting UK and European investors.
Also speaking at the conference were Paul Neeson of Scottish Equity Partners; James Varga, CEO of MiiCard, David Milroy of Maven Capital Partners, and Ian Ritchie of Coppertop.