Bruce McFarlane of MMC Ventures says CEO dynamics are vital
MMC Ventures
What a fun cynical hacks like I used to have with the concept of British unicorns. When the subject came up, it was a golden opportunity to carve out the theme of much-discussed but seldom-seen mythical creatures.
Well, a lot has changed in the last two or three years. According to analyst Beauhurst, there are now about 40 privately held companies worth $1 billion in the UK. What’s more, the Council for the Digital Economy and dealroom.co identified 13″ decacorn companies worth $10 billion or more.
All this confirms that in today’s tech ecosystem, the pursuit of becoming a unicorn is no longer a hybrid ambition. Reaching that $1 billion valuation point has been done many times before and it will be done again.
What has changed
So what has changed? Why is the UK seeing an increasing number of businesses not only scaling up, but reaching milestone valuations?
Bruce McFarlane, is well placed to provide perspective. As co-founder of VC fund, MMC Ventures, he has been investing in technology companies since 2000, a period often characterized as the spectacular bursting of the dotcom bubble of the 1990s. Today, MMC focuses on “transformative” technology and invests on behalf of institutions and high net worth individuals, using the tax-friendly Enterprise Investment Fund rules to reduce the risk. As things stand, it has $500 million under management. Three wallet members have achieved unicorn status and a fourth is in the pipeline.
So when I spoke to McFarlane earlier this week, I was eager to hear his thoughts on the current investment climate.
Public to Private
One of the key factors enabling companies to attract and scale funding is the changing culture among UK investors, particularly in terms of where they are willing to put their money. “We’ve seen a changing attitude to risk in this country,” he says. “That’s partly because the public markets aren’t particularly attractive. People realize that the action is taking place in the private markets. We now have 5,000 investors and the appetite has grown. We also manage institutional money.”
It’s probably a pretty simple equation. As the UK startup sector has matured, achieving some successes, investors have been more willing to embrace the venture model, which is characterized by big wins, rather than balancing the failures. More money coming in has made it easier for companies to raise capital to scale.
More importantly, McFarlane says the ecosystem has become more flexible with secondary stock trading allowing founders to make some money. Investors can also sell their assets.
This flexibility has helped to address one of the perennial problems of the UK ecosystem, which is that companies were often sold too quickly – perhaps gobbled up by trade buyers or foreign companies before they had a chance to reach their full potential.
Another factor—one specific to Enterprise Investment Fund companies—is that investments under the scheme are not constrained by the traditional 10-year VC cycle of investing and getting returns from a fund.
The ability to collect money
That’s the financing side, but what about the companies themselves? What makes a business unicorn material? McFarlane has been directly involved with two unicorns from the MMC portfolio – fintech, Interactive Investor and food delivery service Gousto. He mentions two important factors.
“First and foremost, CEO dynamics are critical,” he says.
“At Gousto, the CEO absolutely gets it,” Macfarlane added, noting that he’s worked tirelessly to build a team strong enough to allow himself to step back from the day-to-day business. business and to focus on strategy.”
McFarlane’s second point is that potential unicorns need to be able to raise money, even in difficult times. “Looking back at the dotcom boom and bust, Amazon has continued to raise money. In our portfolio, Timo Boldt, the CEO of Gousto, has been very successful in raising money and Interactive Investor has also managed to bring in big new investors. to bring in.”
Teams are also important. “There may be gaps in the beginning, but we will help our companies shape their teams,” says McFarlane.
McFarlane has seen the turn of the millennium bloom and burst, so the current flow of money will also last. McFarlane thinks so, not least because tech companies are leading a much more embedded digital revolution. He does expect that some of the foam will come off the market. Good companies will continue to attract the money needed, but companies that may be marginal in terms of potential or performance may have more trouble going forward.
