Venture capital vs self-funded for high growth technology businesses. This was surprising.
August 16, 2011 by Mark T Littlewood
There seems to be a generally held feeling that venture capital is ususally suitable for rapid growth businesses and that founders should consider taking it if they want to add rocket fuel to their business.
We ran a quick analysis of some of the fastest growing companies in the UK and see who the most common investors were. It was inspired by an observation that only 14% of the fastest growing 500 companies in the US were venture backed according to Carl Schramm.
Carl Schramm talking about US innovation and venture capital. The figure quoted above is 21 minutes in.
We (The BLN) have run the Deloitte Fast 50 competition for the past few years and it has given us a really interesting view of the UK's fastest growing technology companies. The Deloitte Fast 50 is an objective ranking of the UK technology companies with the fastest growing revenue over a five year period. In last year's rankings, just 8 of the 50 fastest growing companies in the UK, are venture backed.
2010 Rank, Company, Sector, % growth, Funding
- 1, Mobile Interactive Group (MIG), Software, 26885%, Angel Funding
- 2, DisplayLink (UK) Ltd, Semiconductors, components and electronics, 9041%, VC – Atlas, Balderton, DAG, DFJ
- 3, Mimecast Ltd, Software, 7579%, VC – Index, Dawn Capital
- 4, Translatemedia (Translations Online Ltd), Media and entertainment, 5409%, Self funded
- 5, Periscopix, Internet, 5147%, Self funded
- 6, Bglobal plc, GreenTech, 4447%, PLC
- 7, Forward Internet Group, Internet, 4443%, Self funded
- 8, Global Personals Ltd, Internet, 4391%, Self funded
- 9, UK Grid, Telecommunications / networking, 3348%, Self funded
- 10, Innovise plc, Software, 2124%, PLC
- 11, Helveta Ltd, Software, 2049%, VC – Albion Ventures, BeCapital, Oxford Capital Partners, Succes Europe
- 12, Moneybookers Ltd, Internet, 1831%, Self funded then PE
- 13, Grove Information Systems Ltd, Internet, 1817%, Self funded
- 14, Ubisense Trading Ltd, Semiconductors, components and electronics, 1730%, Angel funding. Now PLC
- 15, Latens Systems Ltd, Software, 1723%, Self funded
- 16, Focus 4 U Ltd, Telecommunications / networking, 1700%, Self funded
- 17, Gyron Internet Ltd, Internet, 1476%, Self funded
- 18, Lovefilm UK Ltd, Software, 1472%, VC – Index, DFJ, others. Purchased by Amazon.
- 19, Bloxx, Software, 1262%, Angel
- 20, Geo Networks, Telecommunications / networking, 1255%, Self funded then PE – Alchemy
- 21, Fluidata, Telecommunications / networking, 1253%, Self funded
- 22, Node4 Ltd, Internet, 1142%, Self funded
- 23, Biome Technologies Ltd, GreenTech, 1132%, PLC
- 24, Intamac Systems Ltd, Internet, 1112%, VC – Seraphim Capital, Octopus Ventures, Catapult Ventures, London Seed and Pace Microtech
- 25, BlueGnome Ltd, Biotechnology / medical equipment, 1096%, Angel/Challenge fund
- 26, Heart Internet, Internet, 1030%, Self funded
- 27, Greenlight Marketing Ltd, Internet, 1029%, Self funded
- 28, Fjordnet Ltd, Telecommunications / networking, 1002%, Self funded
- 29, Content and Code Ltd, Internet, 1001%, Self funded
- 30, Skyscanner Ltd, Internet, 997%, VC – Oxford Capital, SEP
- 31, Concentra, Software, 969%, Self funded
- 32, O-bit Telecom Ltd, Telecommunications / networking, 956%, Self Funded
- 33, TTG (Southern) Ltd, Semiconductors, components and electronics, 927%, Excell Group
- 34, Markit Group Holdings Ltd, Software, 872%, Private Equity – UBS, Citigroup, HSBC, Goldman Sachs etc
- 35, Yudu Ltd, Software, 868%, Self Funded
- 36, Cambridge Broadband Networks Ltd, Telecommunications / networking, 864%, VC – Amadeus, Accel, TVM, Adara,
- 37, Leaf Consultancy, Telecommunications / networking, 848%, Self funded
- 38, Net Media Planet Ltd, Internet, 840%, Self funded
- 39, C4L, Internet, 823%, Self funded
- 40, Saffron Media Group Ltd, Media and entertainment, 801%, VC – Beringea
- 41, HostelBookers, Internet, 799%, Self funded
- 42, Autonomy Corporation plc, Software, 796%, PLC
- 43, Beaming Ltd, Telecommunications / networking, 782%, Self funded
- 44, Rehabstudio, Hi-tech, 747%, Self funded
- 45, M247 Ltd, Internet, 745%, Self funded
- 46, ClinTec International, Biotechnology / medical equipment, 738%, Self funded then private equity after 12 years growth
- 47, Export Technologies, Hi-tech, 703%, Self funded
- 48, Retail Eyes (UK) Ltd, Internet, 701%, Self funded
- 49, Jagex Ltd, Software, 689%, Self funded then private equity after 5 years profitable growth
- 50, Gradwell Dot Com Ltd, Telecommunications / networking, 652%, Self funded
We weresurprised that so few venture capital investments were represented in the list. There are a few possible reasons, The Deloitte Fast 50 requires five years worth of accounts. Perhaps VC investments are in companies that get sold within 5 years? Perhaps they are in early stage companies that don't yet have revenue (though the trend here seems to be that VCs are investing in later stage deals on the whole.
Maybe venture capital isn't the rocket fuel that many people think it is after all or perhaps all those honest, hard-working people that set out to grow profitable, sustainable software businesses – the kind that come to Business of Software – might be onto something…?
I am reminded of somethingthat @Dharmesh said at last year's Business of Software, Venture Capital is not a necessadry evil, in fact it is neither necessary, nor evil.