finnCap Tech Chat | It's not always the one you expect

Five years ago, asking for a call on Teams would have been met with very puzzled looks. Microsoft was still selling Nokia mobile phones, and was yet to announce the launch of Teams in November 2016, and one year earlier, Zoom had raised $30m in Series C funding at a valuation of $206m. Fast forward to 2021 and Zoom is worth $98bn, while Teams is one small cog in a Microsoft machine valued at $1.8tn vs $423bn in 2016.

Over the same timeframe, UK Tech has been moving from strength to strength. Data from the Tech Nation report published this week highlights that in 2020, the $15bn invested by VCs into UK tech placed the UK behind only the US at $144bn and China at $45bn. Since 2015, the UK tech startup and scaleup ecosystem has grown by almost 4x to an estimated $586bn from $148bn, and places the UK ecosystem substantially ahead of Germany ($292bn), France ($148bn), and Spain ($48bn) combined.

Alongside the strong growth in the UK Tech sector, the finnCap Tech franchise has been proudly supporting our 35 UK-listed tech clients access funding, scale their businesses, and achieve their ambitions. Since January 2016, we’ve helped raise over £1.2bn for our tech clients to invest in growth, fund acquisitions, or enable secondary placings. At the same time, the average share price of our clients has increased by +182% since we started working with them (excluding the exceptional Argo’s +4,665% since September 2020), with Ideagen, D4t4, Sopheon, dotDigital, and Arcontech, all returning over +1,000%.

We started working with Ideagen in 2008 at a market cap of £0.4m, and it has since grown to a market cap of £732m as we’ve helped raise funds to facilitate its 22 acquisitions since, including a £49m placing in December 2020. Sopheon joined us in 2012 at a market cap of £7m, and has since grown to £92m, with a £10m secondary placing in 2021. Both businesses have capitalised on the sustained growth in enterprise software, and it’s little surprise to us that the $2.3bn invested in this sub-sector in 2020, ranks it as the second most active area of UK tech investment, alongside health tech.

Moving from enterprise software towards the $4.5bn invested in 2020 in fintech, D4t4 has grown from £4m to £117m as its customer data gathering and management solutions have found wider and wider adoption. Notably, its use in the data hungry US financial services industry has driven a step change in revenue and prospects. At the smaller end of the market, Arcontech has grown from £2m to £23m, and has excellent potential to continue to scale when it can return to selling into new financial institutions, on top of the tier 1 clients that already value its solutions.

Over in the $1.3bn invested in 2020 in martech, we’ve been working with dotDigital to scale the business to £518m from £41m in 2013, and from their recent finnCap tech demo, it’s easy to see why the solution is resonating with clients. We also hosted Tremor for a tech demo in December, and over the past year we’ve helped it grow to a market cap of £803m from £160m in March 2020, as it has capitalised on the structural growth in connected TV and digital video advertising, alongside the successful acquisition of Unruly from News Corp, and a strategic partnership with News Corp.

As you can imagine, we’ve experienced close to everything with our UK tech clients, and 14 years after finnCap was originally founded, we’ve grown up just as quickly as the tech companies scaling around us. Our equity fund raisings in an extraordinary 2020 ranged from £2m to £87m - we want to work with ambitious companies of any size – and it makes us all the prouder when we see a smaller company become a titan on our watch. We’ve added the capabilities to raise debt, raise various forms of equity, and search globally to find companies to acquire or find investors that could be buyers. As the pace of innovation in global and UK tech continues to accelerate, we’re looking forward to the growth that we can help deliver over the next 10 years. If there’s anything that we might be able to help with then we’re always open to talking through it, and while that has been reliant on Teams or Zoom for most of 2020, we’d be very happy for that to be over a drink in 2021.

Happy Friday