"Scaling-Up" - Research shows that a large proportion of economic growth comes from a relatively small number of highly productive, fast growing firms. Here we share a link to Sherry Coutu's presentation on the importance of scaling-up for the UK economy.
Delighted for the Swiftkey Founders. Here is a good piece on what Swiftkey's acquisition means for UK Tech Exits.
Microsoft is acquiring London-based SwiftKey, a predictive-keyboard app maker, for a reported USD250m, which represents a good exit for the two founders and its investors, which had pumped USD21.59m into the company to date. Powered by artificial intelligence (AI), the app fits neatly into Microsoft’s ongoing attempts to build up its mobile and productivity services, as well as its AI and language recognition capabilities. SwiftKey will continue to function as normal with Microsoft saying that it will, “explore scenarios for the integration of the core technology across the breadth of our product and services portfolio.”
Next year the consensus forecast for world growth is 2.6% and for the UK, 2.5%. We are optimistic about next year, however, there are plenty of risks to watch.
Here are our thoughts on the outlook for the UK economy in 2016:
1. Oil Prices – Lower for longer
Oil has continued to tumble throughout 2015 as Brent crude and WTI crude are down close to 40% at 11-year-lows priced at $36 and $34 respectively. Forecasts for oil prices ranging from $25 - $60 per barrel; with Iran pledging to boost exports and OPEC holding a firm stance on their supply we believe that oil has lower to go before it starts to strengthen.
This year’s theme is digital disruption. Here we build on December 2015’s research Looking Forward to 2015: Ten Themes for Technology. We will be tracking the following prominent technology themes during the course of 2016.
1. Security and Privacy – Not just for the individual
“The digital revolution is the new industrial revolution”. This exponential growth of the digital age has highlighted severe deficiencies with the protection of sensitive information and data. A recent survey by PwC, found that 90 per cent of large UK organisations had reported a cyber attack this year, up from 81 per cent a year earlier, highlighting the need for cybercrime legislation. 2016 will need a big leap in becoming a global movement to help protect individuals as well as big corporations.
Venturing forth – the push and pull of early stage valuations
Company valuation is difficult enough in public markets but for early stage companies, lack of track record and profits means that valuation rests mostly on what someone is prepared to pay. Apple’s valuation crystallises every fraction of a second during stock market hours when a trade is booked, but private company valuation crystallises about annually, when investors hand over cash to company management and become shareholders. Company value at this moment equates to funds raised divided by the percentage of the company sold to new investors. This sounds obvious but it means management needs to convince investors that the cash handed over is appropriate to the business needs and will get the business to its next, higher valuation milestone, and that will determine dilution. Our friends at Go4Venture help us “do the math”.
Recent data about gender (in)balance in the digital world shows that women make up only 4% of the engineering sector and about 10% of the VC community, while just 1 tech company out of 10 has a woman among its founders. Matha Lane Fox's hope is that "The UK can become the country with the most gendered-balanced digital sector in the world."
Martha Lane Fox has been a pioneer of digital culture and technology in the UK. She is calling for the creation of a national institution to lead an ambitious change - to make Britain brilliant at the internet.
Delta2020 supports Martha Lane Fox's petition to create DOT EVERYONE a public institution for the digital age.
Here we share a recent article written by Andrew Griffin from Oakhall Advisors that provides a valuable insight for private companies on how to pitch to potential investors.
Most pitches by private companies to potential investors fail. Bad ideas are of course the main problem, but the way companies communicate is also a barrier. Putting your pitch together in a way that actually answers investors’ questions in a structured way will help you identify if you have thought your strategy through properly.
We have a digital revolution in the UK, but lack the data and sector classification to effectively measure and exploit it. Currently its contribution is hidden away in the wider services sector, which makes up almost 80% of the UK economy. We previously explored this subject in Is the UK Missing a Trick? It's Time to Recognise 'Digital Manufacturing'.
Recently this theme has re-emerged following Sir Charlie Bean, former deputy governor of the Bank of England, arguing that the internet revolution has rendered Britain’s official statistics out of date. We thought it worthy of revisiting the topic, this time with supporting data from the Boston Consulting Group (BCG).
The UK’s digital economy is an engine of growth
Dr Ian Jauncey is a Jersey based entrepreneur and investor. He was the lead in the world beating team that invented the first optical fibre amplifier, the key global communications technology that enabled the internet. He now runs Infinite Lightbulb, where he seeks out disruptive technology ideas, and looks to support them with investment and his experience in execution. Here we share Dr Jauncey's market commentary on the impact that the crowd mentality can have on company valuations and potential 'bubbles'.
When GoPro went public in June 2014, the indicative price was $21-$24 per share, valuing the company at $2.95 billion. On the first day of trading the shares moved up 30%. The next day it was 14%, the next 13%. Within a week it had doubled it's share price. By October, the price was $94. Forbes commented that GoPro was "unstoppable". Nick was worth near $3bn. He sold some shares and bought a Jetstream.
Then the unthinkable happened. The share price started to fall. By March this year, they had fallen back to less than $38. So what went wrong?
The Apple Watch was the first new product category Apple had launched in five years, setting the bar and raising smartwatch awareness.
Apple’s CEO Tim Cook stated that the Apple watch is “the most personal device Apple has ever created,” adding: “It is not a shrunken iPhone. It is a new, innovative way to communicate directly from your wrist.”
At the end of 2014, we looked towards the year ahead and the risks which could have an impact on UK economic growth. Now that we are over half way through 2015, we thought it was a good time to revisit and update our thoughts. UK political uncertainty has gone, however the other highlighted risks noted remain largely the same.
In 2014, the UK economy grew 3%. Forecasted growth rates for 2015 and 2016 have faced cuts following a slowdown at the start of the year. Official figures indicated the UK’s growth rate halved in the opening months of 2015. In July, The OBR revised its 2015 GDP forecast downwards to 2.4% from the previous forecast of 2.5%. Other forecasters have made similar cuts. This year’s rate of growth is likely to be lower than 2014 but still a respectable 2.3-2.5%.
Here we revisit some of the domestic and global risks which could have a knock on impact on the UK growth outlook for the remainder of 2015.