We need to create our own tech-funding ecosystem
From Alastair Kilgour, Chief Investment Officer, Parkwalk Advisors, London, UK
Lex makes the excellent point that it is much harder to scale business in the UK and Europe than the US and this is a major hurdle for investors to overcome when they select investments (“UK tech listings: green-eyed present land”, November 6). However, more important is the general investment ecosystem. In the US tech start-ups have access to many funds, high net worths’ tax-efficient pension money and early stage venture capital. These are also available in the UK but on a smaller scale. Where the ecosystem differs markedly is at the next levels of risk and investment.
In the US they have early stage funds taking high risk (often with tax advantages), then large specialist venture capital funds, then private equity, taking a company through the tech development/ commercialisation/growth lifecycle and allowing the investors at the various stages of risk to recycle their investments. A corporate takeout or public listing can come at any part of this cycle. In the UK we do not have a functioning ecosystem that takes in the various investment stages and levels of risk and therefore the different types of investor. We have been led down the rabbit hole of “patient capital”, where a fund is expected to invest from “cradle to grave”. This ignores the different risk levels in the tech development journey and therefore what actually drives investment decisions.
We need to create our own ecosystem with different funds for different levels of risk. This will have to be government primed until it becomes self-sustaining. At this point we will actually have some large tech companies in the UK, employing UK citizens and paying UK tax, providing entities for UK savers to invest in. The government needs to stop tinkering with parts of the ecosystem and focus on the system as a whole.
Alastair Kilgour
Chief Investment Officer,
Parkwalk Advisors,
London SW1, UK
