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Americans are investing more aggressively in the European market

Date: 18 Jun 2015

Bumblebee Design

Robert Ahldin, partner and head of asset management at GP Bullhound, also talks about the influence of syndicates in Europe as the majority of tech companies received investment from five to eight institutional investors to reach their billion dollar valuations.

 

The UK has a reputation of a country where you can’t make big profits anymore. Is that true for tech industry as well?

I think it’s the opposite. The UK is now developing a reputation as a country where you can start and grow a business successfully. This is very clear in the technology industry, where entrepreneurs, investors and established businesses have created an environment capable of fuelling fast growth businesses that make big profits. A recent report showed that seventeen of Europe’s billion dollar tech companies are now based in the UK, consolidating the country’s status as the Unicorn —  emerging tech companies that have valuations over $1billion — capital of the continent.

What makes British tech companies successful? 

The UK is a good market due to its size, its strong connections to the US and other international markets, and the quality of British entrepreneurs. The industry is diverse, spanning from financial technology to e-commerce. Tech is a solid industry in the UK and the wealth creation is soaring.

Where does the money come from? Do you see more British or overseas investors?

We see American investors becoming increasingly aggressive in the European market. European tech companies have proved they can deliver a return on investment, with consumer tech companies in the lead.

However, the most interesting trend is the influence of syndicates in Europe. The majority of tech companies received investment from five to eight institutional investors to reach their billion dollar valuations. Spotify, one of European tech’s great success stories, has received capital from seventeen investors.

Did the industry have to reshape itself around a new type of clients, i.e. young wealthy entrepreneurs in the gaming industry?

The biggest change in the industry has been making a profit. The most successful tech companies are not always focused on profitability, nor should they be. The fierce competition within the sector means revenues are invested back into product development and talent. Amazon is a perfect example – one of the highest valued companies in the world doesn’t generate great profits but concentrates on continued improvement and innovation. To understand the best companies in tech, we have to take a look at valuations rather than profits. For example, an analyst valuing a company may look at the company’s management, the composition of its capital structure, prospect of future earnings, and market value of assets.