As online retailer Farfetch is valued at $1bn we asked ‘are renewed fears of the UK’s tech sector being overhyped justified?’
‘The VC market in Europe is hot right now, but I don’t think it’s out of control. UK tech valuations are still a pittance compared to the Silicon Valley. Farfetch is an impressive business which has grown tremendously in the last 5 years. $90m in revenue and zero EBITA doesn’t justify a $1BN valuation at face value, but it’s all about growth rate (and Farfetch is booming and has investors willing to get behind it at this price). I’ll be watching these guys closely, along with the rest of the sector over the coming 12-18 months. The market is swelling, but it’s not about to burst’
I don’t believe the UK’s tech sector is overhyped at all, to the contrary I believe it’s been hugely undervalued for far far too long! The UK’s tech and startup industry is one of the most entrepreneurial, innovative and forward thinking in the world! Lets celebrate each of these billion dollar success stories as it helps solidify the UK as one of the worlds leading tech hubs.
Founder & CEO
‘Top companies with top management teams that are growing rapidly into big markets should attract high valuations. Without commenting on specific cases, very often the deals are also structured to give additional preference and rights over founder stock to those investors coming in at high valuations.’
A lot of people lost a lot of money when the dot com bubble burst and we are right to be cautious. Investors however have three good reasons to back tech companies this time around.
1/ The online market is huge; everyone is now carrying a connected device in their pocket and most homes are connected with high speed access. This is a far cry from the days of when internet was slow and clunky and required a desktop.
2/ Tech companies can now thanks to cloud services and software develop a product and bring it to market at minimal cost. Most investment now happens after a concept is proven, not before.
3/ Tech companies are best placed to take advantage of global markets and scalable business models. As such a UK tech company can grow internationally very fast if they have a compelling offering.
I don’t believe the UK’s tech sector is currently overvalued. Looking globally, startups in the UK are substantially undervalued in comparison to Silicon Valley where valuations and salaries are significantly higher than London, driving US investors to look more closely at Europe than ever before. London in particular is well placed to make the most of this with global companies headquartered locally, a common language with the US, high quality universities and access to the European market.
“We know firsthand that the UK tech sector is anything but overhyped. If anything, it’s under-hyped, from what we see in Brandwatch and with our partners and customers. In less than six months, we received a US $22 million round of funding and acquired our first company, London-based PeerIndex. UK-based startups and tech companies are flourishing at home and crossing the Atlantic to take on North America in a big way. FarFetch’s valuation is further proof that the industry is taking notice that UK isn’t messing around when it comes to tech. The tech sector in the UK is at the edge of innovation, and is one of the biggest economical success stories of the past decade. It’s important that this growth and this momentum is recognised and taken seriously.”
“It is a very ‘British’ mentality to worry that a sector is being over hyped every time another $1billion valuation is achieved. These businesses and the entrepreneurs behind them should be celebrated for their achievements. If you pause to reflect just how far the European Venture and entrepreneurial scene has come over the last five years there is now overwhelming evidence that there is the talent, the funds and the ambition to grow World leading businesses. Typically Europe tech businesses need to be built on solid business models in order to attract billion dollar valuations as demonstrated by Zoopla and Just Eat during 2014.”
Head of Ventures