LONDON, Feb. 21, 2018 /PRNewswire/ --
- Collective value of over 500 start-ups rises more than six times between 2011 and 2017. This equates to 30% compound annual growth (CAGR) per year.
- £10,000 invested in this cohort in 2011 now worth £63,848
- Investment returns total £24,086 yielding ROI of 237.45%
- IPO exits offer greater value than M&A for investors… companies from the cohort that listed on NASDAQ grew in value at 98% per year
- Fintech tops the table… 63% growth rate double the cohort's average
Exclusive research from online investment platform SyndicateRoom has revealed that investors in early-stage equities have enjoyed a seventh consecutive year of 30% growth.
Early-stage equities: A long-term study – conducted in partnership with research firm Beauhurst – is the second piece of in-depth analysis of the financial performance of early-stage investment into 519 UK start-up businesses between 2011 and 2017.
The report's findings include:
Of the 519 companies in the cohort, 14% had gone onto exit (a trade sale or stock market listing) successfully generating combined returns of £3,785,896,091. These successful businesses outperformed their peer-group by increasing in value at 42.6% per year up to the point of exit.
Are IPOs better for exits than M&A?
The study also found that businesses that exited via an IPO (initial public offering) grew faster than businesses that exited via an acquisition. Companies that went to list on NASDAQ grew in value at a staggering 98% per year. One of the fastest- growing companies in the cohort, Adaptimmune, grew in value at 107% per year and went to list on NASDAQ with a valuation of over £1.2bn.
Early-stage investing does carry risk – 14% of the companies (73 in total) in the cohort failed, resulting in a total loss of value for investors. The majority of the companies that are no longer in business – 31 – failed in 2017.
Returns from early-stage investing
If you invested £10,000 into the cohort in 2011, your investment would now be worth £63,848. You would have lost £341 of your capital after EIS tax relief or £1,367 without EIS tax relief. However, returns from the investment would have totalled £24,086, yielding an ROI of 237.45% and you'd still have £38,394 at work (and appreciating at 30% a year).
Financial services shines
The UK continues to be heralded as the world's fintech capital.
Financial services enjoyed the highest rate of growth (63% CAGR), more than double the CAGR of the cohort as a whole.
TransferWise's 183% CAGR topped not only the table of financial services businesses, but the entire cohort.
Education fails the grade
At 6.32% CAGR, education was by far amongst the worst-performing sectors within the cohort. Given the value society holds for personal development this may come as a shock. However, for anyone familiar with the education sector, it is only a harsh truth. Value and profit, it turns out, are not the same thing.
"This cohort was worth just shy of £1.6bn in 2011, grew to £8bn in 2016 and now, just one year later, I'm delighted it is valued at over £10bn," said Gonçalo de Vasconcelos, CEO and Co-founder of SyndicateRoom.
"What's more, the cohort has returned over £3.7bn to shareholders, demonstrating the long-term profitability of early-stage investing. And with the government-endorsed and incredibly generous tax reliefs that come with the Enterprise Investment Scheme, there has never been a better time to back trailblazing British start-ups."
"We were delighted to partner with SyndicateRoom on what is the most comprehensive and compelling data set surrounding early-stage investing," said Swen Lorenz, CEO of Master Investor.
"What this proves is that despite the inherent risks of investing in individual start-ups, when taken as a diversified portfolio, early-stage investing can be robust and very profitable. In light of dwindling returns in other asset classes, I strongly urge private investors to take notice of early-stage equities."
More information can be found below but for initial enquiries please contact:
M: 07825 739 243
Interviews are available on request.
SyndicateRoom connects ambitious investors with the country's most trailblazing companies.
Started in 2013, SyndicateRoom has rapidly grown to have more than 100 high-growth businesses in its portfolio. By relentlessly focusing on the interests of private investors, SyndicateRoom has developed a trusted reputation and has been recognised in numerous awards.
For more information please visit: https://www.syndicateroom.com/
and to see the report https://www.syndicateroom.com/investing-in-startups
With the help of research firm Beauhurst, SyndicateRoom tracked the investment performance of a cohort of 519 early- stage companies over a seven-year period. The cohort is comprised of UK-based seed- and venture-stage private companies that raised funding in 2011. We then looked at their fair value as of the end of 2017 to investigate how this cohort of companies has performed.