Carol Lee, PwC's technology, media and telecommunications valuation team leader, faced a capacity audience this monthat Bristol's Engine Shed, presenting an overview of how risk capital has been evolving on both sides of the Atlantic.
In an interactive session featuring many of the regions fastest growing businesses, Carol shared her 18 years-plus years in Silicon Valley where she led the PwC's valuation technology practice. Her US experience involved working with technology businesses at all stages of their development including 100+ start-ups, blue chip corporates, global technology business and those going through VC / PE fundraising.
Carol explored the start-up financing cycle, early stage valuation approaches, key trends in pre-money valuations and her personal observations on UK vs.US cultural differences and what fast growing businesses in both countries could learn from one another. Some key points included:
- Early stage businesses are often valued, based on qualitative assessments of the quality of talent and technology developed to date, size of the addressable market and the level of business validation/proof points. Quantitative approaches often focus on multiples of forecast revenues with discounted cash flow analysis reserved for businesses with proven revenue models.
- UK businesses often have more modest aspirations compared to their US counterparts. This is reflected in the way they pitch (e.g. more conservative forecasts / addressable markets) and in the amounts and length of funding requested (e.g. average funding is 1 year vs. 2 years in the US). If UK businesses were braver it would free up more time for them to focus on the business before having to raise further funds before the need to raise further funds.
- Seed funding is very accessible in the UK, however there is often a "valley of death" afterwards where businesses struggle to raise the next stage of funds; and
- UK investors often have a background in property or finance (vs. a greater numbers of ex-entrepreneurs in the US). These more risk averse investors often require greater persuasion to invest in pre-revenue business where the operating model is still unproven. They tend to focus on time to reach profitability / stability compared to US investors who focus more on the entrepreneurial talent and growth story. Tailoring your pitch to the type of investor you are speaking to is really important but finding the right investor for your business is even more so.
PwC has a specialist fast growth team which works in collaboration with a range of exciting and vibrant entrepreneurs. We provide tailored advice and solutions for each stage of your growth journey, from start-up through international expansion to exit. Our team is with you every step of the way.
Please drop us a line to discuss any of the above.