Revolutionary Measures

Selling out too early

Cambridge is rightly highlighted as one of Europe’s biggest innovation hubs, particularly when it comes to commercialising ideas that began in the research lab. This has spawned a huge biotech sector, and helped create a series of billion dollar tech companies that lead their industries, such as ARM and Cambridge Silicon Radio (CSR).

The University of Cambridge has the largest un...

The Internet of Things (IoT) has been identified by many commentators as a key emerging market – and one where Cambridge has the ecosystem, experience and ideas to play a major role. So the news that IoT pioneer Neul has been sold to Chinese telecoms equipment behemoth Huawei depressed me. Not for nationalistic reasons, but simply due to the low reported purchase price ($25m) and the fact that the company has cashed out so early in the growth process. While there was a fair amount of PR spin around Neul’s progress to date, I genuinely believed it could join the billion dollar Cambridge club by developing its technology and building alliances and routes to market.

At the same time, Cambridge Silicon Radio is mulling a multi-billion pound sale to US firm Microchip Technology, reducing the number of major, independent, quoted Cambridge companies. Obviously investors and founders do look to realise their profits at some point, but it is important to balance this by looking longer term. While those that put money into Neul no doubt got a decent return, think how much more they’d have received if the company had been allowed to grow and exploit its market position.

I’m not alone in taking this stance. Cambridge Innovation Capital (CIC), the University of Cambridge-backed VC fund, recently warned its portfolio companies against selling out too early and promised to provide long term, founder friendly, capital to help grow the next ARMs and CSRs.

So what we need is the support, both financial and in terms of time, that gives companies the ability to achieve their potential. Not all of them will make it, and many will be niche players that logically fit better within bigger companies – but at least they’ll have had the ability to aim for the stars before finding their real place in the world. Otherwise Cambridge (and other parts of the UK tech scene), will simply act as incubators that turn bright ideas into viable businesses that can be snapped up and digested by tech giants looking for the newest innovation. It is much better for both the local and national economy that some of these startups make it the stock market as fully fledged businesses, creating ecosystems that generate new sectors and jobs. This requires longer term thinking from everyone involved – otherwise the number of billion dollar Cambridge companies will shrink even further.

October 1, 2014 - Posted by | Cambridge, Marketing, Startup | , , , , , , , , , , , , ,


  1. Chris

    Although you may be right in this case (I have no particular knowledge of Neul or its management), you could look on the bright side and say that this sale will let the founding team (once they finish their earn out period) get back to what they do best – innovating. As we both know all too well, startup founder teams do not always transition to billion dollar scale very well. A new “farmer” owner can optimise the performance of the acquired company (and probably may have access to cheaper funds for investment), while the “hunter/gatherer” startup team can move on to the next innovation challenge. All parties to the sale (don’t forget the VCs) may be better off in the long term.

    OK – I agree it would be nice if the acquirer were also based in Cambridge (or the UK, or Europe even) but that’s another question: why are there no British tech giants to sell out to? What happened to the latter day giants like Plessey, GEC, ICL/Fujitsu, Marconi, Ferranti etc? All down the plug hole and/or sold abroad in the last 30 years. The few remaining UK “technical” PLCs seem to focus on extracting monopoly revenues from government related contracts (defence, police, prisons, social security, etc etc) rather than investing in cutting edge product development.

    Regards Nigel

    Comment by Nigel Thomas | October 1, 2014 | Reply

    • Hi Nigel,

      I agree that the original founders can transition from a business, particularly if they don’t have the skills/inclination for company building. But that wouldn’t stop VCs putting in a new management team that could take the business forward (and deliver a greater return), rather than selling out early. I agree with you – much of the technology sector in the UK (outside ARM et al) are essentially consultancies/outsourcers, not innovators.

      Comment by Chris Measures | October 1, 2014 | Reply

  2. […] previous blogs I’ve talked at length about the UK’s inability to turn a high enough percentage of tech startups into market leaders, compared to countries such as the USA. This may be changing, according to a new report from the […]

    Pingback by From startup to scale-up economy? « Revolutionary Measures | November 26, 2014 | Reply

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