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Do Manchester tech entrepreneurs sell out too quickly?

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This is the third in a four-part series of articles looking at the issues currently preventing the Manchester tech scene from reaching its full potential. In this article, Manchester-based Nikki Scrivener, director and co-founder of Fourth Day PR, explores why some Northern tech startups opt to sell up rather than scale up.

Are confidence and finance linked when it comes to companies selling out? Some argue that North West entrepreneurs sell too quickly which inevitably holds the region back from building tech companies that can compete on the global stage.

There seems to be two camps in this argument: those that have an exit in sight and those that don’t. But, in reality, things aren’t always as clear cut. Rob Booth is testament to that. When he started Invosys with one of his best friends he envisaged retiring by 35, but when the offer came they turned it down.

“What I wanted changed over time. We received an amazing offer in 2015. I could have sold and never worked again. But I knew that I’d be surplus to requirements and I just didn’t want to let it go.”

We need to see more of this if the sector is to really flourish. There’s an understandable temptation to sell when the going’s good, but sticking it out for longer term growth means we’ll move beyond being seen as a city of start-ups.

At Knight Corporate Finance, Paul Billingham works closely with businesses in the tech, telecoms and media sector and believes that exit planning is changing for the better. “Business owners are now looking at the long game and there are a number of tech businesses in Manchester that could very easily sell but are instead trying to build $bn valuations. The main challenge is that US valuations are typically driven by revenue and based on longer term forecasts, and so if an offer comes in that rewards shareholders today for future delivery, then it is always tempting to sell.”

But some feel it’s the fear factor and our risk averse attitude at play again, with Pimberly CEO Martin Balaam arguing that the bird in the hand mentality is more prevalent in the North – business owners may jump to accept a reasonable offer for fear of failing in the future. Or, as he puts it: “Basically, they feel like they’ve worked bloody hard and want out.”

David Grimes at Sorted thinks there also may be a realisation from CEOs that they’ve taken the business as far as they can and don’t have the skills or bottle to scale it to the next level.

Daniel Keighron-Foster, who set up his first business at 18 and sold it for £7 million agrees, but doesn’t necessarily see this as wholly negative. “I don’t think there’s anything wrong with not wanting to take on more pressure, or not being driven by accruing more wealth. For me it was a simple case of gaining more perspective in my life. That’s why I sold.”

Continuing to develop the skills of our business leaders is essential though, and everyone agrees that mentors are crucial whatever stage you’re at. “You need new perspectives as well as new skills”, says Keighron-Foster. “This inability to open up and share is one of the reasons why so many entrepreneurs suffer with depression.”

This makes initiatives such as the newly launched Tech Manchester even more timely and compelling as a way of helping business leaders to scale up. Its vision is ‘to digitally and physically connect tech stakeholders across Manchester, accelerating digital businesses, driving growth and raising Manchester’s profile as a world-class tech hub’.

You can read the previous article in this series, ‘Tech investment in Manchester is improving, but still has a long way to go’  here. Keep your eyes peeled for the next part: ‘How the skills shortage is affecting tech in Manchester’. This series is from the What’s holding us back? report by Fourth Day PR.

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