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UK tech founders shun AIM for exits

An AIM listing is the planned exit strategy for less than a quarter (23 per cent) of UK technology entrepreneurs, according to new research from law firm Nabarro. This is despite the strong demand from AIM investors for opportunities to invest in the tech sector. 

Technology sector stocks made up an average 31 per cent of the portfolios of the investors interviewed by Nabarro, with 88 per cent planning to increase (53 per cent) or maintain (35 per cent) their exposure to AIM tech stocks in the next five years.
The performance of tech companies on the AIM market is historically strong, with analysis from Nabarro demonstrating that technology stocks held their own during the last downturn and have since outperformed the market, with particularly strong results over the last three to four years.
However, although 82 per cent of tech entrepreneurs agreed or strongly agreed that the AIM market is the natural home for fast-growing UK technology companies, listing on other markets is a much more popular ambition (48 per cent) and a trade sale to a bigger tech company (21 per cent) is almost as popular as going for an AIM listing (23 per cent). This reluctance to list on AIM may signal that founders are holding out for a bigger, more ambitious exit further down the line.
The main reasons the entrepreneurs cited for potentially selecting AIM as their exit strategy include realising value for some of their stock (38 per cent); access to capital markets (31 per cent); and being able to grow more quickly (14 per cent). Their two biggest fears were more regulation (56 per cent) and loss of control (22 per cent).
Alasdair Steele, Corporate partner at Nabarro, says: “Our research shows there is an appetite for investment across the tech industry, but lack of awareness of the benefits of an IPO on AIM could be stunting growth in the sector. Businesses need to consider floating on AIM as a stepping stone to raise capital and profile, rather than focusing solely on the London Stock Exchange’s main market, or pinning their hopes on a trade sale to one of the ‘Big Five’ technology brands.”
Nabarro also surveyed current AIM investors to assess their appetite for technology stocks coming to the market. 59 per cent of investors had up to a third of their current AIM investments in tech, while another 25 per cent of investors had one-third to 50 per cent of their current AIM investments in tech. Just under half of AIM investors (49 per cent) expect an increase in the number of AIM IPOs in 2016. Over half (53 per cent) of investors are set to increase their own exposure to AIM tech stocks, while 35 per cent plan to keep their current weighting in the sector. So, overall investor sentiment about AIM’s prospects and the prospects for tech stocks in particular is positive.
The report also looked specifically at Fintech and Medtech as potentially vibrant areas of the UK technology market. 37 per cent of investors see Medtech as the most attractive AIM investment opportunity over the next 12-18 months with Fintech/insurance tech favoured by 27 per cent.
Guy Heath, partner and head of Technology at Nabarro, says: “Investor demand for AIM technology stocks is high, and set to increase over the next five years. If the ambitions of founders meet the increasing appetite of investors for tech stocks, then AIM could become a breeding ground for a new generation of UK and European unicorns.”

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