While investment might always seem like a sign of success, it’s vital that companies don’t get over-excited and spend their money on short-term gains.
This is the view of financial advisor Simon Wax, commenting on the news that £2bn was raised on London markets in Q2 2018. It has been announced that the technology sector led UK IPO activity accounting for five of the 17 listings, raising £911m.
Wax, who works at chartered accountancy firm Buzzacott, says IPOs are a great way to help raise cash quickly but it’s important that when doing so, tech companies have their long-term future in mind.
“It can at times be easy for businesses to get excited by investment and act far too quickly,” he said.
“Once it arrives, they often pour that into areas that bring immediate gains but are not necessarily the areas that will sustain and drive that business forward.”
Businesses should also remember that there are many other sources of finance available which are often quicker and easier to come by, says Wax. These may also be more aligned to the business’ needs than an IPO.
“To really maximise the value of that funding in the long-term, tech companies should have a longer-term, holistic and honest plan in place before a penny is spent,” he said.
“If the plan then dictates that hiring or office expansion is the right option, then that’s great. But it’s that long-term planning stage that’s needed and the reality is that this simply doesn’t happen enough.”
News that London’s tech market has led to a resurgence of flotations in Q2 of this year reiterates its position as a global technology leader, highlighting the opportunities for growing tech companies seeking investment says Wax.
However, he believes that if London’s tech sector is to continue to thrive and enjoy fruitful investment, businesses need to spend their money wisely.
“Those with a long-term view of their journey from start-up to scale-up and onwards will set themselves up for sustained, long-term success,” he said.