Unquoted companies
The issues that may have plagued the listed company side of British enterprise have not been so profound among unlisted companies, according to King.
He said: “On the unquoted side, yes, there are still many great companies out in the market that need capital and, as valuations have become more reasonable, now is a great time to be investing in these companies."
In the first half of 2023, King said the UK did see a slow-down of companies fundraising, though there are some areas where this has not happened, such as in AI, biotech or climate tech.
He added: "Our wide focus areas include all of these and so while, for example, we may have seen fewer fintech opportunities, we have made several investments in biotech companies this year.
"In the second half of 2023 we have started to see more companies out fundraising generally and we expect that trend to continue into 2024."
In the unquoted market, there are approximately 3,000 companies in which Britons could invest, but Octopus's managers would only explore between 300 to 500 of them, with a view to investing in, maybe, 30.
This could mean that Octopus is chasing the same 'sweet spots' that other managers are investing in, but King believes that rigorous due diligence helps the team to find the best opportunities for growth.
He explained: "We invest in the companies we think have the best chance of becoming £1bn+ businesses in the future.
"To do so we have a rigorous due diligence process that we’ve built and refined over the 15 years we’ve been investing to help us find the best opportunities."
King's team focuses on:
- The teams - can they hire great people and sell effectively?
- The market - is it big and ripe for disruption?
- The ability to scale quickly - typically this means tech or tech enabled companies
- The 'unfair advantage' - why will this company will win, compared with others who might be doing the same thing?
King added: "With our focus on early stage, high growth tech companies, we rarely compete with other VCTs.
"Even when we have done, our successful track record of investing in great companies has typically meant entrepreneurs prefer to take our funds, though in some cases we have co-invested together with other VCTs.”
simoney.kyriakou@ft.com
