One of Britain’s most high-profile investors has expressed concerns about “too much money being chucked” at tech businesses in the UK.
Jon Moulton, best known for his successes with household names like jewellery chain Goldsmiths and Parker Pens, founded Better Capital in 2012 after leaving his previous venture Alchemy Partners.
Moulton has also been an active tech investor over the last three decades, having backed peer-to-peer lending marketplace Funding Circle “very early on”, and estimates that around 50 of his 120 current investments have a link to technology.
However speaking to BusinessCloud at an investment roundtable in London organised by the Lancashire Investment Readiness Programme, the 67-year-old said the return on investment in technology is is relatively “poor”, particularly in the UK, and fears that it could become worse.
“Too much money and too few deals is something that worries me – and I see more and more money being chucked at it,” he said.
“The historic returns in tech investing in the UK are probably single digit – even low single digit on average. As you stick more and more money in, unless you actually generate more deals to consume that money, the returns will inevitably get worse.
“I see things like EIS, SEIS, ECT and Patient Capital initiatives as actually threatening there, because if you put in money that doesn’t need a return, doesn’t want a return then you’ll actually put good assets and good people into crap businesses – and that’s bad for the economy and bad for the investor.”
Moulton also raised concerns about the number of unrealistic valuations in the technology sector.
“I’ve literally read seven business plans this morning; five of them I disposed of within a minute because of ludicrous pricing,” he said.
“Occasionally I will be wrong because sometimes tech companies really do hit gold but most of the time I’ll be fine passing on stuff that looks to be 10 times the valuation it should be.”
Although Moulton has enjoyed an enormously successful investment career, he admits he’s “had failures all over the place”.
“The biggest failure was probably Newbridge Networks,” he said. “I made four-and-a-half times my money in three years but if I’d just waited another year it would have been 72 times the money.
“I’ve had some huge successes, some spectacular failures and a lot of fun.”
Other speakers on roundtable included Norman Molyneux, chief Executive, Acceleris Capital; Peter Leather, head of IP & Commercialisation, UCLan and programme director of the Lancashire Investment Readiness Programme; and Rohit Mateur, senior vice president venture capital, Barclays.