The date is December 2021 and Manchester-based delivery tech platform Sorted announced it had closed a $40m (£30m) Series C investment raise led by Chrysalis Investments and Arete Capital Partners.
Already an impressive total, the scale of the investment was even more significant as it came less than nine months after Sorted raised another $15m (£11m) to fund future growth.
At the time Sorted, which helps online retailers to deliver products to customers worldwide, could do no wrong.
Its global customer base had topped more than 500, including retail giants ASOS, M&S, Dunelm, musicMagpie and Asda.
Sorted was already enjoying impressive growth before Covid struck but the pandemic was the trigger for exponential growth.
In the first year of Covid – 2020 – Sorted enjoyed a 100 per cent increase in shipment volume compared to 2019. In January 2021 alone, Sorted saw a 243 per cent year-on-year growth as it was named by the FT as one of fastest-growing companies in Europe.
By the time the delivery platform acquired fellow Manchester firm Clicksit in 2021, staff numbers had reached more than 115 people.
The fact that Sorted hadn’t returned a profit didn’t seem to deter investors.
Fast forward less than two years and Sorted is on the brink of being sold for a knockdown price to AIM-listed Location Sciences.
Simon Wilkinson, the respected former CEO of Mobica and Myriad Group AG, is the chairman of Location Sciences, a location data insight and verification company.
He’s also an investor alongside Mahmud Kamani, founder of Boohoo Group, and Richard Hughes, founder of Zeus Capital.
The deal hasn’t been done yet so serial entrepreneur Wilkinson is restricted on what he can say but he was attracted by the quality of the customers, leadership team and the potential that Sorted’s technology continues to offer the online retail space.
Subject to satisfactory due diligence being completed, Location Sciences has entered into a secured convertible bridge loan agreement with Sorted to lend it up to £2.6 million for ‘working capital purposes’.
The company has also entered into exclusive non-binding heads of terms regarding a potential acquisition of the entire issued share capital of Sorted for a nominal £1.
It is anticipated that as part of the proposed acquisition, Location Sciences will assume around £4m of Sorted’s outstanding debt.
Put another way if the deal goes through a company that is thought to have raised close to $100m in its lifetime could effectively be sold for £6.6m.
So how did it come to this?
To answer that we need to go back to 2009 and the beginning of the Sorted story.
David Grimes, who co-founded the business with Paul Haydock, was fed up of having to wait in post office queues every time he wanted to post a parcel.
He realised other SMEs were faced with the same problem and was convinced technology had the solution.
In 2010 My Parcel Delivery was born – a parcel delivery comparison website that would make sending parcels as simple and as hassle-free as possible.
The surge in the online retail sector meant the timing was perfect and the fortunes of My Parcel Delivery took off.
Not even Haydock’s (amicable) departure from the business could derail the company’s growth.
By harnessing the power of tech, the company – rebranded as Sorted in 2017 – was able to transform the complex battle of logistics into a simple, seamless experience.
Their tagline was simple: “There’s a gap in the delivery experience, and we’re on a mission to fix it.”
It was a compelling story and quickly caught the attention of investors.
In 2019 experienced Carmen Carey was brought in as a non-executive director before replacing Grimes as CEO in 2021, who assumed a board advisory role as a NED.
Carey’s credentials are impressive. She describes herself as a ‘transformation CEO’ and started her career in Silicon Valley as VP (Americas) of global services at NASDAQ-traded BroadVision, where she ran a $100m P&L.
After becoming a global executive, she moved to London in 2004 as COO of MessageLabs. Carey has led three successful exits – ControlCircle to Alternative Networks Group (now Daisy) for Scottish Equity Partners; Big Data Partnership to Teradata for Beringea; and an AIM delist transaction to Hanover Investors.
Sorted was the darling of the tech world – until it was caught up in the macro economic headwinds caused by factors like the war in Ukraine and the growing cost of living crisis.
The seismic shock caused by the collapse of tech lender Silicon Valley Bank in March 2023 should not be underestimated either.
Suddenly investors didn’t just want growth, they wanted a roadmap to profitability.
Unfortunately Sorted’s growth had not kept pace with its forecasts and it remained unprofitable.
It’s a familiar story. In May 2023, Manchester-based FinTech OpenMoney cut around 50 jobs after its lead investor, Duncan Cameron, co-founder of MoneySuperMarket, had decided to stop bankrolling it after investing an estimated £30m+ of his fortune in the startup.
At the time OpenMoney was burning cash at a rate of £600,000 a month and generating less than £1 million a year in revenue.
When turnaround specialists Will Mallard and Patrick Leahy bought the business for a nominal sum the first thing they did was put the loss-making parent company – OpenMoney Limited – into a Company Voluntary Arrangement (CVA) and embark on a major restructure.
Fast forward to the end of May and connected vehicle data company wejo announced its intention to appoint administrators.
The Manchester-headquartered business and one-time unicorn may have grown revenues in 2022 to $8.4m but its net losses in 2022 were an eye-watering $159.3m.
An insider told BusinessCloud: “There’s been a sea change among investors globally when it comes to investing in high growth, loss-making, tech stock. Wejo has been a victim of that.”
However there are some key differences between Sorted and what happened at OpenMoney and wejo.
Sorted’s unaudited management accounts for the year ended September 30, 2022 reveal that the company generated revenues in that year of £6.4m and a loss before tax of around £14.5m. At the same time Sorted had assets of £32.4m.
Location Sciences has clearly seen enough in the business and its numbers to want to buy it.
If the proposed acquisition proceeds, it’s intended that the existing subscribers, including shareholders of Sorted, will be given the opportunity to participate in a cash subscription for up to £5m of new shares in Location Sciences to seek to align their interests with those of existing Location Sciences shareholders.
The planned acquisition would constitute a reverse takeover under AIM rules and is subject to due diligence and satisfactory negotiations.
It’s hoped the deal for Sorted, which currently employs 96 full-time staff, will be finalised by September but the implications for other exciting tech companies will reverberate for a lot longer.