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Happy New Year from the Forsyth Group!

We hope you had an excellent Christmas and are looking forward to an exciting year ahead.

2014 was a very busy and productive year here at the Forsyth Group, building teams across the emerging technology ecosystem, including fintech, ecommerce, biotech and social media. With everyone back to work and the tech scene bustling with excitement for 2015, we thought we’d give a little round-up of some of last year’s trends:

Hiring Big Data expertise continues to be a challenge for the start-up ecosystem, and the need to control and analyse data spans a wide range of tech sectors. However, with the London start-up scene buzzing, candidates are finally leaping from the banks and corporates into early stage ventures. For example, we have been working with the founders of Last.fm on their new venture, Lumi.do, to hire top-level data science and product candidates for their content curating platform. These candidates left giants such as Ebay and Microsoft Bing to join a more exciting, fast-paced, high growth culture, and to be a part of building the future of the web.

London has become an innovation hub for fintech. Figures released at the end of November by London & Partners showed that London based fintech firms had raised $539M, which was triple the amount raised in 2013.  We placed a number of high level executives in London for fintech start-ups in 2014, for companies head-quartered around Europe, including Iceland (www.meniga.com) and Denmark (www.inpay.com), who saw London as the clear choice to build out their teams.

Social continues to be a hot sector. We recently helped social fashion e-commerce site, Styloko, hire a rockstar CEO and well-renowned NED, both of whom were excited to join a company at the forefront of shopping discovery. We have also been working with 23snaps, the leading social network for families, helping them build out their marketing and data science teams, and to hire an NED. As pointed out in a recent blog, Mobile Social Networking is the fastest-growing consumer mobile app category, and this looks set to continue in 2015.

2014 saw a rush of disruptive medtech and biotech start-ups. From personalised mobile healthcare advice (Your.MD, CEO), advanced micro-needles (Innoture, Commercial & Operations Director), to physiotherapy fitness equipment and data platforms (MuJo Mechanics, Commercial Director), we have already seen a lot of innovation in this space, and we predict a lot more investment this year. In 2014 we attended the KPMG Future of Healthcare event, which was designed to help early-stage health-tech companies better understand the UK healthcare industry, get some advice on how to break into the market, and raise angel investment. Corporates are beginning to see that they have a vested interest in engaging with start-ups, as it will help them keep up with the innovation smaller companies are bringing to the market.

At the Forsyth Group, our relationship with the tech scene is a symbiotic one, as we are also active investors. As investors in Seedcamp, we were delighted to see Transferwise raising another $25 million and boasting a high profile with adverts scattered all over the UK. UberVU, where we placed the CEO and VP Marketing, also had a fantastic year, with their acquisition by Hootsuite. We recently invested in fund III of Seedcamp, and we are sure that this year will see continued success of their portfolio companies.

Wishing you all the best for 2015 and we look forward to seeing you soon.

The Forsyth Group team

Mobile Internet Exit Returns Reach $93B In The Last 12 Months

The Mobile Internet sector is proving to be one of the hottest sectors of growth in the tech industry. Whilst the exit of WhatsApp to Facebook is the most obvious manifestation of this upwards trend, new data from Digi Capital shows that this is merely the (impressively large) tip of the iceberg. The data released in Digi Capital’s report shows an astonishing leap from $9.3B in exit returns 2 years ago, to $13.7B the next year, to $93.7B in the last 12 months. This last jump represents a leap of almost 7x growth from the previous year, helping to show the enormous potential in this sector.

The hottest sectors within mobile internet were Messaging, Games and Social Networking. The Messaging sector saw the highest exit returns, with $25.8B, although Facebook’s acquisition of WhatsApp was responsible for $21.8B of that. The Games sector saw the next highest, with $18B in exit returns, and without the outlier of the WhatsApp acquisition, that makes it the strongest sector, closely followed by Social Networking which saw $17.7B in returns. As the below graph shows, 2 other sectors, Food & Drink and Lifestyle also made over $5B in exit returns, as well as another 9 sectors returning over $1B, showing that the current growth is spread between different sectors, and not just focussed on a few.

Multi-Billion dollar exits are obviously good headlines, but the VC and growth equity investors are more interested in the exit returns. Rather than purely looking at how many dollars are received, the important figures are the amount of dollars returned for every dollar invested. As the report states, early stage investors typically hold on to their investments for at least 3 years, and the 3 year average return on investment for mobile internet up to q3 2014 was 3.5x. As the below growth shows, however, in a number of sectors, including the aforementioned Messaging, social networking and Games areas, growth far exceeded this average.

Digi-Capital’s report ends with a quote from the Managing director of Digi-Capital, Tim Merel, which forecasts further good news for those investing in, or creating Mobile Internet companies. According to Merel, Digi-Capital’s analysis indicates that “the next 12 months could be even more rewarding”.

Mobile Internet Sector Sees Record $19.2B Investment Over The Last Twelve Months

Mobile Internet companies saw a record $19.2B investment in the year up to Q3 2014. This represented a substantial and exciting growth of 232% compared with the corresponding year up to Q3 2013. The largest investments were in the mCommerce ($4.2B), Travel/transport ($3.3B), Utilities ($1.8B) and Games ($1.1B) sectors, but as the below graph shows 10 other mobile internet sectors also raised over half a Billion dollars each, showing that the growth in investment is spread fairly evenly, rather than in one specific direction

 

 

 

 

 

 

 

Further analysis shows that Institutional investors have been rewarded for their faith in mobile internet, with Digi-Capitals Mobile Internet index of 78 public companies in and around mobile internet giving an average 28% return in the last 12 months. The graph below shows that there has been especially strong returns in the travel/transport, social networking, messaging and gaming sectors.ly evenly, rather than in one specific direction.

Digi-Capital have also created a quadrant highlighting opportunities where revenue outperforms investment/consolidation activity. According to the graph, there are major opportunities in mCommerce, Appstore/ Distribution, Advertising/Marketing, Enterprise/B2B, Wearables, Business, Eduication and Books. Hidden gems include Navigation, Games and Entertainment, and there are exit opportunities in Social Networking. Selective opportunities are also available in Health & Fitness, Music, Photo & Video, Messaging, Lifestyle, Travel/Transport, Utilites and Finance. This shows that throughout the varying segments in the sector, there are possibilities to make good investments, rather than one sector more obviously dominating. This can only be good news for the Mobile Internet sector.

Tim Merel, the Managing Director of Digi-Capital, sums up this positivity around the Mobile Internet sector by pointing out that “There have been lots of big numbers already, but for Mobile Internet investors the best is yet to come”.

Forsyth Group Places CEO at Styloko

Styloko have announced the appointment of a new Chief Executive, the former ShopStyle Managing Director, Shannon Edwards.

Edwards has a strong background in the online fashion retail space, having joined ShopStyle in 2008 and launched the business in the UK, followed by France and Germany in 2009. Under her leadership, ShopStyle grew the customer base to more than two million monthly unique users, with over 3,000 fashion brands and retailers. Prior to that, Edwards was a director at eBay’s Shopping.com, where she led the sales and communication teams across the US and EU in San Francisco and London.

Styloko have gained a Chief executive with a wealth of global experience, and a great track record of success. Edwards will help Styloko to grow the business globally, and strengthen and forge relationships with retailers.

The Forsyth Group assisted Styloko with this search, and Shannon is the third executive we have placed with the company.

Megadeals Drive Gaming Sector Growth

Our friends at Digi Capital have created a report on the upwards trend of investment in the Gaming sector, which we see as further evidence of the thriving tech market.

5 “Billion Dollar” deals have driven the gaming sector to double the whole of 2013’s investment statistics purely in Q3 2014. Without these 5 deals, games acquisitions are running at similar levels to the previous record year in 2013. This shows the growing momentum and growth in the gaming sector, with the “red letter” deals adding to an already thriving sector.

The Forsyth Group is seeing significant demand in this sector and has made CEO, VP and NED  placements in the games sector for companies like www.joybits.org, www.connect2media.com and www.funcom.com.

Data Courtesy of Tim Merel from Digi-Capital.

5 “billion dollar” deals

The biggest deals of the year so far:

  1. Microsoft/Mojang ($2.5B at 8x revenue and 20x profit): a long term strategic investment to nurture the Minecraft community for Microsoft’s future cloud, mobile, virtual reality and wearables platforms (see more analysis).
  2. Facebook/Oculus ($2B at reported 87x revenue): a long term strategic investment in the potential of virtual reality as a growth platform.
  3. Giant Interactive take private ($1.6B at 8x revenue and 12x operating profit): Giant’s Chairman and financial backers take advantage of the current phase in the investment cycle, betting Giant is more valuable as a private company.
  4. Amazon/Twitch ($970M at reported double digit revenue multiple): Amazon accelerates both its video and games initiatives, while also scoring a competitive win.
  5. Zhongji/FunPlus games assets ($960M): Chinese industrial conglomerate buys its way into the future, providing the remaining FunPlus team with financial firepower to reinvest in mobile.

 

American and Chinese buyers dominate

Consolidation firepower has shifted dramatically during 2014, with an even split in the top 10 games acquisitions between US (5) and Chinese (5) acquirers. This rebalancing looks very different to 2013 when 9 of the top 10 were by Chinese and Japanese acquirers, up from 8 out of 10 from Asia in 2012. The companies being bought come from all over the world (US, Europe, China, Japan, South Korea), so entrepreneurs and investors wanting a good exit need relationships across America and Asia. Europe has been more of a sellers’ than a buyers’ market in recent years.

Games investment returns >11x to Q3 2014

Returns to games investors from exits are >11x the amount invested to Q3 2014, comparing acquisitions to investments so far this year (excluding IPOs, which push returns even higher). While there is a time lag between investments and exits, comparing money flows by year helps track where the market is going.

Games investment returns hovered around 3x to 4x until 2007, plunging to 1x to 2x for 4 years after the financial crisis in 2008. As mobile disruption accelerated in 2012 just 5 years after the iPhone launched, games investment returns rebounded to 5x to 6x, before skyrocketing to >11x this year. Large deals always impact market returns, but there is a consistent upward trend even without them.

 

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