Bernard Ginns: Unicorns make way for donkeys in over-hyped tech sector

ONCE THEY were hailed as unicorns, technology businesses with a valuation of more than $1bn.

Bob Munro, Chris Spencer and Adam Beaumont (left to right) at The Yorkshire Post Business Club

Now they are just as likely to be known as donkeys, the only mythical thing being their ability to ever make a profit.

The hype surrounding many tech firms has been extraordinary, resulting in what experts describe as an asset bubble.

Sign up to our daily newsletter

The i newsletter cut through the noise

The Economist, that learned but slightly dry newspaper, lanced the boil in the latest issue, noting the slowdown in the growth of valuations of tech firms and the marking down of certain holdings.

The publication even went as far as accusing unicorns of “pumping up their valuations and giving outsiders a misleading picture of what they are ‘worth’”.

Our capital city is no stranger to hype or asset bubbles.

According to Tech City News, London is the “undisputed home of unicorns in Europe”.

Quoting research from investment bank GP Bullhound in the summer, the title said 17 of the 40 European tech companies that have achieved IPO or been valued at $1bn or more started in the UK. I wonder how many of those would now be more accurately termed donkeys. Wonga, anyone?

Fortunately, Yorkshire is not a county that tolerates much hype, its people taking pride in telling you exactly what they think.

Consequently, the region does not have an overblown technology sector, nor does it have any so-called unicorns.

It is home however to some of the country’s most profitable technology businesses.

I heard from two of the biggest at The Yorkshire Post Business Club event last Tuesday morning.

Hosted by telecoms specialist aql at its splendid headquarters at Salem Church, chiefs from Callcredit Information Group and EMIS Group told an audience of 50 or so the stories of their businesses.

There was no froth in their tales, just good ideas turned into commercial success through hard graft and team work.

Their experiences should inspire others from start-ups that they too can grow world-class businesses in Yorkshire.

Both had strong views on the availability of cash to fund the growth of the region’s technology sector.

Bob Munro, the new chief financial officer of Callcredit, said: “When I was interviewing for this job, a number of times people said to me, ‘you do realise it is in Leeds?’

“That was among the investment community. There is a weight of capital out there which is not being directed to the North.

“When you go outside the UK, there is a huge weight of capital which has never heard of Leeds.”

Chris Spencer, the chief executive of EMIS, said there is a North-South divide in access to finance for tech businesses.

I hope their messages reach the venture capitalists, fund managers and other money men in London, who ought to be looking further afield for much more substantial bets.

• If the Chancellor thinks his tinkering with reliefs for energy-intensive industries will be enough to stave off the mortal challenges facing Britain’s steel industry, he should get out more and speak to some real business people.

Major users will be exempted from green tariffs following an announcement in his Spending Review.

Tony Pedder, chairman of Sheffield Forgemasters and a former CEO of British Steel, told me: “With a move to an exemption rather than compensation, the Government has ended this uncertainty and we can now look forward to a more competitive situation in terms of energy prices for our steel plants going forward.

“However the industry still needs urgent action from Europe to approve some immediate relief and the speeding up of antidumping measures.”

Back to the Government then, which seems much less in favour of industry than the coalition.