Investing in startups is a very high risk high reward venture – but if you get it right you could make  significant returns compared to other investment classes.

In this article we share the story of 5 hot UK startup exits over the last decade.

1. SwiftKey

These days we see predictive text on our smartphones as a given accessory. Back in 2008, when keyboard text prediction was still in its infancy, SwiftKey was founded in London to use the power of artificial intelligence to learn how people type. They created a smart keyboard that has grown to become one of the most popular in the world with millions of daily users.

Along the way they raised £275k in seed funding led by Octopus Ventures in October 2010. Just over 5 years later, SwiftKey was bought out by Microsoft for £175m in February 2016.

The initial investment by Octopus is likely to have returned a healthy ~50x return.

2. Zynstra

Zynstra is a Bath-based cloud computing specialist that developed a software suite for retail businesses. This solution enables businesses to virtualise their back and front office technology generating significant savings and enabling more effective technology management.

In March 2012, they raised £150k in seed funding and were eventually acquired in December 2019 by NCR for £100m [2].

If you had participated in the seed funding, your investment post exit would likely have netted you a circa 100x return.

3. Graze

Mail-order healthy snacks firm Graze tapped into the growing demand for healthy eating by creating a convenient, tasty and all natural proposition.

The Carlyle Group were suitably impressed and acquired them for £61m in late 2012 [3]. Three years prior to that in June 2019, Graze had raised early stage funding of £850k.

This stake was worth 44% at the time of the acquisition which amounts to £26.8m, a total return of just over 3000% and an excellent CAGR of 175%.

4. VocalIQ

Cambridge-based speech technology startup VocalIQ uses artificial intelligence to help create more natural dialogue between computers and people. The aim is to try to recreate virtual assistants such as Jarvis from Iron Man.

They raised £750k in seed financing from Amadeus Capital Partners in 2014 representing a 34% stake in the business. 15 months later they were acquired by Apple in order to improve Siri for a rumoured $50-100m [4].

Taking the lower estimate of $50m / £33m would still represent a near 1400% increase which translates to a remarkable CAGR of roughly 770%.

5. Magic Pony Technology

The story of Magic Pony, an artificial intelligence company that uses machine learning to improve video and images, truly illustrates the exceptional potential of startup investing. Their team of 14 engineers, 11 of whom have PhDs managed to create systems that could restore blurry images and also create new ones from scratch.

The founders of Magic Pony received an investment of £10,899 from Entrepreneur First in 2014 which returned an astonishing £4.4m just two years later when Twitter acquired them for £102m to bolster their live streaming capabilities [5]. In percentage terms, this is a 40,000% return on their initial investment and an exceptional CAGR of 1909%.

Next Steps

In summary, startup investing can yield amazing returns and should form part of your investment portfolio to add diversification and give you exposure to high growth investments. However they are high risk and many do also fail.

To learn more about startup investing, we’ve actually produced a free ground-breaking startup course designed for potential angel investors: The Ultimate Startup Course.

If you would like to join our angel syndicate where we source the best sharia-compliant startups that we invest alongside you with, check out IFG.VC.

This article is part of our angel investing series. Check it out here.

References

• https://realbusiness.co.uk/swiftkey-investor-on-uk-tech-firms-journey-from-seed-funding-to-microsofts-250m-buyout/
• https://markets.businessinsider.com/news/stocks/ncr-buys-zynstra-for-about-gbp-100-mln-1028782132
• https://angel.co/company/graze/funding
• https://www.businessweekly.co.uk/blog/cambridge-today-blog/why-apple-paid-50m-100m-vocaliq-and-what-it-means-cambridge
• https://www.wired.co.uk/article/entrepreneur-first-startups-london
• Companies House