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The loss of an ARM
Luke Hakes Crunch Network Contributor
Luke Hakes is investment director at Octopus Ventures .
How to join the network Japanese telecoms firm SoftBank recentlyacquired British microchip manufacturer ARM Holdings . ARM’s shareholders approved the $32 billion deal at the end of August, and the company was delisted from the London Stock Exchange on September 5. The deal represents the largest acquisition of a European technology company. Ever.
Since SoftBank’s intentions to take over ARM were revealed, there has been a slew of commentary mourning the loss of a British institution to a foreign company. There has been a lot of negativity around the deal, which has led many to speculate that the U.K. is simply incapable of holding onto businesses after they reach a certain size.
While there’s no doubt that there should be an element of sadness about the sale of such an iconic organization, we shouldn’t be viewing it quite so negatively. The fact that we have a business for which someone was willing to pay $32 billion is a demonstration of huge success, and may kick-start the next wave of British startups.
Yet criticism is still rife, and the U.K. technology industry is all too often assessed in direct comparison with Silicon Valley. In the wake of the ARM deal, many have questioned why we don’t have our own Google or Facebook or any number of other global, Valley enterprises. In my opinion, it isn’t a lack of talent or ambition, but rather a lack of role models. When there is a company like Google or Facebook to point to, it demonstrates to both investors and entrepreneurs alike just what scale is possible.
There’s no doubt Europe is moving in the right direction, particularly when you consider the maturity of the venture capital market in the region.
The U.K. has seen a historical lack of capital available to take startups to the next level, whereas the Silicon Valley has been awash with capital for far longer, enabling the multi-billion dollar businesses we know today.
However, a lot has changed in recent years, and London now has both home-grown and foreign investors looking to invest in British businesses. The U.K. has a number of startups that can, and will, scale up. In fact, according to Silicon Valley Bank, there are 51 startups around the world worthy of $1 billion+ valuations, and 18 of those are British. Over time, we’ll see those — and many more — companies grow and, in turn, instill a greater level of confidence among founders and entrepreneurs that they, too, can scale. It is, after all, an ecosystem where success breeds success, and there are many different ways to scale and succeed.
In a move that’s the reverse of what we usually see, U.K. tech company Micro Focus recently announced its acquisition of U.S.-based Hewlett Packard’s software business for $8.8 billion. It’s an interesting deal, not just because it’s bucking a trend but also because part of the assets contain what’s left of Autonomy. In some ways it’s a U.K. technology company — albeit one with a damaged reputation — coming back into the fold. If European founders and venture capitalists are going to have the confidence to grow big businesses in Europe, I believe this is the kind of activity we need to see in order to grow the confidence of the market.
Softbank has completed its £24B cash acquisition of ARM Holdings Arm Holdings confirms Softbank is buying the chip designer for £24.3B in cash in big IoT move Hewlett Packard Enterprise to spin off software assets in $8.8B transaction There’s no doubt Europe is moving in the right direction, particularly when you consider the maturity of the venture capital market in the region. While Silicon Valley has had a buoyant market since 1972, the market in Europe took longer to mature, but is now rapidly accelerating. In my opinion, parts of the U.K. startup ecosystem have achieved in 10 years what took the Valley more than 40. But we’re not going to reach dizzying heights overnight. Entrepreneurs and investors alike need to become more comfortable with the idea that it is possible to build multi-billion dollar businesses. We’re already seeing the shift with founders holding on to their businesses that little bit longer before exiting, and that is a trend that will continue, if we allow it to.
Part of allowing this to happen means accepting businesses will be acquired when their founders feel the time is right. There are plenty of serial-entrepreneurs in the country who have created, nurtured and ultimately sold businesses, to then use the proceeds to either start a new venture or support other founders in theirs. And this is exactly what is likely to happen with the proceeds of ARM. That can’t be seen as a bad thing.
So instead of mourning the loss of ARM, we should celebrate it as an achievement and move on to the next wave of British success stories. We need to encourage the ecosystem to thrive, scaling up the businesses we have today and using the proceeds of ARM to invest in a whole new generation.
Featured Image: Hiroshi Watanabe /Getty Images
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