The Sophos story - a long hard, very British trek to the promised IPO

With the news that security software firm Sophos wants to raise $100 million (£65 million) from public investors, the words ‘IPO’ and ‘UK technology company’ are about to collide with one another again in an event so rare it almost deserves a celestial billing.

UK tech firms don’t ‘IPO’ terribly often, and you have to go back into the distant past to companies such as the encryption firm nCipher in the year 2000 to find a security notable firm that has taken this path. Most stay private, fairly small and are usually acquired at modest prices  in this state, for example Secerno’s sale to Oracle in 2010.

Or perhaps until recently the UK created so few security startups that reaching the stage of being sold to investors in any form was moot.

Sophos has been upfront about wanting to take the IPO route even if economic conditions turned that into a fruitless labour on two previous occasions. Founded 30 years ago by anti-virus pioneer Jan Hruska and Peter Lammer, by 2007 the company decided an IPO would give it the financial boost to take it to the next stage, reportedly valuing the firm at around £400 million (then $800 million).

The financial crisis intervened and by 2010 and with no IPO in sight after a second attempt in 2009, the sale of a 70 percent stake in the business to private equity Apax Partners a year later was seen as the only viable option.

We had some reservations about the private equity deal at the time – why were the original founders so keen to sell? – but there is no doubt that by 2015 it’s probably now or never for Sophos to go public. Valuations are from the floor, money flows from investors and anything with a whiff of cybersecurity is hot stuff for reasons that don’t require much explanation.

So with another UK security IPO coming, what does it all mean?

We have reached an important juncture for the UK technology scene and while public offerings are never an end in themselves (as they too often appear to be in money-obsessed USA), the UK needs some success stories to buff its growing image for tech and innovation at the important small and medium-size end of the market. A few names that have anchored themselves is good news, especially ones with a record of keeping customers happy.

The irony is that Sophos was never a shining startup story in the first place. It took its founders three decades of hard slog to get even this far and a valuation of around £1 billion. That is far too slow and the number of firms that get this far is still too few.

The money to pay for shares won’t be there for ever and as the cycle turns once again, the same can be said for the real startups now receiving their first and second rounds of funding from eager investors. UK tech needs to hurry up before the winds change again or we’ll be waiting another 30 years to see the like of Sophos again.

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