Dan Cobley talks why at Blenheim Chalcot, we prefer to hunt for gazelles

Jun 2016

City A.M. recently published a feature from Dan Cobley, Partner at Blenheim Chalcot, on why we should forget unicorns, its all about the gazelles.

Investors, founders and journalists tend to become animated when discussing unicorns, those rare tech startups valued at over $1bn.

Some consider these companies the pinnacle of success, while others claim they represent market froth and an impending correction.

Research released this week by GP Bullhound found that in 2016 Europe as a whole has seven more unicorns compared to the same time last year, while London has two more.

Is this a good or a bad thing? Frankly I don’t care.

Throughout my career I have helped establish, led and invested in a range of tech companies, from startups working around a single table, to multinational giants. I am proud to see the progress being made by British tech companies, which are increasingly being held in the same esteem as their US counterparts. But as an investor, I will always remain wary of the term unicorn and the culture that it promotes.

Read more: London continues reign as unicorn startup capital of Europe

My problem is not with any individual founder or company that has achieved a high valuation. Rather it is with the attitude that valuation is more important than value, and that external speculation, often artificially inflated by complex investment structures, is the most important factor when judging a company.

Instead, we, at Blenheim Chalcot, prefer to hunt for gazelles. These are companies able to consistently and repeatedly grow their revenues by 20 per cent or more year on year.

Gazelles maintain growth by solving real problems for more customers each year and by making money on each transaction. They avoid the temptation to chase growth at any cost, or to define success in terms of the competition. Ultimately, they create value that is less vulnerable to market shocks.

Of course, technology allows for rapid growth, but for this to create tangible value requires sound business economics, not just investment-fuelled growth. In my experience, the best companies create value first and grow on the back of this, rather than seizing market share first and considering end users afterwards.

Read more: Rarer than a unicorn? This venture capital firm just floated in London

My colleagues helped to build TDX Group in Nottingham, providing a range of “venture builder services” like office space, legal and marketing support, allowing the founder to get on with patiently building a business that solved a real market need. Ten years later the work paid off when the company had created over 400 jobs and was acquired for £200m in 2014.

This is not to say that speed is bad; it is crucial to bring products to market quickly if startups are to make the most of market opportunities.

Working with the Salary Finance team we went from founding the company to launching a valuable employee benefit in just six months. But in this case, as with TDX, we started with first principles, building a business that will create real customer value, sustainably and scalably. In my view it’s clear, in the long run, gazelles provide more meat than unicorns.

Unicorns will remain the source of speculation, and commentators will continue to point to every success and failure as evidence of good times ahead or an impending crash. Meanwhile much of the real value will be created by companies patiently growing with sound business economics, a real focus on the customer, and, no doubt, patient investors with an eye for the long term.


Dan Cobley

Dan Cobley is a Partner at Blenheim Chalcot, the UK’s leading Venture Builder. Dan joined in 2016 and is the managing partner for FinTech. Dan is a Trustee of The Technology Trust, a charity that helps other charities make the most of technology.

Blenheim Chalcot specialises in building digital businesses that transform industries. It has portfolio sales of over £300m, more than 3,000 employees, and a successful track record of over 40 companies across IT services and software platforms, financial services, education and media.

Before Blenheim Chalcot, Dan spent 8 years at Google, leading European Marketing and then as MD of the UK and Ireland business. And prior to that he ran European Marketing for Capital One.

Dan studied Physics at St John’s College Oxford, and Design, Manufacture and Management at Wolfson College, Cambridge.