The capital markets in the UK are not ready for growth in high-tech companies, according to John Newton, CTO and founder of open-source content management firm Alfresco.
In spite of efforts to introduce a new market segment for fast-growing companies in order to attract more technology IPOs, the London Stock Exchange (LSE) does not even come close to replicating the success of NASDAQ.
"AIM is a joke, I've seen so many people just lose their shirts on AIM. It's not the growth engine that NASDAQ is by any stretch of the imagination," Newton told Techworld.
"All the investors just end up going to the US, whether it's the sovereign wealth funds, whether it's Chinese banks and all the money that they've got, whether it's the Far East or just the US in general, all the money gets concentrated in the US because the infrastructure's there, all the analysts are there."
Despite being headquartered in the UK, Alfresco announced earlier this year that it had appointed former SuccessFactors president Doug Dennerline as its new CEO, in preparation for a forthcoming IPO in the US.
The company's executives said at the time that the best future for Alfresco and its investors was to continue to grow and to ultimately pursue an IPO on the NASDAQ stock exchange.
However, this had not always been the intention. Newton said the company did consider going public in the UK, and it might have happened if the conditions had been right. But a lot of the steps that the government has taken in the last few years have been backward steps.
"When the Labour government made the decision to cut Capital Gains tax, especially with taper relief, I thought finally there's an environment where we can have something that's very competitive relative to the US market," he said.
"At that time, it really did make a difference, and venture capital in the UK and in Europe in general really started taking off. But then we just see the reintroduction of regulation, the changing of the Capital Gains Tax, and I think that's probably a bigger problem that needs to be faced."
However, that does not mean that the LSE can never be a desirable destination for high-growth technology companies. Newton pointed to the New York Stock Exchange (NYSE), which has transformed itself into a high-growth market and recently surpassed NASDAQ in terms of new issues.
"What I've always believed is that the ability exists here, because the people and the experience exist, and people know what to do. It's just in terms of how to build companies, what are the right skills, they're just not organised in quite the right way to be able to take advantage of that," he said.
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