Birmingham needs to take a few risks

Jan 29 2008 By John Duckers, Business Editor

I was chatting to a private equity specialist the other day and we got onto the outlook for Birmingham's new-local stock exchange Investbx.

Last week it had its first flotation - and probably couldn't have picked a worse time what with the main markets being all over the place. But then Investbx had been up and running without actually 'doing anything' for months.

Would it ever dip its toe into the water, some of us were starting to wonder. My contact has only relatively recently started targeting Birmingham, and he had never heard of Investbx.

Now you could say he is, in effect, competition because he is aiming at the £1 million to £6 million mark.

But he was extremely sceptical.

His major concerns were over what sort of track history such SME-type companies could show to potential investors, and how liquidity in such shares could be generated. He speculated on there likely being very small volumes and hence a difficulty in making a market.

In other words the risk of investors getting stuck with the shares must be very real. All valid concerns of which Investbx's team are very well aware.

They know they have a lot of convincing to do and the financial community is watching the experiment closely.

I have said before that I hope the venture succeeds.

Why?

For both positive and negative reasons. First, I think there is a need to help fledgling companies at these sort of levels despite arguments over whether an equity gap exists.

It can be very difficult to find the money needed to expand when you are just a tiddler but with a great idea or product. And the West Midlands badly needs more risk-taking entrepreneurs who can produce the businesses of the future.

Secondly, I would hate the thing to fail and see London laughing in our faces again - have you heard the one about hopeless Birmingham thinking it can have its own stock exchange? I can just see all the Tobys and Jeremys in the wine bars of the capital having a jolly good giggle.

The FT, whose Birmingham-based enterprise editor Jonathan Guthrie wrote a very fair piece about the arrival of Teamworks Karting onto the exchange, put it like this: "If it succeeds, Investbx will be hailed as a visionary experiment other cities should copy. If it fails, it will be decried as a manifestation of public sector folie de grandeur."

Very FT - but on the button.

If you have never heard of Investbx it is an online trading operation backed by Advantage West Midlands.

So it isn't going bust tomorrow because, for AWM's £3 million of funding, it is reckoned Investbx can get five years of operation.

Teamworks Karting is looking to raise £1 million which should capitalise it at £3.9 million. Basically it is targeting corporate types who want to pretend they are Lewis Hamilton.

There is said to be a pipeline of companies looking to launch in Teamworks Karting's slipstream.

Ultimately the exchange aims to become self-supporting by charging fees on capital raised.

I wish it well. ..SUPL: