Organic Growth Masterclass: Codeplay, backed by Foresight

Foresight director Chris Wardle explains how the venture firm helped Scottish software developer Codeplay along its growth trajectory, culminating in a recent sale to Intel delivering a 15.7x return on investment.

Edinburgh-based Codeplay was founded by Andrew Richards and Dr Jens-Uwe Dolinsky in 2002. Richards started his career writing games for the ZX Spectrum, eventually graduating to software for the Sega Megadrive and PlayStation consoles.

“Richards wanted to take the innovation in graphics processing units (GPU) and hardware acceleration that was happening at the time beyond the gaming field, whereby programmers could take software they had written for normal computers and run it on new graphics-capable computers,” Foresight director Chris Wardle explains. “He foresaw that this technology would become increasingly relevant to the growing market of chip production, among other applications.”

One of the main factors that really attracted Foresight to Codeplay back in 2018 was how “laser-focused” the founder was on the opportunity at hand, and how relevant it could be across several key markets, Wardle says: “In fact he may have been a bit too early in some respects - the vision was right but the market wasn’t quite there yet at the beginning of the business. So while the company was profitable and doing well, it had the potential to transform into something even more successful.”

Foresight committed £2.1m to Codeplay in 2018 to fund these growth initiatives - including £1.05m coming from the Foresight Williams Technology EIS Fund.

Money isn’t everything

“One of the most promising applications was in the field of advanced driver assist systems (ADAS), which Codeplay had already identified,” Wardle says. “We funded a big push into that market, and this is where our partnership with Williams Engineering really brought something for the business, beyond just capital: the way they helped Codeplay with how to best approach the automotive market was invaluable.”

“At the same time, there was a noticeable pickup in the supercomputing chips space, for use in data centres and supercomputer applications. This was another big market to tap into, with a shorter lead time compared with the automotive applications, but where performance is absolutely key. So a lot of development time and effort was spent optimising the tech.”

Following the 2018 investment, Codeplay therefore continued to develop its suite of high-performance software assets and also developed its routes to market, selling its solutions to chip companies and downstream users (such as manufacturers of diagnostic healthcare equipment, among others). Part of that growth was international, with the company notably securing two key contracts with the US government to supply its software for supercomputer use.

“We also helped Codeplay build up their board, appointing a new chair and a new finance director, along with introducing more control around the finance function,” Wardle adds.

The journey to growth isn’t always smooth-sailing, but Wardle says that Codeplay was able to successfully negotiate two challenges in particular: “The automotive industry has undergone quite a few shocks in recent years, but Codeplay has been able to navigate that well. Hiring software engineers is always tricky as well - one of the ways in which the company was able to mitigate that challenge was through its proximity to the Edinburgh university, which enabled it to tap into local talent to power its rapidly growing team.”

These efforts have certainly paid off handsomely: the company caught the eye of US tech giant Intel, with a sale announced on 31 May this year. The transaction will generate approximate gross proceeds of £48m for Foresight, implying a 15.7x multiple on capital invested and an internal rate of return (IRR) of nearly 100%.