Description
Redressing The Venture
Redressing the Venture
• Business Turnarounds
• Achieving a successful Exit
Tony Kypreos By invitation
Athens 19 April 2011 Professor Eric Soderquist
1
[email protected]
1. Entrepreneurship – what is it?
2. What to do when ventures fail
• Case study – Bluewave Ltd
3. Achieving a successful exit
• Case studies
4. Discussion
2
Topics
• British Government - UKTI Global Entrepreneur Programme
• Angel Investor and Non-Executive Director (2007+)
• Post M&A Integration - Bauer Media M&A EMAP Plc €1.4B
• Operational Board - T-Mobile International
• Corporate Venturing – Deutsche Telekom T-Ventures
• 3 exits – Founder Intellectual Capital Ventures
• IPO NASDAQ $800m 12/1999 – Agency.com
• 9 years consumer goods brand marketing (Nestle, Diageo)
3
Background Context
1. 14 direct investments & Advisory Boards (USA & Europe)
• Online Publishing – Lingospot Inc.
• Mobile Engagement – ScreenReach
• Nanotechnology – P2i
• 11 other investments through www.springboard.com
2. Co-Founder & Investor of Venture Accelerator
www.springboard.com(Cambridge University)
3. Corporate Venturing & Innovation in Mobility (progress)
4. Management Buy In (MBI) – Search Fund (evaluation)
4
• What makes an entrepreneur?
• Don’t believe the hype
• Passion, sacrifice & resilience
• Leveraging unfair advantages
• What are your options?
• Startup
• Corporate spinout
• Growth stage
• MBI
• Characteristics of a successful entrepreneur?
• Mark Suster – blog
• Are entrepreneurs made or born?
5
Entrepreneurship
“The five entrepreneurial skills for
success are concentration,
discrimination (focus), organisation,
innovation and communication”
Michael Faraday 1791-1867
6
Entrepreneurship
? The action taken to turn a business from
financial failure to recovery and success.
? Why attempt a turnaround?
? The value created by a turnaround is greater than
1. Liquidation, or
2. Book value sale of assets
7
What is a “turnaround”?
Character cannot be developed
in ease and quiet.
Only through experiences of trial
and suffering can the soul be
strengthened, vision cleared,
ambition inspired and success
achieved.
Helen Keller
8
Success in the face of adversity
? PEOPLE
? PRODUCT
? PLANT (Asset Cost Base)
9
The 3 levers
? Stage 1 – Cash Crunch (disaster imminent)
? Stage 2 – Cash Shortfall
? Stage 3 – Quantity of Profit
? Stage 4 – Quality of Profit (first signal)
10
The 4 Stage Continuum
You can tell who the
good seamen are
during a storm.
Greek proverb
11
When things go (badly) wrong
? Web design and development agency founded 1995
? 1997 Revenue £0.3M
? 2000 Revenue £3.6M 130% growth PA
?http://www.guardian.co.uk/media/2001/nov/01/newmedia.internet
? Corporate client base: Pfizer, Unilever, Volkswagen, Reebok,
Levi’s, British Airways, Channel 4
? Sold 51% stake to Danish giant Maersk in November 2001
? London HQ opened offices in NYC, Singapore, SFO
? 140 staff worldwide
12
Bluewave Ltd
13
Everything’s fine
? Dotcom bubble burst – March 2000 & 9/11
? Corporate website design prices collapse
? Corporate customers withdraw budgets and projects
? More significant competition from major players e.g.
Accenture, WPP etc.
? 130% PA revenue growth turns to 50% revenue decline in
2001
? ICV Ltd – Maersk Data Corporate venturing portfolio review
& Bluewave Turnaround remit in 2002
14
But it’s not…
? Complacency
? Rapid growth can lead to poor discipline and bad habits.
? Overconfidence
? Habits and perceptions of the staff and management had not
changed with market conditions.
? Ignorance
? What was considered a strength is in fact a serious cultural
weakness.
15
‘We are what we consistently do... success [or
failure] is not an act, it is a habit.’
Aristotle
16
Act fast!
? STEP 1 – immediate internal assessment
? Cash shortfall stage
? Assess all customer contracts, status and legal liability (Pareto
80/20)
? Assessment of all cost base (e.g. salaries, leases, equipment,
software licenses)
? Review UK employment law (consultation redundancies)
? STEP 2 – Alignment of the Board and Investors
? Agreement of objectives, milestones and frame of reference
? Weekly reviews & status updates
? No surprises (over-communicate)
17
Stakeholder alignment and assessment
Turnaround implementation
? STEP 3 – Communication with staff
? Be transparent and honest
? Create urgency and involvement (break habits)
? STEP 4 – Use “Brutal triage” to gain time
? Identify and focus on strong assets, remove others
? Closed San Francisco, moved NYC to New Jersey, integrated Singapore
to Maersk Asia-Pac
? Terminated contracts with 50% of customers (lost 10% revenue)
? Redundancy programme consultation started in London HQ
? Beware of Saboteurs !
18
Communicate and prioritise
Turnaround implementation
? STEP 5 – Implementation cost reduction
? Renegotiated remaining contracts and met all key clients.
? Careful and fair redundancy consultation process to remove 70% of staff
in London HQ and retained 80% of current revenue.
? Careful selection of staff / talent to retain for the future (on-board)
? Board of management 25% salary cut and no bonus.
? STEP 6 – Identify & Create Market Repositioning
? Be realistic and don’t overstretch
? What is relevant in the current market?
? What assets / capabilities do you have that can be leveraged?
? Identify key gaps
19
Radical cost reform and new vision
Turnaround implementation
? STEP 7 – Implementation of re-positioning
? From Web development to regulatory compliance and e-learning
solutions for the Pharmaceutical, Logistics and Banking sectors
? Recession proof and synergies with core competencies e.g. training for
compliance through the web.
? Deep industry domain expertise gained through associates
? Business development, product partnerships and PR
? STEP 8 – Transformation and company exit
? 18 month of heavy effort
? Flagship clients gained in each sector e.g. Pfizer, Merrill Lynch
? Bluewave Ltd London integrated into IT Group Aspect Ltd – sale
completed
20
Market repositioning and company sale
Turnaround implementation
21
Achieving a “successful” exit
?Apertio exit to NSN (T-Ventures investment)
?PlayFish exit to Electronic Arts
?Different sectors Telco, Social Gaming
?Both UK companies
22
M&A Exit Case Studies
• Apertio – T-Ventures investment
• Exit 3/2008 to NSN $205m
• Core Networking Infrastructure Provider
23
Corporate Venturing
• Apertio delivers a single, open, subscriber-centric architecture for current
and new generation operators.
• Address a significant industry problem
• Reduces “silos” of user information in Telco operators (mobile & fixed) – big
issue
• What really happened?
• Be a “pain” to big incumbents – customers demanded the service from the big players
• Be well funded - control of own destiny did not need to sell
• Have alternatives - Competitive tension NSN, Ericsson & Nortel (and IPO)
24
Apertio exit
• Playfish is a social network gaming company with
innovative, award-winning and category-defining games.
• Over 60 million unique players per month
• $3m seed investment in 2007
• $18m series A (9 months) – Index & Accel
• Sold to EA 2009 $245m – within 2 years (+ earn out)
25
Rapid value creation
• Dare to dream big enough
• Technology disruptor – internet, mobile, social media
(Dinosaur slayer!)
• Widen your addressable market - to take on $50B
game industry
• Challenge the buyer – how will you help me build this
into a Billion $ company?
• Product is less valuable than the community (D2C)
• Product engaged 60 million unique players every
month
• Building strong cultures creates resilience
26
20 x Exit in 2 years!
Learning from Kristian Segerstrale Co-Founder
1. Large & growing market (not small & shrinking!)
• your CEO needs to convince the buyer
2. Be best in class (technology, operations, customers)
• Understand competitive set and why you are better
3. Attractive business model (some examples)
• Cash efficient (hosted, no sales force req’d, no admin, no physical
goods)
• Services not product (no warehousing, no staff, shipping or
logistics)
• Very scalable (no “x deals per staff”ramp up required)
27
“In control factors”
4. Demonstrable opportunity to drive top-line growth
• Revenue growth / validate this
5. Effective management team
• Not necessarily the best but works effectively for results
6. Unexplained strategic relevance to the buyer
• Let the buyer discover something for themselves (set-it up let them
discover it)
7. “Optionality”
• Competitive tensions – never have 1 or even 2 buyers
28
“In control factors”
1. Sell what the buyer wants to buy
• Not your own ambition and vision
• Understand the buyer language and where they need to go
• Show you can continue without them and get bigger / better
2. TIMING is crucial – understand cycles / tensions
• Be aware of when strategic buyer is in the market e.g. Mobile
Advertising (Google Admob, Apple Quottro), Social Gaming (EA
Playfish, Disney Playdom)
But most important of all………..
29
Key success factors
• Participate, know who your potential buyers are.
• Buyers want to buy companys that are not for sale!
• Understand that large companies have lengthy processes
and stakeholder committees
• To get the highest price the buyer must be comfortable
with the business and the people in it
30
3. Educating the buyer community
• Where’s the Talent
• Knowledgeable and competent Non-
executives and Advisory Groups.
• VC investors (Angels, VCs, corporates)
• Industry Associations
• Standards Bodies
• Professionals that understand your needs
• Sensible Cost Bases
31
Know your Global Eco-System
?????????!
32
Thank you!
The Startup Accelerator
•Mentors, Investment, Community
•Springboard is an intensive mentorship-led acceleration programme
located at Cambridge University.
•Over 100 inspiring mentors
•Investment capital
•World class working environment
•13 week bootcamp programme
•Investor Day
•Springboard is open to anyone from the UK or elsewhere. Learn more
www.springboard.com
33
doc_963959818.pdf
Redressing The Venture
Redressing the Venture
• Business Turnarounds
• Achieving a successful Exit
Tony Kypreos By invitation
Athens 19 April 2011 Professor Eric Soderquist
1
[email protected]
1. Entrepreneurship – what is it?
2. What to do when ventures fail
• Case study – Bluewave Ltd
3. Achieving a successful exit
• Case studies
4. Discussion
2
Topics
• British Government - UKTI Global Entrepreneur Programme
• Angel Investor and Non-Executive Director (2007+)
• Post M&A Integration - Bauer Media M&A EMAP Plc €1.4B
• Operational Board - T-Mobile International
• Corporate Venturing – Deutsche Telekom T-Ventures
• 3 exits – Founder Intellectual Capital Ventures
• IPO NASDAQ $800m 12/1999 – Agency.com
• 9 years consumer goods brand marketing (Nestle, Diageo)
3
Background Context
1. 14 direct investments & Advisory Boards (USA & Europe)
• Online Publishing – Lingospot Inc.
• Mobile Engagement – ScreenReach
• Nanotechnology – P2i
• 11 other investments through www.springboard.com
2. Co-Founder & Investor of Venture Accelerator
www.springboard.com(Cambridge University)
3. Corporate Venturing & Innovation in Mobility (progress)
4. Management Buy In (MBI) – Search Fund (evaluation)
4
• What makes an entrepreneur?
• Don’t believe the hype
• Passion, sacrifice & resilience
• Leveraging unfair advantages
• What are your options?
• Startup
• Corporate spinout
• Growth stage
• MBI
• Characteristics of a successful entrepreneur?
• Mark Suster – blog
• Are entrepreneurs made or born?
5
Entrepreneurship
“The five entrepreneurial skills for
success are concentration,
discrimination (focus), organisation,
innovation and communication”
Michael Faraday 1791-1867
6
Entrepreneurship
? The action taken to turn a business from
financial failure to recovery and success.
? Why attempt a turnaround?
? The value created by a turnaround is greater than
1. Liquidation, or
2. Book value sale of assets
7
What is a “turnaround”?
Character cannot be developed
in ease and quiet.
Only through experiences of trial
and suffering can the soul be
strengthened, vision cleared,
ambition inspired and success
achieved.
Helen Keller
8
Success in the face of adversity
? PEOPLE
? PRODUCT
? PLANT (Asset Cost Base)
9
The 3 levers
? Stage 1 – Cash Crunch (disaster imminent)
? Stage 2 – Cash Shortfall
? Stage 3 – Quantity of Profit
? Stage 4 – Quality of Profit (first signal)
10
The 4 Stage Continuum
You can tell who the
good seamen are
during a storm.
Greek proverb
11
When things go (badly) wrong
? Web design and development agency founded 1995
? 1997 Revenue £0.3M
? 2000 Revenue £3.6M 130% growth PA
?http://www.guardian.co.uk/media/2001/nov/01/newmedia.internet
? Corporate client base: Pfizer, Unilever, Volkswagen, Reebok,
Levi’s, British Airways, Channel 4
? Sold 51% stake to Danish giant Maersk in November 2001
? London HQ opened offices in NYC, Singapore, SFO
? 140 staff worldwide
12
Bluewave Ltd
13
Everything’s fine
? Dotcom bubble burst – March 2000 & 9/11
? Corporate website design prices collapse
? Corporate customers withdraw budgets and projects
? More significant competition from major players e.g.
Accenture, WPP etc.
? 130% PA revenue growth turns to 50% revenue decline in
2001
? ICV Ltd – Maersk Data Corporate venturing portfolio review
& Bluewave Turnaround remit in 2002
14
But it’s not…
? Complacency
? Rapid growth can lead to poor discipline and bad habits.
? Overconfidence
? Habits and perceptions of the staff and management had not
changed with market conditions.
? Ignorance
? What was considered a strength is in fact a serious cultural
weakness.
15
‘We are what we consistently do... success [or
failure] is not an act, it is a habit.’
Aristotle
16
Act fast!
? STEP 1 – immediate internal assessment
? Cash shortfall stage
? Assess all customer contracts, status and legal liability (Pareto
80/20)
? Assessment of all cost base (e.g. salaries, leases, equipment,
software licenses)
? Review UK employment law (consultation redundancies)
? STEP 2 – Alignment of the Board and Investors
? Agreement of objectives, milestones and frame of reference
? Weekly reviews & status updates
? No surprises (over-communicate)
17
Stakeholder alignment and assessment
Turnaround implementation
? STEP 3 – Communication with staff
? Be transparent and honest
? Create urgency and involvement (break habits)
? STEP 4 – Use “Brutal triage” to gain time
? Identify and focus on strong assets, remove others
? Closed San Francisco, moved NYC to New Jersey, integrated Singapore
to Maersk Asia-Pac
? Terminated contracts with 50% of customers (lost 10% revenue)
? Redundancy programme consultation started in London HQ
? Beware of Saboteurs !
18
Communicate and prioritise
Turnaround implementation
? STEP 5 – Implementation cost reduction
? Renegotiated remaining contracts and met all key clients.
? Careful and fair redundancy consultation process to remove 70% of staff
in London HQ and retained 80% of current revenue.
? Careful selection of staff / talent to retain for the future (on-board)
? Board of management 25% salary cut and no bonus.
? STEP 6 – Identify & Create Market Repositioning
? Be realistic and don’t overstretch
? What is relevant in the current market?
? What assets / capabilities do you have that can be leveraged?
? Identify key gaps
19
Radical cost reform and new vision
Turnaround implementation
? STEP 7 – Implementation of re-positioning
? From Web development to regulatory compliance and e-learning
solutions for the Pharmaceutical, Logistics and Banking sectors
? Recession proof and synergies with core competencies e.g. training for
compliance through the web.
? Deep industry domain expertise gained through associates
? Business development, product partnerships and PR
? STEP 8 – Transformation and company exit
? 18 month of heavy effort
? Flagship clients gained in each sector e.g. Pfizer, Merrill Lynch
? Bluewave Ltd London integrated into IT Group Aspect Ltd – sale
completed
20
Market repositioning and company sale
Turnaround implementation
21
Achieving a “successful” exit
?Apertio exit to NSN (T-Ventures investment)
?PlayFish exit to Electronic Arts
?Different sectors Telco, Social Gaming
?Both UK companies
22
M&A Exit Case Studies
• Apertio – T-Ventures investment
• Exit 3/2008 to NSN $205m
• Core Networking Infrastructure Provider
23
Corporate Venturing
• Apertio delivers a single, open, subscriber-centric architecture for current
and new generation operators.
• Address a significant industry problem
• Reduces “silos” of user information in Telco operators (mobile & fixed) – big
issue
• What really happened?
• Be a “pain” to big incumbents – customers demanded the service from the big players
• Be well funded - control of own destiny did not need to sell
• Have alternatives - Competitive tension NSN, Ericsson & Nortel (and IPO)
24
Apertio exit
• Playfish is a social network gaming company with
innovative, award-winning and category-defining games.
• Over 60 million unique players per month
• $3m seed investment in 2007
• $18m series A (9 months) – Index & Accel
• Sold to EA 2009 $245m – within 2 years (+ earn out)
25
Rapid value creation
• Dare to dream big enough
• Technology disruptor – internet, mobile, social media
(Dinosaur slayer!)
• Widen your addressable market - to take on $50B
game industry
• Challenge the buyer – how will you help me build this
into a Billion $ company?
• Product is less valuable than the community (D2C)
• Product engaged 60 million unique players every
month
• Building strong cultures creates resilience
26
20 x Exit in 2 years!
Learning from Kristian Segerstrale Co-Founder
1. Large & growing market (not small & shrinking!)
• your CEO needs to convince the buyer
2. Be best in class (technology, operations, customers)
• Understand competitive set and why you are better
3. Attractive business model (some examples)
• Cash efficient (hosted, no sales force req’d, no admin, no physical
goods)
• Services not product (no warehousing, no staff, shipping or
logistics)
• Very scalable (no “x deals per staff”ramp up required)
27
“In control factors”
4. Demonstrable opportunity to drive top-line growth
• Revenue growth / validate this
5. Effective management team
• Not necessarily the best but works effectively for results
6. Unexplained strategic relevance to the buyer
• Let the buyer discover something for themselves (set-it up let them
discover it)
7. “Optionality”
• Competitive tensions – never have 1 or even 2 buyers
28
“In control factors”
1. Sell what the buyer wants to buy
• Not your own ambition and vision
• Understand the buyer language and where they need to go
• Show you can continue without them and get bigger / better
2. TIMING is crucial – understand cycles / tensions
• Be aware of when strategic buyer is in the market e.g. Mobile
Advertising (Google Admob, Apple Quottro), Social Gaming (EA
Playfish, Disney Playdom)
But most important of all………..
29
Key success factors
• Participate, know who your potential buyers are.
• Buyers want to buy companys that are not for sale!
• Understand that large companies have lengthy processes
and stakeholder committees
• To get the highest price the buyer must be comfortable
with the business and the people in it
30
3. Educating the buyer community
• Where’s the Talent
• Knowledgeable and competent Non-
executives and Advisory Groups.
• VC investors (Angels, VCs, corporates)
• Industry Associations
• Standards Bodies
• Professionals that understand your needs
• Sensible Cost Bases
31
Know your Global Eco-System
?????????!
32
Thank you!
The Startup Accelerator
•Mentors, Investment, Community
•Springboard is an intensive mentorship-led acceleration programme
located at Cambridge University.
•Over 100 inspiring mentors
•Investment capital
•World class working environment
•13 week bootcamp programme
•Investor Day
•Springboard is open to anyone from the UK or elsewhere. Learn more
www.springboard.com
33
doc_963959818.pdf