Issue 5 In this issue Exploring the secrets of success · Issue 5 In this issue. Welcome to the...

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Issue 35

In this issue

Welcome to the 35th edition of GS-insight, the magazine of international technology sector Executive Search specialists Gillamor Stephens, part of Sheffield Haworth, the global talent consulting and leadership advisory firm. As a recruitment team, we are fortunate to work with companies at all stages of organ-isational and business development; from university “spin-outs” requiring CEOs to help commercialise “bleeding edge” technology, through to privately owned and VC/PE funded small-mid size businesses seeking the leaders to drive organic and acquisitive growth/internationalisation strategies to the larger corporate entities hiring executives to lead large scale business transformation and growth. In the UK, it is very pleasing to see the geographical spread of executive oppor-tunities with multiple assignments at present in Manchester, Bristol, Oxford, Cambridge as well as London and Thames Valley. Outside of the UK, we are very active in the German and the Nordic regions, where there are many well-funded technology “start-ups”. At the time of writing, the UK is still mired with Brexit uncertainty but this has not had any noticeable impact on executive hiring activity in the technology sector; we are busier than at any point in recent years, with the market for executive talent being very competitive and as a by-product of this we are recording compensation levels trending higher. While for certain roles there is often a strong preference to hire individuals with proven experience and track record, those that have “been there and done it”, we are seeing that some clients are more interested in hiring the high potential candidate who may not immediately match every criteria but, importantly, has the core skills combined with the right attitude, ambition and desire to make a positive impact and prove themselves in a challenging role. To support this activity, we are often working with business psycholo-gists to help in the assessment of an individ-ual’s future potential, culture and value

fit and thereby de-risk the hiring process. Understandably, investors and Boards are very keen to have a robust assessment of the strengths and risks associated with management teams and of their capability to grow, change and adapt to achieve business objectives. This issue of GS-insight explores a wide range of themes with leaders across our industry sector. We discuss the importance of company culture and business growth with Graham Charlton of Softcat and Russell Sloan of Kainos, two of the most successful and fastest growing publicly listed technology businesses. While insight into the positive challenges facing UK headquartered technology “unicorns” is provided by Sophie Fromont of Graphcore and Ross Seychell of Transferwise. International perspective is given by Kelly Kinnard, VP of Talent at Battery Ventures, who helps us understand the competitive market for leadership talent in Silicon Valley and other technology hotspots in the USA. The new frontier of investing in space technology companies is explored with Mark Boggett of Seraphim Space Capital, the only space-tech focussed venture fund anywhere on the planet. A down to earth view on the opportunity in the UK mid-market for cloud managed services is discussed with entrepreneur Des Lekerman, while Ian Spence of Megabuyte, the leading technology analysts, challenges the current hype around AI. The role of interim management in the technological revolution is outlined by our colleague Martin Smith. Plural Non-Executive Chairman Chris Stone provides advice for succeeding as a Non-executive and contrasts between PLC and PE boards. Finally, Alex Stephany of Beam, talks about social enter-prise and the emerging “Tech for Good” sector that is helping society’s most vulnerable.I hope you enjoy this issue and I welcome your feedbackSteve Morrison

Steve Morrison, Managing Director, Gillamor Stephens [email protected] GS-insight can be viewed and downloaded from www.gillamorstephens.com

For more information on Sheffield Haworth, please visit www.sheffieldhaworth.com

Exploring the secrets of successGS-insight discusses some of the latest trends and opportunities in the international technology industry, the importance of company culture in business success and much more …

2 Business InsightGraham Charlton, CFO, Softcat

5 Consulting InsightMartin Smith, Executive Director, Sheffield Haworth Consulting Solutions

6 International InsightKelly Kinnard, VP Talent, Battery Ventures

8 Investment InsightMark Boggett, CEO, Seraphim Space Capital

10 Non-Executive InsightChris Stone, Plural Chairman

12 Unicorn InsightSophie Froment, SVP People, Graphcore

14 Growth InsightRussell Sloan, Digital Services Director, Kainos

16 Entrepeneur InsightDes Lekerman, CEO, TIG

18 Social InsightAlex Stephany, CEO, Beam Foundation

20 FinTech InsightRoss Seychell, Chief People Officer, Transferwise

22 MegaBuyte InsightIan Spence, CEO, Megabuyte

24 Services InsightInsight into Gillamor Stephens

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BUSINESS INSIGHT

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The Start of Something DifferentWhen I joined Softcat, I knew very little about the industry, but I was immediately drawn not so much to what the business did, but to its strong, unique sense of identity and its vibrant operating environment. After meeting some of the people I knew it was the right place for me.

Softcat was founded 26 years ago by Peter Kelly. Peter is a larger than life character with immense enthusiasm, drive and energy. He was convinced that there had to be more to corporate life than the grey world of business he’d experienced in his early career. He wanted to bring his own personality and beliefs to the world of work; to create an environment that was fun and exciting to work in – basically somewhere people would enjoy coming to each day.

I think the idea to get into software resale (the business was initially called ‘The Software Catalogue’) was something a close friend of Peter’s in the private equity world first mooted. That initial idea, Peter’s enthusiasm and creativity, and a great group of people took the business to £50 million turnover over the next 10 years or so. At which point Peter considered selling the company and although that didn’t happen, he realised that new leadership was required to take

The Cultural Route to SuccessGraham Charlton joined IT solutions and services provider Softcat as CFO in 2015, taking the business to IPO within ten months. Here he tells GS-insight what first attracted him to the company and why he believes its unique culture and operational style is one that sets Softcat apart from many other businesses.

BUSINESS INSIGHT

the business through the next phase of growth. By this time the business had been renamed ‘Softcat’, and in came Martin Hellawell who was to be Chief Executive for the next 13 years. Martin had already had a very successful career as part of the leadership team at Computacenter, and he knew exactly what was needed to unlock the true potential of Softcat. He also had the charisma and strength of character to blend in perfectly with and enhance what Peter had begun. So over the next 13 years both Martin and Peter (Peter gradually stepping further away over

the period) propelled the business to a very profitable £600m turnover. It’s important to realise that all of this growth was entirely organic – up to the present day Softcat has never acquired another business nor taken on any debt. The reason for going public rather than executing a trade sale or selling to private equity was because Peter loved and still loves the company and its culture. He didn’t want to lose the strong identity he’d created; an identity that has been fundamental to Softcat’s success. The job of the team running Softcat post IPO has been to stay true to that

Graham Charlton, CFO, Softcat

“I was immediately drawn not so much to what the business did, but to its strong, unique sense of identity and its vibrant operating environment.”

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BUSINESS INSIGHT


very special heritage and just keep going.

Fast ForwardAt the time I joined, the mentality of the business had been to grow in as lean a fashion as possible, so the development of the back-office functions had lagged behind the development of the sales engine. When the time came to commit to the flotation, it was essential to enhance the infrastructure of the business to face the rigours of public life and all of the compliance obligations that brings, and most importantly to establish a solid footing for further growth. Part of that development involved finding a CFO and quite understandably the business set out to find someone with experience of both running an IPO and operating in the lead role in a listed business.

Luckily for me, nobody they saw could tick those boxes as well as fit the culture. So they widened the net and placed a priority on cultural fit coupled with potential rather than experience. At the time I was working at BGL Group as Finance Director of Compare the Market. I had plenty of experience in senior finance roles but, despite 6 years in senior roles at Experian, I had not held the number one job and had not executed an IPO. However, I met Martin and we got on, discovering we had a similar outlook on many things. Our then Chairman, Brian Wallace, decided that I was up to scratch on the finance side and off we went. I joined in January 2015 and we floated in November that same year.

That first year was an incredible learning curve. As soon as I knew I was coming to Softcat, I began to consume every bit of information I possibly could on the IPO process. I think I must have read the London Stock Exchange’s own guide cover to cover at least five times! Of course, any properly resourced process brings with it a raft of profes-sional advisors to call on. The most important thing at that time was to use all that knowledge properly and fully. I always tell people that there are two bits to getting an IPO done – the legal bit and the sales pitch. The legal bit comes down to hard work and diligence, and letting the experts guide you. If you organise a team and

put the work in, you will get it done. The other side, telling the company’s equity story, is something that the management team have to take ownership of. This is what ultimately decides how successful the process is, whether investors feel compelled by your proposition. That part was a great challenge, being so new to the business and the industry, but I really enjoyed it and investors found it compelling.

I didn’t set out to be a public company CFO, I’ve always taken opportu-nities on their own merit without any fixed end point in mind. But I am immensely glad I’ve ended up being just that at Softcat. I think, quite frankly, it’s just about the best CFO job in the UK. Being a CFO puts you at the focal point of information and insight in a business, and if you use that privileged position well, you can really help drive the business forward. Doing that under the spotlight of the public markets with the opportunities Softcat brings is brilliant fun and I’m very lucky indeed to have this job.

Importance of CulturePeople often ask me about the secret of Softcat’s success, and while the answer is easy it’s also hard for people who haven’t worked here to really get it. It’s culture and attitude. People here are given freedom and responsibility within a robust framework of rules and guidelines that are designed to serve the best interests of the company as a whole. We hope our people genuinely care about the business they work for, care about each other, and as a result feel like they are working somewhere special, unique even. If you have that, many other things simply take care of themselves.

While it sounds easy and obvious, creating that kind of culture in my experience is very rare indeed. I’ve seen pockets of it before joining Softcat, but never across an entire organisation (and we’re spread across 8 offices these days). Bringing in large numbers of graduates helps. They’re malleable and looking for leadership and role models, and once they’ve grasped Softcat’s culture and adopted the right attitude, they set the standard for those coming in behind them.

We teach our graduates to play the long game. They have a revenue target from the minute they join the sales team. They’re given no accounts to trade with, they’re cold calling, trying to win new customers – it’s incredibly hard work. We’ve created a remuneration structure that rewards results and teamwork. It’s vital that new joiners understand from the outset that they will only thrive here if they’re a team player, with the drive, hunger and energy to do the very best possible job for our customers.

That’s not for everybody, and conse-quently the first year or two seems many decide a different career would suit them better. But we work hard on supporting them and giving them every chance to succeed. Those who enjoy it and have the ability, resilience and attitude to make a success of it can then look forward to a great career at what we think is one of the best places to work in the world. After those first two years attrition rates drop enormously. The nature of the job changes significantly as well, becoming more about developing a consultative relationship with a set of customers you’ve got to know really well.

Accessing that pool of talent is one of the reasons we have set up our new offices near university towns, but the other is so that our head office doesn’t become an anonymous monolith of 1,500 people where no one knows each other. Each new office is seeded by five or six people who’ve been with Softcat for between three and seven years. Those people who intrinsically understand and enjoy the company culture and who have the desire to build their own new corner of the business.

If you walk into our Manchester office,

“People often ask me about the secret of Softcat’s success, and while the answer is easy it’s also hard for people who haven’t worked here to really get it. It’s culture and attitude.”

BUSINESS INSIGHT

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BUSINESS INSIGHT


it will feel different from our London office, which will in turn feel different to the Marlow office, but you can still tell it’s Softcat. People will smile, say hello, ask you if you need any help. There are open communal areas in each office with lots of people talking. It’s a relaxed environment, but always with a purposeful hum and buzz.

Moving Ahead, Staying RelevantWhen I joined, Softcat had an accounting function that was pretty good at keeping the score and getting us through audits, but we weren’t doing enough in terms of plotting the route ahead and planning for growth. There were lots of myths about how the business worked, so a big part of my job, apart from getting the IPO done, was to shed a bit of new light to hopefully enhance the way we were running the business. Using key data and insight to tweak and nudge an already fantastically well-oiled machine into an even more optimal groove. So since that time we’ve created a new Commercial Finance Team. This team consists of just five people, but it helps inform almost all of the significant decision-making process in the business. That group and the wider team has shown how a well-rounded finance function can really focus efforts and resources and help accelerate growth.

That work gave and continues to give us the confidence to scale-up the organisation at a faster rate. Rather than reaching a plateau on IPO we’re now growing faster than ever in absolute terms and have consistently exceeded expectations in each of the four years since the float.

I’ve been asked about my views on automation in the finance area and, to be honest, I’m sceptical in parts. So often the real value is to be found in the human interpretation of the data. There are definitely processes that we could automate, but if every decision is made only by reference to data you will eventually break something. So for me a large part of the work of a finance function will always be about leadership and judgment.

In terms of our customer propo-sition, technology is advancing

rapidly, particularly with the large-scale adoption of cloud computing. We have to ensure we stay relevant and understand the technology challenges faced by our customers, helping them evaluate the right model for their business. While we don’t really sell the clever appli-cations that sit on their IT infra-structure, we are instrumental in providing the compute power, the storage, the security, the networking and the devices that comprise their technology platform.

Occasionally we might offer to manage some of it for them or to find a partner to help with that, such as maintenance of a security process for example. We’re not trying to move away from selling our products, but there are services that we can and will provide that are relevant in assisting them to have the right technology infrastructure in place.

Figuratively SpeakingWhen I joined Softcat I spent a lot of time trying to get to understand how this industry works. When you look into the detail of many managed service providers, they might have a great proposition, but delve deeper into the numbers and it’s increas-ingly rare to find a growing profitable managed service company.

I’m not being dismissive of services and the potential they have to generate high margins. If you can find the right niche and get the right scale, you can have a fantastic managed service business. But often there seems to me an almost ideological belief that to survive in this space you need predominantly to be a service provider. This is something our former CEO, Martin Hellawell, always

questioned and having looked at it hard myself I’ve found his intuition to be very well-founded indeed. It’s one of the very many things I learned from him.

At Softcat our P&L doesn’t really start with revenue, it only gets going at gross profit. A £10 million commodity licencing deal for a large organisation might only earn us a 3% margin, but that’s still £300,000 gross profit towards the bills. That’s a deal worth doing; the 3% is far less relevant than the £300k.

We’ve made a huge effort to not allow being a public company to change this ability to think for ourselves and plough our own furrow. Those that get the principles like the fact we’ve got clarity of thought on the strategy, and they know the logic is sound because our results bear it out. In fact, when measured relative to gross profit our net earnings are higher now than they’ve ever been because we train our people to compete on value, not price. What IT managers care most about is that the product works and is fit for purpose. They’ll pay for that quality and reassurance, and they’ll keep coming back again because they trust you.

So, in terms of what Softcat’s plans for the future are, well, it’s first and foremost more of the same. Our model works, and the investment strategy is one we’re determined to maintain. We think that will underpin further market share gains for us. We only have 5% market share so there is still a massive opportunity still.

And because of this we’re still entirely focussed on UK customers. We are investing in overseas branches and overseas relationships with suppliers to make sure that we can deliver worldwide for UK customers, but the plan to put sales teams in foreign jurisdictions to sell to non-UK companies is not yet part of the plan.

We haven’t yet made an acquisition but we keep an open mind. We’re continually building capability organ-ically but accept that sometimes inorganic expansion can be a great option too. If the right thing ever came up, we’d look at it.

But, as has always been the case, the single most important thing to all of us at Softcat is the health of our culture.

“Rather than reaching a plateau on IPO we’re now growing faster than ever in absolute terms and have consistently exceeded expectations in each of the four years since the float.”

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CONSULTING INSIGHT


In the UK no other sector is growing quicker than that of the technology sector. It continues to outstrip the rest of the economy by some distance (2.5x), with statistics showing that in 2018, it contributed over £180bn to GDP, up 12% on the previous two years.

With digital transformation continu- ing to drive business change across all industries and marketplaces, it is a given that change will take place at all levels, none more so than when it comes to talent and capabilities. Leadership teams that begin this journey of discovery very rarely end it with the same people in the role. New talent, familiar with new technol-ogies, will inevitably be required. As such, the ability to be innovative and flexible in 2019 is essential, with hiring managers and business leaders needing to up their game when it comes to developing talent pools and working with partners to identify and engage talent in a timely and cost-effective manner.

It is extremely important to note that this is not only a HR issue, but a business one. Executives must embrace strategic workforce planning and treat it as a key priority issue, with the pace of expansion leading to a surge in job creation and a ‘war for talent’. They need to ensure that their companies are agile and can respond instantly to whatever gets thrown at them, dissolving the traditional hierarchical structures that we tend to see and reinventing their workforces.

So, the question now on every execu-tives’ lips is how do we continue to innovate at speed and compete at the top of our chosen marketplace? The answer is clear and lies in their ability to think creatively when it comes to addressing key people and leadership challenges. It is where the

The role of interim management in the technological revolutionMartin Smith, an Executive Director at Sheffield Haworth Consulting Solutions, looks at the rise of the independent consultant and the role they can play in addressing the heightened demand for skilled leaders across what is a rapidly evolving technology landscape.

CONSULTING INSIGHT

role of interim management comes into play.

Such talent can be engaged and on site quickly, free of baggage and adding tremendous value from day one. Having ‘been there and done it’, their ability to deliver has already been proven, as has their ability to move between different environments and cultures, adapting seamlessly to whatever they encounter. They harbour a genuine purpose and can inject a certain momentum into a change scenario or growth agenda, combining a strategic and tactical skillset to define the problem statement, deliver a solution and then hand off to the business.

In 2019, there are many windows of opportunity opening for such operators across the tech sector. Whether it’s an expert who can lead on technology initiatives and focus on the ‘big-picture’, an advisor who can carry out pre-IPO / M&A due diligence or a specialist in organi-sational design who can devise and embed a new Target Operating Model (ToM), it is those businesses who treat interim management as a

vital part of their strategic workforce planning who will come out on top. Combine this with the ever-increasing trend of companies tying employees to longer-term (6 months+) notice periods, a real issue when looking to add to permanent headcount, and the result is a buoyant and compet-itive marketplace.

The investor community must also sit up and take note of interim management and its value add. With the markets as competitive as ever, and as uncertainty about Brexit and worries over a trade war between the US and China persist, it’s a tricky time for dealmakers across the globe. However, with all that in mind, investors press on, with a burgeoning need to build value in their investments.

As such, private equity and venture capital firms must capitalise on the high-quality resource available in the independent market, adopting flexible and agile resource that can relieve and deal with some of the pressures, priorities and sensitivities arising during an investment cycle. In addition, an honest appraisal of leadership capability within their portfolio companies must be carried out, ensuring they have the right people in place to accelerate growth and achieve the kind of exit/returns required.

There are all too many stories of high-potential tech companies biting the dust due to hesitation and burn out. With the ‘ideal world’ scenario of having all the right mindsets and skills in place at any one time rarely achieved, the ability to expand and contract your executive capacity, via the use of interim managers, should always be considered.

For more information, contact Martin Smith on [email protected]

Martin Smith, Executive Director, Sheffield Haworth Consulting Solutions

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ENTREPRENEUR INSIGHT


What are the key aspects of being a global talent lead for Battery Ventures*?Battery is quite unique with our stage agnostic approach, doing both venture, growth and private equity investing. Simply put, my role is to be a “go-to” resource for our portfolio companies, and to help them with any recruiting issues or challenges they might be facing. I often get asked and pulled into many HR questions as well.

Therefore, I spend my days meeting with portfolio companies and help as much as I can. Sometimes it is more about building teams of sales reps or engineers, or about the necessity of upgrading the level of executive talent. In the early days of a startup, companies often bring in people from their own network, but as companies grow they then need to bring in outside executive senior talent. For example, people who can take a company from $10 million to $50 million annual revenues and beyond.

I also make introductions to our portfolio companies. When I interact with external executives, I am thinking about where they might fit in the portfolio and I keep a list of all of the searches that I am aware of in our portfolio. Therefore, for example, if a CFO approaches me directly, I have a list to pull out to see if they fit into any of the searches we have.

How does your current role compare to what you did at Oracle as an in-house Executive Leadership Recruiter?It is very different. Oracle doesn’t use outside recruiters for the senior executive level, so all of the C-level

Views from Silicon ValleyKelly Kinnard is the Vice-President of Talent at Battery Ventures*, a global, technology-focused investment manager involved in both venture capital and private equity, with nearly $7B raised since inception and 125+ portfolio companies worldwide. Kelly provides insight into the key themes and challenges in executive hiring in the world’s leading technology hotspot and across the USA.

INTERNATIONAL INSIGHT

executives at Oracle have a dedicated executive recruiter, who comes out of retained search and directly conducts all of the company’s VP-level and above searches. It was a very execu-tion-oriented role, and any time there was someone hired at the executive level in that part of the organisation, I was involved in that search.

At Battery, I am utilising all of my career experiences to provide advice and support on people-related matters to our portfolio CEOs. Sometimes I help our CEOs chase down resources. For example, when they come to me and ask for a compensation consultant that I can recommend, I have a list of consultants and experts to pull out when necessary and manage those relationships.

I also manage our relationships with recruiters worldwide, both contin-gency and retained. So, on a daily basis, I have portfolio companies needing help with different searches that I can’t do myself. Overall, I have a good overview of who is doing a good job with our portfolio in various fields and geographies and who we should be working with on execu-tive-level retained searches.

What are the key challenges in terms of executive hiring in Silicon Valley?I think it’s getting more and more competitive and companies need to approach hiring in a very humble way. Many early stage companies think their technology, team and passion

Kelly Kinnard, Vice-President of Talent, Battery Ventures

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are top-notch, but to an outside candidate who knows nothing about the company, these companies will all look and sound the same. Many of these companies do not understand how hard they will have to work in order to recruit top talent.

I always tell them that you need to think of recruiting like dating – bring flowers on the first date and think about the fact that you need to woo these candidates. You might even have to go to the candidates, instead of expecting them to show up at your offices. You are also going to have to work very hard to articulate why your company is better than the twelve others in your zip code that look and sound almost identical.

Smart companies understand that, and the ones that are humble usually do the best job and have the most success.

What about the compen-sation factors? There is a perception that there is a salary inflation in the Valley due to the war for talent that has led to less loyalty, with people moving on once their first tranche of options has vested.Yes, that happens. People do change jobs statistically on average around every two years. When these people get hounded and approached with so many opportunities on a weekly basis, you can’t blame them if someone comes along and offers to pay more for their skills. It is a candidate’s market here and they are in the power seat--it is incredibly competitive.

So what are the factors that will get people over the line and signed up?I think it is mostly personal relation-ships. Whenever they know someone at the company, or on the board, that is when they really start thinking about it - especially the senior execu-tives. It might even be a company where the founders are people who worked with the candidate 10 years ago and for whom they have a lot of trust and respect.

When recruiting executives in the Valley, a lot of people will not even

take or return a phone call unless there is a name included or attached. “You were recommended to me by person X who used to work with you and thinks really highly of you” is much more powerful than a cold outreach that everyone gets.

What are the current senior roles that are particularly in demand?Within our portfolio, we have seen a demand for VP of Sales and VP of Marketing roles. For some reason in the last two years, they are the most popular searches and companies are looking for people to help them go to market.

I see this mostly in companies that are smaller and venture backed. They are perhaps currently doing $5 million or $15 million in revenues, but they want someone who has previously taken a company to $50 million and beyond in revenues. There aren’t many people who have done that multiple times and want to do it again. You can’t blame them – that’s really hard to do! When sales leaders get to a certain point in their careers, they do not want to do the same thing over and over again. The headaches that come with going back to another $8 million company to scale it aren’t appealing to a lot of people.

In more recent times we have seen far fewer requirements for VPs of engineering or product, and even CFO searches. We do, however, have regular requests for data analytics leaders.

What about geographic hotspots in the USA?I would say that more and more companies are moving to San Francisco and realising that they need a presence there instead of just being based in the South Bay. Many venture capital funds now have offices in San Francisco as well, SoMa specifi-cally. Many of these firms (including Battery) used to be on Sand Hill Road in Menlo Park exclusively. Younger people want to live in the city; they don’t want to be on a bus commuting down to San Jose and working in the suburbs at the age of 25.

New York has really taken off over the last couple of years as well. We

have a significant number of portfolio companies there and are probably seeing more activity there, in the sectors we focus on, than in Boston. Our Boston team is investing more in Europe, New York and other geogra-phies and wherever they see the best opportunity.

How are you addressing the gender balance within technology companies?A lot of companies make the mistake of not thinking about it early enough, when they still have 10 people and are just getting going. What I see all the time are companies that get to a certain size and every single person on the management team is a man. They have no diversity and all of a sudden, they realise how bad it looks and decide to focus on it. Then they need to a hire a leader and they decide it should be a female, which really is not fair. These discussions should happen much earlier. I don’t think things have gotten any better recently and little has changed.

What about cultural challenges in hiring talent into technology companies?I don’t like it when people use the words “culture fit”, because to me it sounds like they are looking for someone that looks and feels almost exactly like them. Instead of giving feedback on how the candidate interview went, they tell you “Oh, not a cultural fit”. But what does that mean? Is it not someone that you would want to hang out with on a Saturday night or grab a beer with after work? Or is it because they come from a different religious or interest standpoint?

It is lazy from companies to dismiss a candidate on the basis of a lack of cultural fit. Obviously you need someone who is going to fit in well in your company and will be liked and come across as credible, but it is part of our job to push companies to be more structured in how they evaluate candidates and sophisticated in their responses.

*Battery Ventures provides investment advisory services solely to privately offered funds. Battery Ventures neither solicits nor makes its services available to the public or other advisory clients.


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COMPANY INSIGHT


Why Seraphim Space Capital?The trigger was that we were looking for a new area in which to launch (one of many unintentional puns!) a new $100m fund. We identified space as a nexus of several megatrends, such as IOT, AI, autonomous transport and smart cities. Further investigation suggested that the traditional space sector was going through a period of disruption, primarily because the technology advances in different sectors had started to find their way into the space arena.

We saw a new paradigm emerging where there’s certainly a trillion-dollar market that’s available for the space tech sector, with the potential for long-term growth across a broad range of industries. Once we’d decided on investing in space, we were surprised to find there were no other space-tech focused venture

The New Face of SpaceMark Boggett is the CEO of Seraphim Space Capital, the world’s first venture fund dedicated to financing the growth of companies operating in the Space ecosystem. In this article, he tells us how the business started, and the challenges faced by the companies they invest in.

INVESTMENT INSIGHT

funds anywhere on the planet, not even in Silicon Valley and, to this day, we remain the only space-focussed venture fund.

Getting the investment, though, was far from easy. Most investors just saw space as rockets and satellites. And those that have been in the market have seen spectacular failures. The interest in the sector has really been generated by a group of celebrity billionaires: Bezos, Musk and Branson.

How have these personalities helped re-focus and drive investment in the sector? There’s absolutely no doubt that they’ve been instrumental in attracting the attention of the investor community. They’re the people who’ve created headlines that raise public consciousness, which, in turn, has filtered through to the investment community.

Here at Seraphim, we decided to bring in our own celebrities, but from the space world. Michael Jones, for instance, who was the founder of the Keyhole Corporation, which later became Google Earth. More recently Matt O’Connell, co-founder of GeoEye, an earth observation business, and Candace Johnson, co-founder of SES/ASTRA, the largest satellite player in Europe.

These experts in space technology were all able to see Seraphim’s potential to build and sell businesses in the sector with a new cohort of start-ups. They’ve joined as partners to help us identify opportunities and to scale them to become billion-dollar busineses in their own right.

It’s interesting that you’ve decided to take this approach of growing companies from the very earliest point, but why go to all that effort when you could have been just a standard VC?We took inspiration from the pharma and bio market, which is consist-ently the top-performing venture category. The reason they’re so successful is that the majority of the investment in many of these VCs is through the pharma companies themselves. They’re taking big stakes as LPs, then talking to the venture funds about the particular areas that they’re interested in, before going out and finding the companies and taking them through the riskiest stage of their R&D product devel-opment. When they get through to a certain phase, the LPs acquire those businesses.

We’ve recreated this model in the space sector by bringing in a range of corporates, such as Airbus, Telespazio, SES, and Teledyne, along

Mark Boggett, CEO, Seraphim Space Capital

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INVESTMENT INSIGHT


with the European Space Agency, and using their knowledge and experience to help us do the due diligence on the businesses that we’re identifying.

Currently, we have the resource and focus to invest in around four companies a year, even though we’re seeing around 100 companies, globally, per month. To address this, we’ve developed different initiatives associated with Seraphim to enable us to work with a much broader group of earlier-stage start-ups that will ultimately act as a feeder to our fund.

In 2016 we created, alongside our partner, Newable, an organisation called UK Space Tech Angel. This is a group of more than 100 individuals to whom we refer interesting businesses with addressable markets in technology. The angels will then, typically, invest a million or so, and we can then track these businesses and then join them in their A-series.

Two years later we launched the Seraphim Space Camp Accelerator Fund to support companies who have great technology propositions but haven’t been able to validate that through customer engagement. This has led to us bringing on board a whole range of additional corporate partners, such as Inmarsat, Eutselsat, Rolls-Royce, KSAT, Cyient and DSTL, who engage with these emerging businesses on a three-month basis to test and validate their technology, pricing and competitive positioning.

While that’s going on, our venture team are working with the management teams to help them better articulate their business propo-sition and put together their pitch decks. We’re evaluating the teams from an investor perspective and then at the end of the programme, we invite other venture funds to come along to our investor day and to invest into these companies. So far, we’ve put 23 spacetech companies through this programme.

You talk about how broad the sector is, but what do you see as the sweet-spot for Seraphim?We are interested in data from above – satellites, high-altitude platforms and drones - and how that data can be applied to a very broad range of

verticals. There are billions of dollars’ worth of opportunities to use this data now that it’s available at high resolution, low cost and, most impor-tantly of all, more or less real time. When this becomes fully realised, it’ll enable a whole range of new activities such as change detection, identifying anomalies that can be fed into things such things as dynamic maps.

That’s our focus, but we’re also investing into companies that already have sensors in space, but whose end goal is to provide data analytics from them. An example of this is ICEYE, a pioneering small-sat company using innovative radar imaging, but whose end goal is the analytics platform.

Launch is clearly the area that’s attracted most capital from venture to date, but we’re not looking to deploy capital in this area because we believe that there’s been over-in-vestment here – today over 100 launch companies are simultane-ously coming to market whereas only a handful will survive. Over the next few years, as new rockets come on stream, there’s going to be over-supply of access to space, which will be good news for the businesses we’re interested in, because it’s going to lead to continued price erosion and easier access.

Another area of interest, virtually overlooked by other investors, is something we call “downlink”. This is the technologies associated with securely getting the data down from the skyborne platform to a ground station. There are only a limited number of companies currently trying to solve this problem, and the prize is going to be huge for whoever cracks it.

The final component we’re focussed on is product, which is the fastest growing area of the space tech market. As satellites and constella-tions continue to get bigger, that data moves closer to real time and there are more and more applications that will need to be applied.

On the subject of the prolif-eration of satellites, how big an issue is space debris? Every launch in history has led to the littering of space with cast-off components that are no longer required. It’s estimated that there’s somewhere between 250,000 and 750,000 pieces of debris circulating in orbit.

The problem with this is that operators are having to more closely monitor this debris to avoid their satellites being hit. To put this into perspective, a piece of debris that is just 2cm in diameter is the equivalent of a hand grenade going off if it hits another object. The requirement for new satellites to be able to de-orbit when they stop working or reach the end of their useful life is increasing and may become mandatory. For instance, you can have an independent propulsion system, that’s totally independent from the rest of the spacecraft which, upon a separate signal, can send the spacecraft back down towards Earth, where it’ll burn up in the atmosphere.

It’s important that until the problem is resolved, operators maintain a stance of good citizenship to reduce the risks of space debris. Our reliance on satellites depends on it because we can’t afford to have damage to GPS systems linked to, say, the New York Stock Exchange or atomic clocks.

One of the businesses we’ve invested in is LeoLabs. They have a series of ground-based radars that look up at the sky and monitor all the space debris. The information they gather is then passed on to operators, regulators, the military and govern-ments who can then use this to work out the most efficient, safest paths to set their craft on. However, we imagine it’s going to take at least one other major event before the regulators are going to get themselves together and implement the necessary controls.

What next?This is just the beginning for Seraphim. Our first fund was $100m and we are now heading towards a first close of our new $200m fund and this will entail us opening new operations in Europe and Asia. Overall, $4bn was invested in the sector last year to 31st March and this is growing exponentially.

INVESTMENT INSIGHT

“We are interested in data from above – satellites, high-altitude platforms and drones”.

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What Boards are you on currently? I currently chair Idox which is a software provider to the public sector and NCC which is a cybersecurity business. Those are both publicly listed but I am also Chair at two private companies. First there’s Compusoft which is a TA Associates portfolio business. We’re a European market leader in the building, distribution and management of software for kitchen and bathroom designers. The business has grown very successfully with an incredibly dispersed team. The headquarters are in Norway but the CEO lives in the French countryside, the CTO is in Germany and the CFO in Norway, whilst the Head of Sales is based in the UK.

Secondly, I work with an early stage business called Everynet which is an Internet Of Things networking business. For Machine to Machine and IoT connectivity, you can use very low-end radio spectrum that sends tiny packets of data. Our software builds software-defined networks in that space. It allows customers to build a single physical network which they can subdivide and sell to multiple network operators who use it to run IoT connectivity, each on their own private subdivision. The technology was developed by teams in Finland and Russia and the sales team is based out of Miami where there are a lot of telecom tower companies. It’s a founder-led business run out of London, whilst we’re about to go through Series A funding.

What’s good about having a mix of public and private companies is that the rhythms are different. Public companies always want a board meeting on the third week of every month, so diary management becomes critical then. Private businesses are less time sensitive, so I find time for meetings and talks with them at the beginning of the month. But I couldn’t take on more than four companies, especially with the two public businesses.

How did you find the transition to becoming a Chairman?It is quite tricky. In my first two Chair roles, I was younger than the Chief Executive which I took as a prompt to learn how not to be a CEO. I had to learn not to try and second guess or override operational decisions. I think I’ve managed that rather well but it was something I had to actively work on, to acknowledge that it’s not my job to run all the business. It is my job to provide insight and to give early warnings. If I think somebody hasn’t fully thought through all the outcomes of a decision, then I find ways to share my experience without taking over. It’s an important part of the job that I’m getting better at.

At NCC however, I initially went in as Executive Chair because they’d been struggling with governance issues due to a huge amount of change in the business. As a result, I know the management team very well because for a time they all

worked for me. I have a much closer working relationship there than I do, for example, at Idox where I’ve never sat and worked with the team for a few days or accompanied them to customer meetings, all of which I did in my first nine months at NCC.

The challenges can vary and learning how to become a good non-exec is a journey, it’s not instantaneous. A person who taught me a lot about how to share my experiences in an encouraging way was Dave Hodgson, a Partner from General Atlantic, who was on the board when I was at Northgate. He would never tell us outright that something couldn’t be done. Instead, he would always find a way of telling us what he had learnt from negative experiences. A lot of things are recurring stories across different businesses. He would never say, “We tried that at X, Y, Z, it never worked.” He would always find a way of saying, “Do you know, when we tried that at X, Y, Z, here are the things we learned.” That’s a really important point. One of the values non-execs bring to a company is that they’ve made lots of mistakes. I always tell the teams I work with that I want to help them avoid making my mistakes so they can go out, be creative and find their own problems. You have to do that in a way that is supportive, not patronising or belittling.

Is there a difference in how you approach PE and public company roles?There is a difference, largely because

Sitting Across the Divide: The Art of Chairing Public and Private CompaniesChris Stone is a plural Non-Executive Chairman with a portfolio spanning across the technology landscape, from SaaS to IoT. He spoke with GS-insight about his current commitments, his advice for succeeding as a Non-Executive, and the challenges of chairing private and public companies.

NON-EXECUTIVE INSIGHT

Chris Stone, Plural Chairman

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of the extent of involvement from shareholders in public companies. In a PLC you have to often presume what they would want in a given situation. Whereas in private equity backed businesses, you can get more face to face interaction with the investors and simply ask them what they want. Governance is important in any business but when you have that arm’s length from the stake-holders, you have to think a bit more about how to explain the decisions you make. For example, you might have to explain remittance and plans for bonus and options schemes, or about decisions as to where you may or may not be investing. You have to think, “what are the shareholders looking for from this investment?”

I commit time to go and talk to share-holders. I carve out a week each year for each business and tell the brokers to fill my diary with as many meetings as there are shareholders that want to meet me. I don’t go into these meetings with any specific agenda but simply to say, “what do you think about this? What would you like the business to be focusing on? What would you like me to do?” You can’t please everyone but at least I then know what everybody thinks. If I end up displeasing anyone, I can explain to them that the decision taken was that which the majority wanted.

What does the ideal PLC board look like?When I first took over as the CEO of a public company my board had nobody from the technology industry on it. There was a nuclear engineer who at least was an engineer but that was it. That’s completely changed over the last twenty years. There’s now enough people around who’ve built careers focused specifically on technology who can look at a pack of KPIs and understand what activities they will require on an operational level. Today, you have to understand the specific challenges to a business in creating value. Of course, you want a general mix of skills on a board to some degree, but they’ve also got to know which levers to pull to generate value in a technology business.

Besides that, there a few obvious things a board needs to have. One is gender balance and diversity. Then ideally you should have two

accountants who can chair and sit on the audit committee. The best Audit Chair I ever worked with was Sir Stephen Lander at Northgate. He had previously been Director General at MI5 and was brilliant, because he knew when people were fibbing or were not totally convinced of their position. He was superb at just reading body language and saying, “You don’t really believe that, so I’m going to ask you that question again from another angle.”

At NCC for example, we’ve assembled the board very carefully. Jonathan Brooks has great experience having started his non-exec career at Arm and then on numerous other boards. Chris Batterham also has been on a number of boards before, some of which have had their difficulties, whilst others are enjoying very high growth. His role at Blue Prism is very interesting as it gives him an under-standing of how to manage rocket ship growth. We’re a people business so we also have Jenny Duvalier who was Chief People Officer at Arm and lastly, I managed to persuade Mike Ettling to come and join us who has amazing cloud experience from SAP which is vital for us.

Do you think an IPO is the best exit route for tech companies and what is the best market to list on?It depends. On NASDAQ for instance, big companies tend to do very well but there’s also a lot of living dead companies on there which we don’t hear so much about. If your business has a sub-billion-dollar market cap, then I don’t think NASDAQ is the right place to be.

However, I don’t think people can simply blame the market. A public company has got to do two things really well: it’s got to explain to shareholders why the company is a good investment and then it’s got to deliver on that promise. Usually, when businesses face difficulties with valuation it’s because they’ve made a misstep on one of these two counts. The markets are currently really vicious when it comes to such missteps but they can also recover very quickly. The markets aren’t fickle but they are thin, there just aren’t a lot of people putting money into equity markets at the moment.

Do you have a framework for working with CEOs?I really like businesses where I can take on a role coaching the CEO. But I’ve also got to be dispassionate and challenging. I’m currently working with a really interesting mix of CEOs. Adam Palser at NCC has held CEO roles of private businesses, but this is his first with a public company so I’m helping him with that transition. At Compusoft, David Tombre is a first time CEO. He’s been with the business for a long time and knows it inside out, but they’ve recently been bought by Private Equity so that is a big change for him to work through as well. Lawrence Latham at Everynet meanwhile is very experienced and has worked in IoT for the past twenty years. My job there is just to help him with some of the bigger issues, to liaise with the shareholders and make sure the business is structured in the right way for us to grow. There’s a considerable mix of situations which require different approaches.

Besides your packed portfolio, you also own a number of prize-winning Three-Day Eventing horses. Do you see any link between your business and equestrian pursuits?We run the yard as a business but it’s a loss-making business. We won a gold medal at the World Games in September last year and we’ve got six horses on the long-list for the European team, though there’s no guarantee that any one of them will make it. The thing about horses is, it’s 15% outright disaster, like one of them falling in the cross country at the weekend. Didn’t even finish. 10% euphoria because, either, you win or the horse does better than you thought or it shows that it can do something that you didn’t think it could do. Then the rest is just kind of vague disappointment where it’s just, “Oh, could have gone a bit better than that.” You’ve really got to enjoy the whole process.

Our mission statement is to win every gold medal between now and when my wife and I die. That’s our mission. Now, will we get that? No. I’m realistic, but it is something to aim for!


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LEADERSHIP INSIGHT


You started out working for traditional engineering firms in France before making the move into gaming with Electronic Arts, how did this transition come about?I actually began my career as a head hunter, working for a boutique firm in the South of France. I’d previously completed a business degree and had spent a year living in London and Madrid so the language skills I developed during this time made recruitment a natural fit for me.

I first made the jump into HR as an internal recruiter in charge of all the hiring at Coface who provide credit insurance and risk management services. This gave me some interna-tional exposure but I realised I wanted to develop my career as an HR generalist and so I joined Valeo and then Alstom, both massive French engineering companies. At Valeo I was responsible for everything except the production line, whilst at Alstom I oversaw the population for the entire site. Both companies were international organisations and my time there increased my desire to mix my language skills with my background in HR.

I was then approached by Electronic Arts. I’m not a gamer so initially I didn’t know who they were but when I told my cousin he insisted they were an amazing company and that

A Journey in HR – from Engineering to AI, via ReykjavikFrom traditional engineering companies to the gaming sector and now machine learning, Sophie Froment has led a diverse and international career. She talked to GS-insight about her journey as an HR professional and how she is bringing her experience to bear in her new role as SVP People at UK-headquartered tech unicorn Graphcore.

UNICORN INSIGHT

I couldn’t miss such an opportunity. The role was a new creation based in Lyon where I lived, and I was to be the HR Business Partner for the Southern European region. As a U.S.-headquartered business, it also meant I got the opportunity to use

my English a lot more and they really liked the fact I could speak Spanish.

Joining EA marked a pivotal moment in my career, I spent seven years there and earned three promotions. I moved to London and then to their international headquarters in Geneva. In my last role as the Senior HR Director for Europe I was respon-sible for about twenty-one countries.

You next joined CCP, another gaming business, but this was based in Iceland. At EA I was mainly looking after Publishing which is what we call Sales, Marketing, IT, Translation and Finance in the gaming industry. But I wanted to work more with the engineering and creative minds, as I had done in my previous roles.

At first, friends and family were shocked by the decision. They said, “what are you going to do in Iceland?” But as a family we had already experi-enced moving abroad and were open minded. I know it sounds weird, but we thought it sounded kind of exotic!

But I didn’t take the job because it was in Iceland. I joined CCP for the

Sophie Froment, SVP People, Graphcore

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UNICORN INSIGHT


opportunity to lead the whole HR function. Like EA and now in my current role, it was a newly created position and the opportunity to build and develop world-class teams is something that really appeals to me.

The company had been around for about ten years already but there was no one in charge of HR. They had gone through massive growth when they bought and merged with another gaming business, White Wolf in 2006 and had opened an office in Shanghai to become truly global. They went from a headcount of around two hundred to six hundred and eighty by the time I joined in 2010. They were 700 people and had realised the need to hire a dedicated HR exec in order to handle that growth and to do more from a culture perspective.

I liked the challenge that CCP offered but I also loved the people I met during the interview process. I believe it is very important to make sure you fit within a business if you want to add value. This becomes easier as you progress in your career and you develop your own style.

Lastly, I really loved the gaming industry and its combination of technical and creative people. In gaming you only have the people, so it’s a very people focused industry with a more open, less formal style than in traditional engineering companies.

Was it difficult to adapt to Icelandic culture? We didn’t know what Iceland would be like when I joined CCP. I even negotiated that if after a year, we decided it was not for us, then they would agree to relocate me to one of their other offices. The language and the culture are very different, so it wasn’t the same as moving to the UK or Spain.

In hindsight, the move actually helped me balance my work and family life. My kids were young when we moved and I was starting my first leadership position in HR, but Reykjavik is a very small place so I could also educate and spend time with them. My walk from home to the office was just under three minutes so I felt I could be a good mum as well as a good exec. Sure it could be cold and sometimes very windy but looking back, I’d definitely do it again!

You recently joined Graphcore, one of the world’s most exciting AI companies. CCP was changing ownership when I was approached by Graphcore, so the timing felt right but I wasn’t actively seeking a new challenge. As was the case with my previous roles, what I liked about the company was the story. I’m super interested by AI and machine learning, it’s an amazing tech field to be in from an HR perspective. Once again, I met some incredible people when I interviewed, and I liked that the role is another new creation. But whereas CCP had been going for some time before I joined, Graphcore is definitely still a start-up. It’s a fantastic opportunity to help the development of the company so early on.

Despite being an early stage company, we’re also experiencing huge growth and have to hire a lot of people. We currently have close to two hundred employees having doubled in size last year and we’re set to do the same again in 2019. But we’re not arrogant people, we don’t try to do lots of PR all the time. We’re certainly very well known within our field, but one of the challenges we currently face is that many people still haven’t heard of Graphcore.

Although we’ve just closed another incredible round of funding which adds to the story and helps us build our employer brand, people can still be quite risk averse. The world of machine learning and artificial intel-ligence while very appealing in many ways, is still a new and unproven industry.

Another challenge we face is that we’re based in Bristol. It’s a great city to live in but it’s not somewhere a lot of people outside the UK are especially aware of. When I first told friends I was moving to Iceland, they heard Ireland and again when I told them I would be living in Bristol, they thought I said Brighton.

Lastly, in terms of hiring people from outside the UK, Brexit is an issue. People are very concerned about what’s going to happen, often not so much for their own sakes but for their partners and families. We’ve had a few candidates who’ve declined to go further in the interview process until they know more about

what’s happening to the UK and its relationship with the EU.

We also face some internal hiring challenges. We’re always looking for people who will feel comfortable working for a start-up. We need people with experience and knowledge that can add value but who can also handle the turbulence that comes with flying in a prototype. In a start-up, things can change quickly and recently we’ve had a couple of amazing people who have joined the company and left because of these challenges.

We also set the bar really high in terms of our recruitment. Due to the complex nature of what we do but also who we are in terms of company culture, we’re always looking for people who are better than us, so we are extremely demanding.

Given all these challenges you face in recruitment how do you create diversity and inclusion? In my first six months at Graphcore I’ve focused on building the talent acquisition pipeline but now the next step is to become a lot more deliberate in our hiring processes to create diversity and inclusion.

Historically, we’ve been hiring people known to us from the networks of current employees. It’s a great way of recruiting because candidates know and already trust people in the business who in turn know and trust them. It’s also helped us to manage the enormous hiring agenda. If we need to hire two hundred and fifty people and we already have that number in the business, then I can ask each team member to find one person.

But now we need to become more deliberate in our hiring processes and that is top of our agenda. This means strengthening our Talent pipeline / funnel, developing our interviewing skills, keep building world class approaches!.

Bristol is growing quickly as a recog-nised tech hub for start-ups and Graphcore underlines the potential of the region with several other fast-growing companies. It’s going to be another very exciting chapter in my journey!

UNICORN INSIGHT

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INVESTMENT INSIGHT


Digital TransformationThere’s no universal definition for Digital Transformation but at Kainos, it’s about taking a business-critical process and truly transforming it. Others might describe it as updating websites or online brochures but that isn’t genuinely transformative because it doesn’t change the way a business operates. It’s different to IT and software services as well for the way it links change in technology and more general business.

Dealing with diverse business challenges requires us to engage with customers throughout the

Growth and Transformation: How Kainos Shape Business, Employees and Customer ExperienceHaving joined Kainos as a graduate, Russell Sloan today leads their burgeoning Digital Services business. He spoke with GS-insight about the company’s offering, massive growth, culture and hiring strategy.

GROWTH INSIGHT

“The business case was to save £100 million over the next seven to eight years and they’re currently overachieving on that.”

project life-cycle. With some supplier organisations processes are less transparent and it’s all about the big reveal at the end. This is how design agencies often work and it’s how software development projects have run in the past. But we’ve always worked hand-in-hand with our clients meaning we’ve been able to adapt quickly to the growing demand for Digital Transformation services.

A good example of the work we do is our recent partnership with the DVSA. We worked with them to upgrade the system that records MOT results, used by some 65,000 mechanics across the UK. They were previously keying data into dumb terminals which sat in the corner of the garage and served no other purpose. The system was run off a mainframe and cost about £35 million annually. It was old technology and difficult to change.

To succeed, we ensured we under-stood what users really needed. We spent time in garages and spoke to mechanics, gradually developing the beta system before going live. The result was the first UK government transactional service in a public cloud. We switched off the mainframe and scaled the new system so all users could log in. It was absolutely a business-critical process. There are thirty-five million MOT tests every year, underpinning car tax which

alone is a £6 billion industry. It was an eighteen-month project with

a hard deadline and the threat of big financial

penalties for the DVSA if they

were forced to extend. There was scrutiny up to ministerial level, but the business case

was to save £100 million over the next seven to eight years and they’re currently over achieving on that.

Public SectorThough our healthcare and commercial offerings are performing strongly, the UK public sector has fuelled much of our growth. Our recently announced full year results show a 42% growth in our commercial business and a 68% increase in public sector revenues.

The growth in public sector deals was initially driven by the Government Digital Service which worked to show departments how to do things differ-ently and be disruptive. Now depart-ments and agencies understand the benefits of Digital Transformation and are undertaking projects of their own volition. There’s certainly a need to transform their services. This is driven partly by the demands of UK citizens and taxpayers. People are used to a digital world in which they interact daily with social media, so they expect government to be providing the same digital channels and experiences. But there’s also the need to cut cost; the money saving business case never goes out of fashion.

Cost and customer benefits are demonstrated by our work with the Passport Office. Citizens can now go through the process of requesting Russell Sloan, Digital Services Director, Kainos

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GROWTH INSIGHT


passports online. I renewed mine all on my phone, photograph included. As a citizen, it was a really positive experience and for the Passport Office, the business case for full digital transformation is an annual saving of up to £65 million.

At various points, the UK has formed part of the D5, the most digitally advanced nations worldwide. To achieve that, GDS will have looked at other countries. The model is Estonia who had the disguised blessing of having no previous technology infra-structure. They were able to build from scratch, one of the world’s most advanced digital systems without the burden of outdated legacy technology.

At Kainos, we’ve similarly looked to other business sectors for inspiration. Government has been leading the way when it comes to embracing agile ways of working and cloud adoption, but innovative use of data is most prevalent in the financial sector. This is partly because they face less restrictive legislation but there are tangible benefits for any organisation that adapts the way it uses its data.

GrowthI joined Kainos almost twenty years ago when the business had about one-hundred and fifty people. Today, the overall organisation has a headcount around 1,450. In terms of revenue and people, the annual growth rate has been just over 20% for the past five years. When I started the Digital Services business in 2012, we had about thirty-five people in total. Now I have a team of around nine-hundred and fifty working on digital transformation across the UK government, healthcare and commercial.

That growth in all parts of the business hasn’t been linear however, and we’ve had to be careful to prevent certain changes negatively affecting the company. For example, Kainos was originally a software engineering business with little in the way of sales and marketing so we had to focus a lot on scaling the sales team. But as they performed increasingly well, we faced new challenges in terms of larger scale delivery.

At this stage too, we had to focus on reformulating our people processes to operate effectively with a much larger headcount. In the last year, we’ve gone from recruiting one or

two people a week to seven or eight which has created new challenges around on-boarding and putting in place the right frameworks that enable people to succeed.

Part of our culture has always been to hire graduates and give them exciting career prospects. There are lots of leaders in the organisation who have been with the company for their entire careers. This year, we’ll take in around two-hundred entry-level employees - a mixture of graduates, placement students and from our academies and apprenticeship scheme. In the last year, we’ve have received nearly 22,000 job appli-cations and have conducted an interview every twenty-two minutes on average. We get some very capable and ambitious people from a range of subject backgrounds and we keep the bar high. We hire good people and give them challenging and exciting work to inject fresh energy into the business.

The FutureAI and machine learning are becoming pervasive in the technology industry and we’re starting to see tangible benefits from it in enabling Digital Transformation. People worry about the potential increase in unemployment caused by AI disrupting traditional industries, but we see it being used by clients to free up staff from repetitive tasks. Rather than gradually trying to remove people from the business, companies can use AI in a positive way to deploy staff to higher value, more fulfilling tasks.

Returning to the example of data and the DVSA, we implemented for them

a proof of concept followed by a full solution that used machine learning to analyse their data concerning garage inspections. DVSA have a limited team who inspect about 5% of garages a year for signs of fraud. We were able to look at the data in 50% of the time spent manually analysing data and provide insights as to which garages were potentially acting fraudulently. Whereas they used to find two cases of fraud for every nine garages they’d visit in a day, they now on average find seven. Increasing productivity in this respect was a high priority on the board’s agenda as it impacts people’s lives by ensuring MOTs are carried out properly, improving vehicle safety. With this project we were the winner of the 2018 UK IT Industry Awards Artificial Intelligence and Machine Learning project of the year

Competition Kainos is one of the success stories resulting from the change in government policy that encouraged departments to engage SMEs. Our competition ranges from companies of fifty people or less, right up to the large system integrators. It’s become more competitive so we must keep differentiating our business case and finding new ways to add value. It’s changed the nature of our work also as we increasingly engage in larger scale projects which sees us compete more and more with the biggest players.

We have a diverse offering that includes support services with lengthy contracts, some of which have been renewed repeatedly over twenty years. However, the majority of our business is project based and all projects come to an end. Therefore, we work closely with our clients to understand their needs and whether there might be other problems in the business we could help solve. Repeat or recurring business accounts for about 90% of revenue. We remain competitive by focusing on delivery.

Lastly, increased competition has made recruiting and retaining top talent more difficult. Our culture and focusing on our people is important. Besides remuneration, we offer genuine opportunities for career development and work that is truly rewarding. We engage people with the chance to take responsibility on large, complex projects that make a real difference to people’s lives.

“When I started the Digital Services business in 2012, we had about thirty-five people in total. Now I have a team of around nine-hundred and fifty working on digital transformation across the UK government, healthcare and commercial”.

GROWTH INSIGHT

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INNOVATION INSIGHT


Tell us about your first entrepreneurial ventureI left Cavelle Data Systems in 1990 to set up Eurodata along with a colleague from the sales team; we decided to move out of Manchester and locate the office in Islington. Our niche was supplying third party computer maintenance companies with parts to support their contracts. We saw a gap in the market because many of these companies were buying directly from the manufac-turer at full price; our model was to buy end of lease computers and break them up to sell the component parts – there was good profit to be made in that.

As our offices were on the edge of the city in the then unfashionable Clerkenwell, we could quickly deliver to the end users which were mainly banks and financial institutions – these were the people that were spending most on third party mainte-nance contracts.

The regular business of hard drive,

motherboard and memory replace-ments began to pivot towards software configurations and mainte-nance. We therefore hired Novell and Microsoft software engineers to meet this demand. At the peak of the business 2000 we decided to change our strategy and sell IT solutions directly to the end users and trans-formed into a systems integrator. We already had a good team of engineers focused on hardware and software. The growth of the business accelerated over the next 10 years and by 2011 revenue was £30 million, which was almost entirely system integration projects and managed services. In 2011 we sold Eurodata to a competitor, Trinity Expert Systems, which was then subsequently acquired by PE-backed Liberata.

When you built the business did you have any advisers or a Chairman?No, and in hindsight I would have done this completely differently. I would have got some outside

advisers and someone to look at the various internal teams. I would have probably structured the business differently, but because we were focused on running the business and looking at the numbers every month, we weren’t necessarily viewing the “big picture”.

How did TIG come into being?In the 18 months after we sold Eurodata I was looking around for opportunities to buy another IT services company or get back into tech; I was 43 years old and wasn’t ready to retire. In 2013, I was intro-duced to a company called The Internet Group; I put a £1 million loan into the business and bought a 70% stake with an option to buy the 30% stake off the founder in two years’ time – which we eventually did in 2016. The Internet Group was origi-nally an internet service provider, but it shifted to providing support for small businesses, such as putting the networks together. Initially we partnered with VMware to build a cloud platform, we built a great infra-structure as a service platform, spent lots of money on it but unfortunately it didn’t sell very well.

Why was that? There were several reasons. One of the main reasons was that we had come from a business that had massive technical capability and we were coming into The Internet Group which had limited technical capability, but our aspirations were at that mid-market level. It was a very different environment; we were used to dealing with established businesses that understood how to use technology, as opposed to smaller customers that didn’t know how to properly utilise it. We had all these legacy issues and the cost of servicing those companies was higher than the revenue they were gener-

Servicing the “Squeezed Middle”Des Lekerman is CEO of TIG, a provider of IT managed services, Cloud and IT transformation products to the mid-market. He shares insight into his entrepreneurial career and plans to build the most trusted cloud service provider to the mid-market.


Des Lekerman, CEO, TIG

16




ating, so we went through a process of analysing existing contracts.

Tipping Point In 2016 when we bought the founder out, we re-engaged Microsoft. Having previously been one of the largest Microsoft partners in the South East at Eurodata, we had great relationships. Microsoft had a new CEO, Satya Nadella, who’s strategy was cloud first; we met a couple of the senior executives from Microsoft HQ in Redmond, and we then flew out there to understand the strategy further. Following this we crystallised our strategy to primarily focus on building solutions in the Microsoft Azure Cloud – this was the tipping point for us. A key area for us is the security element of Microsoft 365 which is the Enterprise Mobility Suite. These types of solutions had now become our mainstream. We designed an identity and access management solution for multiple Cloud services e.g. services such as Dropbox, Box, Gsuite, AWS and/or SalesForce. Our solution is designed to provide secure access to mitigate the risk of identity theft and preventing data leakage.

Has this led you to focus on particular verticals? Finance, insurance, and recruitment are focuses for us because they’re all professional services businesses and highly data-driven businesses. For example, in recruitment to transact, you just need a phone, an internet connection, a network of people and of course the database. The key asset in any business is data and making sure that this is protected and secure should be a top priority; with technology you can protect against data leakage. This area is really resonating in the market as more and more information becomes highly portable; 10 years ago it was about protecting USB drives, and some financial services organisations

were resorting to putting superglue into them to prevent theft of infor-mation, these days there are software solutions that can prevent you from downloading data on the USB drive or even uploading to other cloud drives like Dropbox or Onedrive.

Most of our customers are mid-size companies; a lot of our expertise is around DevOps and automation which is typically only found in larger enterprise businesses. Similar-sized companies to TIG usually offer their expertise to large organisations like BP or HSBC etc. because they have larger budgets; whereas mid-size organisations are often constrained to a limited budget so must do more with less. Our strategy is to focus on those mid-sized businesses, bringing them enterprise level expertise that’s not normally available to them and supplying it at an affordable cost. Insurance companies, hedge funds, graphic design businesses - anyone who relies on IT is the perfect customer for TIG.

What are your growth ambitions for the next few years? In July 2018 we received £6m from BGF who have been supportive of our vision and growth strategy.

In December 2018 we made our first acquisition of another managed service provider called netConsult making the combined business over £12m in revenue. We aspire in the next three to four years to be £50m revenue and £10m EBITDA.

Over the last 6 months our growth has been fuelled by the increased demand for data analytics. We have completed about six projects so it’s still relatively new, however, we have found a way of automating and organising data in a way that can be easily interpreted. We have built our own IP around it that sits in between an application database and the data warehouse.

We’re currently working on a project for a large recruitment firm who have grown by acquisition. The management team has a requirement to view data from several different sources, through dashboards using Power BI; the feedback from this has been very positive. Data analytics allows business leaders to make

better decisions rather than basing everything on gut-feeling or just on limited data. We have packaged our solutions up into bite size chunks that make it easier for our customers to consume making it accessible for mid-sized companies.

What are the constraints and challenges? Our major challenge is recruiting data scientists and analytics people, so we are training people internally. This has an added benefit as it rewards the loyalty of our existing staff by giving them the opportunity to gain more skills.

The second area is sales. Finding good sales people is tough, and the people that are on the market aren’t necessarily the best. I think people are becoming smarter and more tech savvy and if you’re selling a solution, you’ve really got to understand the business, the drivers and take a consultative approach.

The challenge has always been around having the right people and the right team working together with the right chemistry; it’s having the right mix but getting that cocktail just right is an art. Some people might not have the skills today but with the right training, coaching and mentoring, it can be possible – if they’ve got the aspirations to do so.

“Over the last 6 months our growth has been fuelled by the increased demand for data analytics.”

“The second area is sales. Finding good sales people is tough, and the people that are on the market aren’t necessarily the best. I think people are becoming smarter and more tech savvy and if you’re selling a solution, you’ve really got to understand the business, the drivers and take a consultative approach. ”


17


MEGABUYTE INSIGHT


The journey to becoming an entrepreneurIn 2010, when I got my first smart-phone, I remember turning it on and I realised immediately what the fuss was about. It was clear that tech was going to change everything about the way we access goods and services. I thought this could be an area where I could apply that desire to do things differently and truth be told, I had a slight rebellious streak! So, I began learning more about technology. It was increasingly obvious that technology was a great sector to work in and that there were a lot of people who were very open-minded, smart and collaborative.

Looking further back, my family have always been involved in community and charity work, and

that’s always felt like something that should be part of a rounded life. As I did more in my career, I had the experience of raising what was the largest ever crowdfunding round for a tech start-up. It was €5m – back then, that was a lot of money for a crowdfunding round! I remember thinking, “This is interesting, but maybe we could use this model for social impact.”

Learning from past experiencesI’m still learning and making mistakes, every day. The reality is that learning makes up a series of very small things that, in aggregate, can make the difference. One piece of advice I would give is, while you do get some incredible natural entrepreneurs who can build great businesses pretty much out of the cradle, generally, it’s useful to get some experience in another business and learn in a fast-paced learning environment before setting out on your own. I wouldn’t have been able to be so successful with Beam if I hadn’t had that experience previously - in my case running a parking app called JustPark.

Banking on human compassionI’m an optimist at heart and it’s obvious to me that people are troubled by inequality, homelessness, lack of social mobility and other

problems that affect the most vulnerable in society. Tech is not the solution of itself but tech is a great enabler that can make it safe and incredibly convenient to do something life changing. That’s what we do at Beam. When someone funds a homeless person to do training on Beam - they get updates and even KPIs on their impact once they start funding a larger number of people. For those supporters, it’s one of the most meaningful uplifting things they can be doing with their time - and as much or little money as they want to donate.

Ambitions for BeamThe first thing we’ve really got to work on is increasing the number of people that we’re helping. Each person we help is fantastic, and that’s great, but we really want to have a big impact on this problem. We want to move the needle on homelessness in the UK - all while upskilling the workforce and allowing employers to tap into this new talent pool. There are 290,000 people who live in homeless hostels in the UK; which comprises 130,000 children, and costs taxpayers over £1bn per annum. These are big numbers and we need to make a dent on this problem.

Charity, business or social enterprise?We’re a social enterprise which means Beam is a company that exists, first

The light at the end of the tunnel: Using technology to help homeless people to help themselvesGillamor Stephens sat down with Alex Stephany, the Founder of Beam, a crowdfunding platform supporting homeless people in finding work, to talk about his journey, social enterprise and the emerging “Tech for Good” sector that is helping society’s most vulnerable

SOCIAL INSIGHT

“I’m an optimist at heart and it’s obvious to me that people are troubled by inequality, homelessness, lack of social mobility and other problems that affect the most vulnerable in society.”

Alex Stephany, Founder, Beam

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and foremost, to create social impact. We have a mission lock in our articles and are partnered with a charity, so all donations go to a charity’s bank account which allows us to get the benefits of gift aid and corporation tax relief. We think of ourselves as a hybrid model of being a charity and a strongly purpose-driven business. By setting up as a social enterprise, we’re likely to be more focused at becoming sustainable by generating revenue and, ultimately, growing our impact. The worst thing would be if for the rest of Beam’s existence, we’re using donations to pay our salaries and other costs. I don’t want to be in that position. Already, someone donating can choose to pay nothing whatsoever to Beam’s operating costs and make a 100% charitable donation in training for a homeless person. We also provide the service of looking after the cash and purchasing items – training mostly but also other barriers like transport or tools - direct for each homeless person. You can see the costs of each person’s campaign broken down on their campaign page.

Government involvementThe reception has been excellent from government. Right from the very beginning, we’ve been working with the Mayor of London. More recently, we’ve been partnered with Hammersmith & Fulham to help homeless people in that borough to access new training and work oppor-

tunities. We will likely be partnering with one or two other forward-thinking London boroughs this year who are really interested in how they can create better opportunities for disadvantaged people in their boroughs, but also realise cashable savings at the same time.

Tech4Good: Other Areas of UseA lot of people are very evangelical about tech, and think tech is the answer to everything - quite a common attitude in Silicon Valley. I don’t subscribe to that, but I do think that tech is a necessary part of the solution to every large and complex problem, whether that is homelessness, cancer diagnosis or urban logistics. I think that there is not a single large, complex social problem or environmental problem that technology does not have to be a part of solving. I think that Tech for Good is just beginning now to come of age, and we are seeing more and

more organisations bring techno-logical innovation to bear on some of these problems. I do hope however, that they won’t do it in a classically disruptive sense. A lot of people have thought we are disrupting homelessness, we’re not at all. We work with charities closely in order to not disrupt good structures that have already been put in place.

The reception of Tech4Good by VC FirmsEvery VC and PE that invest in technology, needs to be thinking of their Corporate Social Responsibility (CSR) in the form of Tech for Good. Firstly, because it’s the most powerful use of their skills and resources; and secondly, at least in the early stage of VC, you need to convince entre-preneurs that you care about solving the world’s problems more than making money. If you make money as a by-product, that’s great, but that’s not why you get out of bed every day. Given that more and more entrepre-neurs are mission driven, I think that every VC, increasingly, will be looking to convince on that. So, in short, helping a Tech4Good company with advising, funding and seeding will be how VCs do CSR. That is how they will have the greatest impact and how they will also attract the best entrepreneurs as well.

Currently, it’s tending to be high- net-worth individuals who are more embracing of this segment of technology. In part, because they can be their own free spirits, whereas the tech funds often need to answer to often more conservative LPs.

Advice for budding Tech EntrepreneursThink about where you can add value. Look at what is out there and try and be useful to people in that ecosystem, build your network and take it from there. It’s always about being useful and being part of the solution to the problem, so that’s where I’d start.

If you are interested in becoming a corporate sponsor for BEAM, or to just learn more visit beam.org.

“We’re a social enterprise which means Beam is a company that exists, first and foremost, to create social impact.”

SOCIAL INSIGHT

Journey Referrer

Lauren’s campaign began to fund

Lauren begins her dental nursing diploma

Lauren begins work as a trainee dental nurse

Lauren passes her exams to become a fully qualified dental nurse

Lauren starts full-time work as a dental nurse

Budget Qualification

Dental Nursing Diploma £1,790

Dental Nursing Exam Fee £485

Vaccinations £80

Travel to course £285

Basic life support first aid course £69

Smart leather shoes £50

Textbook £25

Laptop (gifted by Uber) £0

Contingency £280

Total £3,064

SOCIAL INSIGHT

If you are interested in becoming a corporate sponsor for BEAM, or to just learn more visit beam.org.

19

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Like a lot of good stories, this one starts with two friends...They’re both from Estonia. Taavet was the first employee at Skype, so he got paid in euros. But he lived in London and needed pounds to pay the bills. Kristo worked for Deloitte and lived in London. He got paid in pounds but had a mortgage back in Estonia. He needed to pay that in euros.

Every month they moved their money the old way – which wasted their time and money. So they invented a simple workaround that became a billion-dollar business.

8 years down the line – what have you achieved?The TransferWise movement has spread far and wide. Over 5 million customers now trust us to move more than $4 billion dollars every month. (Saving them $4 million in bank fees every day.) And Richard Branson, and PayPal founders Max Levchin and Peter Thiel, among others, have invested in our vision. The latest round was led by growth capital investors Lead Edge Capital, Lone Pine Capital and Vitruvian Partners.

We’ve also opened 11 offices across 4 continents.

Apart from all that, not too much has changed!

Argent sans frontières ?Money without borders has been the goal of many Financial Technology start-ups in recent years, but few have achieved this vision. Over the last 8 years, TransferWise has come from a small Estonian enterprise to become the largest FinTech start-up in Europe. Gillamor Stephens went to their stunning new Shoreditch office to meet with Ross Seychell - Chief People Officer. We wanted to hear the full story - their origins, impressive growth story, and the race for talent in the competitive and increasingly crowded FinTech space.

FINTECH INSIGHT

What do investors say about you?Nimay Mehta, General Partner, Lead Edge Capital said: “The world is moving towards a more transparent way of doing business and we want to be part of that. International money transfers represent a multi-trillion dollar market, until now dominated by banks keeping prices artificially high and transfer times slow. TransferWise has changed all that. For the first time people can send money all over the world at the real exchange rate for a transparent fee, and it’s no wonder five million customers have come onboard so far. The opportunity for TransferWise is set to grow exponentially now that regulators from Europe to Australia are making transparency the status quo.”

What is the TransferWise culture?From the very beginning, the founders focused on the culture they wanted to create as much as they did on the product. Having a good working environment was just as important to them and it continues to be so even after eight years. With such a rapid growth in headcount, it can be hard to keep that culture alive – we do it through effort, focus and energy, but also by allowing mistakes and learning from them.

In the last few years, we have had a clear plan on how we get closer to our mission. Last year we hired about 840 people, the year before that it was 450 people, which is phenomenal growth and we are extremely proud of that. We have quite a large in-house engineering and product team, and about 98% of our roles are direct hires. But it can also be quite tough when you scale a company that fast. This again under-scores the importance of culture. When we bring people on board, we start helping them to develop and to become leaders one day.

How do you hire talent?Our ability to hire in the last couple of years has changed as we continue to become more established in the market. People are aware of our brand and of what we are achieving. This opens up a better qualified and diverse talent pool, including people that perhaps would not have considered TransferWise three or four years ago. We strive to embrace and build on that momentum.

Many of our clients find Engineering talent the most difficult to attract. Is this also the case with TransferWise?It’s a constant challenge. Talented Engineers in the current market are

Ross Seychell, Chief People Officer, TransferWise


in demand and have many opportu-nities and companies competing for their craft.

We are currently in the UK, Estonia, US and Hungary. However, to stay ahead of the curve, we often go out to countries we don’t have opera-tions in yet to talk to candidates and build the talent pipeline.

It’s not all about external hires though, we are creating internal opportu-nities. This year is our fifth boot camp, which is an engineering-specific internship-to-campus programme. This initiative brings together about 25 people in 6 different locations. We give them a few real-life problems and projects to work on within a team. They have buddies and support from more experienced developers, and If they do well, we offer them a permanent job. Last year we successfully converted about 70% of the participants.

Do you target just the top universities?I think you miss a lot of great talent that hasn’t been privileged enough to go to some of those universities. We focus more on relevant courses offered by all institutions. It is also important to remember that not all developers and engineers go down the degree route. This can provide an opportunity to bring people in at an earlier age. I think you need to have options.

Sounds like a lot of thought and effort goes into finding them – how do you keep them?Obviously, things like compensation and career opportunities and other benefits are important. However, we like to think the most vital thing for the people we hire is ownership over something – being able to shape, break, fix and take things forward. Having a vested interest in your work.

In this market, an employer also needs to be innovative and creative in terms of flexible working. For example, we offer a paid six-week sabbatical after every 4 years of service with an added little bonus. You can decide for yourself what you want to do with it – spend time with family, learn a new skill, take up a hobby. Actually, our former Head of Customer Service is in Barcelona, learning to become a data scientist and when he gets back, we will look for a team that needs some data analytics support.

We also have a remote working policy, where individuals across all teams and layers of the company can work remotely for periods of time. They work hard, yes, but can choose to be at home with their family or overseas whilst working at the same time.

TransferWise latestSince this interview was conducted,

TransferWise has announced it has launched its debit Mastercard in the U.S. It was revealed that this product was built specifically for people without borders. To date, that the card has already helped more than 250,000 users in the UK and Europe avoid hidden bank fees when they spend money abroad.

TransferWise in numbers• TransferWise’s borderless debit

card first launched to customers in the UK and Europe in April 2018. Since then cardholders have made more than 15 million transactions.

• They are processing £4bn every month

• TransferWise saves its customers £1bn every year in bank fees

• Almost 20% of its international transfers are instant (delivered in less than 20 seconds)

• 1,600 currency routes, 49 currencies

• Over 1,600 people in the team across twelve global offices - will hire 750 more people in the next 12 months

• Audited financials for fiscal year ending March 2018 revealed 77% revenue growth to £117 million and a net profit of £6.2m after tax

FINTECH INSIGHT

20


in demand and have many opportu-nities and companies competing for their craft.

We are currently in the UK, Estonia, US and Hungary. However, to stay ahead of the curve, we often go out to countries we don’t have opera-tions in yet to talk to candidates and build the talent pipeline.

It’s not all about external hires though, we are creating internal opportu-nities. This year is our fifth boot camp, which is an engineering-specific internship-to-campus programme. This initiative brings together about 25 people in 6 different locations. We give them a few real-life problems and projects to work on within a team. They have buddies and support from more experienced developers, and If they do well, we offer them a permanent job. Last year we successfully converted about 70% of the participants.

Do you target just the top universities?I think you miss a lot of great talent that hasn’t been privileged enough to go to some of those universities. We focus more on relevant courses offered by all institutions. It is also important to remember that not all developers and engineers go down the degree route. This can provide an opportunity to bring people in at an earlier age. I think you need to have options.

Sounds like a lot of thought and effort goes into finding them – how do you keep them?Obviously, things like compensation and career opportunities and other benefits are important. However, we like to think the most vital thing for the people we hire is ownership over something – being able to shape, break, fix and take things forward. Having a vested interest in your work.

In this market, an employer also needs to be innovative and creative in terms of flexible working. For example, we offer a paid six-week sabbatical after every 4 years of service with an added little bonus. You can decide for yourself what you want to do with it – spend time with family, learn a new skill, take up a hobby. Actually, our former Head of Customer Service is in Barcelona, learning to become a data scientist and when he gets back, we will look for a team that needs some data analytics support.

We also have a remote working policy, where individuals across all teams and layers of the company can work remotely for periods of time. They work hard, yes, but can choose to be at home with their family or overseas whilst working at the same time.

TransferWise latestSince this interview was conducted,

TransferWise has announced it has launched its debit Mastercard in the U.S. It was revealed that this product was built specifically for people without borders. To date, that the card has already helped more than 250,000 users in the UK and Europe avoid hidden bank fees when they spend money abroad.

TransferWise in numbers• TransferWise’s borderless debit

card first launched to customers in the UK and Europe in April 2018. Since then cardholders have made more than 15 million transactions.

• They are processing £4bn every month

• TransferWise saves its customers £1bn every year in bank fees

• Almost 20% of its international transfers are instant (delivered in less than 20 seconds)

• 1,600 currency routes, 49 currencies

• Over 1,600 people in the team across twelve global offices - will hire 750 more people in the next 12 months

• Audited financials for fiscal year ending March 2018 revealed 77% revenue growth to £117 million and a net profit of £6.2m after tax

FINTECH INSIGHTFINTECH INSIGHT

21

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For the 25 years that I have been watching the technology sector, there has been one constant; hype. The biggest hype of recent times was obviously the dotcom boom of the late 1990s which was fuelled by the advent of the consumer Internet but, in my view, we are well on our way to the next big one, this time focussed more on enterprise technology. As Cloud and SaaS go mainstream, the new kid on the hype block is artificial intelligence, or AI. In all of the hype cycles I have experienced, the term AI is perhaps the most mis-used term yet. Why? Because the vast majority of what people call AI are just algorithms, many of which aren’t really very sophisticated. Algorithms are as old as mathematics itself and have been used in the technology sector throughout its history, so, on the face of it are certainly nothing to get too excited about.

The key difference between an algorithm and AI is the ‘intelligence’ bit. For an algorithm to become AI, it must have the ability to learn from the results of applying the algorithm and modify the algorithm, hopefully thereby delivering a better result. An example might be in disease diagnosis where an algorithm might be used to identify cancer from scans, but artificial intelligence can then look at the resulting success rates to determine a more accurate way to diagnose. The former is difficult to do but the latter is on another level altogether. Perhaps it’s no surprise then that, according to research by the Financial Times, some 40% of European AI start-ups aren’t actually using any AI in their products.

So why all the negativity, I hear you say? The increasing use of sophis-ticated algorithms is potentially a game changer; who cares if it’s not actually AI? Well, to be fair, this is a good point. Putting aside my analyst pedantry I can see that the AI trend, if that’s what we must call it, is indeed a potential game changer. So, I thought I would spend the rest of

this article giving a summary of my views on why.

AI petri dishTo understand why the use of sophisticated algorithms is growing exponentially, we must first look at the conditions that are enabling them to grow. First, there is the explosion of data in recent years; without the use of algorithms, it would be simply impossible to get any meaningful insights from this data. Secondly, the advent of the Cloud and APIs has made accessing big data substan-tially easier than previously. And, last but not least, Moore’s law has enabled computers to process big data, using said algorithms in acceptable timeframes.

With the conditions now right, AI applications are springing up all over the place but there seems to be three broad categories; customer

experience, product innovation and process optimisation.

Generation gapAll of this plays into my broad theory about the future of enterprise technology; which I summarised in the previous issue of GS-insight. It has been clear for some time that we have entered into a third generation of enterprise technology; the first being mainframe, the second being client server and the third being Cloud. What has become apparent to me more recently is that there is an interesting trend developing within the third generation.

Over the last decade we have seen the growing adoption of Cloud technologies in all areas of enter-prise technology, from Cloud infra-structure to IT services and, of course, to Software as a Service. In my view, Cloud technologies are now in a mass adoption phase in large parts of the economy, especially the service industries. While the focus of the third generation thus far has been largely on a shift to Cloud infrastructure, increasingly, as Cloud technology becomes pervasive, technology companies and also those involved in other sectors are now using Cloud infrastructure to do business differently, with data, collab-oration and new business models at the heart of this fundamental, digital shift. AI is the glue that sticks these various elements together.

All businesses are tech businessesIt is this digital shift, or disruption, which has led to the development of all the ‘techs’; fintech, retail-tech, prop-tech, travel-tech and so on. Cloud, or perhaps ‘digital’ is now a better term to use, technologies are being utilised to disrupt traditional industries to a degree not seen since the dotcom boom of 10 years ago. The most high-profile examples of this are arguably in transport (Uber, Lyft, Deliveroo etc), banking and payment

It’s AI Jim, but not as you know it!Ian Spence, the CEO of Megabuyte, the leading technology analysts, explores how the AI that everyone is going on about isn’t really AI; but it’s still a game changer.

MEGABUYTE INSIGHT

Ian Spence, CEO, Megabuyte

22


(Monzo, Starling, Revolut etc al), health and wellness (BenevolentAI, Healx etc) and e-commerce (farfetch, the Hut Group etc). However, behind these well-known stories there is a broader and fundamental shift to digital business, which has all been enabled by the Cloud infrastructure developed in the last decade or so; Cloud hosting, SaaS, next generation networks, API technology etc.

There have been many column inches dedicated to these digital disruptors, as well as the potential societal impact of their rise, so I do not propose to add to those here. My main interest in this topic is what this latest phase of the third generation of enterprise computing means for those that provide software and ICT services.

On the one hand, the rapid adoption of digital technologies provides a massive structural growth oppor-tunity for software and ICT services companies as their customers lean on them to help with the digital trans-formation. And we are clearly seeing this in our data on the UK market. The average organic growth rate of the companies we track in the Megabuyte service (where we can get the data from Companies House – about a third of the 2,500 companies on our database) is over 10%. And the top companies are growing at more than double that rate, whilst still gener-ating average EBITDA margins also in the 20s. While that growth might not seem as exciting when compared to some of the unicorns references above, I think it ably demonstrates the strength of the sector when set against anaemic UK GDP growth.

There is also no doubt in my mind that this growth is driven largely by the structural demand generated by the generational shift in the use of enter-prise technology. However, when we think about the consequences of the move to digital, it may not be all good news. Why? Because many of the burgeoning digital-native companies will be developing much more of their technology in-house and thereby require much less help from external suppliers. At the same time, business services companies are increasingly investing in technology to provide what are now commonly called tech-enabled services, thereby also potentially taking budget away from

pure technology companies.

Take Megabuyte for example. We are essentially a media company, but in some ways, we look more like a software company. We spend 15% of our revenue on a team of devel-opers that are absolutely core to our strategy. Meanwhile, our external spend with software companies and infrastructure providers is very low; less than 2% of our revenue, and over half of that is with AWS. 10 years ago, we would almost certainly have used an external web agency (in fact we did) to develop and maintain our web platform.

I believe that this blurring of the lines of what is defined as a business services company and what is a technology company has only really just started and will play out across the industry over the medium to long term. Indeed, one might even extend this further to say a blurring of the lines between what is a company (of any kind) and what is a technology company.

So, technology companies, and especially software companies will need to adapt. And the most obvious way in which to adapt is to start providing a service on the back of your software – the clue is in the SaaS title. One obvious way to do this is with a B2B2C model but there are more direct ways to do it as well. There will of course continue to be areas where pure software remains relevant. For example, Megabuyte is a long-standing customer of Xero (and a very happy one at that) and I foresee no reason why we wouldn’t continue to be so for many years to come. But, in my view, most sectors will move in the direction of tech-enabled services as the digital disruption phase of the third genera-tional shift gathers momentum.

This will all come with another big shift in business model. Just as software companies have got used to the shift to a recurring revenue model, now they may need to embrace even

more alien models such as revenue share, pay per click, etc. There are as many business models as there are unicorns but there is one constant; they don’t generate revenue from selling technology.

It all comes back to AIWhile you may be thinking that I’ve gone a bit off piste here – weren’t we talking about AI? – there is method in my madness. The key point is that, as I noted above, algorithms and AI will increasingly be seen as the glue that holds many of these digital strategies together. In my view therefore, AI is becoming the key driver of digital transformation. Take Uber again as an example. At its heart, it is a collab-oration and e-commerce engine bringing together multiple data inputs and outputs to bring driver and customer together, arrive at the right location in the fastest possible time and charge the right fare. But at the heart of all that are algorithms (AI) that make it all work efficiently.

Of course, I’m not the only person to spot this trend and, in the frenzy of activity to find the AI winners, investors are performing their usual trick of throwing money at any company with [insert buzzword] in its title. Also, in keeping with past hype-cycles, valuations often assume a completely unrealistic likelihood of success. Moreover, with the latest start-ups encouraged to seek world domination from the get-go, valuation excess has reached new heights.

Having looked at a significant number of companies claiming to be AI pioneers, my conclusion is that many (probably most) are simply not delivering value in their solutions. After all, a word cloud does not constitute insight. Indeed, you only need to glance at the Softbank Vision fund deck recently published by FT Alphaville to see that investor over-exuberance has reached dotcom bubble proportions in some quarters. As such, it seems likely that we are near the peak of inflated expectations for AI, to quote the Gartner hype curve, and will soon be headed down to the trough of disil-lusionment. But that’s when the real investment opportunities will present themselves.

“AI is becoming the key driver of digital transformation.”

MEGABUYTE INSIGHTMEGABUYTE INSIGHT

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Enterprise Software and Infrastructure ServicesThe pace of transformation in this area is rapid with the ongoing shift to cloud-based, SaaS delivery and subscription consumption models. Our team have significant depth of expertise in supporting clients ranging from high growth, “cloud-first” businesses to larger, more established on-premise software and services providers that are refining their business and organisational models. This expertise allows us to hire the leadership talent necessary for our clients; for example, execu-tives who will transform technologies, “go-to-market” and delivery models in order to offer unrivalled value to their customers.

By understanding the sector dynamics in a competitive market-place, where there is a real supply and demand issue for leadership talent, we have the credibility to represent our clients as compelling proposi-tions to well matched candidates. Whether it be a CEO or CFO who leads a company through a successful exit, a CTO who delivers the transition from a legacy technology to cloud-based technology, or a Sales Director who drives the revenue growth and profit perfor-mance of a business, our ability to support our clients hire the best talent in the market is absolutely proven. Example areas of our technology coverage include: Cyber Security; Enterprise Resource Planning; Big Data & Analytics; Digital; E-Commerce/M-Commerce; Vertical market specific solutions e.g. Healthcare, Financial Services; Unified Communications and Collaboration; Infrastructure Software and Services; Technical Consulting and Digital

Transformation Services and Cloud-Managed Services.

If you’d like to find out more about Gillamor Stephens’ services in the enterprise software and infrastructure services sectors, please contact Steve Morrison, [email protected]

Deep TechWe work extensively in a sector that we broadly define as Deep Tech, hiring across a whole range of leadership positions. Deep Tech clients are innovators and industry leaders in highly technical and skill set specific areas such as: battery technology, autonomous vehicles and engines, space technology and industrial IoT. Many of these companies were born out of academic research at leading universities and have moved through seed capital funding, to securing significant A/B round investments and beyond.

As companies in all stages of growth are tasked with appointing experi-enced executives to drive their commercialisation and market devel-opment plans, Gillamor Stephens’ depth of experience in this sector allows us to understand their needs. As a result of this and our interna-tional reach, we are able to access and qualify the top tier candidates in this sector, with the specific skill sets and knowledge to make this happen. Our passion, expertise and attention to detail makes us their first port of call. Example areas of focus include AI and Machine Learning, Automotive and Autonomous Vehicles, Industrial IoT, Virtual Reality / Augmented Reality,

Satellite and Space Technology and Semiconductors. In addition, we have an enviable track record within

the Distributive Ledger Technology space, having made key hires across business and technology roles on behalf of Banks, Exchanges, FinTech firms and the wider Market Infrastructure community. We, in particular, have unrivalled intelligence in the Blockchain community, tracking start-up funding for new entrants and are in regular dialogue with their development teams.

Gillamor Stephens’ clients trust us to make the best hires for them due to our ability to have a deep and passionate understanding of their complex products. This in turn, allows us to identify the best candidates to meet the needs of the business.

If you’re a Deep Tech business and require advice about your organisation’s talent requirements please contact Paul Gillespie, pgillespie@ gillamorstephens.com

Our parent company, Sheffield Haworth is a global Talent Consulting firm supporting clients with Executive Search, Consulting Solutions, Talent Advisory and Leadership Development in the Financial services, Business & Professional services, Corporate and Digital & Technology industries.

For over 25 years Sheffield Haworth have worked with clients to deliver the best talent and up-to-date industry information across the globe, combining a continued successful track record with an ongoing commitment to diligence, integrity and innovation. The business has 11 offices throughout the Americas, Europe, Middle East and Asia Pacific regions.

For more information, visit www.gillamorstephens.com or www.sheffieldhaworth.com

Insight into Gillamor StephensGillamor Stephens is the international technology sector executive search division of Sheffield Haworth, the Global Talent consulting firm. Over the last 20 years we have been successfully hiring leadership talent for enterprise technology providers across the spectrum from early stage VC backed companies to larger PE backed or listed businesses.

SERVICES INSIGHT

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