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Gs Insight Issue 18

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Welcome to the eighteenth edition of GS-insight, the quarterly magazine from international executive search firm Gillamor Stephens. In this 18th issue of GS-insight, Matt Mead, Managing Director of Investments for NESTA, discusses the challenging world of early stage investment while Tom Wrenn of ECI provides the PE perspective on the current investment landscape. We also speak with Colin Tenwick, recent CEO of StepStone regarding his transformation of this infamous dot.com bust into a booming success.
Jon Temple, CEO of data centre infrastructure management company, nlyte Software explains how there must be an emphasis on the business fundamentals of top line growth and expense reduction in order to grown in the “green” IT market, and Tony O’Donnell of Cambium helps us understand carbon reduction legislation and the opportunities that this creates for technology vendors. Dave Darsch of CEO-Collaborative Forum explores the importance of peer group interaction for CEOs and Keith Cornell sheds insight into the role of the Board. Finally James McDougall, whom we placed as CEO of VC backed ReVolt Technology, talks about the realities of being CEO of a technology innovator in a global market.

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Gs Insight Issue 18

  1. 1. GS- nsight people • i technology • business Issue 18 In this issue 2 Sound Byte Cloud Forecast Tony O’Donnell, co-founder of Cambium explains the GS-insight looks into cloud computing, green IT and much CRC Energy Efficiency more . . . Scheme W 3 Executive View elcome to the eighteenth for Venture Capital and Private Equity Jon Temple, President and edition of GS-insight, the backed technology companies across CEO of nlyte Software discusses green IT quarterly magazine from Europe. Although there has clearly been international executive search firm a reduced level of VC investment and PE Gillamor Stephens. Since forming our transactions over the last couple of years 4-5 Route to the Top business in the 1990s we have seen an we have seen a sustained amount of Colin Tenwick, recent CEO ever-changing landscape in the hiring activity in this sector as the of StepStone shares his transformation of a dot.com technology sector that we serve: from investors seek to ensure they have the from bust to boom the era of client server computing, right management team in place to through dot-com boom and bust onto the deliver on a company’s potential. In this 6-7 VC Economy present day excitement around cloud edition of GS-insight, Matt Mead, Matt Mead MD of computing and software as a service as Managing Director of Investments for Investment for NESTA well as the Green IT agenda. NESTA, brings insight into the challenging brings insight into early Recent studies from IDC show that world of early stage investment while stage VC investments global spending on cloud computing is Tom Wrenn of ECI provides the PE growing a rate of 27% a year, or nearly perspective on the current investment 8-9 PE Economy four times as fast as the overall landscape. Tom Wrenn, of ECI sheds information technology market. In this Investors are united on the need to light on Private Equity issue, we discuss the benefits of cloud have the right team in place for each processes computing for SMEs with Ricky Hudson, stage of a company’s development, but CEO of cloud computing innovator, Star. it can be lonely at the top of an We also gain insight from Colin Tenwick, organisation; Dave Darsch of CEO- 10 Ten Minute Interview James McDougall, CEO of ReVolt former CEO of Stepstone on lessons Collaborative Forum talks about the Technology talks about rock stars, learnt in embracing the cloud and importance of peer group interaction for batteries and entrepreneurial moxie building a successful SaaS business from CEOs. Keith Cornell discusses the role of scratch. the Board, while one of the CEOs we 11 Industry Insight Tony O’Donnell of Cambium helps us hired into a VC backed business, James Ricky Hudson CEO of Star understand carbon reduction legislation McDougall of ReVolt Technology, talks considers the potential of and the opportunities that this creates about the realities of being CEO of a cloud technology for technology vendors, while Jon technology innovator in a global market. Temple, CEO of data centre infrastructure management company, GS-insight can be viewed and 12 Community nlyte Software explains that it is not downloaded from David Darsch, co-Founder of the CEO – enough to purely appeal to a customer’s www.gillamorstephens.com. Collaborative Forum provides support sense of green responsibility as they for those at the top continue to focus on the business I hope you enjoy this issue and I 12 Best Practice fundamentals of top line growth and welcome your feedback. Career Board Director Keith Cornell expense reduction. Steve Morrison, Partner outlines the Board’s vital role Gillamor Stephens recruits extensively smorrison@gillamorstephens.com 11
  2. 2. Sound Byte Green light on carbon reduction Tony O’Donnell, co-founder of Cambium, a leading advisor to technology companies outlines how technology innovators can capitalise on market opportunities created by the CRC Energy Efficiency Scheme T he CRC Energy Efficiency • IT businesses in data collection, relationships inside obliged Scheme (CRC EES) is a modelling and reporting organisations. mandatory scheme designed to • Automatic metering vendors It has been reported by the reduce the absolute emission of • Energy consultancies to support environmental consultancy, ENDS carbon dioxide by the UK over the organisations in understanding that there are now over 300 carbon next ten years through the adoption compliance obligations and in accounting tools to meet CRC EES of energy efficient technologies and developing their response needs. We will see completely new management practices. infrastructures being created by the This legislation will drive This will create a deeper, obliged organisations to manage, fundamental change in both quantified understanding of where measure and account for energy affected organisations (“the and how energy is used across an consumption and emissions. This obliged”) and providers of energy organisation. This understanding will new market space has been efficient technologies (the generate secondary opportunities characterised by a wide variety of “suppliers”). In the process this will for low carbon technology vendors different vendors’ approaches, such create a huge market opportunity to demonstrate how returns on as: worth £800m in 2010 at a time when the economy is being squeezed by investment can be achieved through • Systems management and new technology. The momentum to monitoring vendors re-positioning reductions in Government spending: adopt “clean” technologies will solutions to be specific to carbon For the 20,000 obliged build as the Capped phase of the management and accounting organisations leveraging CRC EES to adopt a sustainable compliant scheme drives higher prices for • Traditional application providers carbon allowance purchase from turning acquisitive to add business strategy as quickly and 2013. relevant functionality - such as cheaply as possible will create a CRC EES therefore offers smaller SAP acquiring Clear Standards competitive advantage. For suppliers success will go to CleanTech vendors of energy • An increase in start up software efficient innovations the opportunity vendors, either from energy or those organisations that understand to market to the UK’s 20,000 largest carbon management the marketplace and align their organisations at a time when they consultancies, or through venture technology with the chosen response will be receptive to new energy capital investment of early target customers. saving ideas. However the CRC is attracting overseas market entrants, In summary CRC EES is a great The Market Opportunity which means early stage companies catalyst of change for the largest Most obliged organisations have not will need to quickly work out where organisations in the UK regarding previously had to provide statutory they are best served by a direct energy efficiency and sustainable carbon reporting, let alone estimate sales approach or by partnering with business. It provides an excellent and then acquire allowances to larger vendors, with established opportunity for innovative cover total emissions of carbon organisations both within the UK dioxide. Neither the technology market, and also subsequent infrastructure nor the management Tony O’Donnell expansion into a massive emerging best practices needed to collect, Tony O’Donnell co-founded Cambium global market. measure, manage and report on in 2008. Following an early career as The spoils will go to those that energy use has been established. an environmental research scientist, understand the implications of CRC Therefore for suppliers the first Tony changed direction and enjoyed EES whilst also executing with focus phase of opportunity will be to help a highly successful sales career with and speed. It promises to be one of create and build this new a number of technology vendors the most important markets of this infrastructure, then integrate with including HP Sequent and BEA , decade. existing systems and management Systems, where he ran the Financial For more information - processes. There will be significant Services vertical for the UK. www.cambiumllp.com/are-you- opportunity for: ready-for-crc/ 2
  3. 3. ?????????? Executive View Greening the Data Centre Jon Temple, President and CEO of nlyte Software gives his view on data centre management T he recent expansion of data expenses through the optimal centres has been significant, placement of assets. This can and forecasts predict that the reduce power expenses by up to 20% global data centre market will on a year on year basis. When you expand at a rate of 5-10% over the consider the power bill for even a next few years (Frost & Sullivan). modestly sized data centre, that Such growth will significantly impact 20% power saving can equate to over the environment – data centres $4 Million on an annualised basis so already account for 3% of total reining in these costs today is energy consumption worldwide, and proving to be extremely important data centre greenhouse gas for our customers. By 2014 it’s going emissions will overtake the airline to be more expensive to run the industry emissions within the next 5- data centre from a power 10 years. perspective than to buy and manage Whilst there is no way to deny the the equipment in it, so for most growing demand for data centres, Jon Temple, organisations there is little time to Jon Temple, President and CEO of President and CEO of nlyte Software lose.” data centre infrastructure Between 2008 and 2009 nlyte management company nlyte initiatives second, partly because grew over 130%, and has recently Software, believes that its impact the penalties for non compliance been selected as a finalist for Red can be tempered. However he also are not aggressive enough to force Herring's North America 100 award. feels that purely appealing to a change. There will be a tipping Although Temple is understandably company’s sense of green point, but only when governments reluctant to “go public with the responsibility will yield poor results: take a more aggressive stance and playbook to success” he does state “There is considerable vendor the tsunami of legislation is about to that being in the right market at the fatigue around the green IT story. break on the shores of every country right time is clearly helpful: Customers are interested in around the globe. When it does, “Latest research states that there corporate environmental companies will realise that these are just north of 106,000 data sustainability initiatives, but in this initiatives have teeth. The ensuing centres worldwide that house equal market they continue to focus change in behaviour will be to, or greater than, 100 racks of primarily on the business widespread. nlyte will be one of the equipment, and this makes our fundamentals of top line growth and technologies that will support and addressable market about $14.5 expense reduction. As such nlyte enable compliance” billion. Today only one company in a aims to help customers reduce their nlyte Software recently won the hundred utilises data centre power expenses, extend the life of “One to Watch Product” accolade at management solutions, which existing data centre facilities and the Green IT Awards 2010, however presents a significant forward improve business process efficiency. their solutions also make pure looking opportunity for nlyte So corporations focus on business sense, as Temple explains: software. This is a rare thing in an performance first and “Our solution is designed to help otherwise rapidly consolidating environmental sustainability reduce data centre operating enterprise software market.” Jon Temple Prior to nlyte Software, Temple was EVP Worldwide Field Operations at Hyperion, growing company revenues to nearly $1 billion and helping to orchestrate the $3.3 billion Oracle acquisition in 2007. Prior to Hyperion, Temple was CEO of Above All Software and spent 12 years at Business Objects in a variety of executive sales and operational leadership positions. During his tenure, Business Objects defined and led the Business Intelligence category before being acquired by SAP for $6.8 billion. 3
  4. 4. Route to the Top The stepping stones to success Colin Tenwick, recent CEO of StepStone, guides us through the company’s transition from dot.com bust to online and SaaS success O nline job board business restructuring assessing how to enabled the whole European StepStone went from having ensure the business operates in a company to speak the same €300 million in the bank after consistent, sustainable fashion. language in terms of pricing and the 1999 stock market float to That ranges literally from the front structure of the offering. being in imminent threat of of your company to the back – e.g. Once we had stabilised the bankruptcy with Ebitda losses of sales forecasting and processes business, it started to become over €210m in November 2001. Yet through to the development profitable and produce great in May 2010 StepStone sold its products using a single platform. We margins. That is the thing about talent management software inherited six different platforms, online business, it is a highly division to HgCapital for €110 how do you go from six to one? cyclical but once it is on the upside million, and in December 2009 Axel What does that actually mean? it just accelerates like crazy. We Springer increased its ownership of I also had to fundamentally wanted to create a business which StepStone to around 90% at an change the culture. We were complemented this highly cyclical estimated value of €165 million. profligately generous - at one stage transactional business with CEO Colin Tenwick something which explains this remarkable turnaround. StepStone was one of Europe’s highest profile dotcom failures. ‘‘ StepStone was like a patient lying on the pavement having just suffered a cardiac arrest; we needed to resuscitate it and get it smoothed the ups and downs. That is how we started to get into recruitment technology, deciding to utilise a subscription How did the based model. company look when you first joined? into an emergency room StepStone was like a patient lying on the pavement having just suffered a cardiac arrest; we needed to resuscitate it and get it into an emergency room. It was there were 25 BMW 3 Series parked ’’ outside for sales staff yet to join the company. I moved this to a results driven culture where every single penny was both forecasted Having been at Sybase in the era when 75% of big enterprise software licence sales were closed in the last 3 hours of a quarter, I wanted to build something that was more predictable. For this reason we haemorrhaging money by and counted. created the new business on a SaaS operating across six different We had a raw company, with model. platforms, had 2,800 staff with an multiple unintegrated acquisitions A SaaS business has a average age of 26 spread across ruled remotely from a heavily fundamentally different economic London, Paris and Madrid focusing centralised corporate function. I model to a traditional software on growth, growth, growth no created clear guidelines regarding business, and the cost of getting matter the cost. measurement points and the value up to speed is very, very high. It is proposition, all with the aim of only after the first year when a How did you address this? empowering local businesses. We customer renews that you start to The first stage was assessing the had fantastically gifted local make any money; however as it is patient - can it survive, does it have managers who lacked the right tools an annuity, it keeps doing that enough cash, can it get support and to succeed - I therefore put in place every single month, so after two secondly is there is an opportunity a solid core of technology, years you have a very, big amount to radically reshape the business? consistent core marketing and of money as long as the customers Second stage starts almost in branding, a cohesive pricing are retained. The whole model is parallel, focusing on radical structure and value proposition that based on attraction and retention. 4
  5. 5. ?????????? Route to the Top ‘‘ all too often in Europe founders of companies build to a successful exit, and become non-executive directors. We don’t have a culture of serial CEOs We started from scratch in 2004 and we exited last year at the run rate close to €60 million, out of which two thirds is monthly recurring ’’ think we have moved way beyond the one size fits all, where standards connectivity and interconnectivity become bywords revenues. and ultimately price performance becomes critical. What have been the most The days of people important lessons that you have commissioning enormous, multi learned in this process? million Euro enterprise software I think that one of the biggest development will rapidly disappear learning points has been the as SaaS delivery mechanisms offer importance of upwards and faster, more assessable benefits to downwards relationships within a businesses. Really, I think what we company. will see are mixed models appearing For a CEO “upward” relationships Colin Tenwick, as economies of scale are realised tend to be with your chairman, and recent CEO of StepStone with SaaS companies developing I have been blessed with two once and deploying many times, exceedingly capable and gifted You built from scratch a successful ensuring an inherent flexibility in chairmen, who managed to be Software as a Service business at the way that software and simultaneously fully supportive StepStone. What is your view on technology is built. I don’t see this whilst also challenging and the SaaS and Cloud market at the as a pseudo-religious war, this is questioning. I think a Chief moment? simply the future. Executive needs to have people to I think inevitably near-core and bounce ideas off, people that will none-core services are going to go What does the future hold for you? challenge, sounding boards into the Cloud, forcing hosting More of the same hopefully, it is fundamentally working in the same suppliers’ services to be assembled just not in me to stay on the bench. direction. If you get this right it can from anywhere with immense I passionately believe in the make an enormous difference. security – resulting in a mixed profession of the CEO, but find that “Downwards” relationships focus model where some technologies will all too often in Europe founders of on how you build a team. You can’t be hosted on premise and other companies build to a successful do everything yourself, and so must areas will be hosted outside. exit, and become non-executive be able to attract exceptional An example of this blurred line directors. We don’t have a culture talent. This is fundamental; could be if a company kept their of serial CEOs, people who are however the problem comes for a core HR system on premise within willing to go and do it again with CEO if you don’t recognise the need their firewall, but placed their the aid of experience - that is what for blended skills across the expense management out in to the I want to do. I want another company. A common failure is that Clouds. So you are going to see a crunchy CEO challenge because I you find CEO’s who either don’t blending as the Cloud calls on the think they are fun, it is the best delegate or prefer to recruit in on-site server and vice-versa. I place to be. their own image - the last thing you want is for your CTO to be the same Bio for Colin as your CFO. The CEO must bring together a fantastic blend of skills Colin has worked in the IT industry for 20 years, joining StepStone from Red and then drive it forward into a Hat Europe where he was Vice President and General Manager. Before that common approach. It is about from 1994 to 1999, he held various senior positions with software company appreciating and developing Sybase, including Vice President of European Marketing and Vice President different skills into a consistent and General Manager of European Operations. whole. 5
  6. 6. VC Economy Investment in a bear market Matt Mead, Managing Director of Investments for NESTA, brings insight to the challenging world of early stage investment N ESTA (National Endowment for start-ups, particularly more common to build a syndicate for Science, Technology and technology companies who take of investors to provide sufficient the Arts) was established in five or six years to develop their money to give a company enough 1998 through an endowment from technology and require ongoing runway to succeed. the National Lottery. As the development capital. Even before Nevertheless, the dual impact of leading independent expert on the recession struck, high tech venture capital funds moving how innovation can solve some of entrepreneurs had cause for upstream and the devastating the country’s biggest social and concern. The migration of many of effect of the recession make for economic challenges, it applies a the original early stage funds into sombre reading. The PWC BCVA blend of practical activities later stage investments left a investment report for 2009 shows including investing in early stage dearth of finance in the sector. that a scarcity of investment is high tech businesses, with rigorous Government backed funds such as apparent at every stage of the research to foster innovation in Enterprise Capital Funds, VCT venture capital cycle; in 2009 total the UK. funds (like Albion and Octopus) UK VC investment was £297 million NESTA Investments, a £50 million and NESTA have had to plug the against £359 in 2008 and £434 evergreen fund managed by Matt gap, playing a critical role in million in 2007. If you drill down Mead has a broad technology remit backing technology entrepreneurs. into those numbers several key typically providing pre-series A and But public finance should not, facts emerge: A round investment into a variety and cannot, work alone. Indeed, of sectors. These range from one of the main benefits of having Geographic split – of the £297 medical devices and diagnostics, public finance at this risky stage is million invested in 2009, £242 electronics, semiconductors, that it can leverage in private million was spent in the South internet, digital media with a investment – helping to grow the East. Probably to an extent this smattering of clean tech for good early stage sector over the long- correlates with sectors as well, measure. term. And because there is less because London and the South East capital around, most investments typically would see more internet View of the current early stage today are done collaboratively. and digital media companies and investment marketplace There are still competing term this appears to claim a We are living in challenging times sheets on certain deals, but it’s disproportionate amount of money. Matt Mead Matt joined NESTA in January 2010. He oversees all aspects of NESTA's investment activity. Matt has over 14 years' experience investing in UK and international early stage ventures and was a Partner in 3i's Venture Capital business. He has worked with companies as a Board member through high growth, turnaround, exit and acquisitions. He recently led the secondary market disposal of 3i's Venture portfolio of assets in both the US and Europe. Matt has worked across all technology sectors but has specialised in the ICT market, working with companies including: Vistorm, a leading provider of e- security services (sold to EDS); Achilles, a provider of supplier information services (sold to HG Capital); Insensys the wind turbine monitoring business (sold to Moog Inc) and other leading venture backed technology businesses such as Garlik, CRF Health, Profile Therapeutics and CDC software. 6 6
  7. 7. ?????????? VC Economy Stage of investment – In 2007, handheld electronic learning aids) Investing in talent £244 million was invested in early being a rare exception with its When assessing the strength of a stage companies. By 2008 this had recent market cap of c. £400 company’s management team, the shrunk to £187 million and by million. As a result venture CEO is often the most scrutinised, 2009 it had diminished to £137 capitalists are typically holding and the following aspects are million. their portfolios for longer which essential: However this pattern has not obviously hurts their returns and stopped entrepreneurs coming up makes it harder to raise the next An understanding of the with ideas and trying to create fund. venture capitalist’s agenda – A businesses. Instead, it appears to CEO who can build a business with have encouraged an increasing A return to core principles an idea of how to generate and number of business angels to The majority of Investors are realise a capital return for ‘‘ bridge the gap between shareholders is a concept, seed funding and early stage The key lesson for me is that critical. investment. One only entrepreneurs are having to be Strong sector need look at the expertise - someone clusters around smarter about attracting finance, who has a very good internet digital media feel for the market and Medtech. but good entrepreneurs will and understands the The key lesson for me is that entrepreneurs always find backing - it just takes sort of competitive differentiation that are having to be smarter about attracting finance, but more searching than it used to good entrepreneurs will always find backing - it just takes more searching than it used to. focusing on fundamentals when looking at their investment activity. They want to understand how the companies that they ’’ a business can find is really important. Exellent talent management abilities - ultimately being able to recruit and build a team of really talented individuals is one of the Why is the early stage investment invest in can build a valuable fundamental challenges for early marketplace so challenged? market position and get to cash stage businesses. In many ways the marketplace is breakeven. There are still Often a different CEO is required difficult and yet it feels no technology or market position led not only for different sectors – but different to any other time I’ve deals – for example the Admob also for different stages of a been involved over the past twenty acquisition by Google and the company’s evolution. The founder years. There remain great Quattro acquisition by Apple in might not be the person that entrepreneurs, starting exciting the mobile advertising space. ultimately takes an organisation businesses that require financing. However these are becoming from concept to revenue, let alone But a key challenge for venture increasingly rare. It comes back to from £10 million of revenue to £50 capitalists is around the exit core principles: investing in world million. It’s rare that you find market. There is little liquidity in class management teams, people who can make that terms of IPOs and trade sales at operating in large potential transition and this is something the moment - Promethean (maker markets with a product that’s that we have to consider when of interactive whiteboards and differentiated. making an investment. 7
  8. 8. PE Economy Private Equity Eye Tom Wrenn, who invests in the software & IT services sector for private equity firm ECI, reveals some of the inner workings of the best established and most successful Private Equity groups in the UK A typical investment target The investment process ECI invests in businesses valued Typically there will be anything between £10-150 million once bank from one to five Private Equity debt and similar factors have been firms approached regarding an considered. Target companies will opportunity, often alongside trade be profitable, cash flow positive, buyers. Where possible an established in their market and not information memorandum will be at risk of running out of cash. The prepared by the investment bank question should be about how much containing information on the profit it reinvests in growth, rather business, historic financials, than ECI having to pump in cash to forecast, structure, the go-to- fund losses. market strategy etc. Interested ECI targets investments that have parties will then tender a first a strong defendable position in a round offer, which the advisor and growing market. Current areas of vendor review, taking through a interest include managed services small number of bidders to the next (as businesses outsource IT in a round of the process. Whilst price is move towards an annual IT cost, important, many deals involve an rather than a large upfront capex), Tom Wrenn of ECI ongoing role and/or investment financial technology (as financial from the founders. Therefore the services businesses come under were the managers and wished to ability of the PE investor to add pressure to spend reasonably retire. value post deal has an increasingly significant sums on improvements to Current: Now entrepreneurs and important bearing on who is their regulatory environment) and business owners are savvier about selected. This includes a track companies targeting the ongoing the value of their business, and get record in the sector, an ability to convergence in communication an advisor if they are thinking about fund ongoing investment, a track technologies. selling. In addition, following the record of growing businesses dot.com crash many tech sector overseas, an ability to bolster the How is an investment target investment bankers left their bulge executive team and an ability to found? bracket banks to create boutiques help make the right investment Historical: 10 or 15 years ago the which trawl through their regional decisions to maximise the potential prize was to get direct deal flow patch or area of specialism, looking of the company. i.e. deals originated through direct for interesting business and The second round of discussions contact with the company. The developing a relationship. So includes more confidential business would usually not have typically ECI will get a phone call information, often including a heard of Private Equity firms, and from a corporate finance adviser at formal presentation on the business they certainly would not have a one of the accounting firms, or a from the management team. This is corporate finance advisor. A Private boutique investment bank saying critical, as the team are Equity firm would talk to the target they’ve got an interesting IT fundamental to the investment. over a period of months and end up services business (often a company Typically the second phase will also doing a deal that either backed the that ECI has met in the past and involve access to a data room that existing management team to buy expressed an interest in backing), would give more detailed the business from its owners or now making £2 - 20 million of profit information in terms of contracts brought in an external management and the process is started from and so on. buy in team e.g. where the owners there... The final round offer will be 8
  9. 9. PE Economy anywhere between four and eight will vary from scenario to scenario. obviously not a great starting point weeks after the first round offer. As an example for an online travel for a Private Equity investment. One bidder will then be selected business in a high growth This can be seen in recent deal based on the price they bid, the environment the strategy may be statistics - there have been very relationship they have developed purely organic growth. As such the few Private Equity deals done over with the management team and business needs a management team the past 12 months. Most Private ultimately the vendors’ views on with sufficient strategic insight to Equity funds have been quite quiet; their deliverability. A period of ensure they are not caught out in a although not necessarily due to a exclusivity will then be given, fast moving market. lack of desire to invest. A vital during which there is a short period For an ERP supplier looking to do component of a Private Equity deal of time to complete final due a “buy and build”, consolidating its is acquisition finance provided by a diligence and finalise the deal. market, it’s more about spotting bank. As a result of the low deal interesting businesses, acquiring volume and the significant pressure The role of the Chairman in a them and integrating them into from the Government to lend portfolio company their business efficiently and cost money to small businesses, these Probably the most important part of effectively. banks are (contrary to popular the ECI model is having a very good The skill set has to be belief) very keen to work with firms Non Executive Chairman; someone appropriate for the opportunity, and like ECI, who they have developed a who is working with the business that can be a challenge for many relationship with over many two or three days a month. The target businesses as these were decades. As such, the famine in Chairman will run the board start ups five or ten years ago, and Private Equity deals does not reflect meetings, but also spend time with the management team were a lack of investment appetite; it is the Chief Executive to act as a entrepreneurs focusing on actually lack of quality sounding board, a mentor and make developing the initial market opportunities. sure that the business is pointing in opportunity. But now it’s a 200 This should soon change as many the right direction. The Chairman person, £50 million business and the owners of good quality businesses can flag when something needs to entrepreneur is struggling to take it are adjusting to the fact that there be reassessed, act as an to the next step. Where are interested investors, independent bridge between ECI appropriate, ECI will use an MBI particularly in Private Equity and and the management team on any (Management Buy In) candidate who that with the short supply of areas of disagreement, and also has experience of running large investment opportunities, quality notify the management team when businesses, and can work with the businesses are attracting a decent they need to point their guns in a entrepreneur to guide it forward. price. slightly different direction. If supplemental recruitment is Valuations are probably not going required ECI’s first port of call is to be the frothy multiples of 2007, The Management Team always to review its internal “Talent but looking at Private Equity deals Fundamentally ECI backs Bank” of Chief Executives, Finance across all sectors, recent multiples management teams, and therefore Directors, non-execs and so on. But have been extremely positive. part of the due diligence process is the aim is to find the best Indeed, in certain cases multiples of assessing if there is a good, high candidate, not just the best that above ten times EBIT are being quality team in place. They might ECI knows, so if there is ever any achieved for businesses which don’t need supplementing in certain areas doubt a call is placed to a relevant have the rich IP, growth prospects if the business has grown, search firm such as Gillamor or high visibility recurring revenues necessitating additional sales Stephens... that many businesses in the capability, or perhaps the Finance technology space display. So for a Director needs some additional A view of the current investment decent business which has support. But fundamentally ECI does landscape weathered the recent storms, such not “run businesses” and relies on In an “easy market” where GDP is as a quality software and services having a good quality management strong, lots of businesses can business with a high level of team that the firm can help achieve prosper, however the terrible recurring revenue, a multiple of their aims, either through combination of credit crunch eight or nine times EBIT is realistic. experience gained with other followed by recession, means many As more deals close, this message portfolio companies, or outside businesses previously performing will spread to vendors creating a consultants and contacts. very well suddenly have profits and more confident and buoyant The exact capabilities required revenues going backwards, market. 9
  10. 10. Ten Minute Interview The Ten Minute Interview Gillamor Stephens spends 10 minutes with James McDougall – CEO of ReVolt Technology Who are you? Where are you? about €5.5 million to support our And are you a rock star? I'm the CEO of ReVolt Technology. I focus long-term on next-generation Well, I don't think I look like a rock travel about 75 or 80% of my time, energy storage for wind and solar. star. I think people probably consider split between the United States, all With the launch in 2012 we will have me more of a bulldog than a rock over Europe, and, as of late, I've been the first company in almost 60 star. been spending quite a bit of time in years of attempts by various China expanding our business. companies large and small to Why's that? successfully commercialize I'm pretty tenacious. I don't always What does ReVolt Technology do? rechargeable zinc-air batteries. have the most eloquent way of We're working on the next generation getting things done. I'm pretty of energy storage. Developing In two years ReVolt will have... straight-forward, head-on, hard- rechargeable zinc-air batteries that We will have hopefully just finished headed. And I just keep coming at it. can run your Blackberry for three an IPO and driving towards a market times longer than it does today, or an cap of close to $1.5 billion. The hottest, most exciting thing electric vehicle for 500 miles, or about being a CEO right now... providing energy storage for You have a new Non Executive It's one word. China. The tomorrow's wind and solar energy Chairman at ReVolt. You recently opportunities for a cleantech CEO in generation systems. called him a rock star. Why? China are staggering Well, in any type of high-tech Are we talking about changing the start-up, it's not the norm to have a What other European companies world? well-established company's CEO excite you? Well certainly trying to transform it, sitting on your board as a Non I'm really excited about what the make it a little bit of a better place Executive Chairman. We have John automotive OEMs in Europe are doing to live in, a cleaner place to live in. Searle, the current Chairman of the as a whole, out at the front working management committee and, on some really interesting platforms Has ReVolt actually sold a battery effectively, the CEO for the Saft for next-generation automobiles, yet? Battery Corporation (a very successful particularly for plug-in electric We're pre-revenue at this point - our publicly listed French company). This vehicles. The European Automotive first commercial launch is in 2012 gentleman has done some amazing OEMs are inspirational and trying to with a line of consumer products. things in his career and he's still at it, lead the way. There is also a cadre of However we've recently won $20 and now he's sitting on our board, really exciting start-up companies million in grant funding from the helping us carve out the vision for working on various bits and pieces government of Germany and the US where we need to take the company within our ecosystem. HeliaTek, Department of Energy to generate next. It's very unusual for companies ChapDrive and Quiet Revolution... large-format rechargeable batteries in this stage of growth to be drawing You have to admire the moxie of for electric vehicles. Also, in 2009 we in that calibre of talent. We're very these guys to step up and create the received a pretty substantial fortunate, and very happy to have next generation variants of wind and investment from RWE in Germany of him. solar production. Gillamor Stephens and ReVolt Technology Gillamor Stephens has worked successfully with ReVolt and its investors since 2007. To date we have placed James McDougall (CEO), Adam Laubach (CTO, EVP of Strategic Development), Thomas Gebauer (CFO) and most recently John Searle (Non Executive Chairman). James is a member of the CEO Collaborative Forum Advanced Program and Thomas is a member of the Finance Stream. 10
  11. 11. Industry Insight Cloud Computing and a guiding Star As cloud computing adoption accelerates globally, we speak with Ricky Hudson, CEO of cloud technology innovator Star to gain his perspective R ecent studies from IDC show business applications by 2012. that they can be delivered across that global spending on cloud Recent research supported by the internet to provide business- computing is growing a rate of cloud technology innovator, Star, grade services without any of the 27% a year, or nearly four times as identified a mismatch between disruption, drudgery and cost fast as the overall information many UK SMEs and new technology's normally associated with paying for technology market. Predicted cloud transformative potential, and an and maintaining expensive hardware computing spending is set to more even larger disconnect within the and software. than double between 2008 and same organisations between the Cloud computing is a key enabler 2012, and total spending on the day-to-day tasks of the IT manager in this respect, because it is the cloud is expected to rise to $42.27 and where they believe their skills delivery platform from which new billion, or 9% of the $493.71 billion can best be deployed. Research services can be quickly provisioned IT market in 2012. shows that IT managers within with no capital outlay and easy pay The implication for IT suppliers is smaller enterprises spend a huge schemes, such as ‘per user per clear. They must position themselves percentage of their time either month’ pricing. These new on- as leaders in IT cloud services, or simply keeping the lights on demand business services can be for forfeit an ever-expanding portion of maintaining and upgrading systems email, CRM, security and storage – the industry's growth. The impact or in fire-fighting mode when or any other combination of of this can be seen in HP announcing systems begin to creek as they pass essentials – but it is the service that plans to invest $1 billion into their best. is important, not the delivery automating and restructuring its “The demands of corporate mechanism. Enterprise Services business, halving computing are rightly rigorous, but “Cloud computing is the enabler, a worldwide data centres and hiring the pressure this imposes on IT platform for businesses to get the an extra 6,000 staff to support a managers is leading them to worry services they need, delivered to heavy focus on cloud computing as more about what could go wrong wherever they need them, any time the company's future. Microsoft is than being energised by the of the day and at a standard and also embracing the concept of cloud prospect of what might be possible” fixed fee” says Hudson. computing, with new versions of its explains Ricky Hudson – Star, CEO For business, exploring the cloud Office productivity suite providing For Hudson, overcoming this is an opportunity to blend existing fully developed Web offerings, anxiety is about demystifying the investments in technology with matching the functionality of its opportunities that the cloud can services that help move IT costs traditional desktop product. SAP bring to UK SMEs by helping from undesirable and risk laden has acquired Sybase in order to companies develop business capital expenditure to a much more catch up in the cloud and Oracle strategies which exploit the manageable operational continues to invest in this field. potential of new technologies expenditure. Overstretched IT However cloud computing is not without compromising performance departments can then focus time just about infrastructure technology demands or security. Star works to and resources on value-added – the biggest part of the market is address specific business needs via a activities that help accelerate the business applications, which portfolio of “utility computing” business towards its goals. accounts for more than half of all tools: in essence, the core Download a free copy of Star’s spending on the cloud. About 52% of applications of the SME market, Cloud Computing guide from: the cloud market will be focused on serviced and managed in such a way www.star.co.uk/cloud 11
  12. 12. Final Coments Company at the top David Darsch, co-Founder of the CEO – Collaborative Forum talks about the importance of peer group interaction I t can be lonely at the top. There experienced similar challenges. given feedback, ideas, opinions and are countless issues, ideas and Instead of pure networking, CEO-CF recommendations from experienced concerns that a CEO may not be offers collaborative problem-solving sources. ready to discuss with members of the sessions at its three annual meetings CEO – CF is European in its Senior Management Team … yet. and other on and off-line tools. approach, which simultaneously Likewise, other doubts or problems CEO-CF places a premium on focuses the community, yet opens it cannot always be taken straight to a quality interaction and to pan-European diversity. CEO – CF company's board. CEOs from every communication. At member events, constantly works to support its walk of life are faced with more or facilitators implement a presentation members, through quality less the same questions: “Where can I process unique to CEO-CF and communication and the collaborative take this problem? And how can I designed by the company to foster process, to achieve their personal trust the advice I'm given?”. concise, productive and professional objectives. As Some 150+ European CEOs (20+ recommendations. Member CEO – CF co-founder Dave Darsch different nationalities) have turned executives are coached by fellows states - “Experience, is learning from to an organisation called the CEO – and CEO-CF staff prior to events in your own mistakes, wisdom is Collaborative Forum (CEO-CF). preparation for what the company learning from the mistakes of Founded in 2005, the Collaborative calls “Member Challenges” and others”. Forum exists to connect CEOs to a “Member Issues”. At the events, For more information please visit: community where they can focus on “Challenges and Issues” are www.ceo-cf.com or contact David their goals alongside peers who have presented, and the presenting CEO is Darsch d.darsch@ceo-cf.com All on Board Following his panel contributions to the European Venture Capital Network, Keith Cornell, Chartered Director, draws on over 25 years of experience including two public and over a dozen private Boards to give insight into the role of Board Directors F irst, I think we should step back Secondary activities Board members should avoid purely and ask “what is the purpose of 1. Preventing and managing crises financial metrics and looking the Board within a VC funded 2. Procuring resources, as needed backwards rather than towards the company?” Besides the obvious 3. Assessing the performance of the future. They should avoid bringing in oversight for the VC over their overall Board. issues relative to their fund (end of investment, I think the Board really 4. Resource aide, for example life, etc.) and issues that are has four major activities and four introductions to key potential between the VC members or between secondary ones: customers, or helping source them and the senior management venture debt team. Where the dynamics go wrong Key roles of the Board and engaged In the context of a Board is when factions exist or establish Directors conducting these activities, I think themselves on the Board. Board 1. Setting/Agreeing the Strategy of the key characteristics are to be members need to think only about the Company prepared and engage in useful their role as Directors of the 2. Overseeing the Execution of that conversations with other Board Company and ensuring the growth of Strategy members and the CEO. A good Board the business. 3. Engaging the CEO (one could say member is curious, listens well, can In summary, an engaged and active hiring and firing the CEO…) be articulate with their own views Board can be a great asset to a 4. Ensuring the Development of the and is willing to accept some degree Company and its CEO. Much value can senior management team/ of “conflict’” in order to tease the be had – if the Board works employee “human capital” best ideas out from the entire Board. effectively and manages its role. 12

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