Secrets of Success
by Real Business - Thursday, 30th August 2007
This is the page
Dr Mike Lynch, Autonomy
Rita Sharma, Worldwide Journeys/Bestattravel.co.uk
Humayan Mughal, Akhter Group
June Reynolds-Lacey, NSH
Techlogistics
Christiane Wuillamie, CWB
Dr Michael Lynch, founder and CEO Autonomy Corporation
“Learn fast. Wasting time is worse than wasting money”
For Michael Lynch, founder and CEO of Autonomy Corporation, the mark of
a successful business is one that learns quickly. “If you learn fast enough,
you’re there the next year,” he says. “We started with a £2,000 loan. What that
meant was that you very quickly worked out what to do – otherwise you’d run out
of money. That’s good training. When you see a business start with £50m of
venture capital, you do worry that they are not going to work out the
priorities. The fact that they’re wasting money is almost irrelevant. What
they’re actually wasting is time. And in technology, time is invaluable.”
This academic-turned entrepreneur has wasted very little time in
creating a company whose value touched £5bn at the height of the tech boom. He
grew up in
The company went public on NASDAQ Europe in 1998 and within a year had
become the best-performing stock. The listing gave access to capital for
expansion and made some customers more willing to do business with the recent
start-up. “Because of the kind of software we sell, companies were often more
comfortable buying mission critical software from a public company rather than
a private one,” explains Lynch.
The core product is software that helps companies organise their information
– most of which isn’t handily filed away. Corporate intelligence today is
largely “unstructured” and resides in e-mails, in brochures or on web sites.
That means that it’s difficult to retrieve and re-use. Autonomy’s software
helps search and catalogue information automatically and – yes, before you ask
- it handles information across all digital domains i.e. text, pictures, audio
and video. Result: more personalised, more effective, cheaper content to fuel
web sites and CRM applications.
The software uses a proprietary pattern matching technology, the result
of research Lynch did at
Autonomy listed on NASDAQ and the London Stock Exchange in 2000, roaring
into the FTSE100 with a £5bn market value and making Lynch a billionaire on
paper. The shares crashed in the high tech meltdown but the company remained
profitable, and the shares recovered to value the company at £868m in 2005.
That makes Lynch’s stake worth £107m. With share sales and property assets, he
is easily worth £164m – that’s a lot of gold under the floorboards.
And there’s more to come. Last year Auronomy acquired Verity, its main
American rival, for £282m, giving it access to the vital American market and
Verity's 15,000 customers. All in all, Autonomy boasts a customer base of more
than 600 global organizations including the 21 agencies responsible for
Autonomy is now the leader in its area by some distance. “That’s
important,” says Lynch, “because it’s a rapidly growing market and when you get
out ahead, you’ve got a big advantage.” He says the key to success in this
market is the so-called network effect. People using Autonomy’s software can
all communicate with each other easily. The more people that use it, the more
powerful it becomes. So at some point it becomes difficult for companies not to
choose it.
Having made large inroads in the corporate sector, Lynch is turning his
attention to the consumer market. He has a joint venture in
“You can search television!” exclaims Lynch, explaining that you can
type in something you’re interested in and the service will deliver content
about that subject, from a single programme to an entire channel if that’s what
you want. The business model is “traditional dotcom,” according to Lynch:
revenue comes from ads that the service places at the start of the video
programmes.
This might seem a radical departure for the company, but Lynch says,
“It’s a good time to take a bet there.” The search engine specialists like
Google and Yahoo have failed to capture the Chinese market the way they have
the
And Autonomy has already tried this kind of service on a small scale.
Their technology powers Blinkx, a search service that internet users can use to
look for video clips from the BBC, Fox News, CNN and Reuters. Blinkx will
provide the front-end for the Chinese venture. Autonomy has an option to take a
stake in return for the knowhow it gave to Blinkx’s founder (and ex-Autonomy
employee) Suranga Chandratillake. Judging by
his hopes for the firm, it must be a stake he’s eager to take up.
“If you’re a very large media company,” he says “as media moves onto the Internet, your biggest threat is probably Google. If you think that there’s a danger that in four or five years people will go to Google and type in ‘Desperate Housewives’ and watch it, then you no longer own distribution of your content. Blinkx could be very valuable to you – one might argue it could mean life or death to your business.”
But for all his optimism, this academic still retains
a sceptic nature when it comes to startups. “I wouldn’t go into business unless
you have the cards stacked in your favour,” he says. “Don’t even think about it
unless you’re ten times better or ten times cheaper.”
Prof Humayan Mughal, co-founder and CEO, Akhter Group
“Learn from other people’s mistakes – it’s cheaper”
Mughal has successfully navigated at least two technology led booms. He
started his first company in 1979, assembling computers just as the exponential
growth in use of microprocessors fuelled the rise of the personal computer
market. “The difference between that boom and the dotcom boom,” says Mughal,
“was that there was a genuine business case. Not everybody rushed in like the
gold rush – it grew gradually based on proper business plans.”
The triumph of the Intel microchip and the IBM compatible personal
computer, seeing off British favourites like the Acorn and the Apricot in the
process, taught him a valuable lesson about the importance of market muscle
over technology excellence. “The IBM compatible became the winner although the
Motorola 68000 was the better platform,” insists Mughal. “From a design
engineer point of view, it was not wonderful. But because IBM used Intel, Intel
became standard.”
He has since been through many ups and downs, but together with his wife
Yasmin he has built Akhter Group into a flourishing operation. Their core
business is providing computers, networks and software solutions for public
sector organizations, particularly in education and defence. Their innovative
technology over the past twenty years has turned it into one of the smallest
but most successful suppliers to the MoD. In 2004 Akhter Group, still 100 per
cent privately owned by his family, made nearly £500,000 profit on sales of
more than £16m. We’ve valued the company at £18m, with Mughal’s stake and other
assets worth about £25m. Not bad considering that Mughal arrived to study
electronics at
“The way I look at it,” he says, “difficult times are also an
opportunity. It’s not easy to get through them but those that do grow stronger.
You learn from other peoples’ mistakes – it’s much cheaper that way.”
Mughal blames mainly the banks and venture capitalists for the dotcom
boom and bust, for their reckless backing of dud propositions. “They did a lot
of damage,” he says. “When the boom was over, they were willing to back nobody.
So even the genuine business cases based on Internet technology and Internet
opportunities were in difficulty.”
When Akhter itself went for a stock market listing in 1997, they were
victims of similar poor judgement from the financial institutions, says Mughal.
“We did try to go to the market, but we had the ‘wrong’ business model.” He
found that investors were more interested in funding companies with a high cash
‘burn rate’ than profitable companies like his own. “Everybody was saying ‘you
don’t need the money, you’re profitable,’” remembers Mughal, who says the
experience cost £1m in wasted professional fees.
The business also suffered from the downturn in 2000 as corporate cut
backs in spending decimated technology markets. Mughal had invested most of his
cash reserves in an acquisition in
But Mughal’s companies have prospered, mainly through an ability to
adapt to changing market conditions. “There are times when you have to tweak
your business model,” he says. In Akhter’s case that means continuously
innovating to keep ahead of the commoditisation of IT products, and focusing
increasingly on services and “solutions”. For example, the company has recently
added desking systems to the PC’s, software and networking they supply to the
education sector. That way schools can re-arrange their classrooms while
keeping their networked PCs running. And the high margins on furniture
compensate for the shrinking margins on the technology products.
Mughal’s relentless in pursuing new ideas – so relentless, he says, that
his accountant has occasionally had to rein in his curiosity.
“You have to have a reasonable spread,” he says. “If you spread yourself
too thin you never get anything done and if you focus on one thing, all your
eggs are in one basket. You also have to recognise that it takes time for a
venture to produce results. If it doesn't, you have to be prepared to cut your
losses. It’s how long you put up with those losses that’s important – it’s
difficult to recognise when ‘enough is enough.’”
What’s exciting his enthusiasm at present is a business he’s set up in
June Reynolds-Lacey, NSH Techlogistics
“Spot the next trend – and wait for demand to catch up”
June Reynolds-Lacey can see the light at the end of the tunnel. It’s
been her toughest two years since she first set up in business 16 years ago,
with the help of a £60,000 loan borrowed using her much loved Jensen
Interceptor car as collateral.
She says her latest venture, Box Telematics, will turn a profit for the
first time this year and generate year-on-year sales growth. “It’s taken a lot
longer than anyone expected,” she admits: six years rather than the three she
anticipated, and nearly £7m investment. At the same time she and her team have
been turning round the fortunes of NSH Techlogistics, the mobile phone
servicing company which she founded in 1989. Its parent, Mobilefone Group,
abruptly lost more than half its business two years ago when its main customer,
Nokia, re-organised operations.
Reynolds-Lacey, however, is used to seeing a project through to
completion. More than once, she’s shown an instinctive ability to spot new
technology early and act on it. “What I've done over the years,” she says, “is
to identify the next main area of interest in telecoms.” More often than not,
this has meant going out to look for customers while waiting for the demand to
catch up. “For the first two to three years, you have to go out with a scatter
gun and see what you can hit,” she says, explaining an approach to signing up
customers that involves asking them, “Can you work with us while we develop a
solution?”
She showed her resourcefulness early on. At 18 she bought her own home,
a large Victorian house, and converted it herself using the building skills
that her dad, a self-employed builder, had taught her. Her B&B for students
helped pay for the mortgage. She admires her father’s attitude – he instilled
the conviction in her that if you want something you should work hard for it.
But her main source of inspiration came from a grandfather whom she never
actually met. A family story of his success - he ran the first pool hall in the
At 35, after years working in catering and sales, Reynolds-Lacey really
started applying her own entrepreneurial talent. She set up NSH Techlogistics
to provide a service hub for mobile phone suppliers. It was the first company
able to handle the scale of service that major players needed as demand for
digital mobile soared. For years, NSH provided after-sales support, training
and maintenance for Nokia mobile phones, with resellers such as
Meanwhile Reynolds-Lacey, who owns 99 per cent of the business, has been
investing profits in Box Telematics. Once again she’s jumped to harness a new
technology before the bandwagon gets rolling. She found the perfect application
when meeting with a fellow entrepreneur - and Bentley owner - at a
Rita and Rahul Sharma, Worldwide Journeys
“The internet’s for bringing in customers”
“Definitely undervalued,” is how Rita Sharma views recent press
estimates of her company’s worth. She says that she has never requested a
valuation and in any case, her husband Rahul is the money man, whereas she, she
says, is the “drive, the feeling” behind the business. Any strictly financial
technique seems likely to underestimate the value of Sharma’s efforts.
“This is 20 years of my life,” she exclaims. “This is my life.”
That sentimental valuation hasn’t stopped the City making its guesses on
the couple’s worth, of course: financiers have tried to woo them into floating
their business, Worldwide Journeys, for £60m. The Sharmas retain 100 per cent
control of the business, and with another £38m in property and other assets, we
value them at £98m. Not bad, considering the company had a tough 2005.
Still, Rita Sharma won’t be too upset about that £98m figure. Since she
started her business from a cupboard-sized office in 1986, she’s been driven by
“an urge to make money”. Back then she was only a few years out of school, with
work for British Airways and a few travel agencies under her belt. “Nobody told
me about investment banking,” she complains.
So she started building her business, booking transatlantic flights for
business travelers. When the market dwindled in the late 1980s she switched to
booking up-market holidays for well-heeled travellers. Rahul,
a chartered accountant, left his partnership with a
The company’s core business, tailor-made luxury holidays, has grown very
successfully ever since. There’s no shortage of customers spending £10,000 or
more on a family holiday to an exotic location; one recent booking for a family
holiday in
But the strategy is to change the balance of business between long haul
and short haul destinations, widening the product range to capitalise on the
growing share of the market for shorter breaks costing around £5,000. “Lots of
our clients come back and ask us if we can recommend somewhere for their second
holiday of the year,” explains Sharma.
After a late start, the Internet is now a crucial element in delivering
this strategy. “We’re not really a ‘clicks and mortar’ company yet,” says
Sharma, “we’re moving towards it, but at the moment we’re more of a clicks and
bricks company.” Her company launched their Bestattravel.com web site
relatively late by travel sector standards in 2003, after an earlier IT project
went badly wrong and set back web development. It’s a period Sharma describes
as “hand on heart the worst days of my career.”
But the online presence doesn’t mean a fundamental change in her
approach, which relies on providing high levels of personal service and expert
advice to a very demanding customer base. “We’re a travel agency, not a
technology company,” Sharma points out. One thing that definitely will not
change is the company’s reliance on the expertise of its travel destination
specialists working in its call centre – there are currently 55 of them
advising customers on holiday destinations from
Sharma sees the internet’s main value as bringing in customers. It also
brings her business an improved reaction time and speed to market. But with her
web site alone valued at £30m, she doesn’t underestimate the power of the
internet as the main driver for increased competition in the travel industry.
Which might be why she’s invested some £3m in it. “There is a ‘new economy’,”
says Sharma. “The Internet is driving margins – everybody has to re-think their
business model.” And think about their exits: the Sharmas could sell to a trade
buyer in two to three years’ time.
Christiane Wuillamie, founder and CEO, Elegius
“Don’t be greedy. But get your nest egg”
Christiane Wuillamie could have sold CWB for a dotcom-sized valuation.
The Vietnam War refugee, who founded the company in 1994, had built it into a
leader in IT services to banks and other financial institutions. By 1999 she’d
made up her mind to sell.
“I looked at the dotcom businesses at the time and I knew I could have
made ten times more selling to a bigger company on an earn-out,” she says. One
of her options to exit her business included an offer from a
But the potential buyer wanted her to stay on in her role of principal
bringer-in-of-business at CWB for another three to five years. Wuillamie
preferred to make a clean break. So she sold out – with no strings attached –
to Thales, the computer services company. The cash transaction took place in
June 2001, just weeks before 9/11 precipitated the stock market crash that
would have hit the value of any share based deal. She was left ready and
financially equipped (to the tune of £20m) to pursue a new career as an angel
investor. And even with £20m in her back pocket, she says entrepreneurs are
more motivated by emotion than money.
“Most entrepreneurs are not greedy people,” she says. “They do it
because they enjoy it and have a passion for it. But at some stage, after five
or six years, you start thinking ‘maybe I should have a little nest egg.’”
Wuillamie believes that the best entrepreneurs take “calculated risks”.
Her own decisiveness and willingness to calculate the odds stood her in good
stead when she first set up CWB. The first few contracts involved doing “clean
up projects” for clients in the finance sector who needed help to dig
themselves out of an IT mess of their own or someone else’s making.
CWB took on many of these jobs on a fixed price basis. “It was unheard
of at the time,” Wuillamie says, “but the investment banks were all going into
emerging markets and their IT systems weren’t ready for it. Our expertise was
to sort out trading floor technology which everybody was desperate for and
their internal teams just didn’t cope.”
The approach worked. Payment terms of 30 per cent on contract meant the
company was cash-rich from the start, and the 20 to 25 per cent margins
generated 100 per cent year-on-year revenue growth.
Her own experience makes her quick to spot the business founders who are tempted by the prospect of easy money rather than focusing on the business basics. “Sensible founders listen better,” she says. “Some of the so-called ‘new economy’ people who are able to get external money earlier are the greediest because they are slightly contaminated by the advice form the banks and VCs. They’re living in cloud cuckoo land.”
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