people technolog siness

Issue 35

In this issue Exploring the secrets of success 2 Business Insight GS-insight discusses some of the latest trends and Graham Charlton, CFO, Softcat opportunities in the international technology industry, the importance of company culture in business 5 Consulting Insight success and much more … Martin Smith, Executive Director, Sheffield Haworth Welcome to the 35th edition of GS-insight, fit and thereby de-risk the hiring process. Consulting Solutions the magazine of international technology Understandably, investors and Boards are sector Executive Search specialists Gillamor very keen to have a robust assessment of Stephens, part of Sheffield Haworth, the global the strengths and risks associated with 6 International Insight talent consulting and leadership advisory management teams and of their capability to Kelly Kinnard, VP Talent, firm. As a recruitment team, we are fortunate grow, change and adapt to achieve business Battery Ventures to work with companies at all stages of organ- objectives. isational and business development; from This issue of GS-insight explores a wide 8 Investment Insight university “spin-outs” requiring CEOs to help range of themes with leaders across our commercialise “bleeding edge” technology, Mark Boggett, CEO, industry sector. We discuss the importance Seraphim Space Capital through to privately owned and VC/PE of company culture and business growth with funded small-mid size businesses seeking Graham Charlton of Softcat and Russell Sloan the leaders to drive organic and acquisitive of Kainos, two of the most successful and 10 Non-Executive growth/internationalisation strategies to the fastest growing publicly listed technology Insight larger corporate entities hiring executives to businesses. While insight into the positive Chris Stone, Plural lead large scale business transformation and challenges facing UK headquartered Chairman growth. In the UK, it is very pleasing to see technology “unicorns” is provided by Sophie the geographical spread of executive oppor- Unicorn Insight Fromont of Graphcore and Ross Seychell of 12 tunities with multiple assignments at present Transferwise. International perspective is Sophie Froment, SVP in Manchester, Bristol, Oxford, Cambridge as given by Kelly Kinnard, VP of Talent at Battery People, Graphcore well as London and Thames Valley. Outside Ventures, who helps us understand the of the UK, we are very active in the German competitive market for leadership talent in and the Nordic regions, where there are 14 Growth Insight Silicon Valley and other technology hotspots many well-funded technology “start-ups”. in the USA. The new frontier of investing in Russell Sloan, Digital At the time of writing, the UK is still mired Services Director, Kainos space technology companies is explored with with Brexit uncertainty but this has not had Mark Boggett of Seraphim Space Capital, any noticeable impact on executive hiring the only space-tech focussed venture fund 16 Entrepeneur Insight activity in the technology sector; we are anywhere on the planet. A down to earth view Des Lekerman, busier than at any point in recent years, with on the opportunity in the UK mid-market for CEO, TIG the market for executive talent being very cloud managed services is discussed with competitive and as a by-product of this we entrepreneur Des Lekerman, while Ian Spence are recording compensation levels trending of Megabuyte, the leading technology 18 Social Insight higher. While for certain roles there is often analysts, challenges the current hype around Alex Stephany, CEO, Beam a strong preference to hire individuals with AI. The role of interim management in the Foundation proven experience and track record, those technological revolution is outlined by our that have “been there and done it”, we are colleague Martin Smith. Plural Non-Executive seeing that some clients are more interested Chairman Chris Stone provides advice for 20 FinTech Insight in hiring the high potential candidate who succeeding as a Non-executive and contrasts Ross Seychell, may not immediately match every criteria between PLC and PE boards. Finally, Alex Chief People Officer, but, importantly, has the core skills combined Stephany of Beam, talks about social enter- Transferwise with the right attitude, ambition and desire to prise and the emerging “Tech for Good” sector make a positive impact and prove themselves that is helping society’s most vulnerable. 22 MegaBuyte Insight in a challenging role. To support this activity, Ian Spence, CEO, we are often working with business psycholo- I hope you enjoy this issue and I welcome your Megabuyte gists to help in the assessment of an individ- feedback ual’s future potential, culture and value Steve Morrison 24 Services Insight Insight into Gillamor Steve Morrison, Managing Director, Gillamor Stephens [email protected] Stephens GS-insight can be viewed and downloaded from www.gillamorstephens.com For more information on Sheffield Haworth, please visit www.sheffieldhaworth.com

tel: +44 (0) 203 457 4060 www.gillamorstephens.com 1 BUSINESS INSIGHT The Cultural Route to Success Graham 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.

the business through the next phase the period) propelled the business The Start of Something of growth. By this time the business to a very profitable £600m turnover. Different had been renamed ‘Softcat’, and It’s important to realise that all of this When I joined Softcat, I knew very in came Martin Hellawell who was growth was entirely organic – up to little about the industry, but I was to be Chief Executive for the next the present day Softcat has never immediately drawn not so much 13 years. Martin had already had a acquired another business nor taken to what the business did, but to its very successful career as part of the on any debt. The reason for going strong, unique sense of identity and leadership team at Computacenter, public rather than executing a trade its vibrant operating environment. and he knew exactly what was sale or selling to private equity was After meeting some of the people I needed to unlock the true potential because Peter loved and still loves knew it was the right place for me. of Softcat. He also had the charisma the company and its culture. He didn’t and strength of character to blend want to lose the strong identity he’d Softcat was founded 26 years ago by in perfectly with and enhance what created; an identity that has been Peter Kelly. Peter is a larger than life Peter had begun. So over the next 13 fundamental to Softcat’s success. character with immense enthusiasm, years both Martin and Peter (Peter The job of the team running Softcat drive and energy. He was convinced gradually stepping further away over post IPO has been to stay true to that 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

“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.” Graham Charlton, CFO, Softcat

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very special heritage and just keep While it sounds easy and obvious, going. “People often ask me creating that kind of culture in my experience is very rare indeed. I’ve Fast Forward about the secret of seen pockets of it before joining At the time I joined, the mentality Softcat’s success, and Softcat, but never across an entire of the business had been to grow organisation (and we’re spread in as lean a fashion as possible, so while the answer is easy across 8 offices these days). Bringing the development of the back-office it’s also hard for people in large numbers of graduates helps. functions had lagged behind the They’re malleable and looking for development of the sales engine. who haven’t worked leadership and role models, and once When the time came to commit to the here to really get it. It’s they’ve grasped Softcat’s culture flotation, it was essential to enhance and adopted the right attitude, they the infrastructure of the business to culture and attitude.” set the standard for those coming in face the rigours of public life and all behind them. of the compliance obligations that We teach our graduates to play the put the work in, you will get it done. brings, and most importantly to long game. They have a revenue The other side, telling the company’s establish a solid footing for further target from the minute they join equity story, is something that the growth. Part of that development the sales team. They’re given no involved finding a CFO and quite management team have to take accounts to trade with, they’re cold understandably the business set out ownership of. This is what ultimately calling, trying to win new customers to find someone with experience of decides how successful the process – it’s incredibly hard work. We’ve both running an IPO and operating in is, whether investors feel compelled created a remuneration structure the lead role in a listed business. by your proposition. That part was that rewards results and teamwork. a great challenge, being so new to It’s vital that new joiners understand Luckily for me, nobody they saw the business and the industry, but I could tick those boxes as well as fit from the outset that they will only really enjoyed it and investors found thrive here if they’re a team player, the culture. So they widened the net it compelling. and placed a priority on cultural fit with the drive, hunger and energy to coupled with potential rather than I didn’t set out to be a public company do the very best possible job for our experience. At the time I was working CFO, I’ve always taken opportu- customers. at BGL Group as Finance Director of nities on their own merit without That’s not for everybody, and conse- Compare the Market. I had plenty any fixed end point in mind. But I am quently the first year or two seems of experience in senior finance roles immensely glad I’ve ended up being many decide a different career would but, despite 6 years in senior roles at just that at Softcat. I think, quite suit them better. But we work hard Experian, I had not held the number frankly, it’s just about the best CFO on supporting them and giving them one job and had not executed an IPO. job in the UK. Being a CFO puts you every chance to succeed. Those who However, I met Martin and we got on, at the focal point of information and enjoy it and have the ability, resilience discovering we had a similar outlook insight in a business, and if you use and attitude to make a success of it on many things. Our then Chairman, that privileged position well, you can can then look forward to a great Brian Wallace, decided that I was up really help drive the business forward. career at what we think is one of to scratch on the finance side and off Doing that under the spotlight of the the best places to work in the world. we went. I joined in January 2015 and public markets with the opportunities After those first two years attrition we floated in November that same Softcat brings is brilliant fun and I’m rates drop enormously. The nature of year. very lucky indeed to have this job. the job changes significantly as well, becoming more about developing a That first year was an incredible Importance of Culture consultative relationship with a set of learning curve. As soon as I knew People often ask me about the customers you’ve got to know really I was coming to Softcat, I began to well. consume every bit of information I secret of Softcat’s success, and while possibly could on the IPO process. the answer is easy it’s also hard for Accessing that pool of talent is one of I think I must have read the London people who haven’t worked here to the reasons we have set up our new Stock Exchange’s own guide cover to really get it. It’s culture and attitude. offices near university towns, but the cover at least five times! Of course, People here are given freedom other is so that our head office doesn’t any properly resourced process and responsibility within a robust become an anonymous monolith of brings with it a raft of profes- framework of rules and guidelines 1,500 people where no one knows sional advisors to call on. The most that are designed to serve the best each other. Each new office is seeded important thing at that time was to interests of the company as a whole. by five or six people who’ve been with use all that knowledge properly and We hope our people genuinely care Softcat for between three and seven fully. I always tell people that there about the business they work for, years. Those people who intrinsically are two bits to getting an IPO done – care about each other, and as a result understand and enjoy the company the legal bit and the sales pitch. The feel like they are working somewhere culture and who have the desire to legal bit comes down to hard work special, unique even. If you have that, build their own new corner of the and diligence, and letting the experts many other things simply take care of business. guide you. If you organise a team and themselves. If you walk into our Manchester office,

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it will feel different from our London rapidly, particularly with the large- questioned and having looked at it office, which will in turn feel different scale adoption of cloud computing. hard myself I’ve found his intuition to the Marlow office, but you can still We have to ensure we stay relevant to be very well-founded indeed. It’s tell it’s Softcat. People will smile, say and understand the technology one of the very many things I learned hello, ask you if you need any help. challenges faced by our customers, from him. There are open communal areas helping them evaluate the right At Softcat our P&L doesn’t really start in each office with lots of people model for their business. While we with revenue, it only gets going at talking. It’s a relaxed environment, don’t really sell the clever appli- gross profit. A £10 million commodity but always with a purposeful hum cations that sit on their IT infra- licencing deal for a large organisation and buzz. structure, we are instrumental in might only earn us a 3% margin, but providing the compute power, the Moving Ahead, Staying that’s still £300,000 gross profit storage, the security, the networking towards the bills. That’s a deal worth Relevant and the devices that comprise their doing; the 3% is far less relevant than When I joined, Softcat had an technology platform. the £300k. accounting function that was Occasionally we might offer to We’ve made a huge effort to not allow pretty good at keeping the score manage some of it for them or to find being a public company to change and getting us through audits, but a partner to help with that, such as this ability to think for ourselves and we weren’t doing enough in terms maintenance of a security process for plough our own furrow. Those that of plotting the route ahead and example. We’re not trying to move get the principles like the fact we’ve planning for growth. There were lots away from selling our products, but got clarity of thought on the strategy, of myths about how the business there are services that we can and will and they know the logic is sound worked, so a big part of my job, provide that are relevant in assisting because our results bear it out. In apart from getting the IPO done, them to have the right technology fact, when measured relative to gross was to shed a bit of new light to infrastructure in place. profit our net earnings are higher hopefully enhance the way we were now than they’ve ever been because running the business. Using key data we train our people to compete on and insight to tweak and nudge value, not price. What IT managers an already fantastically well-oiled “Rather than reaching care most about is that the product machine into an even more optimal works and is fit for purpose. They’ll groove. So since that time we’ve a plateau on IPO we’re pay for that quality and reassurance, created a new Commercial Finance now growing faster than and they’ll keep coming back again Team. This team consists of just five because they trust you. people, but it helps inform almost all ever in absolute terms of the significant decision-making and have consistently So, in terms of what Softcat’s plans process in the business. That group for the future are, well, it’s first and and the wider team has shown how exceeded expectations foremost more of the same. Our a well-rounded finance function can in each of the four years model works, and the investment really focus efforts and resources strategy is one we’re determined to and help accelerate growth. since the float.” maintain. We think that will underpin further market share gains for us. We That work gave and continues to give only have 5% market share so there is us the confidence to scale-up the still a massive opportunity still. organisation at a faster rate. Rather Figuratively Speaking than reaching a plateau on IPO we’re When I joined Softcat I spent a lot And because of this we’re still entirely now growing faster than ever in of time trying to get to understand focussed on UK customers. We absolute terms and have consistently how this industry works. When you are investing in overseas branches exceeded expectations in each of the look into the detail of many managed and overseas relationships with four years since the float. service providers, they might have a suppliers to make sure that we can deliver worldwide for UK customers, I’ve been asked about my views on great proposition, but delve deeper but the plan to put sales teams in automation in the finance area and, into the numbers and it’s increas- to be honest, I’m sceptical in parts. ingly rare to find a growing profitable foreign jurisdictions to sell to non-UK So often the real value is to be found managed service company. companies is not yet part of the plan. in the human interpretation of the I’m not being dismissive of services We haven’t yet made an acquisition data. There are definitely processes and the potential they have to but we keep an open mind. We’re that we could automate, but if every generate high margins. If you can find continually building capability organ- decision is made only by reference the right niche and get the right scale, ically but accept that sometimes to data you will eventually break you can have a fantastic managed inorganic expansion can be a great something. So for me a large part service business. But often there option too. If the right thing ever of the work of a finance function seems to me an almost ideological came up, we’d look at it. will always be about leadership and belief that to survive in this space you But, as has always been the case, the judgment. need predominantly to be a service single most important thing to all In terms of our customer propo- provider. This is something our of us at Softcat is the health of our sition, technology is advancing former CEO, Martin Hellawell, always culture.

4 +44 (0) 20 3457www.gillamorstephens.com 4060 www.gillamorstephens.com+44 (0) 203 457 4060 CONSULTING INSIGHT CONSULTING INSIGHT The role of interim management in the technological revolution Martin 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.

In the UK no other sector is growing vital part of their strategic workforce quicker than that of the technology planning who will come out on top. sector. It continues to outstrip the Combine this with the ever-increasing rest of the economy by some distance trend of companies tying employees (2.5x), with statistics showing that to longer-term (6 months+) notice in 2018, it contributed over £180bn periods, a real issue when looking to to GDP, up 12% on the previous two add to permanent headcount, and years. the result is a buoyant and compet- itive marketplace. With digital transformation continu- ing to drive business change across The investor community must all industries and marketplaces, it is also sit up and take note of interim a given that change will take place management and its value add. at all levels, none more so than when With the markets as competitive it comes to talent and capabilities. as ever, and as uncertainty about Leadership teams that begin this Brexit and worries over a trade war journey of discovery very rarely end between the US and China persist, it with the same people in the role. it’s a tricky time for dealmakers New talent, familiar with new technol- Martin Smith, Executive Director, across the globe. However, with all Sheffield Haworth Consulting Solutions ogies, will inevitably be required. As that in mind, investors press on, with such, the ability to be innovative and a burgeoning need to build value in role of interim management comes their investments. flexible in 2019 is essential, with hiring into play. managers and business leaders As such, private equity and venture needing to up their game when it Such talent can be engaged and on capital firms must capitalise on the comes to developing talent pools site quickly, free of baggage and high-quality resource available in and working with partners to identify adding tremendous value from day the independent market, adopting and engage talent in a timely and one. Having ‘been there and done it’, flexible and agile resource that can cost-effective manner. their ability to deliver has already been relieve and deal with some of the proven, as has their ability to move pressures, priorities and sensitivities It is extremely important to note between different environments that this is not only a HR issue, arising during an investment cycle. and cultures, adapting seamlessly In addition, an honest appraisal of but a business one. Executives to whatever they encounter. They must embrace strategic workforce leadership capability within their harbour a genuine purpose and portfolio companies must be carried planning and treat it as a key priority can inject a certain momentum issue, with the pace of expansion out, ensuring they have the right into a change scenario or growth people in place to accelerate growth leading to a surge in job creation and agenda, combining a strategic and and achieve the kind of exit/returns a ‘war for talent’. They need to ensure tactical skillset to define the problem required. that their companies are agile and statement, deliver a solution and can respond instantly to whatever then hand off to the business. There are all too many stories of gets thrown at them, dissolving the high-potential tech companies biting In 2019, there are many windows traditional hierarchical structures the dust due to hesitation and burn of opportunity opening for such that we tend to see and reinventing out. With the ‘ideal world’ scenario operators across the tech sector. their workforces. of having all the right mindsets and Whether it’s an expert who can lead skills in place at any one time rarely So, the question now on every execu- on technology initiatives and focus achieved, the ability to expand and tives’ lips is how do we continue to on the ‘big-picture’, an advisor who contract your executive capacity, via innovate at speed and compete at can carry out pre-IPO / M&A due the use of interim managers, should the top of our chosen marketplace? diligence or a specialist in organi- always be considered. The answer is clear and lies in their sational design who can devise and ability to think creatively when it embed a new Target Operating For more information, contact comes to addressing key people and Model (ToM), it is those businesses Martin Smith on leadership challenges. It is where the who treat interim management as a [email protected]

+44 (0) 20203 3457 457 4060 www.gillamorstephens.comwww.gillamorstephens.com 5 INTERNATIONALENTREPRENEUR INSIGHT Views from Silicon Valley Kelly 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.

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 Kelly Kinnard, Vice-President of Talent, Battery Ventures $50 million annual revenues and beyond. executives at Oracle have a dedicated I also manage our relationships with I also make introductions to our executive recruiter, who comes out of recruiters worldwide, both contin- portfolio companies. When I interact retained search and directly conducts gency and retained. So, on a daily with external executives, I am all of the company’s VP-level and basis, I have portfolio companies thinking about where they might fit in above searches. It was a very execu- needing help with different searches the portfolio and I keep a list of all of tion-oriented role, and any time there that I can’t do myself. Overall, I have the searches that I am aware of in our was someone hired at the executive a good overview of who is doing a portfolio. Therefore, for example, if a level in that part of the organisation, I good job with our portfolio in various CFO approaches me directly, I have was involved in that search. fields and geographies and who we a list to pull out to see if they fit into should be working with on execu- At Battery, I am utilising all of my career any of the searches we have. tive-level retained searches. experiences to provide advice and How does your current role support on people-related matters to What are the key challenges compare to what you did our portfolio CEOs. Sometimes I help in terms of executive hiring at Oracle as an in-house our CEOs chase down resources. For example, when they come to me and in Silicon Valley? Executive Leadership ask for a compensation consultant I think it’s getting more and more Recruiter? that I can recommend, I have a list of competitive and companies need to It is very different. Oracle doesn’t consultants and experts to pull out approach hiring in a very humble way. use outside recruiters for the senior when necessary and manage those Many early stage companies think executive level, so all of the C-level relationships. their technology, team and passion

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are top-notch, but to an outside take or return a phone call unless have a significant number of portfolio candidate who knows nothing about there is a name included or attached. companies there and are probably the company, these companies will “You were recommended to me by seeing more activity there, in the all look and sound the same. Many of person X who used to work with sectors we focus on, than in Boston. these companies do not understand you and thinks really highly of you” Our Boston team is investing more in how hard they will have to work in is much more powerful than a cold Europe, New York and other geogra- order to recruit top talent. outreach that everyone gets. phies and wherever they see the best opportunity. I always tell them that you need to What are the current senior think of recruiting like dating – bring How are you addressing flowers on the first date and think roles that are particularly in about the fact that you need to woo demand? the gender balance within these candidates. You might even Within our portfolio, we have seen technology companies? have to go to the candidates, instead a demand for VP of Sales and VP of A lot of companies make the mistake of expecting them to show up at your Marketing roles. For some reason in of not thinking about it early enough, offices. You are also going to have to the last two years, they are the most when they still have 10 people and work very hard to articulate why your popular searches and companies are are just getting going. What I see company is better than the twelve looking for people to help them go all the time are companies that get others in your zip code that look and to market. to a certain size and every single sound almost identical. I see this mostly in companies that person on the management team is Smart companies understand that, are smaller and venture backed. a man. They have no diversity and all and the ones that are humble usually They are perhaps currently doing of a sudden, they realise how bad it do the best job and have the most $5 million or $15 million in revenues, looks and decide to focus on it. Then success. but they want someone who has they need to a hire a leader and they previously taken a company to $50 decide it should be a female, which What about the compen- really is not fair. These discussions sation factors? There is a million and beyond in revenues. There aren’t many people who have should happen much earlier. I don’t perception that there is a done that multiple times and want to think things have gotten any better salary inflation in the Valley do it again. You can’t blame them – recently and little has changed. due to the war for talent that that’s really hard to do! When sales What about cultural has led to less loyalty, with leaders get to a certain point in their careers, they do not want to do the challenges in hiring talent people moving on once their same thing over and over again. The into technology companies? first tranche of options has headaches that come with going I don’t like it when people use the vested. back to another $8 million company words “culture fit”, because to me to scale it aren’t appealing to a lot of Yes, that happens. People do change it sounds like they are looking for people. jobs statistically on average around someone that looks and feels almost every two years. When these people In more recent times we have seen exactly like them. Instead of giving get hounded and approached with far fewer requirements for VPs of feedback on how the candidate so many opportunities on a weekly engineering or product, and even interview went, they tell you “Oh, basis, you can’t blame them if CFO searches. We do, however, have not a cultural fit”. But what does that someone comes along and offers regular requests for data analytics mean? Is it not someone that you to pay more for their skills. It is a leaders. would want to hang out with on a candidate’s market here and they Saturday night or grab a beer with are in the power seat--it is incredibly What about geographic after work? Or is it because they competitive. hotspots in the USA? come from a different religious or interest standpoint? So what are the factors that I would say that more and more companies are moving to San It is lazy from companies to dismiss will get people over the line Francisco and realising that they need a candidate on the basis of a lack and signed up? a presence there instead of just being of cultural fit. Obviously you need I think it is mostly personal relation- based in the South Bay. Many venture someone who is going to fit in well in ships. Whenever they know someone capital funds now have offices in your company and will be liked and at the company, or on the board, San Francisco as well, SoMa specifi- come across as credible, but it is part that is when they really start thinking cally. Many of these firms (including of our job to push companies to be about it - especially the senior execu- Battery) used to be on Sand Hill Road more structured in how they evaluate tives. It might even be a company in Menlo Park exclusively. Younger candidates and sophisticated in their where the founders are people who people want to live in the city; they responses. worked with the candidate 10 years don’t want to be on a bus commuting *Battery Ventures provides investment ago and for whom they have a lot of down to San Jose and working in the advisory services solely to privately trust and respect. suburbs at the age of 25. offered funds. Battery Ventures neither When recruiting executives in the New York has really taken off over solicits nor makes its services available Valley, a lot of people will not even the last couple of years as well. We to the public or other advisory clients.

+44 (0) 203 457 4060 www.gillamorstephens.com 7 www.gillamorstephens.com +44 (0) 20 3457 4060 INVESTMENTCOMPANY INSIGHT The New Face of Space Mark 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.

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

Mark Boggett, CEO, Seraphim Space Capital companies from the very earliest point, but why go Why Seraphim Space funds anywhere on the planet, not to all that effort when you Capital? even in Silicon Valley and, to this day, could have been just a we remain the only space-focussed The trigger was that we were looking venture fund. standard VC? for a new area in which to launch (one We took inspiration from the pharma Getting the investment, though, was of many unintentional puns!) a new and bio market, which is consist- far from easy. Most investors just saw $100m fund. We identified space as ently the top-performing venture space as rockets and satellites. And a nexus of several megatrends, such category. The reason they’re so those that have been in the market as IOT, AI, autonomous transport and successful is that the majority of the have seen spectacular failures. The smart cities. Further investigation investment in many of these VCs suggested that the traditional space interest in the sector has really been is through the pharma companies sector was going through a period generated by a group of celebrity themselves. They’re taking big stakes of disruption, primarily because the billionaires: Bezos, Musk and Branson. as LPs, then talking to the venture technology advances in different How have these personalities funds about the particular areas that sectors had started to find their way they’re interested in, before going into the space arena. helped re-focus and drive out and finding the companies and We saw a new paradigm emerging investment in the sector? taking them through the riskiest where there’s certainly a trillion- There’s absolutely no doubt that stage of their R&D product devel- dollar market that’s available for the they’ve been instrumental in opment. When they get through to a space tech sector, with the potential attracting the attention of the certain phase, the LPs acquire those for long-term growth across a broad investor community. They’re the businesses. range of industries. Once we’d people who’ve created headlines that We’ve recreated this model in the decided on investing in space, we raise public consciousness, which, space sector by bringing in a range were surprised to find there were no in turn, has filtered through to the of corporates, such as Airbus, other space-tech focused venture investment community. Telespazio, SES, and Teledyne, along

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with the European Space Agency, verticals. There are billions of dollars’ On the subject of the prolif- and using their knowledge and worth of opportunities to use this eration of satellites, how big experience to help us do the due data now that it’s available at high diligence on the businesses that resolution, low cost and, most impor- an issue is space debris? we’re identifying. tantly of all, more or less real time. Every launch in history has led to When this becomes fully realised, it’ll Currently, we have the resource the littering of space with cast-off enable a whole range of new activities and focus to invest in around four components that are no longer such as change detection, identifying companies a year, even though required. It’s estimated that there’s anomalies that can be fed into things we’re seeing around 100 companies, somewhere between 250,000 and such things as dynamic maps. globally, per month. To address this, 750,000 pieces of debris circulating we’ve developed different initiatives in orbit. associated with Seraphim to enable The problem with this is that operators us to work with a much broader “We are interested are having to more closely monitor group of earlier-stage start-ups that this debris to avoid their satellites will ultimately act as a feeder to our in data from above – being hit. To put this into perspective, fund. satellites, high-altitude a piece of debris that is just 2cm in In 2016 we created, alongside our diameter is the equivalent of a hand partner, Newable, an organisation platforms and drones”. grenade going off if it hits another called UK Space Tech Angel. This is object. The requirement for new a group of more than 100 individuals satellites to be able to de-orbit when That’s our focus, but we’re also to whom we refer interesting they stop working or reach the end of investing into companies that already businesses with addressable markets their useful life is increasing and may have sensors in space, but whose end in technology. The angels will then, become mandatory. For instance, you goal is to provide data analytics from typically, invest a million or so, and can have an independent propulsion them. An example of this is ICEYE, a we can then track these businesses system, that’s totally independent pioneering small-sat company using and then join them in their A-series. from the rest of the spacecraft which, innovative radar imaging, but whose upon a separate signal, can send the Two years later we launched the end goal is the analytics platform. spacecraft back down towards Earth, Seraphim Space Camp Accelerator Launch is clearly the area that’s where it’ll burn up in the atmosphere. Fund to support companies who attracted most capital from venture have great technology propositions It’s important that until the problem is to date, but we’re not looking to resolved, operators maintain a stance but haven’t been able to validate that deploy capital in this area because through customer engagement. This of good citizenship to reduce the we believe that there’s been over-in- risks of space debris. Our reliance on has led to us bringing on board a vestment here – today over 100 whole range of additional corporate satellites depends on it because we launch companies are simultane- can’t afford to have damage to GPS partners, such as Inmarsat, Eutselsat, ously coming to market whereas Rolls-Royce, KSAT, Cyient and DSTL, systems linked to, say, the New York only a handful will survive. Over Stock Exchange or atomic clocks. who engage with these emerging the next few years, as new rockets businesses on a three-month basis come on stream, there’s going to be One of the businesses we’ve invested to test and validate their technology, over-supply of access to space, which in is LeoLabs. They have a series of pricing and competitive positioning. will be good news for the businesses ground-based radars that look up While that’s going on, our venture we’re interested in, because it’s going at the sky and monitor all the space team are working with the to lead to continued price erosion debris. The information they gather management teams to help them and easier access. is then passed on to operators, regulators, the military and govern- better articulate their business propo- Another area of interest, virtually sition and put together their pitch ments who can then use this to overlooked by other investors, is work out the most efficient, safest decks. We’re evaluating the teams something we call “downlink”. This from an investor perspective and paths to set their craft on. However, is the technologies associated with we imagine it’s going to take at then at the end of the programme, securely getting the data down from we invite other venture funds to least one other major event before the skyborne platform to a ground the regulators are going to get come along to our investor day and station. There are only a limited to invest into these companies. So far, themselves together and implement number of companies currently the necessary controls. we’ve put 23 spacetech companies trying to solve this problem, and the through this programme. prize is going to be huge for whoever What next? You talk about how broad cracks it. This is just the beginning for the sector is, but what do The final component we’re focussed Seraphim. Our first fund was $100m you see as the sweet-spot on is product, which is the fastest and we are now heading towards a growing area of the space tech first close of our new $200m fund for Seraphim? market. As satellites and constella- and this will entail us opening new We are interested in data from above tions continue to get bigger, that data operations in Europe and Asia. – satellites, high-altitude platforms moves closer to real time and there Overall, $4bn was invested in the and drones - and how that data can are more and more applications that sector last year to 31st March and this be applied to a very broad range of will need to be applied. is growing exponentially. www.gillamorstephens.com+44 (0) 203 457 4060 www.gillamorstephens.com+44 (0) 20 3457 4060 9 NON-EXECUTIVEINTERNATIONAL INSIGHT Sitting Across the Divide: The Art of Chairing Public and Private Companies Chris 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 Chris Stone, Plural Chairman chairing private and public companies.

What Boards are you on What’s good about having a mix worked for me. I have a much closer of public and private companies working relationship there than I do, currently? is that the rhythms are different. for example, at Idox where I’ve never I currently chair Idox which is a Public companies always want a sat and worked with the team for a software provider to the public sector board meeting on the third week of few days or accompanied them to and NCC which is a cybersecurity every month, so diary management customer meetings, all of which I did business. Those are both publicly becomes critical then. Private in my first nine months at NCC. listed but I am also Chair at two private businesses are less time sensitive, so I The challenges can vary and learning companies. First there’s Compusoft find time for meetings and talks with how to become a good non-exec is which is a TA Associates portfolio them at the beginning of the month. a journey, it’s not instantaneous. A business. We’re a European market But I couldn’t take on more than four leader in the building, distribution person who taught me a lot about companies, especially with the two how to share my experiences in an and management of software for public businesses. kitchen and bathroom designers. The encouraging way was Dave Hodgson, business has grown very successfully How did you find the a Partner from General Atlantic, who with an incredibly dispersed team. The was on the board when I was at transition to becoming a Northgate. He would never tell us headquarters are in Norway but the Chairman? CEO lives in the French countryside, outright that something couldn’t be the CTO is in Germany and the CFO It is quite tricky. In my first two Chair done. Instead, he would always find in Norway, whilst the Head of Sales is roles, I was younger than the Chief a way of telling us what he had learnt based in the UK. Executive which I took as a prompt from negative experiences. A lot of to learn how not to be a CEO. I had things are recurring stories across Secondly, I work with an early stage to learn not to try and second guess different businesses. He would never business called Everynet which is or override operational decisions. I say, “We tried that at X, Y, Z, it never an Internet Of Things networking think I’ve managed that rather well worked.” He would always find a way business. For Machine to Machine and but it was something I had to actively of saying, “Do you know, when we IoT connectivity, you can use very work on, to acknowledge that it’s not tried that at X, Y, Z, here are the things low-end radio spectrum that sends my job to run all the business. It is we learned.” That’s a really important tiny packets of data. Our software my job to provide insight and to give point. One of the values non-execs builds software-defined networks early warnings. If I think somebody bring to a company is that they’ve in that space. It allows customers to hasn’t fully thought through all the made lots of mistakes. I always tell build a single physical network which outcomes of a decision, then I find the teams I work with that I want to they can subdivide and sell to multiple ways to share my experience without help them avoid making my mistakes network operators who use it to run taking over. It’s an important part of so they can go out, be creative and IoT connectivity, each on their own the job that I’m getting better at. find their own problems. You have to private subdivision. The technology do that in a way that is supportive, was developed by teams in Finland At NCC however, I initially went in not patronising or belittling. and Russia and the sales team is as Executive Chair because they’d based out of Miami where there are been struggling with governance Is there a difference in how a lot of telecom tower companies. issues due to a huge amount of you approach PE and public It’s a founder-led business run out change in the business. As a result, of London, whilst we’re about to go I know the management team very company roles? through Series A funding. well because for a time they all There is a difference, largely because

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of the extent of involvement from accountants who can chair and sit Do you have a framework for shareholders in public companies. on the audit committee. The best working with CEOs? In a PLC you have to often presume Audit Chair I ever worked with was what they would want in a given Sir Stephen Lander at Northgate. He I really like businesses where I can situation. Whereas in private equity had previously been Director General take on a role coaching the CEO. But backed businesses, you can get more at MI5 and was brilliant, because I’ve also got to be dispassionate and face to face interaction with the he knew when people were fibbing challenging. I’m currently working investors and simply ask them what or were not totally convinced of with a really interesting mix of CEOs. they want. Governance is important their position. He was superb at just Adam Palser at NCC has held CEO in any business but when you have reading body language and saying, roles of private businesses, but this that arm’s length from the stake- “You don’t really believe that, so I’m is his first with a public company so holders, you have to think a bit more going to ask you that question again I’m helping him with that transition. about how to explain the decisions from another angle.” At Compusoft, David Tombre is a first time CEO. He’s been with the you make. For example, you might At NCC for example, we’ve assembled have to explain remittance and plans the board very carefully. Jonathan business for a long time and knows it for bonus and options schemes, or Brooks has great experience having inside out, but they’ve recently been about decisions as to where you may started his non-exec career at Arm bought by Private Equity so that is a or may not be investing. You have and then on numerous other boards. big change for him to work through to think, “what are the shareholders Chris Batterham also has been on as well. Lawrence Latham at Everynet looking for from this investment?” a number of boards before, some meanwhile is very experienced and has worked in IoT for the past twenty I commit time to go and talk to share- of which have had their difficulties, years. My job there is just to help him holders. I carve out a week each year whilst others are enjoying very high with some of the bigger issues, to for each business and tell the brokers growth. His role at Blue Prism is very liaise with the shareholders and make to fill my diary with as many meetings interesting as it gives him an under- sure the business is structured in the as there are shareholders that want standing of how to manage rocket right way for us to grow. There’s a to meet me. I don’t go into these ship growth. We’re a people business considerable mix of situations which meetings with any specific agenda so we also have Jenny Duvalier who require different approaches. but simply to say, “what do you think was Chief People Officer at Arm and about this? What would you like the lastly, I managed to persuade Mike Besides your packed business to be focusing on? What Ettling to come and join us who has would you like me to do?” You can’t amazing cloud experience from SAP portfolio, you also own a please everyone but at least I then which is vital for us. number of prize-winning know what everybody thinks. If I end Do you think an IPO is the Three-Day Eventing horses. up displeasing anyone, I can explain Do you see any link between to them that the decision taken was best exit route for tech that which the majority wanted. companies and what is the your business and equestrian best market to list on? pursuits? What does the ideal PLC We run the yard as a business but board look like? It depends. On NASDAQ for instance, big companies tend to do very well it’s a loss-making business. We won When I first took over as the CEO but there’s also a lot of living dead a gold medal at the World Games of a public company my board had companies on there which we don’t in September last year and we’ve nobody from the technology industry hear so much about. If your business got six horses on the long-list for on it. There was a nuclear engineer has a sub-billion-dollar market cap, the European team, though there’s who at least was an engineer but that then I don’t think NASDAQ is the no guarantee that any one of them was it. That’s completely changed right place to be. will make it. The thing about horses over the last twenty years. There’s is, it’s 15% outright disaster, like one However, I don’t think people can now enough people around who’ve of them falling in the cross country simply blame the market. A public built careers focused specifically on at the weekend. Didn’t even finish. company has got to do two things technology who can look at a pack of 10% euphoria because, either, you really well: it’s got to explain to KPIs and understand what activities win or the horse does better than shareholders why the company is a they will require on an operational you thought or it shows that it can good investment and then it’s got level. Today, you have to understand do something that you didn’t think it to deliver on that promise. Usually, the specific challenges to a business could do. Then the rest is just kind of when businesses face difficulties in creating value. Of course, you want vague disappointment where it’s just, with valuation it’s because they’ve a general mix of skills on a board to “Oh, could have gone a bit better made a misstep on one of these two some degree, but they’ve also got to than that.” You’ve really got to enjoy counts. The markets are currently know which levers to pull to generate the whole process. really vicious when it comes to such value in a technology business. missteps but they can also recover Our mission statement is to win every Besides that, there a few obvious very quickly. The markets aren’t fickle gold medal between now and when things a board needs to have. One but they are thin, there just aren’t a my wife and I die. That’s our mission. is gender balance and diversity. lot of people putting money into Now, will we get that? No. I’m realistic, Then ideally you should have two equity markets at the moment. but it is something to aim for!

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my English a lot more and they really A Journey in HR – from liked the fact I could speak Spanish. Joining EA marked a pivotal moment in my career, I spent seven years Engineering to AI, via there and earned three promotions. I moved to London and then to their international headquarters in Reykjavik Geneva. In my last role as the Senior HR Director for Europe I was respon- From traditional engineering companies sible for about twenty-one countries. to the gaming sector and now machine You next joined CCP, another learning, Sophie Froment has led a diverse gaming business, but this was based in Iceland. and international career. She talked to At EA I was mainly looking after GS-insight about her journey as an HR Publishing which is what we call Sales, Marketing, IT, Translation and professional and how she is bringing her Finance in the gaming industry. But I wanted to work more with the experience to bear in her new role as SVP engineering and creative minds, as I People at UK-headquartered tech unicorn had done in my previous roles. Graphcore. At first, friends and family were shocked by the decision. They said, I couldn’t miss such an opportunity. “what are you going to do in Iceland?” You started out working for But as a family we had already experi- traditional engineering firms The role was a new creation based in Lyon where I lived, and I was to enced moving abroad and were open in France before making be the HR Business Partner for the minded. I know it sounds weird, but the move into gaming with Southern European region. As a we thought it sounded kind of exotic! Electronic Arts, how did this U.S.-headquartered business, it also But I didn’t take the job because it transition come about? meant I got the opportunity to use was in Iceland. I joined CCP for the 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 Sophie Froment, SVP People, Graphcore

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opportunity to lead the whole HR You recently joined what’s happening to the UK and its function. Like EA and now in my Graphcore, one of the relationship with the EU. current role, it was a newly created We also face some internal hiring position and the opportunity to build world’s most exciting AI challenges. We’re always looking for and develop world-class teams is companies. people who will feel comfortable something that really appeals to me. CCP was changing ownership when working for a start-up. We need The company had been around for I was approached by Graphcore, people with experience and about ten years already but there so the timing felt right but I wasn’t knowledge that can add value but was no one in charge of HR. They actively seeking a new challenge. As who can also handle the turbulence had gone through massive growth was the case with my previous roles, that comes with flying in a prototype. what I liked about the company was when they bought and merged with In a start-up, things can change the story. I’m super interested by AI another gaming business, White Wolf quickly and recently we’ve had a and machine learning, it’s an amazing in 2006 and had opened an office couple of amazing people who have in Shanghai to become truly global. tech field to be in from an HR joined the company and left because They went from a headcount of perspective. Once again, I met some of these challenges. around two hundred to six hundred incredible people when I interviewed, and eighty by the time I joined in and I liked that the role is another new We also set the bar really high in 2010. They were 700 people and had creation. But whereas CCP had been terms of our recruitment. Due to the realised the need to hire a dedicated going for some time before I joined, complex nature of what we do but HR exec in order to handle that Graphcore is definitely still a start-up. also who we are in terms of company growth and to do more from a culture It’s a fantastic opportunity to help culture, we’re always looking for perspective. the development of the company so people who are better than us, so we early on. I liked the challenge that CCP offered are extremely demanding. but I also loved the people I met Despite being an early stage during the interview process. I believe company, we’re also experiencing Given all these challenges it is very important to make sure you huge growth and have to hire a lot you face in recruitment how fit within a business if you want to of people. We currently have close do you create diversity and add value. This becomes easier as to two hundred employees having inclusion? you progress in your career and you doubled in size last year and we’re develop your own style. set to do the same again in 2019. But In my first six months at Graphcore we’re not arrogant people, we don’t I’ve focused on building the talent Lastly, I really loved the gaming try to do lots of PR all the time. We’re acquisition pipeline but now the industry and its combination of certainly very well known within our next step is to become a lot more technical and creative people. In field, but one of the challenges we deliberate in our hiring processes to gaming you only have the people, so currently face is that many people create diversity and inclusion. it’s a very people focused industry still haven’t heard of Graphcore. with a more open, less formal style Historically, we’ve been hiring people than in traditional engineering Although we’ve just closed another known to us from the networks of companies. incredible round of funding which current employees. It’s a great way adds to the story and helps us build of recruiting because candidates Was it difficult to adapt to our employer brand, people can still know and already trust people in the Icelandic culture? be quite risk averse. The world of business who in turn know and trust machine learning and artificial intel- We didn’t know what Iceland would them. It’s also helped us to manage ligence while very appealing in many be like when I joined CCP. I even the enormous hiring agenda. If we ways, is still a new and unproven negotiated that if after a year, we need to hire two hundred and fifty industry. decided it was not for us, then they people and we already have that would agree to relocate me to one Another challenge we face is that number in the business, then I can of their other offices. The language we’re based in Bristol. It’s a great ask each team member to find one and the culture are very different, so city to live in but it’s not somewhere person. it wasn’t the same as moving to the a lot of people outside the UK are But now we need to become more UK or Spain. especially aware of. When I first told friends I was moving to Iceland, they deliberate in our hiring processes and In hindsight, the move actually heard Ireland and again when I told that is top of our agenda. This means helped me balance my work and them I would be living in Bristol, they strengthening our Talent pipeline / family life. My kids were young when thought I said Brighton. funnel, developing our interviewing we moved and I was starting my skills, keep building world class first leadership position in HR, but Lastly, in terms of hiring people from approaches!. Reykjavik is a very small place so I outside the UK, Brexit is an issue. could also educate and spend time People are very concerned about Bristol is growing quickly as a recog- with them. My walk from home to the what’s going to happen, often not so nised tech hub for start-ups and office was just under three minutes much for their own sakes but for their Graphcore underlines the potential so I felt I could be a good mum as partners and families. We’ve had of the region with several other well as a good exec. Sure it could be a few candidates who’ve declined fast-growing companies. It’s going to cold and sometimes very windy but to go further in the interview be another very exciting chapter in looking back, I’d definitely do it again! process until they know more about my journey!

www.gillamorstephens.com+44 (0) 203 457 4060 www.gillamorstephens.com+44 (0) 20 3457 4060 13 INVESTMENTGROWTH INSIGHT Growth and Transformation: How Kainos Shape Business, Employees and Customer Experience Having 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.

project life-cycle. With some supplier was to save £100 million over the Digital Transformation organisations processes are less next seven to eight years and they’re There’s no universal definition for transparent and it’s all about the big currently over achieving on that. Digital Transformation but at Kainos, reveal at the end. This is how design it’s about taking a business-critical agencies often work and it’s how Public Sector process and truly transforming it. software development projects have Though our healthcare and commercial Others might describe it as updating run in the past. But we’ve always offerings are performing strongly, the worked hand-in-hand with our clients websites or online brochures but UK public sector has fuelled much of meaning we’ve been able to adapt that isn’t genuinely transformative our growth. Our recently announced quickly to the growing demand for because it doesn’t change the way a full year results show a 42% growth in business operates. It’s different to IT Digital Transformation services. our commercial business and a 68% and software services as well for the A good example of the work we do increase in public sector revenues. way it links change in technology and is our recent partnership with the more general business. DVSA. We worked with them to “The business case was Dealing with diverse business upgrade the system that records challenges requires us to engage MOT results, used by some 65,000 to save £100 million with customers throughout the mechanics across the UK. They were previously keying data into dumb over the next seven to terminals which sat in the corner eight years and they’re of the garage and served no other purpose. The system was run off a currently overachieving mainframe and cost about £35 million annually. It was old technology and on that.” difficult to change. The growth in public sector deals was To succeed, we ensured we under- initially driven by the Government stood what users really needed. We Digital Service which worked to show spent time in garages and spoke to departments how to do things differ- mechanics, gradually developing the ently and be disruptive. Now depart- beta system before going live. The ments and agencies understand the result was the first UK government transactional service in a public benefits of Digital Transformation cloud. We switched off the mainframe and are undertaking projects of and scaled the new system so all their own volition. There’s certainly users could log in. It was absolutely a need to transform their services. a business-critical process. There are This is driven partly by the demands thirty-five million MOT tests every of UK citizens and taxpayers. People year, underpinning car tax which are used to a digital world in which alone is a £6 billion industry. It was they interact daily with social media, an eighteen-month project with so they expect government to be a hard deadline and the providing the same digital channels threat of big financial and experiences. But there’s also the penalties for the need to cut cost; the money saving DVSA if they business case never goes out of were forced to fashion. extend. There was scrutiny up Cost and customer benefits are to ministerial demonstrated by our work with the level, but the Passport Office. Citizens can now go Russell Sloan, Digital Services Director, Kainos business case through the process of requesting

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passports online. I renewed mine all a proof of concept followed by a full on my phone, photograph included. “When I started the solution that used machine learning to As a citizen, it was a really positive Digital Services business analyse their data concerning garage experience and for the Passport inspections. DVSA have a limited team Office, the business case for full in 2012, we had about who inspect about 5% of garages a digital transformation is an annual year for signs of fraud. We were able saving of up to £65 million. thirty-five people in to look at the data in 50% of the time spent manually analysing data and At various points, the UK has formed total. Now I have a team provide insights as to which garages part of the D5, the most digitally of around nine-hundred were potentially acting fraudulently. advanced nations worldwide. To Whereas they used to find two cases achieve that, GDS will have looked at and fifty working on of fraud for every nine garages they’d other countries. The model is Estonia visit in a day, they now on average who had the disguised blessing of digital transformation find seven. Increasing productivity in having no previous technology infra- across the UK this respect was a high priority on the structure. They were able to build board’s agenda as it impacts people’s from scratch, one of the world’s most government, healthcare lives by ensuring MOTs are carried out advanced digital systems without the and commercial”. properly, improving vehicle safety. burden of outdated legacy technology. With this project we were the winner At Kainos, we’ve similarly looked to two people a week to seven or eight of the 2018 UK IT Industry Awards other business sectors for inspiration. which has created new challenges Artificial Intelligence and Machine Government has been leading the around on-boarding and putting Learning project of the year way when it comes to embracing in place the right frameworks that agile ways of working and cloud enable people to succeed. Competition adoption, but innovative use of data is Part of our culture has always been to Kainos is one of the success stories most prevalent in the financial sector. hire graduates and give them exciting resulting from the change in This is partly because they face less career prospects. There are lots of government policy that encouraged restrictive legislation but there are leaders in the organisation who have departments to engage SMEs. Our tangible benefits for any organisation been with the company for their competition ranges from companies that adapts the way it uses its data. entire careers. This year, we’ll take of fifty people or less, right up to the Growth in around two-hundred entry-level large system integrators. It’s become employees - a mixture of graduates, more competitive so we must keep I joined Kainos almost twenty years placement students and from our differentiating our business case ago when the business had about academies and apprenticeship and finding new ways to add value. one-hundred and fifty people. scheme. In the last year, we’ve have It’s changed the nature of our work Today, the overall organisation has received nearly 22,000 job appli- also as we increasingly engage in a headcount around 1,450. In terms cations and have conducted an larger scale projects which sees us of revenue and people, the annual interview every twenty-two minutes compete more and more with the growth rate has been just over 20% on average. We get some very biggest players. for the past five years. When I started capable and ambitious people from We have a diverse offering that the Digital Services business in 2012, a range of subject backgrounds and includes support services with we had about thirty-five people in we keep the bar high. We hire good lengthy contracts, some of which total. Now I have a team of around people and give them challenging have been renewed repeatedly over nine-hundred and fifty working on and exciting work to inject fresh twenty years. However, the majority digital transformation across the energy into the business. of our business is project based and UK government, healthcare and all projects come to an end. Therefore, commercial. The Future we work closely with our clients to That growth in all parts of the AI and machine learning are understand their needs and whether business hasn’t been linear however, becoming pervasive in the technology there might be other problems in the and we’ve had to be careful to prevent industry and we’re starting to see business we could help solve. Repeat certain changes negatively affecting tangible benefits from it in enabling or recurring business accounts for the company. For example, Kainos Digital Transformation. People about 90% of revenue. We remain was originally a software engineering worry about the potential increase competitive by focusing on delivery. business with little in the way of sales in unemployment caused by AI Lastly, increased competition has and marketing so we had to focus disrupting traditional industries, but made recruiting and retaining top a lot on scaling the sales team. But we see it being used by clients to free talent more difficult. Our culture and as they performed increasingly well, up staff from repetitive tasks. Rather focusing on our people is important. we faced new challenges in terms of than gradually trying to remove Besides remuneration, we offer larger scale delivery. people from the business, companies genuine opportunities for career At this stage too, we had to focus on can use AI in a positive way to deploy development and work that is truly reformulating our people processes staff to higher value, more fulfilling rewarding. We engage people with to operate effectively with a much tasks. the chance to take responsibility on larger headcount. In the last year, Returning to the example of data and large, complex projects that make a we’ve gone from recruiting one or the DVSA, we implemented for them real difference to people’s lives. www.gillamorstephens.com+44 (0) 203 457 4060 www.gillamorstephens.com+44 (0) 20 3457 4060 15 ENTREPRENEURINNOVATION INSIGHT 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.

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’ Des Lekerman, CEO, TIG time – which we eventually did in 2016. The Internet Group was origi- Tell us about your first motherboard and memory replace- nally an internet service provider, entrepreneurial venture ments began to pivot towards but it shifted to providing support software configurations and mainte- for small businesses, such as putting I left Cavelle Data Systems in 1990 nance. We therefore hired Novell the networks together. Initially we to set up Eurodata along with a and Microsoft software engineers to partnered with VMware to build a colleague from the sales team; we meet this demand. At the peak of the cloud platform, we built a great infra- decided to move out of Manchester business 2000 we decided to change structure as a service platform, spent and locate the office in Islington. our strategy and sell IT solutions lots of money on it but unfortunately Our niche was supplying third party directly to the end users and trans- it didn’t sell very well. computer maintenance companies formed into a systems integrator. with parts to support their contracts. We already had a good team of Why was that? We saw a gap in the market because engineers focused on hardware and There were several reasons. One many of these companies were software. The growth of the business of the main reasons was that we buying directly from the manufac- accelerated over the next 10 years had come from a business that had turer at full price; our model was and by 2011 revenue was £30 million, massive technical capability and to buy end of lease computers and which was almost entirely system we were coming into The Internet break them up to sell the component integration projects and managed Group which had limited technical parts – there was good profit to be services. In 2011 we sold Eurodata to capability, but our aspirations were made in that. a competitor, Trinity Expert Systems, at that mid-market level. It was a which was then subsequently As our offices were on the edge of very different environment; we were acquired by PE-backed Liberata. the city in the then unfashionable used to dealing with established Clerkenwell, we could quickly deliver businesses that understood how to the end users which were mainly When you built the business did you have any advisers or to use technology, as opposed to banks and financial institutions – smaller customers that didn’t know these were the people that were a Chairman? how to properly utilise it. We had all spending most on third party mainte- No, and in hindsight I would have these legacy issues and the cost of nance contracts. done this completely differently. servicing those companies was higher The regular business of hard drive, I would have got some outside than the revenue they were gener-

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ating, so we went through a process were resorting to putting superglue better decisions rather than basing of analysing existing contracts. into them to prevent theft of infor- everything on gut-feeling or just on mation, these days there are software limited data. We have packaged our Tipping Point solutions that can prevent you from solutions up into bite size chunks that In 2016 when we bought the founder downloading data on the USB drive make it easier for our customers to out, we re-engaged Microsoft. or even uploading to other cloud consume making it accessible for Having previously been one of the drives like Dropbox or Onedrive. mid-sized companies. largest Microsoft partners in the Most of our customers are mid-size What are the constraints and South East at Eurodata, we had great companies; a lot of our expertise relationships. Microsoft had a new is around DevOps and automation challenges? CEO, Satya Nadella, who’s strategy which is typically only found in larger Our major challenge is recruiting data was cloud first; we met a couple of enterprise businesses. Similar-sized scientists and analytics people, so the senior executives from Microsoft companies to TIG usually offer their we are training people internally. This HQ in Redmond, and we then flew expertise to large organisations like has an added benefit as it rewards out there to understand the strategy BP or HSBC etc. because they have the loyalty of our existing staff by further. Following this we crystallised larger budgets; whereas mid-size giving them the opportunity to gain our strategy to primarily focus on organisations are often constrained more skills. building solutions in the Microsoft to a limited budget so must do more Azure Cloud – this was the tipping with less. Our strategy is to focus on point for us. A key area for us is those mid-sized businesses, bringing “The second area is the security element of Microsoft them enterprise level expertise that’s sales. Finding good 365 which is the Enterprise Mobility not normally available to them and Suite. These types of solutions had supplying it at an affordable cost. sales people is tough, now become our mainstream. We Insurance companies, hedge funds, and the people that designed an identity and access graphic design businesses - anyone management solution for multiple who relies on IT is the perfect are on the market Cloud services e.g. services such customer for TIG. as Dropbox, Box, Gsuite, AWS and/ aren’t necessarily the or SalesForce. Our solution is What are your growth best. I think people designed to provide secure access to ambitions for the next few mitigate the risk of identity theft and are becoming smarter preventing data leakage. years? In July 2018 we received £6m from and more tech savvy BGF who have been supportive of and if you’re selling a “Over the last 6 months our vision and growth strategy. our growth has been In December 2018 we made our first solution, you’ve really acquisition of another managed got to understand the fuelled by the increased service provider called netConsult demand for data making the combined business over business, the drivers £12m in revenue. We aspire in the and take a consultative analytics.” next three to four years to be £50m revenue and £10m EBITDA. approach. ” Has this led you to focus on Over the last 6 months our growth particular verticals? has been fuelled by the increased The second area is sales. Finding demand for data analytics. We have good sales people is tough, and the Finance, insurance, and recruitment completed about six projects so people that are on the market aren’t are focuses for us because they’re all it’s still relatively new, however, we necessarily the best. I think people professional services businesses and have found a way of automating and are becoming smarter and more tech highly data-driven businesses. For organising data in a way that can be savvy and if you’re selling a solution, example, in recruitment to transact, easily interpreted. We have built our you’ve really got to understand you just need a phone, an internet own IP around it that sits in between the business, the drivers and take a connection, a network of people an application database and the data consultative approach. and of course the database. The key warehouse. asset in any business is data and The challenge has always been making sure that this is protected We’re currently working on a project around having the right people and and secure should be a top priority; for a large recruitment firm who the right team working together with with technology you can protect have grown by acquisition. The the right chemistry; it’s having the against data leakage. This area is management team has a requirement right mix but getting that cocktail really resonating in the market as to view data from several different just right is an art. Some people more and more information becomes sources, through dashboards using might not have the skills today but highly portable; 10 years ago it was Power BI; the feedback from this has with the right training, coaching and about protecting USB drives, and been very positive. Data analytics mentoring, it can be possible – if some financial services organisations allows business leaders to make they’ve got the aspirations to do so.

www.gillamorstephens.com+44 (0) 203 457 4060 www.gillamorstephens.com+44 (0) 20 3457 4060 17 MEGABUYTESOCIAL INSIGHT The light at the end of the tunnel: Using technology to help homeless people to help themselves Gillamor 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 Alex Stephany, Founder, Beam

The journey to becoming an that’s always felt like something that problems that affect the most should be part of a rounded life. As vulnerable in society. Tech is not entrepreneur I did more in my career, I had the the solution of itself but tech is a In 2010, when I got my first smart- experience of raising what was the great enabler that can make it safe phone, I remember turning it on and largest ever crowdfunding round for and incredibly convenient to do I realised immediately what the fuss a tech start-up. It was €5m – back something life changing. That’s what was about. It was clear that tech was then, that was a lot of money for a we do at Beam. When someone funds going to change everything about the crowdfunding round! I remember a homeless person to do training on way we access goods and services. I thinking, “This is interesting, but Beam - they get updates and even thought this could be an area where maybe we could use this model for KPIs on their impact once they start I could apply that desire to do things social impact.” funding a larger number of people. For those supporters, it’s one of the differently and truth be told, I had a Learning from past slight rebellious streak! So, I began most meaningful uplifting things they learning more about technology. experiences can be doing with their time - and as It was increasingly obvious that I’m still learning and making mistakes, much or little money as they want to technology was a great sector to every day. The reality is that learning donate. work in and that there were a lot of makes up a series of very small Ambitions for Beam people who were very open-minded, things that, in aggregate, can make The first thing we’ve really got to smart and collaborative. the difference. One piece of advice I would give is, while you do get some work on is increasing the number Looking further back, my family incredible natural entrepreneurs who of people that we’re helping. Each have always been involved in can build great businesses pretty person we help is fantastic, and that’s community and charity work, and much out of the cradle, generally, great, but we really want to have a it’s useful to get some experience big impact on this problem. We want in another business and learn in a to move the needle on homelessness “I’m an optimist at fast-paced learning environment in the UK - all while upskilling the before setting out on your own. I workforce and allowing employers heart and it’s obvious wouldn’t have been able to be so to tap into this new talent pool. to me that people are successful with Beam if I hadn’t had There are 290,000 people who live that experience previously - in my in homeless hostels in the UK; which troubled by inequality, case running a parking app called comprises 130,000 children, and homelessness, lack JustPark. costs taxpayers over £1bn per annum. These are big numbers and we need of social mobility Banking on human to make a dent on this problem. compassion and other problems Charity, business or social I’m an optimist at heart and it’s that affect the most obvious to me that people are enterprise? vulnerable in society.” troubled by inequality, homelessness, We’re a social enterprise which means lack of social mobility and other Beam is a company that exists, first

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and foremost, to create social impact. more organisations bring techno- We have a mission lock in our articles “We’re a social logical innovation to bear on some of and are partnered with a charity, so these problems. I do hope however, all donations go to a charity’s bank enterprise which means that they won’t do it in a classically account which allows us to get the Beam is a company disruptive sense. A lot of people benefits of gift aid and corporation have thought we are disrupting tax relief. We think of ourselves as a that exists, first and homelessness, we’re not at all. We hybrid model of being a charity and foremost, to create work with charities closely in order to a strongly purpose-driven business. not disrupt good structures that have By setting up as a social enterprise, social impact.” already been put in place. we’re likely to be more focused at becoming sustainable by generating The reception of Tech4Good revenue and, ultimately, growing our tunities. We will likely be partnering by VC Firms impact. The worst thing would be if with one or two other forward- Every VC and PE that invest in for the rest of Beam’s existence, we’re thinking London boroughs this year technology, needs to be thinking of using donations to pay our salaries who are really interested in how their Corporate Social Responsibility and other costs. I don’t want to be they can create better opportunities (CSR) in the form of Tech for Good. in that position. Already, someone for disadvantaged people in their Firstly, because it’s the most powerful donating can choose to pay nothing boroughs, but also realise cashable use of their skills and resources; and whatsoever to Beam’s operating costs savings at the same time. secondly, at least in the early stage and make a 100% charitable donation Tech4Good: Other Areas of in training for a homeless person. We of VC, you need to convince entre- also provide the service of looking Use preneurs that you care about solving the world’s problems more than after the cash and purchasing items – A lot of people are very evangelical making money. If you make money as training mostly but also other barriers about tech, and think tech is the like transport or tools - direct for answer to everything - quite a a by-product, that’s great, but that’s each homeless person. You can see common attitude in Silicon Valley. not why you get out of bed every day. the costs of each person’s campaign I don’t subscribe to that, but I do Given that more and more entrepre- broken down on their campaign page. think that tech is a necessary part neurs are mission driven, I think that of the solution to every large and every VC, increasingly, will be looking Government involvement complex problem, whether that is to convince on that. So, in short, The reception has been excellent homelessness, cancer diagnosis or helping a Tech4Good company with from government. Right from the urban logistics. I think that there is advising, funding and seeding will be very beginning, we’ve been working not a single large, complex social how VCs do CSR. That is how they with the Mayor of London. More problem or environmental problem will have the greatest impact and recently, we’ve been partnered with that technology does not have to be how they will also attract the best Hammersmith & Fulham to help a part of solving. I think that Tech for entrepreneurs as well. homeless people in that borough to Good is just beginning now to come Currently, it’s tending to be high- access new training and work oppor- of age, and we are seeing more and net-worth individuals who are more embracing of this segment of technology. In part, because they can Budget Qualification Journey Referrer be their own free spirits, whereas the tech funds often need to answer to

Lauren’s campaign began to fund Dental Nursing Diploma £1,790 often more conservative LPs.

Dental Nursing Exam Fee £485 Advice for budding Tech Lauren begins her dental nursing Vaccinations £80 Entrepreneurs diploma Travel to course £285 Think about where you can add value. Look at what is out there and Lauren begins work as a trainee Basic life support first aid course £69 dental nurse try and be useful to people in that Smart leather shoes £50 ecosystem, build your network and take it from there. It’s always about Textbook £25 Lauren passes her exams to become being useful and being part of the a fully qualified dental nurse Laptop (gifted by Uber) £0 solution to the problem, so that’s Contingency £280 where I’d start. Lauren starts full-time work as a If youyou areare interestedinterested in in becoming becoming a a dental nurse Total £3,064 corporate sponsorsponsor for for BEAM, BEAM, or or to to justjust learnlearn moremore visit visit beam.org beam.org. .

www.gillamorstephens.com+44 (0) 203 457 4060 www.gillamorstephens.com+44 (0) 20 3457 4060 19 FINTECH INSIGHT FINTECH INSIGHT 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 Ross Seychell, Chief People Officer, crowded FinTech space. TransferWise in demand and have many opportu- TransferWise has announced it has In the last few years, we have had Sounds like a lot of thought What do investors say about nities and companies competing for launched its debit Mastercard in the Like a lot of good stories, a clear plan on how we get closer and effort goes into finding you? their craft. this one starts with two to our mission. Last year we hired them – how do you keep U.S. It was revealed that this product was built specifically for people friends... Nimay Mehta, General Partner, Lead about 840 people, the year before We are currently in the UK, Estonia, them? Edge Capital said: “The world is that it was 450 people, which is US and Hungary. However, to stay without borders. To date, that the They’re both from Estonia. Taavet was moving towards a more transparent phenomenal growth and we are ahead of the curve, we often go out Obviously, things like compensation card has already helped more than the first employee at Skype, so he got way of doing business and we want extremely proud of that. We have to countries we don’t have opera- and career opportunities and other 250,000 users in the UK and Europe paid in euros. But he lived in London to be part of that. International quite a large in-house engineering tions in yet to talk to candidates and benefits are important. However, we and needed pounds to pay the bills. avoid hidden bank fees when they money transfers represent a multi- and product team, and about 98% of build the talent pipeline. like to think the most vital thing for Kristo worked for Deloitte and lived spend money abroad. trillion dollar market, until now our roles are direct hires. But it can the people we hire is ownership over in London. He got paid in pounds but It’s not all about external hires though, dominated by banks keeping prices also be quite tough when you scale a something – being able to shape, had a mortgage back in Estonia. He we are creating internal opportu- TransferWise in numbers artificially high and transfer times company that fast. This again under- break, fix and take things forward. needed to pay that in euros. nities. This year is our fifth boot camp, • TransferWise’s borderless debit slow. TransferWise has changed all scores the importance of culture. Having a vested interest in your work. which is an engineering-specific Every month they moved their money that. For the first time people can When we bring people on board, we In this market, an employer also needs card first launched to customers in internship-to-campus programme. the old way – which wasted their send money all over the world at the start helping them to develop and to to be innovative and creative in terms the UK and Europe in April 2018. This initiative brings together about time and money. So they invented a real exchange rate for a transparent become leaders one day. of flexible working. For example, Since then cardholders have made 25 people in 6 different locations. We simple workaround that became a fee, and it’s no wonder five million we offer a paid six-week sabbatical more than 15 million transactions. billion-dollar business. customers have come onboard so How do you hire talent? give them a few real-life problems after every 4 years of service with an and projects to work on within a • They are processing £4bn every far. The opportunity for TransferWise Our ability to hire in the last couple added little bonus. You can decide team. They have buddies and support month 8 years down the line – what is set to grow exponentially now that of years has changed as we continue for yourself what you want to do with from more experienced developers, have you achieved? regulators from Europe to Australia to become more established in the it – spend time with family, learn a • TransferWise saves its customers are making transparency the status and If they do well, we offer them The TransferWise movement has market. People are aware of our new skill, take up a hobby. Actually, £1bn every year in bank fees quo.” a permanent job. Last year we spread far and wide. Over 5 million brand and of what we are achieving. our former Head of Customer Service successfully converted about 70% of is in Barcelona, learning to become a • Almost 20% of its international customers now trust us to move more This opens up a better qualified What is the TransferWise the participants. data scientist and when he gets back, transfers are instant (delivered in than $4 billion dollars every month. and diverse talent pool, including culture? we will look for a team that needs (Saving them $4 million in bank fees people that perhaps would not have less than 20 seconds) Do you target just the top some data analytics support. every day.) And Richard Branson, From the very beginning, the considered TransferWise three or • 1,600 currency routes, 49 four years ago. We strive to embrace universities? and PayPal founders Max Levchin founders focused on the culture they We also have a remote working currencies and Peter Thiel, among others, have wanted to create as much as they and build on that momentum. I think you miss a lot of great talent that policy, where individuals across all did on the product. Having a good hasn’t been privileged enough to go to teams and layers of the company can • Over 1,600 people in the team invested in our vision. The latest Many of our clients find round was led by growth capital working environment was just as some of those universities. We focus work remotely for periods of time. across twelve global offices - will investors Lead Edge Capital, Lone important to them and it continues Engineering talent the more on relevant courses offered by They work hard, yes, but can choose hire 750 more people in the next Pine Capital and Vitruvian Partners. to be so even after eight years. With most difficult to attract. all institutions. It is also important to to be at home with their family or 12 months such a rapid growth in headcount, it remember that not all developers and overseas whilst working at the same We’ve also opened 11 offices across 4 Is this also the case with can be hard to keep that culture alive engineers go down the degree route. time. • Audited financials for fiscal year continents. – we do it through effort, focus and TransferWise? This can provide an opportunity to ending March 2018 revealed 77% Apart from all that, not too much has energy, but also by allowing mistakes It’s a constant challenge. Talented bring people in at an earlier age. I TransferWise latest revenue growth to £117 million and changed! and learning from them. Engineers in the current market are think you need to have options. Since this interview was conducted, a net profit of £6.2m after tax

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in demand and have many opportu- Sounds like a lot of thought TransferWise has announced it has nities and companies competing for and effort goes into finding launched its debit Mastercard in the their craft. them – how do you keep U.S. It was revealed that this product was built specifically for people We are currently in the UK, Estonia, them? US and Hungary. However, to stay without borders. To date, that the ahead of the curve, we often go out Obviously, things like compensation card has already helped more than to countries we don’t have opera- and career opportunities and other 250,000 users in the UK and Europe benefits are important. However, we tions in yet to talk to candidates and avoid hidden bank fees when they build the talent pipeline. like to think the most vital thing for the people we hire is ownership over spend money abroad. It’s not all about external hires though, something – being able to shape, TransferWise in numbers we are creating internal opportu- break, fix and take things forward. nities. This year is our fifth boot camp, Having a vested interest in your work. • TransferWise’s borderless debit which is an engineering-specific In this market, an employer also needs card first launched to customers in internship-to-campus programme. to be innovative and creative in terms the UK and Europe in April 2018. This initiative brings together about of flexible working. For example, Since then cardholders have made 25 people in 6 different locations. We we offer a paid six-week sabbatical more than 15 million transactions. give them a few real-life problems after every 4 years of service with an • They are processing £4bn every and projects to work on within a added little bonus. You can decide team. They have buddies and support for yourself what you want to do with month from more experienced developers, it – spend time with family, learn a • TransferWise saves its customers and If they do well, we offer them new skill, take up a hobby. Actually, £1bn every year in bank fees a permanent job. Last year we our former Head of Customer Service successfully converted about 70% of is in Barcelona, learning to become a • Almost 20% of its international the participants. data scientist and when he gets back, transfers are instant (delivered in we will look for a team that needs less than 20 seconds) Do you target just the top some data analytics support. universities? • 1,600 currency routes, 49 We also have a remote working currencies I think you miss a lot of great talent that policy, where individuals across all hasn’t been privileged enough to go to teams and layers of the company can • Over 1,600 people in the team some of those universities. We focus work remotely for periods of time. across twelve global offices - will more on relevant courses offered by They work hard, yes, but can choose hire 750 more people in the next all institutions. It is also important to to be at home with their family or 12 months remember that not all developers and overseas whilst working at the same engineers go down the degree route. time. • Audited financials for fiscal year This can provide an opportunity to ending March 2018 revealed 77% bring people in at an earlier age. I TransferWise latest revenue growth to £117 million and think you need to have options. Since this interview was conducted, a net profit of £6.2m after tax www.gillamorstephens.com+44 (0) 203 457 4060 www.gillamorstephens.com+44 (0) 20 3457 4060 21 MEGABUYTE INSIGHT 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.

For the 25 years that I have been experience, product innovation and watching the technology sector, process optimisation. there has been one constant; hype. The biggest hype of recent times was Generation gap obviously the dotcom boom of the All of this plays into my broad late 1990s which was fuelled by the theory about the future of enterprise advent of the consumer Internet but, technology; which I summarised in in my view, we are well on our way to the previous issue of GS-insight. It the next big one, this time focussed has been clear for some time that we more on enterprise technology. As have entered into a third generation Cloud and SaaS go mainstream, the of enterprise technology; the first new kid on the hype block is artificial being mainframe, the second being intelligence, or AI. In all of the hype client server and the third being cycles I have experienced, the term Cloud. What has become apparent to AI is perhaps the most mis-used me more recently is that there is an term yet. Why? Because the vast interesting trend developing within majority of what people call AI are the third generation. just algorithms, many of which aren’t Over the last decade we have seen really very sophisticated. Algorithms the growing adoption of Cloud are as old as mathematics itself and technologies in all areas of enter- have been used in the technology prise technology, from Cloud infra- sector throughout its history, so, on structure to IT services and, of the face of it are certainly nothing to course, to Software as a Service. In get too excited about. my view, Cloud technologies are now The key difference between an in a mass adoption phase in large algorithm and AI is the ‘intelligence’ parts of the economy, especially the bit. For an algorithm to become AI, service industries. While the focus it must have the ability to learn from of the third generation thus far has the results of applying the algorithm Ian Spence, CEO, Megabuyte been largely on a shift to Cloud and modify the algorithm, hopefully infrastructure, increasingly, as Cloud thereby delivering a better result. this article giving a summary of my technology becomes pervasive, An example might be in disease views on why. technology companies and also diagnosis where an algorithm might AI petri dish those involved in other sectors are be used to identify cancer from scans, now using Cloud infrastructure to do but artificial intelligence can then To understand why the use of business differently, with data, collab- look at the resulting success rates to sophisticated algorithms is growing oration and new business models at determine a more accurate way to exponentially, we must first look at the heart of this fundamental, digital diagnose. The former is difficult to the conditions that are enabling them shift. AI is the glue that sticks these do but the latter is on another level to grow. First, there is the explosion various elements together. altogether. Perhaps it’s no surprise of data in recent years; without the then that, according to research by use of algorithms, it would be simply All businesses are tech the Financial Times, some 40% of impossible to get any meaningful businesses insights from this data. Secondly, the European AI start-ups aren’t actually It is this digital shift, or disruption, advent of the Cloud and APIs has using any AI in their products. which has led to the development made accessing big data substan- So why all the negativity, I hear you of all the ‘techs’; fintech, retail-tech, tially easier than previously. And, say? The increasing use of sophis- prop-tech, travel-tech and so on. last but not least, Moore’s law has ticated algorithms is potentially a Cloud, or perhaps ‘digital’ is now a enabled computers to process game changer; who cares if it’s not better term to use, technologies are big data, using said algorithms in actually AI? Well, to be fair, this is a being utilised to disrupt traditional acceptable timeframes. good point. Putting aside my analyst industries to a degree not seen since pedantry I can see that the AI trend, With the conditions now right, AI the dotcom boom of 10 years ago. The if that’s what we must call it, is applications are springing up all most high-profile examples of this indeed a potential game changer. So, over the place but there seems to are arguably in transport (Uber, Lyft, I thought I would spend the rest of be three broad categories; customer Deliveroo etc), banking and payment

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(Monzo, Starling, Revolut etc al), pure technology companies. more alien models such as revenue share, pay per click, etc. There are as health and wellness (BenevolentAI, Take Megabuyte for example. We Healx etc) and e-commerce (farfetch, are essentially a media company, but many business models as there are the Hut Group etc). However, behind in some ways, we look more like a unicorns but there is one constant; these well-known stories there is a software company. We spend 15% they don’t generate revenue from broader and fundamental shift to of our revenue on a team of devel- selling technology. digital business, which has all been opers that are absolutely core to our enabled by the Cloud infrastructure It all comes back to AI strategy. Meanwhile, our external developed in the last decade or so; spend with software companies and While you may be thinking that I’ve Cloud hosting, SaaS, next generation infrastructure providers is very low; gone a bit off piste here – weren’t we networks, API technology etc. less than 2% of our revenue, and over talking about AI? – there is method in There have been many column half of that is with AWS. 10 years ago, my madness. The key point is that, as inches dedicated to these digital we would almost certainly have used I noted above, algorithms and AI will disruptors, as well as the potential an external web agency (in fact we increasingly be seen as the glue that societal impact of their rise, so I do did) to develop and maintain our web holds many of these digital strategies not propose to add to those here. My platform. together. In my view therefore, AI is main interest in this topic is what this becoming the key driver of digital latest phase of the third generation transformation. Take Uber again as of enterprise computing means for an example. At its heart, it is a collab- those that provide software and ICT “AI is becoming the oration and e-commerce engine services. bringing together multiple data On the one hand, the rapid adoption key driver of digital inputs and outputs to bring driver of digital technologies provides a transformation.” and customer together, arrive at the massive structural growth oppor- right location in the fastest possible tunity for software and ICT services I believe that this blurring of the time and charge the right fare. But companies as their customers lean lines of what is defined as a business at the heart of all that are algorithms on them to help with the digital trans- services company and what is a (AI) that make it all work efficiently. formation. And we are clearly seeing technology company has only really Of course, I’m not the only person this in our data on the UK market. The just started and will play out across to spot this trend and, in the frenzy average organic growth rate of the the industry over the medium to long of activity to find the AI winners, companies we track in the Megabuyte term. Indeed, one might even extend investors are performing their usual service (where we can get the data this further to say a blurring of the trick of throwing money at any from Companies House – about a lines between what is a company (of company with [insert buzzword] in third of the 2,500 companies on our any kind) and what is a technology its title. Also, in keeping with past database) is over 10%. And the top company. hype-cycles, valuations often assume companies are growing at more than a completely unrealistic likelihood double that rate, whilst still gener- So, technology companies, and of success. Moreover, with the ating average EBITDA margins also especially software companies latest start-ups encouraged to seek in the 20s. While that growth might will need to adapt. And the most world domination from the get-go, not seem as exciting when compared obvious way in which to adapt is to valuation excess has reached new to some of the unicorns references start providing a service on the back heights. above, I think it ably demonstrates of your software – the clue is in the the strength of the sector when set SaaS title. One obvious way to do Having looked at a significant against anaemic UK GDP growth. this is with a B2B2C model but there number of companies claiming to are more direct ways to do it as well. be AI pioneers, my conclusion is that There is also no doubt in my mind that There will of course continue to be this growth is driven largely by the many (probably most) are simply not areas where pure software remains delivering value in their solutions. structural demand generated by the relevant. For example, Megabuyte generational shift in the use of enter- After all, a word cloud does not is a long-standing customer of Xero constitute insight. Indeed, you only prise technology. However, when we (and a very happy one at that) and I think about the consequences of the need to glance at the Softbank foresee no reason why we wouldn’t move to digital, it may not be all good Vision fund deck recently published continue to be so for many years news. Why? Because many of the by FT Alphaville to see that investor to come. But, in my view, most burgeoning digital-native companies over-exuberance has reached sectors will move in the direction of will be developing much more of their dotcom bubble proportions in some tech-enabled services as the digital technology in-house and thereby quarters. As such, it seems likely disruption phase of the third genera- require much less help from external that we are near the peak of inflated tional shift gathers momentum. suppliers. At the same time, business expectations for AI, to quote the services companies are increasingly This will all come with another big shift Gartner hype curve, and will soon be investing in technology to provide in business model. Just as software headed down to the trough of disil- what are now commonly called companies have got used to the shift lusionment. But that’s when the real tech-enabled services, thereby also to a recurring revenue model, now investment opportunities will present potentially taking budget away from they may need to embrace even themselves.

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Enterprise Software and Transformation Services and Cloud- the Distributive Ledger Technology Infrastructure Services Managed Services. space, having made key hires across business and technology roles If you’d like to find out more The pace of transformation in this on behalf of Banks, Exchanges, about Gillamor Stephens’ services area is rapid with the ongoing shift FinTech firms and the wider Market in the enterprise software and to cloud-based, SaaS delivery and Infrastructure community. We, in infrastructure services sectors, subscription consumption models. particular, have unrivalled intelligence please contact Steve Morrison, Our team have significant depth in the Blockchain community, tracking

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