Click Here to see Part 1 of the Interview with Rob
Taking a business to a global market is the step that many founders look back at when thinking about what took them from being a small company to a leading enterprise within their field. If your business has proven itself and you are able to identify a market overseas there will also be an existing business infrastructure to support this demand.
The US not only has a highly coordinated funding culture of banks, institutions and VCs, but also a talent pool that has evolved since the early days of silicon valley.
Rob Barrow started out with a computer science degree in the UK and went on to prosper alongside the arrival of game changers such as broadband, the arrival of graphical user interfaces on the desktop, the web and now the mobile revolution.
I recently asked Rob about his business and his eventual move to the US
In my early thirties having worked as a consultant for a number of years, I decided shortly after having a baby and taking on a big mortgage to resign from my job and start my own business. This was in the early eighties and microcomputers were just starting to happen and I knew that I could do something with business systems.
While going through this process my business partner and I realised that we wanted to be in systems software and very quickly started to write software for Unix based machines and on the back of that we discovered a market for our business in California.
Why was there a demand for your business in the US?
Our business model changed, when we were selling the business systems we were selling to end users and resellers, but we worked out that a smart place to be was selling to the computer manufacturers themselves as all the early adopters were in the US where we would get a licence fee every time they sold.
Did your presence in the US give you any tactical advantages in growing your business further?
Because we were working with the manufacturers in the late eighties, we were able to see what they were doing and spotted an opportunity as the internet was just starting to happen with something called ARPANET. Suddenly everyone wanted to connect their machines to the internet. We were able to produce something to do this which did two things - it gave us a huge cash pile and experience in the early days of the internet.
It sounds like there were significant ongoing changes from the start
How did you manage a team around the business as time went on? When the company was first founded, we had a team of about 30 people. Then we produced this latest product called SurfControl and although we had a good business and were getting well paid, we had to ask ourselves do we carry on with this or do we go with someone else and put a lot of money into a new product and take it to the States? This would mean serious investment and this wasn’t for everyone in the company, therefore we built a team to take to the States.
With your new product and restructured business what kind of investment were you looking for at that point?
We knew we had a major opportunity in front of us in the States and that we’d need about £50m to take it to market. The route we chose was to list on the AIM market and with a couple of VCs already in the firm we persuaded them that an AIM listing was the right thing to do to raise some money. Still a small company in 1998 of around 30 people with a small office in California, we managed to raise about £20m and knew we could take our product to market. We put our forecasts in and it worked like clockwork. Two years later in 2000 we were main market FTSE250 employing 650 people with a valuation of a £1bn.
What was the hardest part of building the team?
Going from 30 to 80 staff was the most difficult task. This meant traditionally looking at middle managers, which was always a problem for businesses. We struggled initially to hire the right people as we went out to hire the middle managers which didn’t work. Then we realised that we probably had the Middle Managers in the 80 staff we employed, so we took a gamble and found our middle managers internally, and it paid off. The key in this search
was respect within the team and it was quite interesting that it is often wasn’t the obvious choice. Within two years your business has grown at an almost unimaginable rate.
What kind of people did you have on board at that time?
In 2000 we assembled a fantastic board of directors which was key. They included people from KPMG, the London Stock Exchange, IBM and Apple. We knew we wanted people who could take us places as we had a clear focus on exit during the lifetime of our product and in four years we managed to grow the revenue up to £100m. One of the best things about software is that you are working on over 99% gross margin, so as soon as you outstrip your costs your revenue goes straight to the bottom line which was great for the acquirer.