Social Media Summariser Hootsuite shows how High Tech Lichfield can see growth

Posted by Chris on February 15th, 2012

Hootsuite is one of a number of applications that now exist for people to monitor relevant activity on a number of social media networks simultaneously like Facebook, Twitter, Linkedin and Google +. Competitors to Hootsuite include TweetDeck, PeopleBrowser and CoTweet. One of the major concerns for investors considering investing in HootSuite was it’s location in Vancouver, Canada.

You may know that Vancouver is  the home of many start-ups lots of which are ” high Tech. ” including HootSuite. HootSuite was ranked in the top 10 at the time of this survey.

Vancouver is a beautiful City located on the West Coast of Canada and a 100 or so miles away from Seattle, U.S. – the home of Microsoft and the original home of Starbucks Coffee . I have been to Vancouver a number of times – mainly to ski in Whistler. I sent my son David there to learn about Internet Marketing and I will also always remember it as the home of ” those otters “. You know the cute ones that float around holding hands and have over 17 Million hits on YouTube !! We tried to get David to visit the otters in Vancouver Aquarium but he never quite made it. He did however fly out to Vancouver and back on his own.

Anyway – back to HootSuite. One of the downsides identified with HootSuite by the venture capitalists, as mentioned earlier, was that it was based in Vancouver.  You can’t really believe that Vancouver is viewed ( by some ) as a backwater but it is. It’s vibrant start-up community is a drop in the ocean when compared with e.g. San Francisco, New York and Boston.

The biggest problem perceived ??? How would they get the talent needed ??

In fact this “disadvantage” turned out to be an advantage ….

“Up there, surrounded by quality dev talent with limited competition, HootSuite has been able to attract A+ people at a fraction of the cost of its competitors. This advantage has only grown as HootSuite now is one of the top tech companies to work for in Canada and can pull from across the entire country. ”

Similarly a ” Silicon Crossroads ” in Lichfield would be perceived as ” nowhere ” by the High Tech. community but it has major advantages in the talent pool, the location, access to transport and many other areas.

2007 article about Vancouver’s High Tech. start-up’s:

Investing in a Tech Bubble

Posted by Chris on June 22nd, 2011

This exerpt is taken from here
where you will find the full article and origins.
Steve Blank
The proposer’s rebuttal remarks
Jun 17th 2011 | Steve Blank

You’ve got to know when to hold ’em
Know when to fold ’em
Know when to walk away
Know when to run
Kenny Rogers – The Gambler

My esteemed colleague, Ben Horowitz, essentially makes four arguments: 1) look at how relatively cheap Apple, Google and Amazon stock is, compared to their growth; 2) major technology cycles tend to be around 25 years long, with the bulk of the purchases occurring in the last five-to-ten years—the major adoption wave for the Internet technology platform is due to hit within the next 8 years; 3) the economics of building internet businesses has changed; and 4) the markets are much bigger.

Therefore, he concludes that a boom is coming…but asks if you want to miss it because it has the possibility of becoming a bubble?

If this were a magic act, we would suggest that Mr Horowitz’s arguments are misdirection. To answer the question before the house, “Are we in a tech bubble?” he offers that as Apple, Google and Amazon survived the crash, we can ignore the fate of the thousands of failed public and private companies when the bubble burst in March of 2000. The issue is not whether we are on a 25-year tech cycle or that the next eight years are really going to be great. The issue is whether the next 100+ tech IPOs carried by this bubble will be worth their offering price in eight years.

One of the least understood parts of a bubble is that there are five types of participants: the Smart Money, the Shills, the Marks, the True Believers and the Promoters. Understanding the motivations of these different groups helps to make sense out of the bubble chart below.

Four stages

Smart Money are the prescient angel investors and venture capitalists who started investing in social networks, consumer and mobile applications and the cloud three, four or five years ago. They helped build these struggling ventures into the Facebooks, Twitters, and Zyngas before anyone else appreciated that these companies could have hundreds of millions of users with off-the-chart revenue and profits.

In a bubble, the Smart Money doubles down on their investment in the awareness phase, but—when it starts becoming a mania—the Smart Money cashes out. (Really Smart Money recognises it is a bubble, and bets against it.) They manage this all with knowledge of the game they are playing, but they do not hype it, talk about it or fan the flames. They know that others will.

The Shills are the middlemen in a bubble. They profit from the boom times. They are the mortgage brokers and real estate agents in the housing bubble, the investment bankers and technology press in the bubble. Since it is in their interest to keep the bubble going, they will tell you that housing always goes up, that these bonds are guaranteed by a big bank, and that this tech stock is worth its opening price. All the stories peddled by Shills have, at their heart, why “it is a new age” and why “all the old ways of measuring value are obsolete”. And why “you will be an idiot if you do not jump in and reap the rewards and cash out”.

The Marks are your neighbours or parents or grandparents. They are not domain experts. They know nothing about real estate, financial markets or tech stocks, but they do not want to miss the “investment opportunity of a lifetime”. They hear reassurance from the Shills and take their advice at face value, never asking or questioning the Shills‘ financial incentives to sell you this house/mortgage/tech stock. They see others making extraordinary amounts of money at the start of the mania—”just buy a condo or two and you can sell them in six months”. What no one tells the Marks is that, as they are buying, the Smart Money and institutional investors are quietly pulling out and selling their assets.

The True Believers do not financially participate in the bubble like theMarks (for lack of assets, timidity, or time) but they would if they could. They have no rational evidence to believe, but for them it is a “faith-based” belief. By their numbers, they give comfort to the Marks around them.

The Promoters are the ones who keep the bubbles inflated even when they know that the asset exceeds its fundamental value by a large margin. While Shills have no credibility, Promoters have “brand-name” credibility that makes the Marks trust them. What makes thePromoters‘ role egregious is that they are a small subset of the Smart Money. They loudly tell the Marks and the Shills that everything is just fine, enticing them to buy into the bubble, as the Promoters are liquidating their own positions.

To support his position Mr Horowitz used a quote from Warren Buffett that I wish I had found, “The only way you get a bubble is when a very high percentage of the population buys into some originally sound premise…that becomes distorted as time passes and people forget the original sound premise and start focusing solely on the price action.”

The “facts” raised by Mr Horowitz, that “the size and scale of these new markets have never been seen before; some of these applications and companies will reach billions of customers, generate unprecedented revenues and profits” are likely true. But they do not support his argument about the bubble valuations that we are seeing across all the companies filing for IPOs (Pandora Media just priced its IPO at $2.6 billion dollars, while admitting it will have operating losses through the end of fiscal 2012). But to justify his position, he lists the low price/earnings ratios of Apple, Amazon, Google and He argues that, if we are in a bubble, these companies ought to have their prices inflated as well.

A bubble does not work that way. Bubbles attract Marks and Shills to new shiny toys, not existing ones. Apple, Amazon, et al are not the current objects of desire that this bubble is about. The question is, are we in a new tech bubble? Does the new wave of social/web/mobile/cloud companies going public have valuations which exceed their fundamental values by a large margin (today and in the foreseeable future)?

In other words, “Would you want your mother to buy these stocks to hold them—or to flip them?”

Every bubble is a big-stakes game—played for keeps. In it, the usual cast of characters appear: the Smart Money, the Shills, the Marks and the Promoters.

There is a saying in poker, “If you can not figure out who the Mark is at the table, it’s you.”

2 years on from Peter MacLeans 365iT plc acquisition of 5i Limited

Posted by Chris on January 25th, 2011

In 2009 we sold 5i Limited to what became 365iT plc ( formerly Impera plc ) which is run by Peter MacLean, who helped build Guardian iT into a £110m business.

I originally invested in 5i Limited in around 2002 when finance would have been virtually impossible to raise for a Hi-tech start-up of this nature.

The original investment period was 3-5 years but I gave 5i’s management until 2009 to produce a return on my investment.

So, post the sale of 5i Limited to 365iT, what has happened ?? What does the future look like ??

365iT is pursuing a buy and build strategy – looking for suitable, complementary hi-tech companies to add  to it’s portfolio. It has raised funds from e.g. LMS Capital, the South East Growth Fund and Sussex Place Ventures.

It bought  7 Global from LMS Capital and also acquired Fox I.T. last year.

I will be posting a series of blogs on the post sale performance and my recommendations to other companies that are considering becoming part of 365iT.

Midlands based engineering company Aardvark Engineering gets new shareholder

Posted by Chris on May 15th, 2010

Engineering company Aardvark Engineering has a new shareholder

Who is Chris Windley, multi-millionaire entrepreneur and Mergers and Acquisitions specialist.

Chris wants to get in touch directly with all customers and explain his strategy for the company for the future.

Under Chris’s guidance Aardvark Engineering will set on a new course and before this strategy is outlined he wants to talk to all Aardvark customers.

Call Chris directly on 07881 500002 as he is keen to hear your views.

Ten key hooks for investors in early stage businesses

Posted by Chris on March 20th, 2010

Written by Guy Rigby, Head of Entrepreneurship at Smith & Williamson

Family and friends are a great source of funding for start ups and early stage businesses, but raising money from external investors or business angels is challenging.

Here are ten of the key issues that investors will be considering when they meet you or read your business plan.

1. First impressions

First impressions are critical. Most investors will decide not to proceed within the first 30 seconds of any discussion, or within a minute or two of picking up your business plan. Think about your approach, test in on your friends and practise it to perfection. Don’t fall at the first fence.

2. Demonstrable need

Where is the pain and what exactly is the need for your particular product or service? Most businesses offer ‘me too’ opportunities which are not obviously exciting to an investor. Make sure it’s clear how and why yours is different. Is it better, faster, cheaper or is there some other reason why you will succeed when many others fail?

3. Existing Revenues

Raising money for a business with pre-existing revenues is far easier as demand for your product or service has already been partially proven. The fact that you have already established the beginnings of a customer base will carry huge weight in any discussions.

4. Strategy

You may have a great idea, and you may have existing revenues, but what is the future for your business? Do you have a vision? If so, is it realistic or just “pie in the sky”? We have all seen those hockey stick shaped graphs showing an embarrassment of riches only a year or two down the track. Don’t be tempted to over-promise and under-deliver. It’s normally transparent from the start.

5. Business plan

The credibility of your proposal will be reflected in the quality of your business plan. A poorly presented, badly researched plan will kill your proposal before it has a chance. An idea may be good enough to gain the backing of family and friends, but it won’t cut the mustard with any serious investors.

6. Business model

Your business model will determine how and where you make your profits and how you will build long term value in your business. A model that requires huge revenues to deliver small profits is inherently unattractive, whereas a business in a niche market with high barriers to entry will be of interest to potential investors.

7. You

Are you credible in the eyes of the investor? What is your track record and what experience do you have of your business? Most successful entrepreneurs “stick to the knitting”, creating businesses based on their passion (ie something they know and understand), personal knowledge or experience. If this is limited, get the support of a mentor or partner. This will demonstrate maturity in the eyes of your investor.

8. Financials

Businesses go bust because they run out of cash, so be sure to demonstrate a good understanding of your financials. Margins and overheads will be part of the discussion, as well as working capital and cash flow. Remember that small businesses are normally cash constrained and prone to overtrading, so the investor will need to understand how you will manage this.

9. Pricing

Don’t be tempted to overvalue your business. We are a long way from the heady dotcom days when investors were persuaded to part with large amounts of cash based on little more than an idea. Nothing will put an investor off more quickly than an excessive or unsupportable valuation. The more you need, the more you will have to give away, so be realistic, cut your cloth and take in as little external funding as possible.

10. Exit

It’s very easy for an investor to put money into your business, but how will he get it back? A vague idea that you would like to buy his shares back at some future date is unlikely to be attractive. Taking in external funds means that you need to “begin at the end” in terms of thinking about exit, having a clear strategy and plan. This may change as the business grows, but you need that stake in the ground.

These are just some of the issues an investor will be thinking about, often subconsciously, in the short time that he focuses on your business. If you’ve thought it all out beforehand and you can tick all the boxes, you will have a strong chance of success.

Good luck!

Bring on the Rainmaker !!!

Posted by Chris on January 6th, 2010

An interesting article on David Wimers blog:

“Bring on the Rainmaker!”

imagesca3axevrM&A Transactions require one in 2010.

A Rainmaker is described as one who is known for achieving excellent results in a profession or field, or who is believed to be capable of producing rain, as through magical or ritual actions. And whether you’re the owner or another key person in your organization, you need to be beating the drum for rain these days after our year of drought. We all know the worth of water when the well runs dry. Certainly in the M&A Transactional market of 2009, the M&A Advisor has become Chief Rainmaker for 2010. 

more here..

IT services and solutions provider 365iT appoints Pieter Hooft as non-executive director

Posted by Chris on December 19th, 2009

IT services and solutions provider 365iT appoints Pieter Hooft as non-executive director

Appointment of Non-Executive Director

Basingstoke 21st December 2009: 365 iT plc, the IT services and solutions provider, is very pleased to announce the appointment of Pieter Hooft as a non-executive Director of the
Pieter Hooft is currently Managing Director of UK Investments for LMS Capital plc, the LSE listed international investment group. He has over 15 years’ investment experience in
management buyouts and development capital in the UK and across Europe.
Commenting on this appointment, Peter MacLean, 365 iT’s
chairman and chief executive, said: “I am delighted to
welcome Pieter to the Board. He has extensive experience of
helping companies achieve rapid and profitable growth and I
look forward to his contribution to the Board and to his
expertise and support for the continued development of the
Pieter previously worked at Apax Partners and JPMorgan
Partners. Since joining LMS Capital in November 2006, Pieter has joined the boards of
Updata Infrastructure Holdings Ltd, Entuity Ltd, Kizoom Ltd, ITS Engineered Systems Inc and
First Index Inc.
Pieter is a Dutch national and is fluent in French and German. He was educated in The
Netherlands and at HEC Paris.

Notes to the Editor
365 iT plc was founded in 2005 and now employs over 85 people. Through its wholly owned
subsidiaries (365 iTechnology Ltd, 5i Ltd and 7 Global Group Ltd), the group provides an extensive
range of IT services and solutions that address the nine strategic functional areas in IT operations and
management: IT Managed Services, Unified Communications, Business Continuity, Data Backup, IT
Security, Virtualisation, Networks, Storage Solutions and Infrastructure solutions.
Stephen Bean
Tel: +44 (0) 7747 100000

ICON Corporate Finance

Posted by Chris on December 10th, 2009

Nortons Corporate Finance & Consulting

Posted by Chris on December 10th, 2009

Contact: Rory or Ian.

Investing in Companies – Prioritising the P’s !!

Posted by Chris on October 21st, 2009

We have talked about the use of the “ P “ words as an aide memoire to ensuring that a proposed investment has the right ingrediants.

The main P words that we are using are People, Proposition, Profit, Potential and Plan. After some considerable deliberation I have decided to prioritise them in this order. Let’s look at why and also add some meat to the bones of each of these points.

Certainly you could debate my ordering considerably. You could say, for example, that without the right Proposition, the right idea, nothing else matters. You could also say, especially in the light of Google, Facebook and Twitter, that Potential is more important than Profit. However I think that lots of people would agree with me that Profit is, generally speaking, more important than Potential.

I have put People at the top because I believe, and indeed I have seen, that People can make an average Proposition really work and that People can also really kill a good Proposition. In that sense People are more important than the Proposition. I think that it is also the case that a lot of business’s are similar to one another but the thing that differentiates one similar business model to another is the People that are running it. In addition, almost all Propositions will be challenged really hard during their business lifetime and it is the People that will recognise the challenge and fine tune it, rise above it, side step it, go around it or simply change the  original business model in order to succeed. This seems to me to be almost inevitable – that the original business Proposition will have to be changed in the light of experience to succeed.

If People are the most important aspect of the company that you are proposing to invest in then what are we looking for in those People ?? ( We don’t know how many People we are talking about here, or what roles they hold ). If you are talking about a number of People then it is great to see them working as a team, each with their own skills, but working together. It is also important that there is a leader. Ideally we would like to see experience. Experience of starting and growing a start-up or early stage company.

In no particular order we are looking for a number of characteristics in these People. These will include – passion, persistence, determination, professionalism, presentability, believability, likeability, honesty, loyalty and innovativeness.

The Proposition will be our second most important “ P “. Some people would say that the Proposition is the most important “ P “ but I have explained why it is not for me. The Proposition must be logical, understandable, researched, focussed and it must generally scream “ I have to buy one of those “ or “ I can see exactly why someone would have to buy one of those “. In my experience the original Proposition rarely stands the test of time fully intact. It is almost always “ not quite true in the light of experience “.

If the People and the Proposition look good then we come to the debate about Profit and Potential. We must also consider whether we are talking about Gross Profit  ( Transaction Profit ) or Net Profit ( Trading Profit ). Profit before all overheads are considered or profit after all overheads are considered.

What we know from, for example, the dotcom experience, is that companies that have relatively small transactional revenues and profits become hugely valuable when huge transaction numbers come into play. In other words if they are scalable and replicatable globally then small amounts of revenue and profit turn into massive overall revenues and then profits because of the huge numbers involved. ( Microsoft, Amazon, and eBay might be examples of this. )

Profitability ( It costs me this, I sell it for that and make a profit of whatever ) is clearly important but it might not lead to the company being as valuable as when it had huge Potential.

It is also one thing to be asking yourself whether you will achieve a highly valuable company by going for a low profit, high revenue model versus a high profit, low revenue model but entirely another to be asking whether you should go a virtually no profit ( or negative profit ), global transaction model !!! ( Google, Facebook and Twitter being examples of these ) The founders of Google could easily see how they could get millions of transactions ( well users anyway ) but not so easily how those millions of transactions would turn into revenues and profits.

Our assessment of Potential will include considering whether it is applicable globally and whether it is scalable and replicatable.

The final thing that we will look for is a Plan. A financial plan ( sales, costs, profits/losses,cashflow ) and a business plan ( How is it all going to happen ). This will be clear, simple, achievable ( at least on paper ) and concise. I put the Plan at the bottom because, inevitably, it will change !!       



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