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

1. GS- nsight
people •
i technology • business
Issue 18
In this issue
2 Sound Byte
Cloud Forecast
Tony O’Donnell, co-founder
of Cambium explains the GS-insight looks into cloud computing, green IT and much
CRC Energy Efficiency more . . .
Scheme
W
3 Executive View elcome to the eighteenth for Venture Capital and Private Equity
Jon Temple, President and
edition of GS-insight, the backed technology companies across
CEO of nlyte Software
discusses green IT quarterly magazine from Europe. Although there has clearly been
international executive search firm a reduced level of VC investment and PE
Gillamor Stephens. Since forming our transactions over the last couple of years
4-5 Route to the Top business in the 1990s we have seen an we have seen a sustained amount of
Colin Tenwick, recent CEO
ever-changing landscape in the hiring activity in this sector as the
of StepStone shares his
transformation of a dot.com technology sector that we serve: from investors seek to ensure they have the
from bust to boom the era of client server computing, right management team in place to
through dot-com boom and bust onto the deliver on a company’s potential. In this
6-7 VC Economy present day excitement around cloud edition of GS-insight, Matt Mead,
Matt Mead MD of computing and software as a service as Managing Director of Investments for
Investment for NESTA well as the Green IT agenda. NESTA, brings insight into the challenging
brings insight into early Recent studies from IDC show that world of early stage investment while
stage VC investments global spending on cloud computing is Tom Wrenn of ECI provides the PE
growing a rate of 27% a year, or nearly perspective on the current investment
8-9 PE Economy four times as fast as the overall landscape.
Tom Wrenn, of ECI sheds information technology market. In this Investors are united on the need to
light on Private Equity issue, we discuss the benefits of cloud have the right team in place for each
processes
computing for SMEs with Ricky Hudson, stage of a company’s development, but
CEO of cloud computing innovator, Star. it can be lonely at the top of an
We also gain insight from Colin Tenwick, organisation; Dave Darsch of CEO-
10 Ten Minute Interview
James McDougall, CEO of ReVolt
former CEO of Stepstone on lessons Collaborative Forum talks about the
Technology talks about rock stars, learnt in embracing the cloud and importance of peer group interaction for
batteries and entrepreneurial moxie building a successful SaaS business from CEOs. Keith Cornell discusses the role of
scratch. the Board, while one of the CEOs we
11 Industry Insight Tony O’Donnell of Cambium helps us hired into a VC backed business, James
Ricky Hudson CEO of Star understand carbon reduction legislation McDougall of ReVolt Technology, talks
considers the potential of
and the opportunities that this creates about the realities of being CEO of a
cloud technology
for technology vendors, while Jon technology innovator in a global market.
Temple, CEO of data centre
infrastructure management company, GS-insight can be viewed and
12 Community nlyte Software explains that it is not downloaded from
David Darsch, co-Founder of the CEO – enough to purely appeal to a customer’s www.gillamorstephens.com.
Collaborative Forum provides support
sense of green responsibility as they
for those at the top
continue to focus on the business I hope you enjoy this issue and I
12 Best Practice fundamentals of top line growth and welcome your feedback.
Career Board Director Keith Cornell expense reduction. Steve Morrison, Partner
outlines the Board’s vital role Gillamor Stephens recruits extensively smorrison@gillamorstephens.com
11

2. Sound Byte
Green light on carbon reduction
Tony O’Donnell, co-founder of Cambium, a leading advisor to technology companies
outlines how technology innovators can capitalise on market opportunities created by
the CRC Energy Efficiency Scheme
T
he CRC Energy Efficiency • IT businesses in data collection, relationships inside obliged
Scheme (CRC EES) is a modelling and reporting organisations.
mandatory scheme designed to • Automatic metering vendors It has been reported by the
reduce the absolute emission of • Energy consultancies to support environmental consultancy, ENDS
carbon dioxide by the UK over the organisations in understanding that there are now over 300 carbon
next ten years through the adoption compliance obligations and in accounting tools to meet CRC EES
of energy efficient technologies and developing their response needs. We will see completely new
management practices. infrastructures being created by the
This legislation will drive This will create a deeper, obliged organisations to manage,
fundamental change in both quantified understanding of where measure and account for energy
affected organisations (“the and how energy is used across an consumption and emissions. This
obliged”) and providers of energy organisation. This understanding will new market space has been
efficient technologies (the generate secondary opportunities characterised by a wide variety of
“suppliers”). In the process this will for low carbon technology vendors different vendors’ approaches, such
create a huge market opportunity to demonstrate how returns on as:
worth £800m in 2010 at a time when
the economy is being squeezed by
investment can be achieved through • Systems management and
new technology. The momentum to monitoring vendors re-positioning
reductions in Government spending: adopt “clean” technologies will solutions to be specific to carbon
For the 20,000 obliged build as the Capped phase of the management and accounting
organisations leveraging CRC EES to
adopt a sustainable compliant
scheme drives higher prices for • Traditional application providers
carbon allowance purchase from turning acquisitive to add
business strategy as quickly and 2013. relevant functionality - such as
cheaply as possible will create a CRC EES therefore offers smaller SAP acquiring Clear Standards
competitive advantage.
For suppliers success will go to
CleanTech vendors of energy • An increase in start up software
efficient innovations the opportunity vendors, either from energy or
those organisations that understand to market to the UK’s 20,000 largest carbon management
the marketplace and align their organisations at a time when they consultancies, or through venture
technology with the chosen response will be receptive to new energy capital investment
of early target customers. saving ideas. However the CRC is
attracting overseas market entrants, In summary CRC EES is a great
The Market Opportunity which means early stage companies catalyst of change for the largest
Most obliged organisations have not will need to quickly work out where organisations in the UK regarding
previously had to provide statutory they are best served by a direct energy efficiency and sustainable
carbon reporting, let alone estimate sales approach or by partnering with business. It provides an excellent
and then acquire allowances to larger vendors, with established opportunity for innovative
cover total emissions of carbon organisations both within the UK
dioxide. Neither the technology market, and also subsequent
infrastructure nor the management Tony O’Donnell expansion into a massive emerging
best practices needed to collect, Tony O’Donnell co-founded Cambium global market.
measure, manage and report on in 2008. Following an early career as The spoils will go to those that
energy use has been established. an environmental research scientist, understand the implications of CRC
Therefore for suppliers the first Tony changed direction and enjoyed EES whilst also executing with focus
phase of opportunity will be to help a highly successful sales career with and speed. It promises to be one of
create and build this new a number of technology vendors the most important markets of this
infrastructure, then integrate with including HP Sequent and BEA
, decade.
existing systems and management Systems, where he ran the Financial For more information -
processes. There will be significant Services vertical for the UK. www.cambiumllp.com/are-you-
opportunity for: ready-for-crc/
2

3. ??????????
Executive View
Greening the Data Centre
Jon Temple, President and CEO of nlyte Software gives his view on data centre
management
T
he recent expansion of data expenses through the optimal
centres has been significant, placement of assets. This can
and forecasts predict that the reduce power expenses by up to 20%
global data centre market will on a year on year basis. When you
expand at a rate of 5-10% over the consider the power bill for even a
next few years (Frost & Sullivan). modestly sized data centre, that
Such growth will significantly impact 20% power saving can equate to over
the environment – data centres $4 Million on an annualised basis so
already account for 3% of total reining in these costs today is
energy consumption worldwide, and proving to be extremely important
data centre greenhouse gas for our customers. By 2014 it’s going
emissions will overtake the airline to be more expensive to run the
industry emissions within the next 5- data centre from a power
10 years. perspective than to buy and manage
Whilst there is no way to deny the the equipment in it, so for most
growing demand for data centres, Jon Temple, organisations there is little time to
Jon Temple, President and CEO of President and CEO of nlyte Software lose.”
data centre infrastructure Between 2008 and 2009 nlyte
management company nlyte initiatives second, partly because grew over 130%, and has recently
Software, believes that its impact the penalties for non compliance been selected as a finalist for Red
can be tempered. However he also are not aggressive enough to force Herring's North America 100 award.
feels that purely appealing to a change. There will be a tipping Although Temple is understandably
company’s sense of green point, but only when governments reluctant to “go public with the
responsibility will yield poor results: take a more aggressive stance and playbook to success” he does state
“There is considerable vendor the tsunami of legislation is about to that being in the right market at the
fatigue around the green IT story. break on the shores of every country right time is clearly helpful:
Customers are interested in around the globe. When it does, “Latest research states that there
corporate environmental companies will realise that these are just north of 106,000 data
sustainability initiatives, but in this initiatives have teeth. The ensuing centres worldwide that house equal
market they continue to focus change in behaviour will be to, or greater than, 100 racks of
primarily on the business widespread. nlyte will be one of the equipment, and this makes our
fundamentals of top line growth and technologies that will support and addressable market about $14.5
expense reduction. As such nlyte enable compliance” billion. Today only one company in a
aims to help customers reduce their nlyte Software recently won the hundred utilises data centre
power expenses, extend the life of “One to Watch Product” accolade at management solutions, which
existing data centre facilities and the Green IT Awards 2010, however presents a significant forward
improve business process efficiency. their solutions also make pure looking opportunity for nlyte
So corporations focus on business sense, as Temple explains: software. This is a rare thing in an
performance first and “Our solution is designed to help otherwise rapidly consolidating
environmental sustainability reduce data centre operating enterprise software market.”
Jon Temple
Prior to nlyte Software, Temple was EVP Worldwide Field Operations at Hyperion, growing company revenues to
nearly $1 billion and helping to orchestrate the $3.3 billion Oracle acquisition in 2007. Prior to Hyperion, Temple was
CEO of Above All Software and spent 12 years at Business Objects in a variety of executive sales and operational
leadership positions. During his tenure, Business Objects defined and led the Business Intelligence category before
being acquired by SAP for $6.8 billion.
3

4. Route to the Top
The stepping stones to success
Colin Tenwick, recent CEO of StepStone, guides us through the company’s
transition from dot.com bust to online and SaaS success
O
nline job board business restructuring assessing how to enabled the whole European
StepStone went from having ensure the business operates in a company to speak the same
€300 million in the bank after consistent, sustainable fashion. language in terms of pricing and
the 1999 stock market float to That ranges literally from the front structure of the offering.
being in imminent threat of of your company to the back – e.g. Once we had stabilised the
bankruptcy with Ebitda losses of sales forecasting and processes business, it started to become
over €210m in November 2001. Yet through to the development profitable and produce great
in May 2010 StepStone sold its products using a single platform. We margins. That is the thing about
talent management software inherited six different platforms, online business, it is a highly
division to HgCapital for €110 how do you go from six to one? cyclical but once it is on the upside
million, and in December 2009 Axel What does that actually mean? it just accelerates like crazy. We
Springer increased its ownership of I also had to fundamentally wanted to create a business which
StepStone to around 90% at an change the culture. We were complemented this highly cyclical
estimated value of €165 million. profligately generous - at one stage transactional business with
CEO Colin Tenwick something which
explains this
remarkable
turnaround.
StepStone was one
of Europe’s
highest profile
dotcom failures.
‘‘ StepStone was like a patient
lying on the pavement having
just suffered a cardiac arrest; we
needed to resuscitate it and get it
smoothed the ups
and downs.
That is how we
started to get into
recruitment
technology,
deciding to utilise
a subscription
How did the based model.
company look
when you first
joined?
into an emergency room
StepStone was like a patient lying
on the pavement having just
suffered a cardiac arrest; we
needed to resuscitate it and get it
into an emergency room. It was
there were 25 BMW 3 Series parked
’’
outside for sales staff yet to join
the company. I moved this to a
results driven culture where every
single penny was both forecasted
Having been at
Sybase in the era
when 75% of big
enterprise software licence sales
were closed in the last 3 hours of a
quarter, I wanted to build
something that was more
predictable. For this reason we
haemorrhaging money by and counted. created the new business on a SaaS
operating across six different We had a raw company, with model.
platforms, had 2,800 staff with an multiple unintegrated acquisitions A SaaS business has a
average age of 26 spread across ruled remotely from a heavily fundamentally different economic
London, Paris and Madrid focusing centralised corporate function. I model to a traditional software
on growth, growth, growth no created clear guidelines regarding business, and the cost of getting
matter the cost. measurement points and the value up to speed is very, very high. It is
proposition, all with the aim of only after the first year when a
How did you address this? empowering local businesses. We customer renews that you start to
The first stage was assessing the had fantastically gifted local make any money; however as it is
patient - can it survive, does it have managers who lacked the right tools an annuity, it keeps doing that
enough cash, can it get support and to succeed - I therefore put in place every single month, so after two
secondly is there is an opportunity a solid core of technology, years you have a very, big amount
to radically reshape the business? consistent core marketing and of money as long as the customers
Second stage starts almost in branding, a cohesive pricing are retained. The whole model is
parallel, focusing on radical structure and value proposition that based on attraction and retention.
4

5. ??????????
Route to the Top
‘‘ all too often in Europe founders of companies build
to a successful exit, and become non-executive
directors. We don’t have a culture of serial CEOs
We started from scratch in 2004 and
we exited last year at the run rate
close to €60 million, out of which
two thirds is monthly recurring
’’
think we have moved way beyond
the one size fits all, where
standards connectivity and
interconnectivity become bywords
revenues. and ultimately price performance
becomes critical.
What have been the most The days of people
important lessons that you have commissioning enormous, multi
learned in this process? million Euro enterprise software
I think that one of the biggest development will rapidly disappear
learning points has been the as SaaS delivery mechanisms offer
importance of upwards and faster, more assessable benefits to
downwards relationships within a businesses. Really, I think what we
company. will see are mixed models appearing
For a CEO “upward” relationships Colin Tenwick, as economies of scale are realised
tend to be with your chairman, and recent CEO of StepStone with SaaS companies developing
I have been blessed with two once and deploying many times,
exceedingly capable and gifted You built from scratch a successful ensuring an inherent flexibility in
chairmen, who managed to be Software as a Service business at the way that software and
simultaneously fully supportive StepStone. What is your view on technology is built. I don’t see this
whilst also challenging and the SaaS and Cloud market at the as a pseudo-religious war, this is
questioning. I think a Chief moment? simply the future.
Executive needs to have people to I think inevitably near-core and
bounce ideas off, people that will none-core services are going to go What does the future hold for you?
challenge, sounding boards into the Cloud, forcing hosting More of the same hopefully, it is
fundamentally working in the same suppliers’ services to be assembled just not in me to stay on the bench.
direction. If you get this right it can from anywhere with immense I passionately believe in the
make an enormous difference. security – resulting in a mixed profession of the CEO, but find that
“Downwards” relationships focus model where some technologies will all too often in Europe founders of
on how you build a team. You can’t be hosted on premise and other companies build to a successful
do everything yourself, and so must areas will be hosted outside. exit, and become non-executive
be able to attract exceptional An example of this blurred line directors. We don’t have a culture
talent. This is fundamental; could be if a company kept their of serial CEOs, people who are
however the problem comes for a core HR system on premise within willing to go and do it again with
CEO if you don’t recognise the need their firewall, but placed their the aid of experience - that is what
for blended skills across the expense management out in to the I want to do. I want another
company. A common failure is that Clouds. So you are going to see a crunchy CEO challenge because I
you find CEO’s who either don’t blending as the Cloud calls on the think they are fun, it is the best
delegate or prefer to recruit in on-site server and vice-versa. I place to be.
their own image - the last thing you
want is for your CTO to be the same Bio for Colin
as your CFO. The CEO must bring
together a fantastic blend of skills Colin has worked in the IT industry for 20 years, joining StepStone from Red
and then drive it forward into a Hat Europe where he was Vice President and General Manager. Before that
common approach. It is about from 1994 to 1999, he held various senior positions with software company
appreciating and developing Sybase, including Vice President of European Marketing and Vice President
different skills into a consistent and General Manager of European Operations.
whole.
5

6. VC Economy
Investment in a bear market
Matt Mead, Managing Director of Investments for NESTA, brings insight to the
challenging world of early stage investment
N
ESTA (National Endowment for start-ups, particularly more common to build a syndicate
for Science, Technology and technology companies who take of investors to provide sufficient
the Arts) was established in five or six years to develop their money to give a company enough
1998 through an endowment from technology and require ongoing runway to succeed.
the National Lottery. As the development capital. Even before Nevertheless, the dual impact of
leading independent expert on the recession struck, high tech venture capital funds moving
how innovation can solve some of entrepreneurs had cause for upstream and the devastating
the country’s biggest social and concern. The migration of many of effect of the recession make for
economic challenges, it applies a the original early stage funds into sombre reading. The PWC BCVA
blend of practical activities later stage investments left a investment report for 2009 shows
including investing in early stage dearth of finance in the sector. that a scarcity of investment is
high tech businesses, with rigorous Government backed funds such as apparent at every stage of the
research to foster innovation in Enterprise Capital Funds, VCT venture capital cycle; in 2009 total
the UK. funds (like Albion and Octopus) UK VC investment was £297 million
NESTA Investments, a £50 million and NESTA have had to plug the against £359 in 2008 and £434
evergreen fund managed by Matt gap, playing a critical role in million in 2007. If you drill down
Mead has a broad technology remit backing technology entrepreneurs. into those numbers several key
typically providing pre-series A and But public finance should not, facts emerge:
A round investment into a variety and cannot, work alone. Indeed,
of sectors. These range from one of the main benefits of having Geographic split – of the £297
medical devices and diagnostics, public finance at this risky stage is million invested in 2009, £242
electronics, semiconductors, that it can leverage in private million was spent in the South
internet, digital media with a investment – helping to grow the East. Probably to an extent this
smattering of clean tech for good early stage sector over the long- correlates with sectors as well,
measure. term. And because there is less because London and the South East
capital around, most investments typically would see more internet
View of the current early stage today are done collaboratively. and digital media companies and
investment marketplace There are still competing term this appears to claim a
We are living in challenging times sheets on certain deals, but it’s disproportionate amount of money.
Matt Mead
Matt joined NESTA in January 2010. He oversees all aspects of NESTA's
investment activity. Matt has over 14 years' experience investing in UK and
international early stage ventures and was a Partner in 3i's Venture Capital
business. He has worked with companies as a Board member through high
growth, turnaround, exit and acquisitions. He recently led the secondary
market disposal of 3i's Venture portfolio of assets in both the US and Europe.
Matt has worked across all technology sectors but has specialised in the ICT
market, working with companies including: Vistorm, a leading provider of e-
security services (sold to EDS); Achilles, a provider of supplier information
services (sold to HG Capital); Insensys the wind turbine monitoring business
(sold to Moog Inc) and other leading venture backed technology businesses
such as Garlik, CRF Health, Profile Therapeutics and CDC software.
6
6

7. ??????????
VC Economy
Stage of investment – In 2007, handheld electronic learning aids) Investing in talent
£244 million was invested in early being a rare exception with its When assessing the strength of a
stage companies. By 2008 this had recent market cap of c. £400 company’s management team, the
shrunk to £187 million and by million. As a result venture CEO is often the most scrutinised,
2009 it had diminished to £137 capitalists are typically holding and the following aspects are
million. their portfolios for longer which essential:
However this pattern has not obviously hurts their returns and
stopped entrepreneurs coming up makes it harder to raise the next An understanding of the
with ideas and trying to create fund. venture capitalist’s agenda – A
businesses. Instead, it appears to CEO who can build a business with
have encouraged an increasing A return to core principles an idea of how to generate and
number of business angels to The majority of Investors are realise a capital return for
‘‘
bridge the gap between shareholders is
a concept, seed funding
and early stage
The key lesson for me is that critical.
investment. One only entrepreneurs are having to be Strong sector
need look at the expertise - someone
clusters around smarter about attracting finance, who has a very good
internet digital media feel for the market
and Medtech. but good entrepreneurs will and understands the
The key lesson for me
is that entrepreneurs always find backing - it just takes sort of competitive
differentiation that
are having to be
smarter about
attracting finance, but
more searching than it used to
good entrepreneurs will always
find backing - it just takes more
searching than it used to.
focusing on fundamentals when
looking at their investment
activity. They want to understand
how the companies that they
’’ a business can find is
really important.
Exellent talent management
abilities - ultimately being able to
recruit and build a team of really
talented individuals is one of the
Why is the early stage investment invest in can build a valuable fundamental challenges for early
marketplace so challenged? market position and get to cash stage businesses.
In many ways the marketplace is breakeven. There are still Often a different CEO is required
difficult and yet it feels no technology or market position led not only for different sectors – but
different to any other time I’ve deals – for example the Admob also for different stages of a
been involved over the past twenty acquisition by Google and the company’s evolution. The founder
years. There remain great Quattro acquisition by Apple in might not be the person that
entrepreneurs, starting exciting the mobile advertising space. ultimately takes an organisation
businesses that require financing. However these are becoming from concept to revenue, let alone
But a key challenge for venture increasingly rare. It comes back to from £10 million of revenue to £50
capitalists is around the exit core principles: investing in world million. It’s rare that you find
market. There is little liquidity in class management teams, people who can make that
terms of IPOs and trade sales at operating in large potential transition and this is something
the moment - Promethean (maker markets with a product that’s that we have to consider when
of interactive whiteboards and differentiated. making an investment.
7

8. PE Economy
Private Equity Eye
Tom Wrenn, who invests in the software & IT services sector for private equity firm
ECI, reveals some of the inner workings of the best established and most
successful Private Equity groups in the UK
A typical investment target The investment process
ECI invests in businesses valued Typically there will be anything
between £10-150 million once bank from one to five Private Equity
debt and similar factors have been firms approached regarding an
considered. Target companies will opportunity, often alongside trade
be profitable, cash flow positive, buyers. Where possible an
established in their market and not information memorandum will be
at risk of running out of cash. The prepared by the investment bank
question should be about how much containing information on the
profit it reinvests in growth, rather business, historic financials,
than ECI having to pump in cash to forecast, structure, the go-to-
fund losses. market strategy etc. Interested
ECI targets investments that have parties will then tender a first
a strong defendable position in a round offer, which the advisor and
growing market. Current areas of vendor review, taking through a
interest include managed services small number of bidders to the next
(as businesses outsource IT in a round of the process. Whilst price is
move towards an annual IT cost, important, many deals involve an
rather than a large upfront capex), Tom Wrenn of ECI ongoing role and/or investment
financial technology (as financial from the founders. Therefore the
services businesses come under were the managers and wished to ability of the PE investor to add
pressure to spend reasonably retire. value post deal has an increasingly
significant sums on improvements to Current: Now entrepreneurs and important bearing on who is
their regulatory environment) and business owners are savvier about selected. This includes a track
companies targeting the ongoing the value of their business, and get record in the sector, an ability to
convergence in communication an advisor if they are thinking about fund ongoing investment, a track
technologies. selling. In addition, following the record of growing businesses
dot.com crash many tech sector overseas, an ability to bolster the
How is an investment target investment bankers left their bulge executive team and an ability to
found? bracket banks to create boutiques help make the right investment
Historical: 10 or 15 years ago the which trawl through their regional decisions to maximise the potential
prize was to get direct deal flow patch or area of specialism, looking of the company.
i.e. deals originated through direct for interesting business and The second round of discussions
contact with the company. The developing a relationship. So includes more confidential
business would usually not have typically ECI will get a phone call information, often including a
heard of Private Equity firms, and from a corporate finance adviser at formal presentation on the business
they certainly would not have a one of the accounting firms, or a from the management team. This is
corporate finance advisor. A Private boutique investment bank saying critical, as the team are
Equity firm would talk to the target they’ve got an interesting IT fundamental to the investment.
over a period of months and end up services business (often a company Typically the second phase will also
doing a deal that either backed the that ECI has met in the past and involve access to a data room that
existing management team to buy expressed an interest in backing), would give more detailed
the business from its owners or now making £2 - 20 million of profit information in terms of contracts
brought in an external management and the process is started from and so on.
buy in team e.g. where the owners there... The final round offer will be
8

9. PE Economy
anywhere between four and eight will vary from scenario to scenario. obviously not a great starting point
weeks after the first round offer. As an example for an online travel for a Private Equity investment.
One bidder will then be selected business in a high growth This can be seen in recent deal
based on the price they bid, the environment the strategy may be statistics - there have been very
relationship they have developed purely organic growth. As such the few Private Equity deals done over
with the management team and business needs a management team the past 12 months. Most Private
ultimately the vendors’ views on with sufficient strategic insight to Equity funds have been quite quiet;
their deliverability. A period of ensure they are not caught out in a although not necessarily due to a
exclusivity will then be given, fast moving market. lack of desire to invest. A vital
during which there is a short period For an ERP supplier looking to do component of a Private Equity deal
of time to complete final due a “buy and build”, consolidating its is acquisition finance provided by a
diligence and finalise the deal. market, it’s more about spotting bank. As a result of the low deal
interesting businesses, acquiring volume and the significant pressure
The role of the Chairman in a them and integrating them into from the Government to lend
portfolio company their business efficiently and cost money to small businesses, these
Probably the most important part of effectively. banks are (contrary to popular
the ECI model is having a very good The skill set has to be belief) very keen to work with firms
Non Executive Chairman; someone appropriate for the opportunity, and like ECI, who they have developed a
who is working with the business that can be a challenge for many relationship with over many
two or three days a month. The target businesses as these were decades. As such, the famine in
Chairman will run the board start ups five or ten years ago, and Private Equity deals does not reflect
meetings, but also spend time with the management team were a lack of investment appetite; it is
the Chief Executive to act as a entrepreneurs focusing on actually lack of quality
sounding board, a mentor and make developing the initial market opportunities.
sure that the business is pointing in opportunity. But now it’s a 200 This should soon change as many
the right direction. The Chairman person, £50 million business and the owners of good quality businesses
can flag when something needs to entrepreneur is struggling to take it are adjusting to the fact that there
be reassessed, act as an to the next step. Where are interested investors,
independent bridge between ECI appropriate, ECI will use an MBI particularly in Private Equity and
and the management team on any (Management Buy In) candidate who that with the short supply of
areas of disagreement, and also has experience of running large investment opportunities, quality
notify the management team when businesses, and can work with the businesses are attracting a decent
they need to point their guns in a entrepreneur to guide it forward. price.
slightly different direction. If supplemental recruitment is Valuations are probably not going
required ECI’s first port of call is to be the frothy multiples of 2007,
The Management Team always to review its internal “Talent but looking at Private Equity deals
Fundamentally ECI backs Bank” of Chief Executives, Finance across all sectors, recent multiples
management teams, and therefore Directors, non-execs and so on. But have been extremely positive.
part of the due diligence process is the aim is to find the best Indeed, in certain cases multiples of
assessing if there is a good, high candidate, not just the best that above ten times EBIT are being
quality team in place. They might ECI knows, so if there is ever any achieved for businesses which don’t
need supplementing in certain areas doubt a call is placed to a relevant have the rich IP, growth prospects
if the business has grown, search firm such as Gillamor or high visibility recurring revenues
necessitating additional sales Stephens... that many businesses in the
capability, or perhaps the Finance technology space display. So for a
Director needs some additional A view of the current investment decent business which has
support. But fundamentally ECI does landscape weathered the recent storms, such
not “run businesses” and relies on In an “easy market” where GDP is as a quality software and services
having a good quality management strong, lots of businesses can business with a high level of
team that the firm can help achieve prosper, however the terrible recurring revenue, a multiple of
their aims, either through combination of credit crunch eight or nine times EBIT is realistic.
experience gained with other followed by recession, means many As more deals close, this message
portfolio companies, or outside businesses previously performing will spread to vendors creating a
consultants and contacts. very well suddenly have profits and more confident and buoyant
The exact capabilities required revenues going backwards, market.
9

10. Ten Minute Interview
The Ten Minute Interview
Gillamor Stephens spends 10 minutes with James McDougall – CEO of ReVolt
Technology
Who are you? Where are you? about €5.5 million to support our And are you a rock star?
I'm the CEO of ReVolt Technology. I focus long-term on next-generation Well, I don't think I look like a rock
travel about 75 or 80% of my time, energy storage for wind and solar. star. I think people probably consider
split between the United States, all With the launch in 2012 we will have me more of a bulldog than a rock
over Europe, and, as of late, I've been the first company in almost 60 star.
been spending quite a bit of time in years of attempts by various
China expanding our business. companies large and small to Why's that?
successfully commercialize I'm pretty tenacious. I don't always
What does ReVolt Technology do? rechargeable zinc-air batteries. have the most eloquent way of
We're working on the next generation getting things done. I'm pretty
of energy storage. Developing In two years ReVolt will have... straight-forward, head-on, hard-
rechargeable zinc-air batteries that We will have hopefully just finished headed. And I just keep coming at it.
can run your Blackberry for three an IPO and driving towards a market
times longer than it does today, or an cap of close to $1.5 billion. The hottest, most exciting thing
electric vehicle for 500 miles, or about being a CEO right now...
providing energy storage for You have a new Non Executive It's one word. China. The
tomorrow's wind and solar energy Chairman at ReVolt. You recently opportunities for a cleantech CEO in
generation systems. called him a rock star. Why? China are staggering
Well, in any type of high-tech
Are we talking about changing the start-up, it's not the norm to have a What other European companies
world? well-established company's CEO excite you?
Well certainly trying to transform it, sitting on your board as a Non I'm really excited about what the
make it a little bit of a better place Executive Chairman. We have John automotive OEMs in Europe are doing
to live in, a cleaner place to live in. Searle, the current Chairman of the as a whole, out at the front working
management committee and, on some really interesting platforms
Has ReVolt actually sold a battery effectively, the CEO for the Saft for next-generation automobiles,
yet? Battery Corporation (a very successful particularly for plug-in electric
We're pre-revenue at this point - our publicly listed French company). This vehicles. The European Automotive
first commercial launch is in 2012 gentleman has done some amazing OEMs are inspirational and trying to
with a line of consumer products. things in his career and he's still at it, lead the way. There is also a cadre of
However we've recently won $20 and now he's sitting on our board, really exciting start-up companies
million in grant funding from the helping us carve out the vision for working on various bits and pieces
government of Germany and the US where we need to take the company within our ecosystem. HeliaTek,
Department of Energy to generate next. It's very unusual for companies ChapDrive and Quiet Revolution...
large-format rechargeable batteries in this stage of growth to be drawing You have to admire the moxie of
for electric vehicles. Also, in 2009 we in that calibre of talent. We're very these guys to step up and create the
received a pretty substantial fortunate, and very happy to have next generation variants of wind and
investment from RWE in Germany of him. solar production.
Gillamor Stephens and ReVolt Technology
Gillamor Stephens has worked successfully with ReVolt and its investors since 2007. To date we have placed James
McDougall (CEO), Adam Laubach (CTO, EVP of Strategic Development), Thomas Gebauer (CFO) and most recently
John Searle (Non Executive Chairman). James is a member of the CEO Collaborative Forum Advanced Program and
Thomas is a member of the Finance Stream.
10

11. Industry Insight
Cloud Computing
and a guiding Star
As cloud computing adoption accelerates
globally, we speak with Ricky Hudson, CEO of
cloud technology innovator Star to gain his
perspective
R
ecent studies from IDC show business applications by 2012. that they can be delivered across
that global spending on cloud Recent research supported by the internet to provide business-
computing is growing a rate of cloud technology innovator, Star, grade services without any of the
27% a year, or nearly four times as identified a mismatch between disruption, drudgery and cost
fast as the overall information many UK SMEs and new technology's normally associated with paying for
technology market. Predicted cloud transformative potential, and an and maintaining expensive hardware
computing spending is set to more even larger disconnect within the and software.
than double between 2008 and same organisations between the Cloud computing is a key enabler
2012, and total spending on the day-to-day tasks of the IT manager in this respect, because it is the
cloud is expected to rise to $42.27 and where they believe their skills delivery platform from which new
billion, or 9% of the $493.71 billion can best be deployed. Research services can be quickly provisioned
IT market in 2012. shows that IT managers within with no capital outlay and easy pay
The implication for IT suppliers is smaller enterprises spend a huge schemes, such as ‘per user per
clear. They must position themselves percentage of their time either month’ pricing. These new on-
as leaders in IT cloud services, or simply keeping the lights on demand business services can be for
forfeit an ever-expanding portion of maintaining and upgrading systems email, CRM, security and storage –
the industry's growth. The impact or in fire-fighting mode when or any other combination of
of this can be seen in HP announcing systems begin to creek as they pass essentials – but it is the service that
plans to invest $1 billion into their best. is important, not the delivery
automating and restructuring its “The demands of corporate mechanism.
Enterprise Services business, halving computing are rightly rigorous, but “Cloud computing is the enabler, a
worldwide data centres and hiring the pressure this imposes on IT platform for businesses to get the
an extra 6,000 staff to support a managers is leading them to worry services they need, delivered to
heavy focus on cloud computing as more about what could go wrong wherever they need them, any time
the company's future. Microsoft is than being energised by the of the day and at a standard and
also embracing the concept of cloud prospect of what might be possible” fixed fee” says Hudson.
computing, with new versions of its explains Ricky Hudson – Star, CEO For business, exploring the cloud
Office productivity suite providing For Hudson, overcoming this is an opportunity to blend existing
fully developed Web offerings, anxiety is about demystifying the investments in technology with
matching the functionality of its opportunities that the cloud can services that help move IT costs
traditional desktop product. SAP bring to UK SMEs by helping from undesirable and risk laden
has acquired Sybase in order to companies develop business capital expenditure to a much more
catch up in the cloud and Oracle strategies which exploit the manageable operational
continues to invest in this field. potential of new technologies expenditure. Overstretched IT
However cloud computing is not without compromising performance departments can then focus time
just about infrastructure technology demands or security. Star works to and resources on value-added
– the biggest part of the market is address specific business needs via a activities that help accelerate the
business applications, which portfolio of “utility computing” business towards its goals.
accounts for more than half of all tools: in essence, the core Download a free copy of Star’s
spending on the cloud. About 52% of applications of the SME market, Cloud Computing guide from:
the cloud market will be focused on serviced and managed in such a way www.star.co.uk/cloud
11

12. Final Coments
Company at the top
David Darsch, co-Founder of the CEO – Collaborative Forum talks about the
importance of peer group interaction
I
t can be lonely at the top. There experienced similar challenges. given feedback, ideas, opinions and
are countless issues, ideas and Instead of pure networking, CEO-CF recommendations from experienced
concerns that a CEO may not be offers collaborative problem-solving sources.
ready to discuss with members of the sessions at its three annual meetings CEO – CF is European in its
Senior Management Team … yet. and other on and off-line tools. approach, which simultaneously
Likewise, other doubts or problems CEO-CF places a premium on focuses the community, yet opens it
cannot always be taken straight to a quality interaction and to pan-European diversity. CEO – CF
company's board. CEOs from every communication. At member events, constantly works to support its
walk of life are faced with more or facilitators implement a presentation members, through quality
less the same questions: “Where can I process unique to CEO-CF and communication and the collaborative
take this problem? And how can I designed by the company to foster process, to achieve their personal
trust the advice I'm given?”. concise, productive and professional objectives. As
Some 150+ European CEOs (20+ recommendations. Member CEO – CF co-founder Dave Darsch
different nationalities) have turned executives are coached by fellows states - “Experience, is learning from
to an organisation called the CEO – and CEO-CF staff prior to events in your own mistakes, wisdom is
Collaborative Forum (CEO-CF). preparation for what the company learning from the mistakes of
Founded in 2005, the Collaborative calls “Member Challenges” and others”.
Forum exists to connect CEOs to a “Member Issues”. At the events, For more information please visit:
community where they can focus on “Challenges and Issues” are www.ceo-cf.com or contact David
their goals alongside peers who have presented, and the presenting CEO is Darsch d.darsch@ceo-cf.com
All on Board
Following his panel contributions to the European Venture Capital
Network, Keith Cornell, Chartered Director, draws on over 25 years of
experience including two public and over a dozen private Boards to
give insight into the role of Board Directors
F
irst, I think we should step back Secondary activities Board members should avoid purely
and ask “what is the purpose of 1. Preventing and managing crises financial metrics and looking
the Board within a VC funded 2. Procuring resources, as needed backwards rather than towards the
company?” Besides the obvious 3. Assessing the performance of the future. They should avoid bringing in
oversight for the VC over their overall Board. issues relative to their fund (end of
investment, I think the Board really 4. Resource aide, for example life, etc.) and issues that are
has four major activities and four introductions to key potential between the VC members or between
secondary ones: customers, or helping source them and the senior management
venture debt team. Where the dynamics go wrong
Key roles of the Board and engaged In the context of a Board is when factions exist or establish
Directors conducting these activities, I think themselves on the Board. Board
1. Setting/Agreeing the Strategy of the key characteristics are to be members need to think only about
the Company prepared and engage in useful their role as Directors of the
2. Overseeing the Execution of that conversations with other Board Company and ensuring the growth of
Strategy members and the CEO. A good Board the business.
3. Engaging the CEO (one could say member is curious, listens well, can In summary, an engaged and active
hiring and firing the CEO…) be articulate with their own views Board can be a great asset to a
4. Ensuring the Development of the and is willing to accept some degree Company and its CEO. Much value can
senior management team/ of “conflict’” in order to tease the be had – if the Board works
employee “human capital” best ideas out from the entire Board. effectively and manages its role.
12