2 Diversity InsightAnne Stevens, VicePresident, Rio Tinto

4 Sound ByteLouise O’Sullivan, CEO AnamTechnolgies

5 Brand InsightAdam Pikett, CEO SportPursuit

6 Investment InsightNick Habgood, Co-Founder, Azini Capital

8 Mobile InsightJulien Codorniou, Facebook

10 Innovation InsightJon Edington, Director TechnologyVentures, Imperial Innovations

13 International InsightHugo Suidman, ChiefDevelopment Officer,Delivery Hero

14 Executive ViewTim Gregory, President,CGI UK

16 Megabuyte InsightIan Spence, CEO Megabuyte

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GS-insightp e o p l e • t e c h n o l o g y • b u s i n e s s

Issue 26

In this issue

Iknow from speaking to a number ofvery senior HR professionals in the“blue chips”, that they are very

worried that one well-known brand willbe picked upon and exposed as beinghopelessly out of step on diversity andpilloried as a dinosaur employer, whichwe all know in these days of socialmedia, can take only hours. Thediversity statistics for a number ofcorporates in terms of ethnic diversityat senior management levels will makeworrying reading in many cases, but thefear is that someone will be made anexample of shortly and be left holdingthe baby.

Gender diversity and assisting womento progress through a traditional careercycle and still raise a family has beengiven a slightly dystopian twist recentlywith announcements from Apple andFacebook to have a $20,000 benefitspackage option for freezing eggs. Ithink it’s great that this bold step hasignited the debate around sociallyengineering the workplace, assomething needs to change for sure.

We at Gillamor Stephens are in thebusiness of building Executive Boardsand Management Teams. We are oftenasked “to reflect a particular diversitypolicy in our selection of candidates”,although to date this has neverextended to an instruction to positivelydiscriminate, at least for now.

In my experience, thinking back onthe numerous business cultures I’veworked around, I can see a clear

correlation between diverse leadershipteams evolving with relative ease tomeet business challenges and thosewithout balance seemingly alwaysplaying catch up. Diverse staff producediverse ideas.

It is relatively easy for Digital agecompanies like Apple and Facebook totake the lead. They are global and “ofthis age” and their workforce reflectsthis and reflects their target customeraudience. It’s tougher for the “bricks toclicks” companies to reinventthemselves to having for instance 7.5%Asian and British Asian representation onthe board, as the statistics and hencetargets would suggest. If your business is50 years old and deeply non digital, thiscan feel a daunting challenge.

Vince Cable has recently announcedan initiative to drive more boardroomplaces in “blue chips” for ethnicminorities, with the target thatrepresentation should mirror thediversity statistics for the UKpopulation. A great initiative that willfurther raise awareness but can diversetalent supply pragmatically meetdemand. Hmmm, any answers anyone? Ihave a few.

But luckily we are holding a seminaron this exact topic later in November,with an esteemed panel and theparticipation of circa 40 senior HR andTalent Executives, to come up withsome practical answers; more to follow.

Dominic Burrows, Partner, GillamorStephens.

Diversity in theSpotlightWhilst not a new topic, the issue of gender and ethnicdiversity in the modern workplace seems to be front andcentre of the socio – economic agenda right now

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GS-insight can be viewed anddownloaded fromwww.gillamorstephens.comI hope you enjoy this issue and Iwelcome your feedback.Steve MorrisonPartner, Gillamor Stephenssmorrison@gillamorstephens.com

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Diversity Insight

Despite the best efforts ofnumerous strategic campaigns,we still see a lack of progress

and in fact little or no change at thetop of some industries (e.g.construction, engineering, mining).Have attitudes changed towardswomen in senior roles? Do wegenuinely believe that women leaderscan make a positive difference? Acynic might question that we appearto say all the right things yet lack theactions required to effect asignificant change.

We see and hear many chairmenespouse all the right messages to themarket, to employees and toshareholders about the commitmentto diversity and inclusion within theirorganisation. And yet, progressremains slow and almost painful insome instances.

Women now account for 20.7% ofboard members in FTSE 100companies, according to a recentreport by Lord Davies. Whilst this maybe a significant improvement on the2011 figure of 12.5%, it is still a longway from gender parity. 

If we believe statistics and researchas well as experience in othercountries (e.g, Norway) then a betterbalanced board will almost certainlydeliver better business outcomes,happier clients, engaged employeesand of course bigger profits. 

It’s worth noting that 42 percent ofnew leaders around the globe arewomen, according to data from TheGlobal Leadership Forecast 2014/2015(GLF) from DDI and The Conference

Board. Although more womengraduate than men and are earningentry-level jobs in fields previouslydominated by men, women are stillfar outnumbered in the ranks ofsenior leadership. At the same time,the business case for gender diversityhas never been stronger. That sameglobal study found that organisationswith more women consistentlyperform better financially. Companiesin the bottom 20 percent of financialperformance had only 19 percentwomen in leadership positions;companies in the top 20 percent have37 percent female leadership. 

See more here:www.ddiworld.com/DDI/media/blogs/Gender_Diversity_Blog1.jpg

If, on the other hand, we dismissthe evidence and continue to recruitand promote in our own image, rejectpeople because they adopt a differentstyle from our own, then quitefrankly, nothing will ever change.While 'fit' is very important, theability to complement and blend withother skill sets is also extremelyvaluable. 

The age old argument that womenand men working together make for abetter business, still appears lost onmany people at the top of thebusiness world - and they are not allmen in my experience. There isundoubtedly an element of 'well I'vemade it, why cant you ?' coming fromsome women in senior positions. Onthe other hand, we see many manyexamples of very senior women givingother women a helping hand and the

support they need as they facemultiple challenges with careerprogression and advancement.

The role of HROften diversity and inclusion isconsidered something that 'HR do'which is somewhat difficult to believein this day and age.Nevertheless,without the rightleadership, culture and commitmentthroughout the business, the best HRfunction in the world can't make thechange that will really make thedifference in this space.

So what will it take?My hypothesis is that we need to stepback, re-evaluate and be very clearabout what excellence looks like - forour business and our futureaspirations. 

A re-think about the way wemeasure potential would be a goodstart. From early identification rightthrough to leadership developmentprogrammes, the criteria that hasbeen used in the past is based on anumber of 'masculine traits' such asassertion, aggression, profit beforepeople, delivering the number at allcosts rather than a balanced focus oncollaboration, communication, teamwork, nurturing talent which aretypically 'feminine traits'. 

Men are often accused of being toodriven, too competitive and too'tough', while women are often seenas too accommodating, not analyticalenough or too 'soft'. I am, of course,citing these extremes to prove a

More woman at the top? It’s allabout the culture!Do we REALLY want women on boards and leading from the top of our organisations -and if so what are we doing to create a supportive and inclusive environment to ensurethis happens ?

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point. While it would be wrong to putgender based labels on individualstyles, there is clear evidence that astrong blend of skills, attributes andapproaches can make for a moreeffective team in any business. 

It is here that the question of ourown unconscious biases come to thefore. After all, we all have implicitassumptions about cultural norms andthose preferences undoubtedlyinfluence our decisions and ourbehaviours. We’re all biased. In factwe use our bias often to operate andsurvive because our brains areconfigured that way to alert us todanger. But whether we act upon abias is another thing altogether. Weare, let's face it, challengingthousands of years of establishedpatterns and learned behaviourswhich have typically had women inmore subservient roles. Could thereason behind this be the unconsciousbias not only of men, but also ofwomen themselves? 

Atlantic magazine in April 2014featured the article 'The ConfidenceGap' where Katty Allan and ClaireShipman demonstrate clear evidencethat women can be their own worstenemy when it comes to progressionand that in order to succeed,confidence is equally as important ascompetence. They have interviewedmany powerful women over the yearsand have been surprised at the levelof self-doubt that is still evident,even at that level. I haven't yet readtheir book but can highly recommendthe article: www.theatlantic.com/features/archive/2014/04/the-confidence-gap/359815/

If we truly believe that we needdiversity of thought and diversity ofperspective in our boardrooms then toachieve this, companies must investin their female talent and nurturethem through the organisation. Weneed bold competency models andinnovative talent processes that are

relevant to the business demands,irrespective of gender.

The other and most crucial elementof making any change stick isleadership - and I mean realleadership. Actions, measures andaccountability from the Chairman,The Board, the Executive team andall leaders within the organisation.Words and messaging are all well andgood but until somebody at the topstands up and effectively says 'we aredoing this' and then holds the businessleaders to account to act and operateaccordingly, it is unlikely to make adifference. Examples such as GinniRometty at IBM and Paul Polman atUnilever are impressive role models interms of their personal commitmentand the number of female leaders andwomen in senior roles.

Ginni Rometty‘You have to stick up for what youbelieve in. And that, to me, is thebiggest thing you can do about drivinginclusion.’

Paul Polman ‘It's all about the way we valuethings. If you look at the femalebrain, it's differently developed from

the male brain; there is a betterbalance between the left and theright side. So there is more empathy,more purpose, longer-term thinking,more partnership and a sense ofequality, a better understanding andlistening skills than men.

So the skills you need to be moresuccessful in the future probably aremore in the female than they are inthe male. For that reason you need tobe sure that you have a very diverseorganisation.’

In my view, we are definitely makingsome progress towards shifting thenorms of thousands of generationsbefore us as we battle unconsciousbias from both men and from women.Sadly, we still see some token femaleappointments but women want to bethere on merit and capability, notbecause of targets and quotas. Weneed to do more to nurture ourfemale talent and evaluate against abalanced set of criteria that fits thebusiness demands for the future. Weneed more visionary men and womento act as advocates, sponsors andsupporters of talent coming upthrough the ranks.

So if we are really serious andcommitted to driving this change,then we all have a role to playirrespective of our seniority, positionor gender. Until we act and operate ina way that truly demands a shift inculture, beliefs, attitudes andaccountability (in the way that wesee with the 'Paul Polmans' or 'GinniRomettys' of this world), we willmerely continue to talk about whatwe should be doing, rather than whatwe are doing.

I, for one, look forward to greatermomentum and more businesssuccesses based on a pro-active,balanced agenda - and even more, toa time where we need no longer, toraise this as an issue. 

Anne Stevens - Board Trustee,Over The Wall and VP, Rio Tinto. 

Anne StevensVice President, Rio Tinto

4

Sound Byte

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Louise O'Sullivan, CEO of Anam Technologies, on why the lack of femaleentrepreneurs in the sector is a problem we need to address now

Following the very well-publicised case recently of afemale Silicon Valley

entrepreneur allegedly beingstripped of her co-founder title as itwas deemed to devalue thecompany, it offers a perfectexample of women's place andperception in the technology andcommunications industry.

Within my working life, I wouldrarely view myself in terms of mygender. I focus on my ability to domy job better than anyone else.However, as a female CEO of astartup company, it is abundantlyapparent that I am in a minority inmy sector.

The reality is that women are stillnot perceived as leaders or creatorsof technology, sometimes even bythemselves. Whilst this hasramifications for the tech industryas a whole, it is also deeplyreflective of the investment housesof the Silicon Valley scene; womendon't get the same level of fundingas men. 

The lack of female role modelsThere are many reasons why, butthe two major issues are: the lackof representation in seeking fundingin the first place and the fact thatthe funding stage of a business ishigh risk. VC firms are generally riskaverse and tend to invest withinfamiliar networks and businesses,and as there are not enough casestudies of successful female-ledsuccessful startups, they are seento be a much higher risk than male-led companies. 

On top of this, there are simplyless women who even get to theinvestment stage than men. In theUK, women only account forjust under a third of those in self-employment and part of the

problem is that women often don'tperceive themselves as suitablecandidates to set up and run acompany. As an RBS Groupstudy into businesses found, womenare much less likely to attribute theclosure of their company to"business failure" and more likely tocite "personal reasons" than men.

It is evident that where initiativesare undertaken to specificallyencourage women intoentrepreneurship, the result ishighly positive and shows markedincrease and progress in terms ofincreasing numbers of female runbusinesses.  According to the Officeof National Statistics, between 2008and 2011 women accounted for 80percent of the newly self-employed.We need to see this kind ofrepresentation in technology andtelecoms.

The gender gap is a languageproblemThe problem is far more deeprouted than just in the minority ofsexist and misogynistic individuals,however. If men were to visiblyrecoil when a woman showed up, orwere often making overtly sexistcomments, then we'd be able tochange things very quickly withcurrent legislature. But the way inwhich women are disbarred isn't inthe moment of the pitch with VCs.It's in the whole construction of howwe expect women to relate to menin conversation, such as throughdeference. That's because we aresocialised from a very early age tointeract in those ways and ittherefore feels natural or normal.

We are socialised to interpretmale gestures and styles ofconversation as authoritative andconvincing, so even though men andwomen who are on paper "the same"

in terms of qualifications,experience and aptitude, in person,it will seem to you like the man isthe better person for the jobbecause of socialised standards ofauthority. I am passionate aboutencouraging more women to putthemselves forward. Why? Becausewe need more balance. This is notabout having an industry run bywomen, this is about having abalance of representation and morerole models for the next generationcoming through.

Numerous studies by organisations such as McKinsey,Thomson Reuters, and LeedsUniversity have shown thatcompanies with the most women ontheir boards of directorssignificantly and consistentlyoutperform those businesses withno female representation.

The elephant in the room I have been to a number of eventson encouraging women in industryand often the one area that isdanced around is that of combininga family with a leadership role. Thisis invariably at the forefront of awoman's mind when pushingforward for her personal success.This is an area that hampers womenputting themselves forward andslows men in encouraging womenforward. 

I have ample personal experiencefrom both men and women whosuggest I compromise my family byworking to the level of ambitionthat I do. But I have three sons anda daughter. I want them all to knowthat irrespective of gender,everyone takes their place in theworld shoulder to shoulder, and Ican't demonstrate thattheoretically. I have to lead byexample.

Gender parity in tech startups

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What is SportPursuit andwhat do you do?SportPursuit runs branded

concession sales with top sportsbrands, and sales typically run forseven days and offer discounts of40-70% off RRP. SportPursuit aims toinspire sports men and women tolook at brands and products thatthey may not have tried before, byusing email as a trigger to visit thesite. It’s very different toconventional retail, where thecustomer goes online, searches theproduct they want, finds the bestprice and then buys it from there.Our model is about saying, “comeand check out these products”, andgetting them excited enough tomake a purchase. Since our firstsale in 2011, we have built up acommunity of almost 1.5m membersand work with over 600 brandpartners.

How did you go about creating anew consumer “brand”?There are a couple of importantthings. The founding team and thepeople you subsequently hire needto be passionate about the categoryyou operate in. Rhys, Victoria, Lukeand I are passionate sports people.Some of us are bettersportsmen/sportswomen thanothers but we are all fanaticalabout it. That passion runs throughthe DNA of pretty much everyonewe’ve recruited.

The majority of new staff comefrom our member base. They’veused the site themselves, loved theidea and have responded to anewsletter saying we were hiring.Most importantly, like us they are

fanatical about sport. The second point is making sure

that everything you do is good foryour customers and your keypartners. So for us, it’s aboutmaking sure that we have the bestprice in the market, and deliveringspecialist customer service. Whenwe talk to our brand partners weneed to be transparent and deliveron our promises. We also focus a loton making sure the products lookgreat. Yes, the products are atdiscount prices but that doesn’tmean the brand identity shouldsuffer, we work tirelessly to makesure every brand is proud of howthey look when they feature onSportPursuit.com.

As a small business, how did youget major global sports brands topay attention to SportPursuit? Any entrepreneur will tell you thatpersistence and being unwilling totake ‘no’ for an answer is key. Wegot traction because the propositionwe created ultimately has a positiveimpact on the sports industry, it isgood for the brands, it helps growthe market and it helps engage newcustomers. Our very different andhighly innovative approach helpedus capture the attention andinterest of many brands in thesports market; this at least got usthrough the door. Once you’ve gotone or two great brands, then theirbrand peers look at it and say,“Actually, why am I not workingwith SportPursuit”.

What is the value proposition toyour brand partners? We provide brands with a “walled

garden” to sell discounted stockonline. SportPursuit enables thebrand to move stock while alsokeeping the bar very high in termsof the brand experience and thepresentation of the item. There aresimilar examples of what we do inthe physical retail world. Think ofthe Selfridges January sale; it looksgreat, it’s great value but it is notcheap, even though it’s discounted.It’s highly branded and veryaspirational. At the other end of thescale you have another greatretailer, TK Maxx, which essentiallydoes the same thing as theSelfridges January sale but in a waythat attracts a different type ofcustomer. Internally, we aspire tobe the “Selfridges January Sale forSport”.

Our flash sales model also meansthat we do not cannibalise thebrands’ more traditional retail sales.From surveying our member base weknow that £9 out of every £10 spenton SportPursuit was incremental.

What are the biggest challengesfor e-commerce companies overthe next year? The shift to mobile is rapid, and wesee it in our business. Mobile andtablet represent 50% to 65% of ourtraffic. I think this trend willcontinue to accelerate and, as itdoes, so the customers’ expectationof the experience on mobile andtablet will rise. They won’t accepta clunky, conventional websitethat’s being squished onto thescreen. They expect somethingwhich is custom built to fit on thosescreen sizes, and is extremelyuseable and content focussed.

The Pursuit of ExcellenceAdam Pikett, CEO & Founder of SportPursuit, talks about building a consumerbrand and the importance of delivering a high quality customer experience.

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Investment Insight

66

We talk with Co-Founder NickHabgood.

When and why did you form Azini?We formed Azini in 2004 but reallygot started with the currentbusiness model in 2007. We’d beeninvesting and involved in theventure market since 1998 and seenthat the lack of liquidity wasinhibiting the growth of the market.

The issue is that investments inprivate companies are, bydefinition, very illiquid. It’s verydifficult for an individualshareholder, to achieve an exitunless they can persuade all of theother shareholders to sell the entirebusiness. Even then, there can bepoints in the cycle when it’s justnot possible to sell a business, orthe business may not be ready forsale. Given that it might take 10 oreven 15 years for a company toreach maturity, that’s a bigproblem.

We decided that offering liquidityin this otherwise illiquid market wasan opportunity and thankfully wehad some great backers whoagreed. We set up Azini Capital toacquire minority shareholding inprivate and small cap publictechnology companies.

The interesting thing is that thereare many different reasons whysomebody would want to sell theirinterest in a business before anatural trade sale or IPO exit. Theclassic is a venture capital fund that

has come to the end of its definedfund life. However, we have alsoacquired interests from privateequity funds, corporate investors,small-cap fund managers, hedgefunds, high net worth investors, andfounders. The seller could be asstraightforward as a founder who,for example, still owns 25% of thebusiness and has decided to leaveto pursue other interests or startsomething new.

One school of thought on thismodel is that it is buyingdistressed assets from otherinvestors, but from what you’resaying, that’s absolutely not thecase.

It’s absolutely not the case. We lookfor strong and healthy companieswith good growth prospects. We’relooking for shareholders who, forsome rational reason, are lookingfor liquidity.

When we evaluate opportunities,we look at the growth prospects ofthe company, just as any ventureinvestor would. In many cases ourreturns don’t come from buying at adiscount but from the growthprospects of the company over thenext three to five years.

In October 2010 we bought aportfolio of holdings in 18companies from Apax Partners. Apaxwanted to focus on their verysuccessful buyout activities anddecided that it made strategicsense to sell their portfolio ofgrowth-stage technologyinvestments. These were reallygood quality businesses locatedacross the UK, USA, Scandinavia,Germany, Ireland and Israel. I thinkthat the fact that top qualityorganisations, such as Apax, 3i andJPMorgan, are engaging insecondary transactions shows that ithas become an accepted andrespectable part of the industry.

What is the sector focus for Azini?We focus on growth-stage,technology, and technology enabledbusinesses. Companies which haveproven products and demonstrablecommercial traction. There is noabsolute cut-off but typically we

Nick HabgoodCo-Founder Azini Capital

A different type of investing –understanding directsecondary transactionsAzini Capital is a UK based private equity firm that specialises in acquiringshareholdings in private and small-cap public technology companies fromhistorical investors and shareholders

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Investment Insight

work with companies with at least£5m of revenue. The largestcompany in our business has £50mof revenue.

Most of the time when we’reputting additional investment intothe companies, it’s not becausethey’re burning lots of cash on aday-to-day basis, but because theyare investing in sales andmarketing,opening newinternationaloffices or makingbolt-onacquisitions. It’smore about drivinggrowth and helpingthe company getto the next level.

Is it a competitivemarket?Not really – and that has itsadvantages and disadvantages. Notmany people know that there is anoption to sell a minorityshareholding in a private company.However, on the other hand therearen’t very many people who willbuy a 20% or 30% stake in abusiness.

We sometimes describe ourposition in the private equitymarket as sitting between, butaway from, the venture capitalplayers and the buy-out firms. Theventure community are principallylooking to invest fresh capital intorelatively early stage businesses.The buyout community are normallylooking to acquire control of moremature, cashflow positivebusinesses. We sit in the middlewhere we’ll acquire a 20%, 30%, 40%stake in a growth-stage company,and if required also put additionalcapital into the company. We’reborrowing a little bit from both theventure and the buyoutcommunities.

Tell us about the various funds.Our first fund, creatively namedAzini 1, was invested between

September 2007 and September2008. We acquired a small portfoliofrom a property company, someholdings in individual AIM listedcompanies and an entire fund fromJPMorgan.

In our second fund we acquiredthe portfolio of companies fromApax Partners.

Then from the end of 2010 we

had a series of very successful exits,selling more than a dozencompanies with more than $1.25bnof value in a three-year window.That was quite nice because thatmeant that our funds were fullyreturned and into profit.

Earlier in the year (2014) weraised our third fund. Azini 3 is a$100m fund that allows us toaddress portfolios or individualcompany opportunities. Wecompleted the first investment afew weeks ago; acquiring aninterest in an AIM listed businesscalled Kalibrate.

We meet lots of individuals whowant to move from exec to non-exec and become chairman ornon-exec directors. Obviouslywithin your business you’ll havenon-execs. Any advice as to howto make the transition, as it isquite difficult to make thebreakthrough into the non-execworld?It sounds obvious but it is firstlyreally important to understand thedifference between executive andnon-executive roles. To use a sportsanalogy, it is the differencebetween being a player and being

the manager or coach. These arefundamentally different roles and itis a surprisingly difficult transition.Perhaps think about taking on anon-executive position in a smallerbusiness and allow yourself sometime to get comfortable with therole.

In terms of securing a role - Ithink it’s a question of trying to

think about whatdifferentiates you.Which are the two orthree skills orexperiences thatmake you uniquelyvaluable to abusiness? Weirdly, it’snot necessarily justabout things like yourcontacts database orthe fact you know an

industry sector. Actually, many ofthe good non-execs are really goodat things like recruiting - probablyone of the more important thingsthat we do in our jobs, frankly.

To extend the sporting analogy -one key to success is getting theright players on the pitch, eachplaying in the right position andideally to the same game plan.Finding and creating a balancedteam is really important. In smaller companies in particular Ihave gone away from trying to findthat superstar striker – theindividual entrepreneur CEO whopurports to be the perfect all-rounder. I’ve had the privilege ofworking with plenty of reallytalented people, and there is nodoubt that the right CEO makes ahuge difference, but very fewpeople can play every position. As abusiness grows and the needs of thebusiness changes, there is a riskthat the individual superstar playerbecomes the constraint on thebusiness. It’s often better to workat trying to build a balanced, teamof talented people who actuallywork together as a team – and Iwould include the non-execs as apart of that team.

Finding and creating a balanced team is really important . . . I havegone away from trying to find thatsuperstar striker – the individualentrepreneur CEO who purports to

be the perfect all-rounder

8

Mobile Insight

8

Alot has been written aboutFacebook’s shift to mobile inrecent years. Can you tell us

more about where you and yourteam fit into that?I manage the platform partnershipsteam in EMEA. That’s the team thatworks with developers, the peopleand companies who are buildingapps on the Facebook platform. Wemanage that ecosystem, and ourfocus is to grow the ecosystem anddrive adoption of the platform fromLondon to Tel Aviv through Russiaand Barcelona and beyond.

We work with small companies ontheir way to becoming billion-dollarcompanies, and also big companiesthat are shifting to mobile. We try

to give them the best possiblesupport. We’ve pivoted to mobile,so we like to think that we can helpour partners go through thattransition as well.

King.com is a great example. Thecompany was started 12 years ago,and even up to four years ago it wasa company just doing skill games onKing.com and on some otherinternet portals. They weren’t onmobile, they weren’t on Facebook.Once they’d made the decision tomonetise these games on differentplatforms, they became the numberone grossing app on Facebook, iOSand Android – in a mere three years.That’s the great thing about theFacebook platform. It can make you

big on Facebook, obviously, but alsoon mobile. Because King.com wasnumber one on Facebook, almostimmediately they became numberone on mobile.

How does the Facebook platformdiffer from the Google, Microsoft,and Apple platforms?Facebook is the only cross-platformplatform. Apple will make you bigon iOS; Google will make you bigmaybe on the web and also onAndroid. But, Facebook is acompany that will make you big onFacebook, on the web, on iOS, onAndroid, on Windows Phone. Wewant our developers to besuccessful everywhere there are

Facebook’s App EconomyJulien Codorniou talks about Facebook’s growth in mobile and shares hisperspectives on the app ecosystem

Mobile Insight

9

users. Facebook has 1.3 billionactive users a month, most of themon mobile. If you want to grow faston the web and on mobile, that’s aninteresting place to start!

We also don’t compete with ourdeveloper partners. We don’t doFacebook music, but we do workwith Spotify and others to helpbring them onto the Facebookplatform and create a great musicexperience. We also don’t do gamesor e-commerce. It’s a strategicdecision that enables us to workwith everybody.

How do you manage the developercommunity?We believe and we hope that theplatform is self-service, so thatanybody can come and develop anapp and use Facebook to build,grow and monetise theirapplication. Usually we know thesecompanies or their VCs or theirengineers. We run developer eventsalmost every day in every country.We also do a roadshow every sixmonths, travelling around Russia,Israel, France, Germany, Spain, UK,and the Nordics.

What defines a platform companylike Facebook is that we do wellwhen our partners do well. It’simportant for us to manage the bigpartners, but we are also constantlytrying to identify and engage withour next generation of partners.Who is going to be the Blablacar orthe Skyscanner of tomorrow? Wespend a lot of time with the start-up communities everywhere inEurope.

What trends do you see in thedeveloper community in EMEA? We clearly see the rise of the super-start-ups - a new generation ofcompanies in Europe. 95% of theirpeople are technical, and thebusiness is built to be “mobile first”or sometimes mobile only. We see a

lot of companies like this poppingup in emerging markets. In contrastto Silicon Valley, there is no start-upinvestment or infrastructure inBelgrade for example. Therefore,companies have to make money onday one. This creates very differentkinds of companies, and I thinkthat’s good for Europe because theyhave global reach and millions ofusers, making them highlyprofitable.

Mobile also lends itself to easierset up. Take any software companythat wants to launch in the US; youhave to open an office, hiremanagement, do some marketingand develop partnerships just todistribute your software. Right now,if you have a mobile app, you justclick “Launch on the app store” andthat’s it. You’re in a market ofalmost 300 million people instantly.

The cost of building software istrending towards zero, but so is thecost of distributing software. Theexpense of a platform is nothingcompared to the pain and thefriction it was 10 years ago todeploy a global software company.This creates huge opportunities forcreative and innovative developersin places where you would notexpect to see the next billion dollarsoftware company.

What do you see happening in themobile industry overall? We clearly see the growth ofAndroid devices. The monetisationis not the same on Android as oniOS, but it’s getting better. We’llsee more good Android devices andthat will produce more Android-firstdevelopers, which was not the casethree years ago. That’s interestingfrom a platform developerperspective.

I also see some e-commercecompanies in Europe alreadymaking 50% of their revenues onmobile. Conversely, I also see

companies doing less than 5%, ornothing, but they will come to it.Some of them don’t even have anative mobile app that allowspeople to buy stuff.

That shift to mobile is going to hitthe world and create some newkings. It will also kill someestablished companies that do notmove fast enough. This is true in e-commerce, media, entertainment,and every possible vertical you canthink of. The CEO of Facebook saidthat, if he was to launch thecompany again today, it would bemobile only, like Whatsapp. We’reseeing numerous highlysophisticated teams with a lot ofvery smart money from successfulVCs being mobile only. They’re noteven looking at the web. That’s aninteresting change for everybody.

What are the key skills needed forthe mobile economy of the future? Simple. It is RoI driven. These newcompanies, Facebook included, areall the same - they live on BI. Mostof the decisions are based on A/Btesting and Excel reports. That’squite a contrast to many long-established companies. I sit on theBoard of Le Monde and they don’tdo A/B testing. Everything is basedon intuition rather than data-drivenreports and A/B testing on hundredsof different samples. But that’s howmobile works and it’s a bigchallenge for companies that don’thave the right developers, anddon’t have data analysts or BIpeople to do that.

E-commerce is starting to getthere. Amazon is a good example,but the average European e-commerce company does notoperate like them, where everyclick on mobile and on the webreally matters. That’s a greatopportunity for the next generationof European engineers.

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Innovation Insight

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Imperial Innovations(“Innovations”) was founded in1986 as the technology transfer

office for Imperial College London,to protect and maximisecommercial opportunities arisingfrom research undertaken at theCollege. In 2006 Innovations’ shareswere admitted to trading on the AIMMarket of the London StockExchange ("AIM").

Innovations has a technologypipeline agreement with ImperialCollege London which extends until2020, under which it has exclusivecommercialisation rights andcontinues to act as the technologytransfer office for Imperial CollegeLondon. The Group also acts as thetechnology transfer office for selectNHS Trusts linked to the College.

Following a fundraising in January2011, Innovations has made anumber of investments inopportunities arising fromintellectual property developed ator associated with the University ofCambridge, University of Oxfordand University College London. InJune 2014, Innovations completed a£150 million fund-raising by meansof a placing of new shares.

Since admission of its shares totrading on AIM in 2006, Innovationshas raised more than £346 millionof equity (before costs) from

investors, which has enabled it toinvest in some of the most excitingspin-outs to come out of UKacademic research. In addition, theGroup has a £30 million loan facilityfrom the European Investment Bankfor investment in biotech andtherapeutics businesses.

During the period from admissionon AIM up until 31 July 2014,Innovations invested a total of £176million across its portfoliocompanies, which have raisedcollectively investment of £822.5million.

Investment StrategyInnovations supports scientists andentrepreneurs in thecommercialisation of their ideas,which means we tend to investpretty early. This might be at aproof-of-concept stage, where aresearch team needs help to work-up an idea, or it might be a seedinvestment in the order of £25k to£1 million to get the business offthe ground. Assuming we aresatisfied with the venture’sdevelopment, we then progressivelydeploy more capital over time.

In the seed deals, we tend to bethe first investor, but there mightalso be some “angel investors” whocome in alongside us who know thesector that the company isoperating in. There may also besome early-stage funds that we willinvest alongside.

If we invest a little bit later, in aSeries A deal, this is usuallyalongside venture funds that havealready invested. A Series A roundfor us would typically be in theorder of £1 million to £5 million(although on occasion we investmore significant amounts) to helpthe business to build organisationalstrength and develop necessarypartnerships.

We then selectively build ourstake in our most promising assets

Innovation andCommercialisation in the UKGolden TriangleJon Edington, Director Technology Ventures provides insight into ImperialInnovations Group plc which is focused on commercialising leading UK academicresearch sourced from the 'golden triangle' formed between Cambridge, Oxford andLondon

Jon EdingtonDirector Technology VenturesImperial Innovations

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Innovation Insight

by deploying more capital andattracting co-investors to thebusiness. Our largest investment todate has been CircassiaPharmaceuticals plc into which weinvested £25.5 million over a seriesof funding rounds prior to its initialpublic offering (IPO) in March 2014.

Balance sheet investorOne important difference betweenInnovations and most venturecapital funds is that we are not aclosed-end fund, which wouldtypically invest for five years andthen harvest for five years. Rather,we commit capital from our ownbalance sheet. This means we cantake a flexible approach withrespect to the amount of money weinvest and the timescales overwhich we invest. This gives us theopportunity to invest earlier thanventure capital funds and to stayinvolved for longer.

We’re trying to build really big,substantial businesses, based on theresearch output of the UK’s leadingresearch intensive Universities. Themanagement team and ourshareholders all recognise that ittakes time to build these business –anything from eight to ten years –so we know we’ve got to bepatient. We are very selective inthe companies in which we investand we are not afraid to maketough decisions to re-align or ceaseinvestment into under-performingportfolio companies. Our focus forfollow-on investment is to build ourstakes in our most promisingbusinesses – companies that wehave co-founded, lived with, knowfrom the inside and can grow withambition. This avoids the traditionalrisk of a VC investing largeramounts of money into later-stagebusinesses where there is anasymmetry of information betweenthe investee companies and the VC.

Currently, the Group has a

portfolio of 36 companies that weactively invest in and take an activerole in the management of thebusiness. We’re minority investors,holding a stake of around 30percent on average, so we don’tcontrol these companies, but wework very closely with the boardsand management teams of each tohelp them to grow their businesses.This includes leading funding roundsand attracting co-investors to thebusiness.

We also have substantial capitalresources at our disposal whichgives us the capacity to stayinvested for however long we needto in order to grow the portfoliocompany with pace and ambitiontowards some kind of liquidityevent. Also, compared to someinvestors which tend to spin outtheir companies early on AIM, wetend to keep our companies privatefor longer, preferring to iron-outthe inevitable bumps in the roadbefore seeking to bring companiesto the public markets.

ICTInnovations is involved in thecommercialisation of promisingopportunities from a broad range oftechnology sectors, but has builtparticular expertise in the keysectors of therapeutics, medtechand medical devices, engineeringand materials, and information &communications technology (ICT).

These four sectors reflect thestrengths of the UK science baseand the technological heritage ofthe four universities that we workwith. We have built our capabilityin each sector and adapted to theirdifferent dynamics.

My specialism is in the ICT sector,where there are a number ofthematic areas that are of interestto us. We spend a lot of timethinking about and researchinggrowth markets and working back

from there to identify businesses orIP that is relevant to those bigopportunities.

One of those “hot” areas isaround data analytics and big data -analysing and making sense of largevolumes of low-value data – whichcan provide valuable insights thatbusinesses can then use in someway to improve their performance,for example by allowing them totarget customers more effectivelyor launch new service propositions.

There is also an interestingopportunity within IT security,where we are seeing a real changein the landscape with the increasinguse of mobile devices, the ongoingmove to cloud and so on. This iscreating new vulnerabilities andadditional areas that IT securityneeds to address. Historically, inthe UK, we’re really good at thetechnical side of these issues, sowe’re also looking to buildbusinesses in this sub-sector.

There are also excitingopportunities in financialtechnologies, particularly aroundtransaction processing and aroundreducing the cost of transactions.There’s a real cluster of financialbusinesses in London, so we’ve gota lot of prospective customers inclose proximity and a lot ofcommercial and technical expertisehere.

Due DiligenceAs I mentioned earlier, we arehighly selective in the companies inwhich we invest and do thoroughdue diligence, both at the outsetand again at each subsequentfunding round. Our co-investors,often venture capital companies orstrategic partners, will also oftendo their own due diligence on thesecompanies.

All of our Venture team havetechnical backgrounds and aninherent understanding of the

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sectors in which they operate. Whatwe try to do, is get the product-market fit right, really early. Wespend a lot of time trying tounderstand the technology and howit is differentiated from othersolutions. Also, we try to make surethe technology is defensible, with astrong patent position or highbarriers to competitor entry.

To help us with this we make useof the networks we have built upover the last 10 years or so toidentify people with the specialistskill-sets required to understand theunderlying technology in detail andassess the potential marketopportunity. This is importantbecause it can take many years andmillions of pounds of investment todevelop an opportunity fromlaboratory to commercial product,so the prize has to be worth fightingfor.

For example, on Semetric, abusiness which gathers a hugeamount of entertainment data fromaround the web globally every dayand synthesises it into usefuloutputs for customers in theentertainment industry, we found acouple of technical experts, wholooked at the technology and lookedat the software architecture. Inturn, this led us to a couple ofmarket experts who understood themusic market, which is whereSemetric were focused when wefirst invested. Significantly, theseadvisers also understood the TVmarket as well - who the producerswere, what the distributionchannels were and how they woulduse the information – so thisallowed us the opportunity to assessthe business from both a technologyand market perspective.

We try to back market leaders.For example, Featurespace, aspinout from Cambridge, is a leaderin predictive analytics. Theirsoftware looks at transactions that

an individual makes on the Internetand then can predict with a degreeof certainty what they’re going todo next. It can be used as an anti-fraud solution but also as a solutionto identify customer churn. Thebusiness is progressing incrediblywell. They raised a further £3million a few months ago, withInnovations leading the fundinground alongside Cambridge Angelsand Nesta. We’ve got several otherexamples in the portfolio, wherethe companies are growing on atrajectory and we’re providingworking capital or growth capitalfunding, for example, to expandinternationally.

The importance of goodmanagementCrucially for long-term valuecreation, our philosophy is toensure that portfolio companies areset up appropriately right from thestart. This means ensuring that theventure is funded sufficiently toattract experienced managementwith a track record and an insightfulunderstanding of the market inwhich the technology will bedeployed. It takes high quality,highly motivated management tobuild value, so we aim to get reallygood teams into these companiesvery early on.

So, if we’re looking at a seed dealfor example, we would try to get areally good commercial Chairmaninto the business very early on.Somebody who understands thetechnology, but can then help withthe commercialisation strategy. Wewould then bring in a goodcommercial Chief Executive, oncethe time is right. We have done alot of this over the years, so weknow what qualities and skills we’relooking for and how to navigatepotential cultural issues. Forexample, it is important to ensurethat the technical founders can see

the value that the new CEO willbring. It’s always a fine balance asto when to recruit the ChiefExecutive, because if it’s too early,before the product is really ready,then it can be a bit of a waste oftime and money on each side.However, our general philosophy isto get the right team in early,because, ultimately, a lot changesover the period of theseinvestments and we need theseteams to be able to respond tochange over time.

Proximity is importantWorking up a portfolio companyover a number of years requires alot of “heavy lifting” both by ourown team, but also by themanagement of our portfoliocompanies and the co-investors andindustry partners with whom wecollaborate. Experience has taughtus that this is far easier to do if youare only an hour or so away.

As a result, we focus ouroperations on the academic clusterwithin the ‘golden triangle’ broadlybounded by London, Oxford, andCambridge. This area is a home tofour of the world’s top 10universities, Imperial CollegeLondon, University of Oxford,University of Cambridge andUniversity College London, whichhave a combined research incomeof £1.4bn. This area is also a world-leading scientific cluster, home to aleading scientific researchinstitutions, the headquarters ofleading technology andbiotechnology companies, andcentres of innovation such asTechCity and MedCity.

It is not easy recruiting top talent into young companies.However, companies in the ‘goldentriangle’ have an advantage overthose in other regions because ofthe rich talent pool within theregion.

Innovation Insight

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International Insight

Can you start by telling usmore about Delivery Hero?

Delivery Hero is a worldwidenetwork of online food orderingsites, operating in 23 countries andwith over 75,000 restaurantpartners. The company is not evenfour years old and is already backedup with a lot of investment. Wewant to be the biggest player in theworld in this area. Delivery Heroalready delivers two orders everysecond somewhere in the world andwe are still growing very fast;around 100% per year.

What have been the key lessonsfrom managing such rapidinternational growth?It’s important to act like aninternational company from anearly stage. That way you can pickthe best people from all around theworld. Although Delivery Hero isheadquartered in Berlin, we havesomething like 45 nationalities inthe team and English is our businesslanguage, so we are not a Germancompany as such, it is really aninternational company.

From a business perspective,growth varies a lot from country tocountry. Delivery Hero is amarketplace so we need to haveenough restaurants and enoughconsumers in each market. Despite the differences betweenmarkets there needs to be a strongand consistent brand, and a highquality service. So, in countrieswhere we have a good brand andlots of restaurants, we often do alot of TV advertising to drive

traffic. In other countries we aremore focused on establishing thebrand and partnering withrestaurants.

It’s rare to hear about an earlystage company talk about TVadvertising…TV is very powerful for us. It’s notright for every market but it is veryscalable and allows us to reach a lotof people. We can see that itdirectly drives usage of DeliveryHero by people who are sitting infront of their TV set. TV advertisingalso drives downloads of our appwhich in turn encourages people tomake their first order.

How is “mobile” impactingDelivery Hero?It is very dependant on the country,but the mobile channel is veryimportant and it’s getting more andmore important. As soon ascustomers are in the habit of usingthe app it takes away thecompetition. Because the app sitson the customer’s mobile phone ortablet, it becomes very personal tothe user. You can store settings andmake re-ordering very easy. Appsalso provide rich data that helps usto improve the service. If you knowsomeone’s “favourites” and theirlocation, you can accurately suggestrestaurants in the neighbourhood.Mobile uptake varies from countryto country. In Germany, and in theUK, it is still less than one in twoorders. But in Korea, mobileaccounts for way over 50% oforders. Regardless of the country,mobile is growing fast and we

expect it to become the dominantchannel.

Berlin is one of biggest start-upcities in Europe. What is thegeneral temperature there?There are more and more serialentrepreneurs who stay here. Theybuild their companies and theirportfolios here because there reallyis a culture of start-ups. It’shappened over time and I now seeBerlin as the capital of start-ups inEurope. The city supports start-upsreally well. There are lots ofinitiatives to make it easier forstart-ups to hire people or tosupport them finding office space.The other thing is that, for a bigcity, Berlin is still a relativelyaffordable city. You can build abusiness here without havingexcessive property costs or peoplecosts.

What is it about Berlin that worksso well for Delivery Hero? The culture is the main thing. Thereis a really strong start-upcommunity. There are lots ofopportunities because all the start-ups are so well connected. Thatoffers employees the chance togrow within a business or switchbetween different start-ups. It’slike a small society in itself. It’s alsogreat for business leaders and itcreates a very open environment forsharing ideas. Berlin is goingthrough a big change. You see iteverywhere and the city is evolvingyear by year. That fuels a lot ofinnovation and there is a lot moreto come.

Delivering GrowthFresh from a $350M funding round, Delivery Hero is one of the hottest digitalcompanies in Europe. Hugo Suidman, Chief Development Officer, shares some ofhis perspectives on growth and the Berlin start-up scene.

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Executive View

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Tim, 18 months ago youinherited a big slice of theLogica cake when CGI

acquired Logica. What were thekey challenges you had toovercome and what opportunitiesfor the business have emergedsince that time?The integration of CGI and theLogica business has gone extremelywell and has delivered benefits forboth our clients and our members(we refer to our employees asmembers), as well as enhanced ourprofitability. We broke theintegration journey up into anumber of phases and we’re aboutto enter phase three.

We now have a well-defined CGIculture and our overall goal is tocreate an organisation in which thepeople who work in the companyare owners of the company, enjoyworking together, can build theircareers and deliver excellentservice to our clients.

CGI operates under ourManagement Foundation, whichencapsulates our agreed businessprocesses and governance.

The Management Foundationrecognises the three stakeholders inthe business; our clients, ourmembers, and our shareholders. As Imentioned, our employees arecalled members, as, we offer thema share participation plan thatencourages real engagement withthe continuing success of theorganisation. At present over 70% ofUK members take part in thescheme.

CGI is a metric drivenorganisation; we focus on a

programme called ‘Managing forExcellence’ which is an output ofthe Management Foundation, wherewe measure the performance ofevery Business Unit (BU) in thesame way – delivering a level ofconsistency in how we report.

We restructured Logica’sEuropean operation into the CGImodel. CGI is a bottom-uporganisation not a top-downorganisation, and that creates verydifferent behaviours. CGI’s modeleffectively enables each part of theorganisation to be the master oftheir own destiny, with their ownbusiness plan which is relevant totheir local market, their clients,their operation and their individualmarket strengths and opportunities.We don’t believe in matrixmanagement, we believe in

ownership, accountability and infocus.

I’ve often referred to CGI as anintimate organisation, because eachindividual member is directlyinvolved and can genuinely make adifference to the success of thebusiness.

How does the BU structure cometogether when you’re servicingglobal accounts that are lookingfor a global replication of servicefrom you?One part of the rationale foracquiring Logica was to increaseCGI’s global footprint, which hadbeen predominantly NorthAmerican, with me running Europe,which was relatively small incomparison. Now, with our biggerscale, we’re starting to createglobal accounts and have createdtwo global account BU’s, whichhave total responsibility for aparticular client – something Ibelieve is genuinely unusual in theindustry and certainly best servesthe client.

What are the key things that CGIare going to be focusing on movingforward to chalk up successes interms of getting the company togrow and compete?We have now created anorganisation that has the rightprocesses and people to deliverexecutional excellence and ourclients recognise that executionalexcellence is part of our heritageand an integral part of CGI’s DNA.

We also recognise the importanceof focusing on our strengths, as you

Value beyond contractTim Gregory, President of CGI UK explains how CGI seeks to deliver value beyondcontract to its clients

Tim GregoryPresident of CGI UK

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Executive View

can't be an expert at everything.We know we’re very good atoutsourcing execution and about60% of the business here in the UKis outsourcing. We are also verystrong in certain market sectors, forexample we’re probably recognisedas the market leader in energy andutilities as we are currently buildingthe Smart meter data hub tosupport the government initiativeto install Smart energy meters intoevery home.

We have a lot of expertise inpayments, so again, we will exploitthis and the growing levels ofdemand for mobilepayments, so that’san area we’regoing to start toreally develop.

Our CyberSecurity Practicehas 150Consultants and Ithink that makesus one of thelargest in the UK market. We’vejust finished building our CyberCentre, which basically is going tosupport a new service calledAdvanced Threat Investigation.

We recognised when we did theintegration that Logica had a lot ofhealthcare capability, and so didCGI, so we’ve put those twotogether and we now have a verystrong growing healthcare sector.

Our business is about talent andfinding talent, but from CGI’sperspective, where do you see thekey pressure points for talent outin the marketplace and how doyou see yourselves going out thereto make sure you’re getting thebest? And once you’ve recruitedthem how are you able tointegrate the best?We launched our CGI TalentProgramme about a year ago. Partof that Talent Programme is based

around the fact that as ITcommoditises, as it’s going fasterand faster, the winners in the gamewill be those organisations thatreally add value and candemonstrate service excellence.And our theme is the Value Beyondthe Contract. It’s all about havingthe right people who can make adifference. And that’s why we needto attract the best individuals towork for this organisation, rightfrom entry level up to seniorprofessionals and leaders. We havedeveloped our graduate programmeand apprenticeships to attract and

train the best talent who candevelop their careers within CGI.Furthermore we will promote themost promising people and rewardand incentivise them to delivertheir best.

We were the first company in theworld that was recognised as havinga five star service desk – locatedhere in the UK. One of the reasonsis because we take quality peopleinto that service desk as part oftheir career development.

We do some very innovativethings in CGI now. There aren’tmany companies that have a spacedivision; we’re building all thecontrol systems for Galileo at themoment, which is very exciting.

There is so much talentthroughout our organisation, andmany have grown their careers withus, having started at junior levels.So it is these kind of opportunitiesthat will offer our talent the

opportunity to carve a successfulcareer with CGI.

Does setting the bar high,together with CGI’s uniqueculture, present a challenge infinding that talent then, as someof the other SI’s and softwarehouses don’t necessarily have thattype of collaborative approach.Does that limit the people whocan come in and do that work foryou?It certainly makes us more selectiveand careful in how we recruit. Thecost of recruitment is not just the

monetary cost ofthe recruitment. Ifyou get it wrong,you lose sixmonths, youpotentially damageyour brand and youcould damage yourclient relationship,so I think we aremore likely to

encourage and grow our own talent.This approach will help us todevelop our leaders of the futurebecause they will have absorbedour culture and ethos throughouttheir career with CGI. We have sucha strong culture within CGI – so it’svery important that all ourmembers are engaged and involvedin the company culture.

A really good place to stop andsum up I think; so what are yourclients saying, why are theybuying, why are they staying withyou?The feedback I see most often fromclients is that CGI members go theextra mile. I think that goes backright to the culture of theownership, the engagement, makingit personal and intimate. That’s oneof the big factors that they’ve seenas a result of the CGI acquisition.And something I’m very proud of.

It’s all about having the right peoplewho can make a difference. And that’s

why we need to attract the bestindividuals to work for this

organisation, right from entry level upto senior professionals and leaders

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Megabuyte Insight

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Since my last GS-insight missive,in which I sounded a positivenote on the new technology

companies arriving on the market,sentiment has rather taken a turnfor the worse. The pull back ofQuantitative Easing combined witha widespread re-allocation of assetsfrom small & mid-cap funds intolarge cap stocks has significantlyreduced appetite for new issues,especially those at the racier end ofthe spectrum. Symptomatic of thischange is that, perhaps inevitably,after a 12 month period where theywere more likely to use the stockmarket as an exit mechanism, theprivate equity community is againplucking investment from thequoted sector in public to privatetransactions. So what does all ofthis imply for the health of the IPOmarket in 2015?

To recap on the story so far, aftermany years in the doldrums, the IPOmarket came back with gusto lastyear and reached its peak at theend of 2013 and into early 2014.However, our view was that many ofthe IPOs and follow-on offeringsduring that period were forcompanies that were either tooearly in their development or justdownright poor quality. However,the market spent some monthspushing many of these stocks todizzying heights - from there theonly way was down. And so it hasbeen, with essentially all of thesevery highly valued tiddlers (BlurGroup, 1Spatial, Outsourcery)coming back down to earth with abump and most trading well belowtheir IPO price. And even those thatwere admitted to AIM later in thecycle (bubble?) at somewhat morereasonable valuations, such asRosslyn Analytics, have not survivedthe cull.

However, there is some good

news. In amongst the tiddlers,there have also been a decentnumber of larger, higher qualitytech IPOs which have, withoutexception, performed well sincetheir IPOs. Servelec shares are up53% since its December 2013 IPO,Manx Telecom has risen 25%, FDMGroup shares are up 18% andGamma Telecom, which only startedtrading a few weeks ago, is up 17%.There have also been some betterperforming smaller IPOs such asIMImobile, up 28% since its recentIPO and, to be fair to WANdisco, theinvestment case for which I haveexpressed scepticism in the past, itsshares are still more than doublethe IPO price, despite a very sharpdrop in recent months.

So it has really been something ofa two tier market. Most of thesmaller, higher risk IPOs haveunderperformed, whereas thelarger, more mature businesses haveoutperformed. And this gives ussomething of a clue as to how themarket might play out as we enter2015. While it does seem that themarket for smaller, arguably higherrisk IPOs is now gone for the timebeing, I still believe that there isappetite for reasonably priced, highquality businesses that wish to listin London.

However, it is the ‘reasonablypriced’ bit which may be an issuegoing forward. Three of the fourlarger IPOs noted above wereprivate equity exits which, in myview, were only really an option forthe private equity backers becausepublic company valuations weretemporarily higher than thoseavailable for a secondary buyout.Add to this that the institutionalappetite was there for a total exiton IPO and it’s a very attractiveoption.

But is seems that this brief

arbitrage window has now closed,and there is no clearer sign that theprivate equity to capital marketvaluation dynamics has switchedback in favour of private equitythan the return of the public toprivate transaction after a longabsence. In recent weeks,Penta/Tosca have bid to take Daisyoff the market at 11x EBITDA andHgCapital is in the process ofacquiring AIM listed software vendorAllocate for 13x EBITDA. Thesedeals together are valued at £600m.

But to end on a more cheery notefor the capital markets, there arestill reasons why some of the largerprivate equity backed, UKheadquartered tech companies maychoose to list in London. Take forexample Cybersecurity vendorSophos, a serious player in itsmarket internationally would havethe choice to list in London orNASDAQ. However, Sophos is not thehigh growth/high losses stock thatUS investors seem to love but, Iwould argue that its solid growth,great earnings visibility and sheerscarcity value would make it veryattractive to London investors. Itwould not be surprising if Sophos orbanking software vendor Misyschose to list in London over thenext couple of years, which wouldprovide a welcome boost to thesector and the wider market.

So, in conclusion, we can say withreasonable certainty that the IPOmarket for small, high risk stocks isgone and is unlikely to return anytime soon. But, to my mind, this isno bad thing. Conversely, themarket for larger, higher qualitybusinesses will remain open, butthe resurgence of competition fromprivate equity money will limit thenumber of such companies wishingto go the IPO route.

Ian Spence, CEO Megabuyte

Whither the IPO market in2015?