Episode Transcript
Neil: Good afternoon and welcome to Be Inspired. I'm sat here with Jay Patel, General Manager at Cisco and former CEO of IMImobile. Hi, Jay, how are you doing?
Jay: I'm really well, Neil.
Neil: Jay, we're going to talk about IMImobile today. Tell us about the journey, where did the company start, how did you get involved?
Jay: So I got involved initially as a VC. And what IMImobile does, is we provide the software and infrastructure for large consumer businesses to communicate with their customers. It's something that we all recognise today. So when you get a message from your bank or logistics provider or you're having a chatbot experience with a service provider, there's technology behind that. We provide the cloud infrastructure and software that does that service. And we do it at scale across the UK and the US. I got involved initially as a VC, you know we invested, essentially Series A money, or even seed money, into a couple of founders. And the business grew really well for the first five, six, seven years. We worked with a lot of telecom operators. And then and then the iPhone came along. And people today may not quite recognise the impact the iPhone had. And the impact the iPhone had was actually the carriers or the operators who used to be the kind of walled gardens of the mobile internet, were no longer the walled gardens. And so the business had to go through a pivot. And so I got more involved as a VC as the business went through a pivot. And then we actually changed our focus on who our target customers were in about ten, twelve years ago. And that's when I got more operationally involved, and I finally became the CEO a year before the IPO. We had grown actually very rapidly from about 2005 to 2010. And then growth started slowing off a bit as we went through that pivot.
Jay: And as the carriers became less important. So as we were looking ultimately for an exit, because some of the investors had been in five plus years, seven plus years, eight plus years.
Neil: Sure.
Jay: And we know how, how fund cycles can be ten years.
Neil: Right.
Jay: So when we were looking for an exit, we started looking at a trade sale, like you do. Would have got some value, but maybe not maximised value. We were also looking at a PE recap of the early venture investors. And then also we threw an IPO into the ring. And that was that was where we were, where we ended up.
Neil: And how did you convince everyone around the table to think about an IPO in London particularly on AIM?
Jay: Well at the time, I think again, I'm not sure rational investors actually at times need convincing of any particular route. I think.
Neil: Right.
Jay: I think in general, investors can be very, very mercantile and basically maximise value. That's what they're there for. So so what we ended up doing, was we ended up looking at essentially dual tracking processes, where we had prepared essentially for a trade sale to a PE house or trade, and we were running that process with an investment bank. At the same time, we thought well maybe if that either doesn't work or to get the value that we wanted, we could have an IPO in our back pocket, or at least have the option.
Neil: Sure.
Jay: We were quite lucky in those days of having the IPO markets open up just a bit. So we did our preparations, and had some term sheets from PE.
Neil: Right.
Jay: And then it was either that or an AIM listing. And as a management team, there are certain advantages to being on the public market versus being part of a PE process, and also for selling investors. Because again, one of the things that we had, we had some funds that needed to exit.
Neil: Sure.
Jay: And we had some funds that were happy to roll and carry on.
Neil: Right.
Jay: Management teams that could see that there was still some way to go in the business. So how do you, you know, marrying all those different objectives, different timelines, is easiest in an IPO versus a 100% trade set or PE recap.
Neil: Right. And were you ready to become a public company CEO at that point?
Jay: Well, I'd been on the public company board since about 2003. So I'd been on the plc board on a couple of companies before then. So I was very much aware of the rules of some of the institutional shareholders. And I was, you know, aware that, you know, the junior market, particularly the AIM market.
Neil: Yeah.
Jay: Is regulated, but not overly so. Right. So therefore, you know, there's obviously, you know, rules, regs, take-over panels, there's lots of things that you need to know. But at the same time, I felt as if I was fully aware of the, of the consequences of being listed. And I was comfortable with it. So therefore, you know, it wasn't such a big step.
Neil: Sure.
Jay: At the same time, I think, you know, if you've got faith in your business and you and you've got faith in your numbers, and it's a good solid business, I think no one should be that worried about it.
Neil: And talk us through that profile, what sort of revenues did you have? I remember.
Jay: Yeah. So, so, we we were a a business that had a lot of, I'd say, recurring kind of revenue, which is also a good thing for being on the public market. So we were about £35 million of revenue, £6, £7 million of EBITDA. We raised £30 million. But actually £22 of that went out to the selling shareholders.
Neil: Right.
Jay: And only 8 actually came into the business. We then a year later did a secondary placing, so we managed to get the selling shareholders who wanted to get out, out. They made money on the investment so they were happy.
Neil: Sure.
Jay: The management team secured additional share options over a period of time. So they were happy. And the investors that wanted to stay, stayed and they sold out subsequently at a much higher value. So I think virtually all the stakeholders at the at the end of it were happy.
Neil: Brilliant. Brilliant. So 2014 DeepMind's just been sold to Google. You had GrubHub go public in the States in April, JustEat the same week here. You guys IPO'd in June. And I think you kind of opened the market here, I remember there being a few other tech IPOs like Crossrider that came afterwards. What sort of, what did you do from that point on?
Jay: Well again, by virtue of being listed, and by virtue of kind of in some ways, you get stability by being listed because you're not necessarily then, in some cases in the PE situation, for example, you might already have your eyes on the next exit. You know, you know, in public markets, you've now got to hit whatever expectations you've set. It's it's great that the, you're allowed to get on with running the business. Which I think is one of the biggest advantages of being listed. So we could just get on and run the business. We acquired in those two, three years of post IPO, at least four or five businesses, you know, for valuations between £5 and £15 to £20 million.
Neil: So it was like Textlocal.
Jay: Textlocal, a business called Archer, a business called Infracast, that essentially allowed us to consolidate, and a company called Healthcare Communications, to consolidate our position in the UK market.
Neil: Yeah.
Jay: So you know, we got ourselves into the position in the UK market where I could genuinely guarantee that everybody in any room, had had a message that we had processed in the last week. So you know we, we became number one in the UK.
Neil: Sure Mr. Shah, you're late for your appointment...
Jay: Mr Shah, you're late for your appointment, you're behind on your bills...
Neil: You know me too well!
Jay: We worked with and through the acquisitions, managed to consolidate a market. And again, I think, you know one of the, one of the advantages of being a listed company is, is once you get out of all the preference stacks and all the stacks that you have in venture capital, you have ordinary shares.
Neil: Right.
Jay: And they have a value, and you can trade them. And we were able to pay for cash and then add share compensation as part of a deal. Some earn out as part of the deal, and you know, that allowed us to acquire good entrepreneur-led businesses, you know, most entrepreneurs stay for two or three years post acquisition. And we really made it made a good business out of doing that kind of work. We then also used that foundation to go to the US, and that was a little more of a leap, but obviously it was successful in the end.
Jay: Do you wish you had gone to the US earlier?
Jay: Yeah, for sure. I mean, I mean hindsight's always easy to say 'should have, would have, could have.' We were very tentative in our first steps in the US. And you know, one of the things again, about the technology markets, particularly, which I know you know, a lot of technology people look at listing, is they are global in nature.
Neil: Sure.
Jay: And by virtue, especially of SaaS cloud businesses being global in nature.
Neil: Yeah.
Jay: You know, sometimes you're in that situation where you are either going to have to make it in the US or get eaten. You don't have much choice. And we decided that when we looked around the market, that our technology platform was as good as anybody's out there.
Neil: Yeah.
Jay: Including the US players. And therefore, let's go and play in their yard.
Neil: Right.
Jay: Rather than wait for them to come here. One of the other things which I think is very interesting, again, I know you may have some UK software CEOs, or people looking at this podcast or listening in, is we may underestimate that if we work for a large UK plc as one of our clients, or a handful of them, they push us pretty hard to create really good software. There's a lot of companies in the US who would love to have that software, and don't, in some way, don't believe the hype of Silicon Valley and how good their tech is, because they've scaled it in a large market. I think if we take some of our best software to the US, I think that you've got the same possibilities, because we've typically, typically had to operate at a high pace in the UK. So therefore, when we went to the US and we now have the likes of BestBuy and Walmart, and some of the big banks there.
Neil: Sure.
Jay: Had we got there earlier, maybe we would have been bigger or whatever. But in the end, you know, one of the things that we in the UK, I think are probably more careful with in general is capital.
Neil: Sure. Definitely.
Jay: So we kind of, you know, we raised some capital, went there. Could we have raised more and gone harder? Probably. But yeah.
Neil: I'm glad you touched on that, because there's probably a lot of CEOs out there with a bit of imposter syndrome, looking out to the Valley, looking at some of these companies that have raised hundreds of millions of VC dollars.
Jay: Yeah.
Neil: That they are competing with. Yeah, but the UK is a great testing ground for....
Jay: The UK is a great testing ground. And, and also don't believe the hype on the $100s of millions. Often, it's just wasted in in needless go to market things that don't work. And actually having a focused approach, with a great product though, the product has got be good, I think you can punch above your weight for sure.
Neil: Yeah. And they say that good companies are not enough. It's going to be a good investment for investors as well. And meeting all those expectations is key. Tell me, how did you meet Mike? Because I thought you and Mike Jefferies, your CFO, were a great double act. And I remember coming along to your results presentations and it got a little boring Jay right? He's like, 'we're going to do this, and we're going to hit the numbers'. And you delivered.
Jay: We were partly also lucky because we had a great, we have a great business, great business model. Mike I met through an acquisition that we made where when we did the pivot 2010. One of the other things about being listed is I think the relationship between the CEO and the FD is so important. But you really do need to somehow kind of work very closely together.
Neil: Mm hmm.
Jay: Particularly, as, you know, you need to obviously set the right expectations. You need somebody there that is not the CEO but is going to hold the CEO to account on whatever we're telling the City, whatever your telling investors. I do think that, it's that relationship, and therefore again, if there's CEOs out there, or FDs looking at it, you've got to make sure that's a very solid foundation on which you build a business.
Neil: Great. So great story, international business, double-digit growth. How many acquisitions did you do in total?
Jay: So I think we did about seven or eight. I looked at it the other day, and basically, we raised roughly £100 million of either primary or secondary capital. Or primary or secondary placings, and then roughly did about £100 million worth of deals, about seven deals.
Neil: Wow.
Jay: Yeah, I think for me, one of the other things about using the capital markets, because fundamentally lots of people forget that a listing is not an exit. A listing is not, you know, it's it's a capital market. And you are there to raise capital, you're in competition with other people trying to raise capital, and existing companies that also have shareholders. So you've got to kind of look at it from the perspective of why are you doing it? And you have a clear vision of why you're listing and what the purpose is of your business and what story you need to get, tell investors to get capital. And what we basically always realise is because we were a cloud technology software business, that it is global in nature, that at some point it would consolidate. The market would consolidate. And either we would be the consolidator, or we would be consolidated. And I think that once we went to the US, it was very apparent to me that we had a great potential for our software. The product was great, customers loved it, but we needed a lot more feet on the street, right? So you need a lot more salespeople in order to be the number one.
Neil: Sure.
Jay: And so we were out there, we were looking at acquisitions. We were also then meeting, you know, the big players in, you know, the big tech players and in the US, you know, trying to become part of their ecosystems. So again, if you look at everybody from Microsoft to Oracle to Salesforce to Cisco, to everybody, they've all got huge ecosystems around them in the U.S. Right. Lots of partner networks, a lot of ISV partners. And once you understand that game over there, you kind of get, you kind of feel as if you've got to somehow be in the game, in one of their ecosystems. And at some point, you're the product they want to put on the, put into their, into their distribution. And you know, we got ourselves into a position where Cisco we're looking at strengthening some of their product set. They've obviously got huge distribution. And that's how it kind of happened. There are a number of potential buyers of the business. And, you know, I think we managed to get a, you know i think it was a 50% premium, 60% premium on the, the weighted average price for the previous six months, and it's a cash deal.
Neil: Sure.
Jay: So you know, ultimately, it was a very good deal for the shareholders.
Neil: Fantastic. Jay I know hundreds of CEOs, but few do I know who've stayed on with the acquirer for as long as you have done. You talked about having feet on the street. Is that what's still driving you today?
Jay: I think ultimately the responsibility of, of CEOs or founders or anybody in any situation, is to make sure that whatever they've created endures.
Neil: Yeah.
Jay: RIght. You know, there's, there's a lot of situations where companies crumble after they've been sold.
Neil: So many..
Jay: Or things go wrong, so there's a lot of stuff. And it's not something which, you know, myself and my colleagues, we've, you know, so most of my colleagues are also still there. You know, I've probably retained 95% plus of the entire senior management team, you know, with my team at Cisco. And, you know, I think that, you know, for me, it's about making sure that even in ten years or twenty years time from now, that I could sit around and go, hey, that little piece of software that's powering some part of the US or something, we're somewhere in the middle of that. You know we created something of software and me and my team, that would be a tick in the box beyond all the financial measures. So making sure you embed something in your organisation that you're selling to was also a goal. So that's why we are still there.
Jay: That's hugely inspiring. Thanks so much Jay.
Neil: Good to talk to you.
