Month: April 2013

In conversation with…Tim Bleakley, CEO of Ocean Outdoor

Earlier this month, Smedvig Capital and Entrepreneurs Universe jointly hosted an evening with Ocean Outdoor at Home House. Tim Bleakley, CEO of Ocean Outdoor, and previous MD of CBS International Outdoor and Viacom Outdoor, shared his career journey with the audience. Attendees included CEOs, as well founders and Chairs of interesting growth companies.

Smedvig Capital initially invested in Ocean Outdoor, the UK leader and innovator in spectacular and iconic out of home advertising sites, in 2008. In May 2012, the business was sold to UK-based mid-market private equity house, Lloyds Development Capital (LDC), for £35m.

Here’s a snapshot of the conversation:

Where did the urge come from to become an entrepreneur?

I was entrepreneurial in early life, and that stayed with me well through corporate life – running businesses and turning brands around – but I never really shared in the value creation.

I feel almost born again in the world of private equity where there is freedom to run the business, support, encouragement and drive, with little red tape around it. I find that really invigorating.

What made you take the jump from the corporate world into the PE world? And, why Smedvig Capital?

When I was making the decision, it was about trying to match the things I was passionate about and being relatively bold about those things I was good at. You have to be honest with yourself – know your strengths and weaknesses. Building teams, turnaround across a three or four year period, innovation and ideas, and energy have always been things I have had in abundance.

The great thing about private equity is that for a lot of the things I wasn’t as qualified in, a good VC house has in spades, but they don’t necessarily have some of the attributes that their CEO or management team might have.

You have somebody in the background to guide you through the labyrinth – particularly in a business that’s failing – to get it back on track. I think that’s a lethal combination.

I found myself lucky in a small business that had the potential to have a really large profile, and was at the beginnings of something very exciting which I understood; the transition from analogue to digital. You could recognise very quickly that this was a business that had massive potential.

I’d like you to amplify what you found are the key differences between PE and non-PE?

You have to be able to think quickly and move fast in this day and age, and in large corporates you can get a lot of unnecessary stagnation and red tape.

In my experience of private equity, strong chairmanship is very important for corporate governance, and also integrity of shareholders and the board are very important. I found there is more cutting through what really matters in corporate governance versus what is just red tape.

In order to move quickly and move fast you need support – you don’t need the red tape – and you need strong chairmanship, as well as shareholders and investors with integrity.

On your new journey in the PE world what have you particularly enjoyed?

There are a number of things I have enjoyed. In my view if you’re not learning you’re not living. I found the learning experience really invigorating, and felt I was becoming a better businessman on the back of their expertise; it wasn’t a one-way street from a development point of view.

I found the entrepreneurship, drive and pace motivational because there is a focus on what really matters. At Smedvig and LDC, they are very good at helping management teams focus on the key metrics for growing a business.

Those things lend themselves to freedom to operate, and agility. That sort of environment encourages innovation, ideas and people moving at the right pace, under the right sorts of pressures.

What do you think the world of PE can do for the wider economy? What do you think it can do to kick-start the economy?

The more that can be done in really understanding the nature and the mind sets of the teams you are investing in early on, the more there will be to share at the end of the day as the business is a success. I encourage all PE firms to invest more in the early stages in how they analyse people skills.

We need people to invest in those who have ideas and energy; people who are willing to say they have a good idea but need the help, skills and management set, and need capital.

What do you think the biggest challenge facing entrepreneurs is today?

The pace of technological change is phenomenal – I think that is both the biggest opportunity and the biggest risk. Personally I am a huge believer in people and team building. I think having the right people around you and spending a lot of time on that in the early stages of any start-up or business will pay dividends in the end.

Firstly because it can protect you from the risk of changes in technology – you should have the right people around you who are adaptable and understand it – and also because one of the biggest challenges right now is around retention of talent.

You are known for building leading management teams, and for your leadership. Where and how have you found your top people?

It’s a combination of experience over time; I have always spent a lot of time recognising talented people early on in their careers – marking them down mentally – as one day it might be worth giving them a call. Hopefully I create an enjoyable environment in which people can work. As I have moved I have been able to take people with me and recruit good talent.

I have often looked in other sectors as well. I think it’s usually important in a fast turnaround or a brand turnaround within a media organisation to drop a few grenades in there to change the status quo. That usually means going to a different sector that has some similar attributes but perhaps quite a different way of thinking.

When you have put your team together, and you have a clear picture of the progression that they are going to make, what do you do to grow your team and people?

In large businesses open communication is very important; you have to get messages out so that people understand change. I am a massive believer in development; a lot of that is around transparency. I like to allow people to come into their working life and it to be an extension of their lives.

Abstract training is something I am a big believer in – putting people in an environment where they can ask stupid questions and learn is very important – particularly at a senior level. I am also a believer in taking people out of the comfort of their environment and getting them to do different things.

In PE in particular, it’s very important to do things in an all for one, one for all basis. We created an atmosphere at Ocean where everybody is sharing in the value. The talk of exit is banned – people don’t want to work in a business that’s going to end – people want to work in a business where they are going to grow, and they’re taking it somewhere.

MBAs or managers? (Experience based vs. book based?)

There is huge value in technical development; a lot of people are massively successful having had that sort of training and education. In terms of actual management and leadership, there is no text book in my view. Your experiences in life are the things that influence your style of leadership, and your ability to relate to and interact with other human beings.

What are your own drivers and values?

Firstly, challenge is very important to me; the idea of being able to do something that somebody has said is not possible is a big personal motivator.

The second thing is people; I need the energy of people around me and I enjoy the interaction between people.

Honestly, I am more interested in building a media brand that has a reputation for changing the model in our sector, or doing something that people didn’t think was possible, than the cheque at exit.

Who’s had the biggest influence on you, and what was it?

Sir Robin Miller and Kelvin MacKenzie, from an inspirational point of view. Sir Robin Miller always said management isn’t about privileges, he was very people orientated and instilled the ethos at Emap. Kelvin MacKenzie was hugely influential personally because of his sheer front against the establishment.

Also Tom Goddard, who was Global Chief Exec at CBS, and is now Chairman at Ocean (and a number of other companies). My father was also a huge influence on me; he was a state educator in the comprehensive system and always saw the good in people. He is someone I perhaps get some of my people skills from.

Looking back on your career, what would you have done differently?

I would have left corporate life 8-10 years earlier. I should have probably followed my instincts and moved into this entrepreneurial part of business life earlier.

What does the future hold for Ocean, and for Tim Bleakley?

We specialise in large giant format digital out of home displays, and also spectacular displays such as the Imax at Waterloo. We specialise in those stand-out locations, and operate 35 to 40 of those locations. I think our smallest competitor operates about 6/700 billboards. There are four players, who control 90% of the market, and they all have tens of thousands of billboards; we are a precision specialist in the part of the market that is growing the fastest.

The future of our business – what will take us from a £35m business to a £100m business – we hope is all around Ocean being the bridge between the old and the new. We have put technology on the streets that’s not being driven at full speed in many ways, and the next part of our development is trying to form that bridge between the technology that’s on the street, which can display fantastic looking full motion pictures and video etc., but also can connect machine to machine. The next stage for us is around mobile out of home; how are we going to connect this fantastic kit we put on the streets to tablet devices.

For me personally, perhaps move into another sector and turn something around on a larger scale where I have some share of the value creation. After that opportunity, what I’d like to do is try and legitimise some of my theories and share them in a collegiate way.

Sir Trevor Chinn on the role of a Chair in a VC-backed business

Smedvig Capital is delighted to support Directorbank on a video series that explores the role of the Chairman in a venture capital backed business. Directorbank has worked with Smedvig Capital on the appointment of a number of high-calibre Chairmen and NEDs through both pre-deal and portfolio management stages.

In the first of a 3-part video series we hear from Sir Trevor Chinn, a leading figure in the automotive industry and ex Chairman and CEO of Lex Vehicle leasing (now RAC).

Click here to view video – Sir Trevor Chinn

Sir Trevor was Chairman of RAC Plc until 2003 when he retired from the board after 48 years of service. He is currently Senior Adviser to CVC Capital Partners, and was Chairman of the AA and Kwik-Fit, both former CVC portfolio companies. Sir Trevor has been on the board of three Smedvig Capital investments; ITIS, Streetcar and Tusker. He is currently Chairman of Tusker, the market leader in salary sacrifice cars.

The video series aims to provide an informative overview of VC Chair best practice and we hope you find it interesting.

The Smart Cube expands into China to influence global clients’ competitive advantage

Firm expects to integrate localized insights with global intelligence to impact client strategies and decision making

The Smart Cube, a leading global professional services firm delivering custom research and analytics, today announced the expansion of its operations into Dalian, China, located on the northeast seaboard in the province of Liaoning. The addition of China to The Smart Cube’s growing worldwide operations brings its number of locations to nine countries, with four research centres and more than 400 employees.

The Smart Cube clients’ demand for expertise about China drove the firm’s decision to add Far East expertise to its growing global roster of intelligence capabilities. Specifically, the firm’s office in Dalian will deliver insight and analysis ranging from strategy to marketing to supply chain for global clients with a special interest in the region. The analyst team anchoring the new China operations will be comprised of local analysts integrated with the strong talent, process and capabilities from its other global research centres.

“Since 2003, The Smart Cube has experienced rapid expansion on the global stage,” said Gautam Singh, Co-Founder and CEO of The Smart Cube headquartered in London. “We have delivered more than 17,000 high-value studies to over 200 blue-chip clients and our entry into China will strengthen this capability for clients around the world. Indeed, our presence in China is of immense strategic consequence given the economic power of the region. The specialised insights we can bring from direct, hands-on knowledge will strongly influence our clients’ competitive advantage.”

What is a ‘proven business model’?

By Johnny Hewett, CEO Smedvig Capital, originally posted on

Determining what is a quantifiably sound business model is hard work for both entrepreneurs and investors.

Like many development capital stage investors, in contrast to seed investors, we state the need for evidence of a proven business model before investing. One of the questions we frequently get asked is, ‘what does proven business model actually mean?’

The easy answer is to give a run rate revenue number (with £2 million plus being a good proxy at Smedvig Capital), but in practice it is more nuanced than that and we frequently move away from that number in both directions.

Obviously different firms approach this in very different ways but there are two main questions that are likely to be consistently required to be answered for a business model to be ‘proven’.

First, as Rob Ryan put it in his book on entrepreneurship, ‘Will the dogs eat the dog food?’, which translates: can it be demonstrated that customers like the product (or service) offered, and like it sufficiently at the price offered that a high percentage of them come back for more of it?

Second, can the company produce or provide that ‘dog food’ at high enough gross margin to a big enough potential target universe to make the economics of the business attractive in the medium to long term?

Both questions are clearly vital; if the business is not fulfilling a customer need effectively, there will be no customers but if it can’t be delivered in a financially interesting way and with a large enough potential scale, then satisfying a customer need is not going to be relevant for very long.

The above sounds more straightforward when written than perhaps it is in the real world. Many complexities exist when seeking something like demonstrating customer loyalty. Customer loyalty is critical in distinguishing one-off trial versus long-term value to the customer. However, whilst easier for products purchased frequently, where there are long intervals between purchase it is harder.

In those circumstances, other methodologies have to be used including primary research. Likewise, what is an attractive enough gross margin is non-straightforward. For most products and services it may evolve with scale/time but it is the right starting point from which assumptions can be made about its likely evolution along with other elements of the P&L. The latter, though vital, with long experience in many industries can be reasonably forecast, so the assessment of what constitutes an attractive enough gross margin for a given industry or business model is one with which we are comfortable.

It is perhaps worth mentioning a couple of watch outs. On occasion, the evidence of a proven business model is presented as the demonstration that it has worked successfully for another business in another market. This can often be a very helpful additional piece of evidence but, equally often, there are so many different variables at play that it does not really demonstrate convincingly that it can work in a completely different market.

Similarly, we often see early-stage businesses with low priced (i.e. low gross margin) contracts which are presented as evidence of demand. However, this is only evidence of demand at that price – of course, many early stage companies do go on to raise prices, but one shouldn’t assume that demand is fully elastic with pricing.

Hence, a ‘proven business model’ is not really about a revenue level, £2 million or otherwise. In some situations, a low revenue figure (<£1 million) can often suffice if it includes a large number of customers, who regularly repeat purchase, with a price that yields an attractive gross margin. By comparison, a large revenue number (£5 million plus) which is based on a contract with a single customer at a low gross margin, may show a number of things but would not necessarily constitute, in our mind, a proven business model.

BBC Worldwide implements mediamorph

BBC Worldwide, the commercial arm of the British Broadcasting Corporation (BBC), recently implemented mediamorph, a leader in business software for the global media industry, to support and enhance its digital distribution channels through cloud-based contract and royalty management solutions.
“As we have evolved and grown our digital content licensing business, we’ve encountered challenges in managing commercial terms, understanding cross- platform viewership and handling royalty processing,” said Linda Passey, Senior Manager, Digital and Home Entertainment, BBC Worldwide. “Mediamorph has provided a solution that allows us to manage these issues with tracking, measurement and financial workflow for our digital distribution.”

Mediamorph’s bespoke solution suite offers BBC Worldwide data validation, royalty processing systems for revenue recognition, customized reporting, an interactive business analytics tool and a single-point tracking service that can be used by team members around the globe.

“We’re pleased to offer a robust suite of services to BBC Worldwide, which is a prime example of the ways in which digital content are changing the landscape of the entertainment media industry,” said Michael Sid, CEO and founder, mediamorph.

ITV implements mediamorph’s cross platform reporting solution

ITV has implemented mediamorph, a cloud based solution and services for improved content performance tracking, analysis, and reporting across web, mobile and third party platforms.

The mediamorph system aims to improve visibility of how content performs on platforms both owned by ITV and by other parties distributing their programmes. The solution combines web based software and a managed services team to provide higher data completeness and more accuracy of multiplatform viewership information.

Neale Dennett, Controller of Pay and Distribution at ITV said: “We are committed to bringing the very best content and quality viewing experiences to viewers across a range of platforms.”

“With mediamorph, our teams have a quicker, easier and more consistent way to understand how our shows are performing across the growing range of platforms where our content is available”, added Anthony Chin, Head of Business Systems at ITV.

“We are extremely happy to be working with ITV and to support the organisation as it expands content availability, via a variety of distribution channels and business models”, said Tim Rottach, Managing Director of International for mediamorph.

Modern Law magazine’s interview with Jordan Mayo

Originally published in Modern Law Magazine, ABS Supplement 2013

Smedvig Capital has invested in legal services since 2005 when the capital venture firm backed the first ABS, Premier Property (part of myhomemove). Jordan Mayo discusses the benefits and attraction of investing in legal services and why firms need to take a longer term approach and adopt a culture that is open to taking calculated risks.

Q: Why did Smedvig Capital see the legal services arena as a candidate for investment and what elements of the legal services market are most appealing?

A: At Smedvig Capital we invest in fast-growing businesses that are taking an innovative and disruptive position in large, established markets. Clearly the legal services market is enormous, being worth over £23B in aggregate and with several specialist verticals such as conveyancing worth £1B or more. However, despite the large market and although there are some great law firms and lawyers, the sector has generally been underinvested in, principally due to the restrictions on external capital pre-ABS. As a result, and with some notable exceptions, there is often relatively little deployment of technology – both to improve the client experience and to improve efficiency levels – and relatively little investment in sales and marketing infrastructure to help grow firms and their brands. Consequently, the market is highly fragmented with few clear leaders, even in niche segments. For example, when we first invested in myhomemove in December 2005, it was one of the largest mover conveyancing firms with just 0.5% market share. We saw a huge opportunity to significantly extend their lead in this market.

Q: Why has the Private Equity House continued its investment for so long?

A: We are principally funded by the Smedvig family, so we have a very stable, long-term source of capital which in turn allows us the flexibility to commit long-term capital to successful portfolio companies. When we initially funded myhomemove in 2005 we agreed a five year plan with the management team, however the exit timing always remained flexible. In 2008 following the crash we saw an opportunity to invest more capital, increase market share and grow the business further so together with the management team agreed to extend the investment timeframe. Since 2007 the market has stabilised at roughly half the historic volumes of the previous decade, but in the same period myhomemove increased their volumes of activity by over 60% and more than doubled their market share. Investment in infrastructure, technology, processes and people have allowed this growth. Continued investments in people and technology have led to industry-leading customer satisfaction levels and time to completion. In addition our unit cost position is extremely competitive. So we see a huge amount of growth still to go for. In fact, today MHM’s market share is a little over 3% and the aim is to get to 10% in the near future.

Q: What are the benefits of being the first to take part in the ABS route?

A: From a consumer perspective, as an ABS the business has used external investment and expertise to improve customer service and deliver improved efficiency levels. From a Smedvig Capital perspective, we have invested in over 40 fast-growing businesses since 1996 and of course have experience of being an investor in a regulated ABS environment. We feel that we are very well-placed to support other ambitious and innovative legal services firms in future.

Q: Did the nature of Premier Property (being a conveyancing focused, transactional organisation) provide the ingredients for success in terms of prescribing the ABS model and regulatory requirements? Or are all legal services able to benefit from the ABS model, so long as the leadership, ethics, business plan, funding etc meets the requirements?

The ABS model works best when a law firm can efficiently use external capital to improve its processes, customer experience and ultimately create value by growing profitably. The model also needs forward thinking management teams who are prepared to make long-term investment decisions and who are culturally open to outside input and the experiences from other industries. At the moment that seems to be truer of ‘volume’ sectors, where law firms seem to have been quicker to grasp how investment in technology can improve service and profitability. To use a conveyancing example, 80% of clients use MHM’s eWay system to see the progress of their case and view the relevant documents online. All that said, our strong belief is that the whole legal industry will move in this direction over time. Looking out in the medium, or long-term it seems plausible that the whole legal sector will look very different in terms of external investment and use of technology.

Q: Do ABSs require a fresh approach to leadership and management?

A: They certainly require a longer term approach and a culture that is open to taking calculated risks. There is a perception that this is not always the case in traditional multidisciplinary law firms with multiple partners. The partner model does not naturally lend itself well to ABSs; when there are a group of partners in a firm, the structure is often not conducive to making mutual long-term decisions. myhomemove was an external, disruptive entrant into the legal services market. Innovation certainly can come from existing law firms, but it can also come from outside of the sector.

Q: Does Smedvig Capital have any other legal services offerings in its portfolio and would it consider any in the future?

A: Yes, we are actively looking at other legal services investments. More specifically, we are interested in those with ambitious management teams and great people. We want to invest in firms with disruptive, scalable business models, as well as a strong market position where there is the ability for us to add value – from our experience at myhomemove and also at dozens of other fast growth business – as well as, of course, capital.

Q: What has been the response from the Private Equity / investment sector in the legal services arena in light of ABSs? Will we see more widespread investment in the future?

A: There has been a lot of noise around investments in this sector, however in reality there has been little activity to date and surprisingly few deals have happened. Firstly whilst there are many great law firms, it is difficult to find firms that are culturally a good fit for a PE investor. Secondly, the ABS approval process is still new and the regulatory framework is still more complex than in other industries. However, I think that this will change and we will see more widespread investment in the legal sector in future.

Q: Are transactional-based ABSs in danger of lowering standards of customer care in return for lower fees and a faster service?

A: I think this is one of the most surprising concerns about ABSs. In contrast to small highstreet law firms, large scale businesses like myhomemove and Premier Property Lawyers are able to invest in technology, infrastructure, processes and people. A large scale business like this is going to be more efficient than a small high-street firm and has resources to invest to improve the customer experience. At myhomemove the team provide a consistently personal and trusted conveyancing service, which is strengthened by great technology and innovation. Through investment in technology and people, they can further reduce the risk of fraud and provide reassurance to lenders.

Q: How have ABSs helped meet the Legal Services Act – in terms of providing more choice for consumers – in your view?

A: It is too early to tell really. With the ABS model, we would expect to see consolidation in the number of suppliers – and perhaps very dramatic consolidation in certain segments. So whilst there will be new entrants the number of suppliers will probably fall. That said, we would expect to see far more innovation in propositions, pricing and so forth and so consumers will be offered genuine alternatives in the way legal services are delivered and paid for. In the long run, more investment in legal services and more innovation has to be good news for consumers.