Friday, November 11, 2011

Breakfast at No10 Downing Street

This is a guest post from Rob Keve, Founder, CEO of Fizzback Group Ltd, a company backed by TAG and others.

"Last week I was invited to present to some MPs over breakfast in Parliament, about UK start-ups. In the first few minutes, their full English fry-up was clearly winning the battle for their attention. 
The only serious question on all MPs lips is how to stimulate economic growth and they didn’t see the relevance of a venture capital backed start ups on economic growth. 
I told them that we were only a five year old business having raised modest amounts of funding but had created over 100 jobs in the UK alone – they stopped sipping their tea from the exquisite House of Commons porcelain teacups. 
Next I explained we had generated more in direct tax income for the economy than the amount we raised in the first place and had just injected a further $80M indirectly into the economy by way of sale pro-ceeds from an overseas buyer – they put down their forks and put away the HP sauce. 
Finally, I explained that a small group of brethren calling themselves Fizzback had won some of the world’s largest brands as clients, was improving these brand’s competitiveness all whilst putting British technology on the global map – they looked up to see who was talking. 
Tonight, when they go home, I hope that as they are pulling up the draw-bridge they will ‘get it’. Economic growth comes from innovation and self-initiative. It comes from a just a few dozen individuals in a few square feet of space designing a unique solution, garnering deep in-sight, selling & servicing to the top brands in the world. 
That creates growth. That is economic leverage. The answer isn’t to be found in public sector spending, in UK policy board rooms or in banking regulation. 
The answer is to be found at Fizzback and the other ground breaking start-ups like us. We create economic activity, jobs and wealth."
Rob Keve

Monday, September 19, 2011

Fizzback does a NICE deal

Readers of this blog may have noticed that Fizzback, an investment we made in 2005, gets lots of coverage – here in and in tweets @robinklein. Aside from the fact that I’m passionate about customer service being a fundamental competitive advantage and one of the pillars of a great brand, I have a strong personal connection with the company.

Today we are announcing that a sale of Fizzback to Nice Systems (NASDAQ: NICE) for approximately $80m has been agreed. The transaction is scheduled to close in a few weeks.

In many ways this is a great result for the team and the investors to be celebrated. Nice is a very good home for Fizzback and Fizzback is going to add considerably to Nice (see product/market details below)

On the other hand, its a disappointment that a company which had begun to make a global impact in the world of Customer Experience Management, had captured some of the largest corporate clients worldwide, is not going solo ‘all the way’.
The TAG philosophy has always been to support founders and to recognize that entrepreneurs’ own motivation must ultimately be the deciding factor in these types of decisions.

Some history of this super company is relevant and I think interesting.

Our relationship with Rob Keve, Fizzback's founder, goes back about 15 years and we invested in IMI (Instant Market Intelligence – its former iteration) in 2005 - as part of the company's small seed round. I well remember the 4 hours Rob and I spent driving to and from the Cotswolds every month during 2003 for the Cotswold Company's board meetings. Rob was thinking about starting IMI.
Like many successful companies, the vision for Fizzback made a few pivots along the way.

Its initial vision was to address demand for rapid market research and new forms of customer insight- kind of vox pop via SMS. Selling a product to the market research community didn’t seem to me to be a place where we’d find good sized budgets. Rob had another much more appealing idea which he was running in parallel. A service to retailers and service providers which enabled consumers to provide feedback at the point of experience – in store, on the train etc – via their mobile phones – via SMS. IMI would interpret the message (using NLP appropriate to SMS ‘speak’), categorise and direct the message to the appropriate department for action.
This latter idea got me excited. I agreed to invest and join the board as Chairman.

Rob and I pulled together a small group of angels – including Jonathan McKay – and what a great decision that was! Jonathan, who is a real enterprise software/services guru, took over the Chair in 2008 and helped Rob build the stellar sales team and been an invaluable guide to the business.

Step one back in 2005 was hire a small team. Tech head was Herx Fisherman who conceived and built the original Fizzback Enterprise platform. Operations head was Jonathan Morris (my son-in-law) – still the Operations Director of the group, often holding things together …. another reason for the soft spot for this company.

Step two was creating a brand which would define a category. With the help of Phil Ley of Branded, Fizzback emerged. This was not about market intelligence, it was about actionable feedback.

The learnings gleaned from early clients like Butlins, National Express and others helped the evolution of the product.
The 2 relatively modest funding rounds – first from Advent £2.5m in October 2006 and later, at the end of 2009 £1.6m from Advent, Nauta and TAG helped focus the company on bravely targeting giant accounts like Tesco, Carphone Warehouse, BT, Vodafone, Virgin, O2, Waitrose, Eurostar and the rest.

These kinds of customers ensured that the Fizzback platform was always at full stretch – not just in terms of scaling but in their demands for enhanced functionality. Great customers demand great products and service!

The support from our VC backers has been magnificent – in the very early days from our good friends  at Advent - first Frederic Court and then from Mike Chalfen – who is a master at the insightful intellectual challenge and has been an active practical support all the way.
Jordi Vinas, the Nauta board member provided the Euro perspective and his knowledge of the mobile vertical in particular has been hugely valuable.

So another great European company gets sold to a foreign company just 6 years after its foundation. No problem with that -and I do expect we'll see more of the proceeds being re-cycled and re-invested in the growing Euro tech eco-system.

Extracts from the press release:

The Fizzback SaaS offering is a real-time operational VoC solution. It sends consumers requests for feedback relating to a specific interaction or transaction via mobile, web or social media. The consumer is engaged at the point of experience, for example in the contact center, branch, point of sale (POS), mobile application, or web. The feedback is analyzed by the system to determine a relevant response, and automatically conduct a dialog with the consumer in natural language rather than a survey format.

Fizzback’s unique approach generates game-changing response rates of up to 50%, significantly higher than industry norms at under 10%, as it motivates consumers to provide relevant feedback, at the moment of interaction. Additionally, consumers provide feedback about their experience rather than only about what was asked in a survey. With more than 150 million feedbacks collected annually, Fizzback enables organizations to better understand their customers’ perceptions, and be agile across the organization, while improving customer experience at the various enterprise touch points.

The combination of Fizzback and NICE will both improve CEM as well as operationalize VoC both for the contact center and across the enterprise. Correlating customer feedback to specific interactions or transactions helps improve performance enterprise-wide with statistically validated responses, as well as enhance quality management and processes. Key efficiency metrics that can be significantly improved include First Contact Resolution (FCR) and Average Handle Time (AHT) in the contact center and employee performance in direct customer facing roles.

Capturing, analyzing and acting on the Voice of the Customer (VoC) is critical to the success of any Customer Experience initiative. NICE’s cross-channel analytics solutions support VoC programs by: (1) analyzing customer interaction content (indirect feedback), whether the customer is interacting with the organization or talking about the organization through the contact center, social media, or other channels, and by extracting insights from these interactions; and (2) by analyzing customer behavior (inferred feedback), such as transaction and web browsing patterns or their journey along different touch points. By adding direct customer feedback with the Fizzback solution, NICE now provides a complete CEM solution that delivers a holistic understanding of the customer by combining on one platform the VoC from each of the three feedback dimensions: direct, indirect and inferred.

Zeevi Bregman, President and CEO of NICE said, " The adoption of and demand for CEM solutions, at all levels of the organization, including Marketing, Finance and Operations, is on the rise. With the addition of Fizzback, NICE is expanding the scope of its capabilities of Impacting Every Customer Interaction by introducing a Customer Experience Management solution with the most complete Voice of the Customer offering. This enables our customers to more effectively capture, understand and leverage VoC as the foundation to a cross-enterprise CEM strategy.”

Rob Keve, CEO of Fizzback said, “Our unique solution has been enabling our customers to achieve exceptionally high response rates from their customers, and to receive feedback in real-time. This combination allows them to take immediate action for increasing customer loyalty and driving efficiency across the enterprise. This has resulted in extremely high usage rates for our customers, making Fizzback a strategic part of how our customers make decisions and run the business. Thus, we are proud to have experienced rapid growth and high rates of product adoption. We are looking forward to combining these capabilities with NICE’s real-time, cross-channel analytics to provide both NICE and Fizzback customers greater access to even broader capabilities with a more complete VoC solution.”

Under the terms of the agreement, NICE will acquire Fizzback for a total cash consideration of approximately $80 million. Subject to certain conditions and satisfaction of terms, the transaction is scheduled to close in the beginning of the fourth quarter of 2011 with 2 to 3 cents dilution of fully diluted Non-GAAP EPS for that quarter. In 2012, the acquisition is expected to add approximately $20 million to NICE’s non-GAAP revenues, to be slightly dilutive, and to become accretive to fully diluted Non-GAAP EPS within four quarters post closing. 


About Fizzback
Founded in 2004 headquartered in the UK and backed by  Advent Venture Partners, Nauta Capital and TAG, Fizzback is a global provider of Voice of the Customer solutions, providing software solutions for Real-Time Customer Feedback that drive customer loyalty and employee performance. The award winning Fizzback solution helps companies listen, respond and act in real-time to their customers’ comments. Fizzback customers include tier-1 organizations from a variety of vertical industries, including, British Telecom (BT), O2, Best Buy Europe, Everything Everywhere, National Express Virgin Media, Tesco and several Tier 1 North American telecom carriers.

About NICE Systems
NICE Systems (NASDAQ: NICE), is the worldwide leader of intent-based solutions that capture and analyze interactions and transactions, realize intent, and extract and leverage insights to deliver impact in real time. Driven by cross-channel and multi-sensor analytics, NICE solutions enable organizations to improve business performance, increase operational efficiency, prevent financial crime, ensure compliance, and enhance safety and security. NICE serves over 25,000 organizations in the enterprise and security sectors, representing a variety of sizes and industries in more than 150 countries, and including over 80 of the Fortune 100 companies. www.nice.com

Previous posts re Fizzback:
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Monday, September 12, 2011

TAG commits another 250K Euros to extend runway for Seedcamp companies

Seedcamp is obviously in our bones at TAG, but for a little colour,  
I remember:

  • brainstorming the concept while it was a twinkle in Saul and Reshma’s eye
  • being on the first Board with Mattias, Sara, Paul, Sumon and Jason
  • pitching to new investors and writing the first cheques to Seedcamp I and II
  • funding Zemanta, MyBuilder and Kublax in 2007; Toksta in 2008; Erply in 2009 and Editd in 2010
  • going to Mini Seedcamps in Ljublianga, New York, Tel Aviv, Paris, Copenhagen
  • working closely on Seedsummit and the latest Term Sheet program

So we love Seedcamp - that's a given.

But having just spent the week at Seedcamp in London, its clear that the Seedcamp platform and network has moved to a new level and finally there is also serious capital available.

But most importantly the latest group of Seedcamp companies are totally inspiring by:

  1. the progress they have made,
  2. the scale of their ambition
  3. the amount they have achieved with little to no money.
Seedcamp has never shied away from the fact that to build something great takes time - and to building an ecocystem takes decades.

We still have a long way to go in the markets we operate, TAG is not ready to buy a tracker (and also we are fundamentally "stock pickers").

We’ve had our successes and failures at TAG, that’s part of investing and its especially so at the earliest stages. However, we are inspired by the progress we’re seeing - especially from Eastern Europe - and want to make sure that at least some of this year's 20 teams will have at least double their run-way and be able to take some more time to develop the right product, find the right customers and discover which investors share their vision and values.

So we are offering €50k as a convertible loan to 5 teams from this week’s Seedcamp in order to help extend their runways further and look forward to contributing in a small way to the continuation of their journey from seed to start-up to superstar.
As frequently happens, Techcrunch got a sniff and published this offer here:
We would of course invite any other investors - European or otherwise to join us in this funding - this is a promising group and they deserve our support

Here are some edited highlights of Seedcamp Week.

  1. Daily Video Highlights: 
  2. Some of the news coverage:
  3. Seedcamp announcements:

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Tuesday, August 30, 2011

Do we need more engineers in government?

Its very interesting that the number of students applying for Engineering and Science courses at University has - at last - started to rise. In the UK anyway.

Have you ever thought about why it is that there are so few engineers and scientists in UK and US government. 

The UK’s cabinet has six PPE (Politics, Philosophy and Economics) degrees, five history degrees, three law degrees, and plenty of other arts and humanities graduates.

The fact that most come from a couple of universities concerns me less than the fact that the 'gene pool' in terms of education, experience, ways of thinking 
and problem solving seems very narrow indeed.
Politicians in the UK are often heard decrying the fact that we don't have enough engineers - they presumably don't mean in Government. They mean in industry. 

Countries like China on the other hand have its politburo full of scientists and engineers. Hu Jintao, the country’s president, graduated with a degree in water conservancy engineering, while the rest of the group consists of chemical, electrical and radio engineers and the the odd geologist.

I'd like to advance a theory as to why this very obvious disparity between some western democracies and China in the people we get to lead us and take the profound decisions which affect our and our children's lives.

In the UK and the US, to get elected you need to be an orator, have the 'gift of the gab', be charismatic, media friendly, articulate, persuasive. Not necessarily the strengths of the average engineer or scientist  - or anyone else with left-brain hemi-spherical dominance.

Does our democratic process unfairly disadvantage the engineers and the scientists?

In China, those that get top marks in the Sciences, its seems, get to the top.

Thursday, August 11, 2011

Stick or Twist. Sell or swing for the fences.

A number of the companies in the TAG portfolio are at very tricky junctions in their lives. Its the point where they are now faced with multiple options. I'm guessing there are many companies at this particular point.
None of these options is bad - but deciding on which to take is not at all easy.
Many startups of the 2006-2008 vintage are reaching the point where they are real businesses, generating cash and growing well.
So what is the problem?
Simply put - where to next?
The options broadly fall into these 4 categories:
1. Sell
2. Continue building with cash internally generated
3. Raise more cash at a good valuation and go for growth
4. A combination of 1 and 3 - ie take some cash off the table, raise more funds for the company and really go for it. [This can be done by an IPO or raising VC/Private Equity funds - but that's another issue]

Many entrepreneurs  - mostly those outside of the US - are criticised for selling too early. I'm pretty sympathetic to a first time entrepreneur who having sweated for 5 years or more is sorely tempted to convert his/her shares into cash.
The amounts of cash a founder will receive for a good business are literally life changing - in a good way.

Investors often see the situation very differently. Especially if the company is still growing rapidly and is addressing a large market. There is frequently great frustration at the lost opportunity to build something really big - something fund returning.

Increasingly, enlightened investors are working closely with founders to enable option 4 - ie allow founders to sell ordinary shares - at nominal (or no) discount to the price paid for new preferred shares.

This would seem to be a good way forward for a founder who still has 'fire in the belly', wants to continue to build a huge company but also has the need to get their personal finances on a sound footing.

The lesson in all this for startups is that choosing investors who can help navigate through this rather tricky phase is pretty important.

Monday, May 02, 2011

A Bubble? - Chinese Style.

You think we are experiencing a bubble? Sure we are - but in China, everything is bigger – much bigger.

I've just returned from China and made a couple of illuminating visits.

First to Innovation Works. The brain-child of Kai-Fu LeeInnovation Works is an incubator, Beijing style.
Lee, having been with Apple and Silicon Graphics in the US,  Microsoft China and then Google China, Kai-Fu knows a thing or two about identifying, attracting and nurturing talent.

He tells me that they have 120,000 graduates on their database on which to call to help staff the dozens of companies being incubated in his Beijing offices, a few blocks from Beijing University.

Innovation Works houses 400 young people working away at building a wide range of companies. About 30 of these are directly employed by Innovation Works and are called the ‘platform team’. These folks (average age I guess about 27/28) are business, finance and marketing graduates whose job it is to attend to the formation, funding, administrating, recruiting for the start-up companies and helping them with their ‘go to market’ plans.
In fact, they do everything other than build the product itself.

This was how incubators were meant to work during the ‘first bubble’ of the late 90’s and 2000.
The difference – as we all know -  is that now the cost of building a product and getting it market tested is a fraction of what it once was AND in China it is a fraction of what it costs in the US or Europe.
Not only is working space extraordinarily cheap but engineers and graduates generally earn 1/5th of their US/Euro counterparts – AND are apparently of high quality and in plentiful supply.

The effect of this is that the $200,000 which Innovation Works invests in these start-ups takes them a very long way indeed. So far that a typical Series A, Kai-Fu tells me, commands a $50m post money Series A.
Yes, that's $50m! I checked twice. Not $15m but $50m.

Given the number of $1bn+ funds which have been raised recently in China [Sequoia etc etc], it is not surprising that VCs aren’t much interested in placing a couple of million in a number of start-ups.

During my visit, Chris Evdemon, who runs the incubator, was just finalizing the judging for next crop of start-ups to join the line – following what I understood was a Seedcamp type application and review process.

It was difficult to get a good picture of what all these start-ups were working on and how their evolution may impact on world markets but my impression was that the vast majority (approx 90%) were aimed at the Chinese market – in ecommerce, mobile apps, social, Android development platforms and games.
The latter category being the most likely to be reaching global markets any time soon.

I expect that retaining star talent and building large, meaningful companies will become challenging as it becomes ever easier for talent to get their own backing and the skills required to build serious global businesses go beyond engineering and towards marketing, finance and management.

My second visit was to a relative veteran of the Chinese ecommerce world – Diane Wang, founder and CEO of DH Gate.
DH Gate is a B2B marketplace matching (with a number of important added value elements) SME buyers worldwide to Manufacturers in China.

DHgate.com was founded in early 2004. Before founding DHgate, Diane was one of the founders of Joyo.com, where she successfully led the company through the Internet boom, downturn and revival. After a year of its establishment, Joyo became the top B2C brand in China. Diane was also the Country Marketing Director of Cisco Systems. From 1993 to 1999, Diane was the Marketing Service Manager and Head of Business Development Department for Microsoft (China).
Thus far in her career, Diane has received "Outstanding Woman of China" and "Outstanding Woman of Beijing" awards—two of the highest forms of recognition given to professional women in China.

TAG was fortunate in investing a small amount in DH Gate’s $6m Series B round in 2007. At the time its gross monthly trading volume was around $1m. Today its at least 15X that and employs over 700 people.

Its interesting that the Chinese Government, as part of its recently published 5 year plan, has included information technology as a fundamental part of their strategy for stimulating internal demand and as a driver of growth. The focus on infra-structure development is truly astounding and with it will inevitably come very rapid growth.

Driven by ongoing urbanization, improving broadband infrastructure, and an influx of affordable smart devices and applications, China’s mass market consumers are starting to take up applications in Internet entertainment, e- commerce, digital content, and mobile Internet.
With an expected 750m netizens by 2015 and the Chinese telecom operators competing to take up broadband speed, and promote 3G wireless data with attractive tariff plans, subsidized smart phones and tablets for consumers the future looks bright for the Chinese technology sector.
[ref Jeffreys Asia Equity Research, April 2011]

Comparing China’s adoption of the web to the rest of the world is instructive.
Almost one quarter of everyone on the planet connected to the web is resident in China.
They have twice the web population of the US and 9 times that of the UK- today.

That said, the market to foreign web services is pretty inaccessible (unlike luxury goods)– as Google and others are finding. Local companies are adept at replicating, improving and adapting to their market.

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Sunday, April 03, 2011

Where are all the Euro talent acquirers?

Facebook, Google, Microsoft et al routinely make 'talent acquisitions'.
In the last 10 years, Google has made 93 acquisitions 
- the majority of these have been to get their hands on the talented founders and teams who have built some technology or have demonstrated such a capability. 75 of these acquisitions have been in North America and most of these in the San Francisco Bay Area.
Microsoft have made 140 acquisitions in the last 20 years - again the vast majority in the US.
Yahoo made 62 acquisitions in 15 years - only 10 outside the US.

Even the new kid on the block, Facebook, has made 14 buys - 10 in the US.

The possible answers to why the predominance of targets are US based are these:
1. They have better engineers in the US. [this I very much doubt - though no doubt I'll be corrected]
2. Tech companies in the US are building stuff targeted to be bought by one of the big boys.
3. If you're going to buy a company for their talent - you want to keep that talent and integrate it with your own operations or development teams.
4. The eco-system is such that the corporate development teams know the startups and vice versa. Not just know them but meet regularly at the many events and in the coffee bars on University Avenue and elsewhere.
5. Buying a talented team elsewhere (ie outside the US) is risky - there is the cultural gap, the legal hurdles, the distance, the time shift etc

These transactions - 250 of them between just the 3 mentioned - power the whole ecosystem. The funds generated for the founders, the VCs, the LPs are considerable and get recycled in a sometimes perfect virtuous circle.

So, where are all the Euro based talent acquirers?

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Friday, March 25, 2011

I think the UK Government is listening to us

Following hard on the heels of the Home Office's announcement relating to Entrepreneur visas, this week's budget had a distinctly enterprise supportive flavour.

I had very much hoped this would be the case and certainly the signals coming out of the Department for Business (in the shape of Mark Prisk - who attended Seedcamp's SeedSummit for a full hour and half), the PM in his Tech City announcement and No10's enterprise task force including treasury officials, gave one hope.

Government has the loudest megaphone in the land and once they 'discovered' Silicon Roundabout at Old Street it moved swiftly into the vernacular and the media have been making regular trips east ever since.

Its easy to be cynical when it comes to politics but I do believe we have a tech friendly Government determined - and able - to keep Britain as the best place to start a business in Europe.
I have reason to believe too, that the personal pressure which David Cameron has applied to Google, Facebook, Cisco and co to heavily invest in Tech City is being taken very seriously by those companies.

The details of the budget are well covered elsewhere but its worth summarising some of the key points which will directly impact early stage technology companies and entrepreneurship.

1. Expansion of Entrepreneurs Relief:  limits capital gains tax to
10% on business sales under certain conditions. The “lifetime” limit on capital gains which can qualify for entrepreneurs relief  will be doubled from 6 April to £10 million.

2. Changes to the Enterprise Investment Scheme
offers income and capital gains relief for investors in growth businesses.
The rate of income tax relief on EIS investments will rise from 20% to 30% from 6 April 2011.
This means if you invest £100,000 in a qualifying company, you immediately benefit from an income tax
deduction of £30,000. ..and the qualifications and type of shares are to be made much simpler and wider - limits now to 250 employees rather than 50. The annual allowance for individuals doubles to £1m

3. Corporation Tax:

The main rate of corporation tax will be reduced from 28% to 26% from April 2011.
The rate will then be reduced by a further 1% in each of the following three years, giving rise to a corporate tax rate of 23% by 2014. This will give the UK one of the lowest rates of corporate tax in Europe.
The small profits rate of corporation tax will fall from 21% to 20% from April 2011.

4. R&D Tax Credits:

There is a major boost in the Budget for small businesses investing in research and development. The rate of relief on qualifying R&D expenditure rises to 200% from April 2011, with a further increase to 225% from April 2012.

All in all there has never been a better time for start-ups in the UK!

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