Sam Riley is the chief executive of Ansarada, a Sydney-based technology company that provides virtual data rooms that are used in the due diligence process for mergers and acquisitions. The company, which had revenue last year of $3.2 million, is enjoying a boost from the recent surge in M&A activity and is planning to head to the US market later this year.
Today, Sam talks to us about the art of product development, selling a premium product to premium clients and why SEO is helping a little Australian tech company crack America.
We’re seeing a lot of M&A in the market at all levels. I guess that couldn’t be better timing for a business like yours.
Yes I know it is. When we started the business there was a higher level of activity, like in the end of 2006-07. So we’re seeing that type of activity come back, especially larger deals that went off table because companies couldn’t get the leverage, the deals in the hundreds of millions of dollars.
So it is a good time for us but equally so we also positioned ourselves during the downturn to build up relationships with the corporate recovery practices like McGrathNicol and Ferrier Hodgson. So we run a lot of data rooms for them for sale processes in distressed assets.
So that was something that you were able to switch into in the downturn?
Not to sound bright but it actually was one of the smart things that we did. We foresaw during the good times that a bit like the seasons come and go that heightened M&A activity would have to turn around eventually. And so we started developing relationships with the insolvency guys when they were not so busy. And then as they became busier we managed to sign up a couple of national agreements with them and build relationships. We’ve run some large processes like the sale of ABC Learning Centres, which involved disposing of a lot of assets at once in a complex way with thousands of interested parties.
That definitely would have kept you busy. Given your data rooms are virtual, can you really handle any amount of work or is there a point where the virtual rooms are filled?
No, the technology has got the capability and the infrastructure to run processes with millions of documents and thousands of users.
Just to go back to the start of the business. Now I know you don’t specifically have an M&A background. How did the all get off the ground?
My background is more of the serial entrepreneur looking for opportunities to create a business around, where you get paid for the value you bring to the market place. I’d finished up a previous business and my sister gave me a call one day and said “there’s this data room product and we met with a couple of people and we’re thinking about launching it and do you want to come along”. She’s got an accounting background at KPMG. And so I met with these people and they’re the four founders of the business. There’s Andrew, Rachael, Daphne and I. So Rachael and Daphne are accountants and Andrew’s IT.
They were involved with a process where a data room was required and they found it quite clunky and overpriced, so that lead Andrew to think that he could do a better job and then eventually the girls and Andrew recognised you need someone in the sales and marketing capacity or entrepreneurial to get it off the ground. So the four of us met up and said okay let’s give it a go, but we’re not all going to pour in our mortgages and our houses and leave our jobs because we don’t need to.
We sort of went into investigation sort of stage to figure out if there was a real scalable business to be had and if so, what would be required. So then we met with some people that would be the end users like the bankers and lawyers. We didn’t sell to them, we just said ‘look we’re starting this company and we’re going to build something tailor made for due diligence to make it quicker and easier and more secure and flexible so you can get deals done quicker and extract more value’.
That started a long customer development process and eventually they started saying ‘guys you’ve got enough functionality and it looks easy enough to use and you can start selling it.’ So we then started putting more resources into marketing and that’s sort of the story of how the company grew.
What did that process teach you about the market? I guess it would have made selling the product that much easier because you had all the contacts.
It taught us a lot about the market because you end up rewriting your business plan or at least your product development plan weekly. It’s better than sitting in the corner and guessing what you should do and it means that you build a business and a product I guess that’s more flexible because you realise it has to be, which opens up your scope.
The other thing it did it obviously built up a good list of contacts, because you’ve gone to them and asked their advice and you go back a few months later and say ‘hey, we’ve built that feature you said and can you have a look and see what you think.’ And then they see that you’ve actually done exactly what they want and that bridges a big gap on trust, which is half the battle in winning any client in any industry. So I guess it gave us a bit of a quicker entry to market. The barrier for us can be for us on establishing trust because people are using your product for very, very confidential, important processes so they’re taking a risk if it doesn’t work.
Security concerns would be one of the top things, particularly for first time users. How have you allayed those?
Well there’s two ways. Firstly there are things you can demonstrate like protecting documents with rights management to stop people printing and saving and stuff, and dynamic watermarking, so when someone opens a document, it identifies their name and email and the date and time they opened it so obviously they are not going to circulate it because it could incriminate them. So you can demonstrate that live but then there’s other things like how we manage their data, how we manage our infrastructure and everything like that. And they are things you can’t prove in the demo, so we actually got sick of answering security questions ad-hoc so we made a decision early on to build a strong foundation and look at what standard was out there for managing information securely.
And I guess it’s a problem that all software as service providers have – proving to their customers that they are managing their data effectively. There is a standard and it’s called ISO27001 and that sets the procedures and controls that should be in place to manage an information security system, so we went and aligned our whole business to that, changed the way we do things and hired a full time compliance manager. Eventually we got audited against it and got a certificate saying that we were compliant with that standard for managing information in our data rooms, so that actually shortened the sales cycle, but it also again elevated the level of trust because we demonstrated that we comprehensively addressed security in the best way possible. And combined with the features like rights management and dynamic watermarking and other wow things I guess you can show in the product, it makes a pretty compelling security statement.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
