Sam Riley

Just in terms of selling this product. Take the Australian market for example, a group of experts probably, 200 or 300 in the group. How does that change the selling procedure when you know the names addresses, photos of your targets? What’s the emphasis on in the selling process?

Allowing the product to be customised so that you can easily point and click tailor it to the client. It’s more long-term focused not short-termed selling because you sort of get one or two chances to create an impression so the emphasis is on quality, so you’re not just randomly approaching these people with a generalised campaign. It’s sort of more investigative – what do these people currently use, why, who’s the key player there, who are we going to speak to, what approach should we use? It’s more of well thought-out strategy.

It’s called a targeted strategy I guess but we do have thousands of potential users because over the years the data has actually been used outside of the traditional M&A process for any due diligence activity. Even business brokers are starting to use our product to even sell a $5 million or $10 million business because it’s still the same process. There are buyers that are interested, there’s information that they need to review to decide if they want to buy it, some of the buyers are the guy’s closest competitors so you don’t want these contracts and financials walking the streets. So protecting it and also the efficiency for the business broker to allow someone else into the process very quickly rather than couriering around papers or making them visit the office or something like that or they can widen their scope of buyers so they can have someone overseas do the same due diligence as someone across the street.

But those things have evolved outside of the core M&A target. We always focused on the big boys like the UBSs and their corporate finance houses of the accountancy firms and the major law firms because they push you so intensely on functionality because they’re obviously managing more information, and have more security requirements. So we found that when we built things tailor made to them around a big emphasis on simplicity then that made it easy to switch off some of those features so it could just be sort of dumbed down to make it simple and tailored to what they were doing.

Are there any markets that you’ve stumbled into?

Yes, the tendering and procurement market. We got recommended some time ago by one of our clients to speak to the Victorian Government when they were franchising their train and tram network. And we went and met them and said what are you doing, it sounded a lot like a data room, it’s exactly the same process. So we ended up running that process for the Government and it went very well and it ticked all their probity boxes because they could ensure through the audit trails that everyone had seen everything at the same time and it was fair. And from there we’ve run a number of tendering and procurement processes so that was one industry which someone might have said we could do that one day but not really paying any attention until we got recommended there.

Did you have any problems around securing capital for growth because it sounds like you’re investing in a lot of technology?

We tried to leverage existing technology or put them into work in a unique way. So the way that we did our document security, we didn’t want the end user to have to install a plug-in so we wanted it to be simple and work out of the box. So we knew Adobe had a rights management server but that was designed to be installed on infrastructure in an organisation and we met with them and said we want to put it in our data room. And they said what, on the internet? And we said it’s on the net, but it’s in a controlled way. They didn’t have a pricing model for us so we actually created a royalty model with Adobe, so any data that uses that security, Adobe gets a small cut of the fee.

What about capital requirements?

As we are growing, our business suffers on a bit of a delay in realising revenue because obviously you send an invoice when a data room is up and running but then it falls into a pay cycle, which might then fall into another payment cycle when invoicing an advisor, so it is the type of business where you can have a delay on cash.

Basically the only challenge we have had is managing cash in order to be able to take advantage of opportunities. We did want to go overseas but we were sort of saving up the cash to do that and then a couple of our clients liked the product and we got chatting and they actually helped us out to accelerate that and took a small equity investment. So we didn’t actually go to the markets in the traditional way to raise capital, we just had people that we had built a lot of trust with.

But then the challenge was, we went to the UK in 2008 and it was the worst time. The dollar got smashed against the pound, they went into their crisis. Our worst case revenue actually turned out to be much worse than anticipated and then our expenses were much more than we anticipated so it did put a little bit of strain on the business. We have turned that around now but that was a major challenge.

Obviously all growing businesses have cashflow issues, but the payment and sales model like you described, did that lead to a few weeks of sitting there watching the internet banking account?

I do a lot of reading and read about the evolution of a start up and what happens, and thought ‘oh that won’t happen to us’ but you always have these things in the back of your mind. One of the best things we have ever done is every month we put together a very thorough management pack. That covers a lot of things and one of the components is the cash forecast. We’ll forecast our cash balance three to four months in advance and the method we use to do that is the worst case collection cycle and worst case sales with fully weighted expenses, so we get a very clear view and we can say ‘if this keeps happening in three or four months this is what it is going to look like’. So we can take action hopefully and not get a surprise.

The big expansion this year is into the US and this is not a bad time to be going in there. While the economy is struggling back to its feet, like Australia there is a lot of M&A activity at the moment and people trying to take advantage of cheap asset prices. I guess you are going in there with pretty high hopes.

Yeah we are, and also we are going in with high hopes as we have expanded before overseas and learnt a few lessons and we have been working on refining the product, product features, business model and the systems. So we are going in there like you said with the high hopes about the market but also knowing that we have the experience to make an impact in a bigger way than we otherwise would have a couple of years ago.

So possibly the big challenge over there is getting your foot back in the door, will the contacts help with that a little?

They can, but it is not a straight line as people might think. We might work for KPMG or Deloitte here, but it doesn’t necessarily translate to them having the door open for you or getting a hug from someone in Chicago. We have found that sometimes the only thing that they have in common is the logo on their business card, although not always. Overseas our experience has been that they will take more of a guide of colleagues that are in competing companies rather than a sister company in Australia. You know it is one of those quite odd things. I was at a breakfast not long ago and Emmanuel Perdis from the cosmetics sector was saying that you think we all speak English, we all watch Friends, we laugh at the same things, they must be the same as us, but as he said they are not.

So given the sales cycle and the fact it takes a long while to get that business off the ground, how are you preparing to go into that market now?

We do already have revenue from several countries around the world through search marketing, especially optimising the site for SEO in organic rankings but also Google Adwords. People have searched for our kinds of services and found the site and they have got an online demo and then being a virtual product they have then liked it, signed up and ran projects and we have supported them, through 24/7 support from Australia and London.

So we actually haven’t focused those search engine marketing efforts on the US but we have dragged some business, so before we go there we are ramping up that focus on getting more leads from search marketing efforts in the US so we can actually land on the ground and go, well we have a few customers.

Then I guess the second half of the year you might have a name on the door somewhere.

Yeah, we’ll put people and an office on the ground, in maybe two cities, but we can see focusing a little bit more on search marketing for that geography would yield greater results because we get results already without trying that hard.