In the Game - Julie Meyer

11 Years of Ariadne Capital * What We Have Learned * Ideas Building Upon Ideas

Ariadne Capital celebrated its 11^th year anniversary on the 7^th of December 2011.    As I reflected on that recently, I reminded myself of how fortunate we’ve been to stand shoulder to shoulder with some great men and women who are bringing the future to us.

From the start, we were always going to be different.     We stated at the beginning that the capital wasn’t the point, but the ideas and the people who drove those ideas were.    I’ve worked in the technology world since September 1988, and what excites me about it is that it really is about ideas.    The ideas which shape markets, and how they can be accelerated through the application of technology.    Through the various “de facto standards”, “beachheads”, “go to market” strategies that I’ve been involved in in my career so far, new facts emerge – new winners and losers – it’s a fascinating race to the future. 

Matt Ridley called it, “Ideas having sex”.    That’s what moves the world.   The connections of ideas in calculated and serendipitous ways.   So a brief history of Ariadne Capital’s own engagement with ideas is probably called for on our 11^th birthday: 

2001 – BeTheDealer – Peer to peer gambling.     We advised on a capital raise for a company based out of Israel which offered the world’s first peer to peer betting product.    This was an early sign that the hub/spoke architecture of the IT industry was shifting.   

2001/2 – Nanomuscle – Ariadne’s first sizable deal where we raised $15 million into a micro-motor firm in the US with offices in HongKong which had the ability to create torque in a unique fashion.    We were intrigued with its applications in cars and toys. 

2002 – Espotting – Pay Per Click Advertising.    Ariadne was a business development advisor to this company which had the original business model that Google later adopted.    It was acquired for ~$200 million in January 2004.    Demonstrated that the UK can build at scale paradigm shift companies, but Espotting struggled to get the funding to enable it to become a global leader. 

2003 -  Skype – Free calls on the web – Howard Hartenbaum, the original angel investor in Skype through the Draper Richards fund reached out to me in September 2003 asking me to “take a look”.    Ariadne did a lot of the early business development at Skype through 4 dedicated people who eventually flipped into Skype.    It was amazing to see something go from underfunded to sold for $2.5 billion in less than 2 years.

2003 – Intamac – Remote Home Monitoring and Management – this one hurt.    I first met the Founder and CEO through BT, who we were advising at the time.    He had had the vision in 2000 from his work on the engines of airplanes while in the airforce that houses would be run like an airplane cockpit.    I could see it, and I tried really hard to get this company into a leadership position.     The company didn’t focus on getting consumers using it, but tried and failed to get the telco incumbents to adopt it.    We learned what SpinVox later proved – that all B2B companies are ultimately B2C2B companies.    I’m proud that Ariadne helped Intamac do the first partnership deal that CISCO through Linksys did with a company in the EMEA region.   I’m sad that we couldn’t get it over the line.    When Barry Maloney, Partner of Benchmark Capital, said to me, “we were 95% of the way there, Julie” – I had to disengage.    It was just too painful.

2004 – Monitise – mobile money.    Alastair LUkies, the CEO first reached out to me after a panel discussion in March 2004, and we have been advising Monitise since November 2004 on business development, acquisitions, investor strategy, go to market and marketing.     They provide a solution to 250 financial institutions to help them get into the world of mobile money.    Monitise sit at the heart of the mobile money ecosystem and organise the traffic flows and business model for the industry.   Backed by VISA five times, operating on 4 continents, every 20 seconds someone uses a Monitise service to access their balance, transfer funds, or buy something.

2005 – Zopa – peer to peer lending – Ariadne had been advising Egg and Richard Duvall’s team when he and they broke away to set up Zopa (Zopa of Potential Agreement).    Richard first put me onto Carlotta Perez, from whom a great deal of learning has been had at Ariadne Capital.   Perez’s theory of disruptive technology and adoption is fundamental to understanding the world that we live in.    She also spoke of free-formers – what I would later refer to as Individual Capitalists.    Ariadne helped the Zopa founding team with their July 2005 round of capital, bringing in Jonathan Rowland and Tim Draper from our own network.   We also helped them secure early lenders.   Zopa was one of the first consumer financial services plays that Ariadne advised on.    While Zopa today is not the subversive play that Duvall had originally thought up, it is well-placed to reshape the world of money.    Technology in 2007/8 was becoming standardised and componentised, and companies like Zopa didn’t benefit from that as they spent a lot more than they would today to build the same thing.

2006 – SpinVox – voice to text -  I first met Christina Domecq, the founder of SpinVox, at CarPhone Warehouse where we were doing some work in the summer of XX.     Spinvox would go on to secure £50 million, and be sold to Nuance Technologies.   What we learned from SpinVox is that all B2B companies are ultimately B2C2B companies.        What Spinvox did really really right was to get circa 100,000 users through a clever CarPhone Warehouse deal and then march that user demand into the mobile carriers, securing 33 carrier deals.

2006 – Otodio – text to voice – Although Otodio didn’t work, they had the idea – opposite of SpinVox – that people would want text read out to them in cars on the way to work, on the train, etc.    Otodio was trying to organise a set of actions in a multi-dependency world (a network) – getting adoption by publishers, device manufacturers, auto manufacturers.  They didn’t have the market power to do this, and they and we didn’t focus on business model enough.

2006 – Independent IP – a “linked in” for music publishers.   Based in Amsterdam, this management team wanted to start afresh with a way to create the vault of music where rights and income streams for the artist could be managed by a center body, Independent IP.    IIP would enable transactions, and organise the business model.    Traction was tough as they were dealing with Goliaths in the music industry who were interested in the new new thing, but were never going to break ranks and adopt it.    They or their model will become where the music industry moves to.   We learned that the entrepreneur understands the new digital network  or ecosystem that the established industry is moving into before the established industry does.   But we weren’t able to help them enough find their early adopter.    We could see though the shape of the David/Goliath battles to come. 

2006/7 – Lickerish – redesign of the world of professional photography.    The founders of Lickerish had a central thesis around incentivising costs and revenue streams for all of the parties in the transaction.    Put another way, the celebrity being shot will choose to take a taxi rather than a limo if the costs of the photoshoot are deducted from the net proceeds to him/her.  This was ground-breaking.  While ultimately not as successful as they/we would have liked, they were on to a big idea around “making it people’s interest for you to be successful” early on.

2007 -  The Bizmo – We were quite captivated by The Bizmo as it was the first time that we actively focused on business model as the disruptive force.    The Bizmo had an application that would “forward distribute” content, and where each party which touched the application would take a cut.    While ground-breaking, the application wasn’t sufficiently good.    The management team have moved on.

2008 – 1click2fame – The management team was early to understand how competitions online could drive engagement between artists and followers, and brands and users.     They have morphed their proposition a number of times, but have successfully built client relationships with Tesco and Pepsi.    Ariadne learned a lot through this project – primarily about how the world of TV is moving to the web, how digital applications (“digital enablers” in Ariadne speak) are transforming established companies, and ultimately how it’s “all about the data”.

2009 – SliceThePie/ Sound Out – Through Paul Brown, a former EIR at Ariadne, we were introduced to David Courtier-Dutton, the Founder and CEO of SoundOut.    SoundOut has created a vault of crowd-reviewed tracks from unsigned artists.   Through their deal with CBS, Tomorrow’s Hits Today, they are proving that it will be the digital enablers which transform the music industry.   It wasn’t their first product (fan financing – SliceThePie) or their first go to market strategy (discussions with the Record Labels), but second product and second go to market – speaking to the radio stations who were tired of being told by the Record Labels what to play, that they got their mojo, and realised that radio stations which a great ability to break new artists could do that in the digital world too. 

2010 – Digital Stores - D2C music merchandise - Ariadne advised on the sale to EMI. 

2011 – BeatThatQuote – Although the sale of BeatThatQuote to Google was completed on the 4^th of March 2011, this was 21 months in the making.    Ariadne had been advising BTQ on business development activity when they received an approach from Google that we helped to negotiate to a close.    The conclusion was a 122 EBITDA multiple on exit valuation.    BTQ was a financial services price comparison, but crucially was offering cashback deals where the end users data was being given an economic upside.     We see that data is the next battleground, and that the digital enablers are the ones that are building this consumer data profiles which are then leveraged across the Goliath distribution bases.  

2011 - LivingPlanIT - Smart Cities - Ariadne started advising LivingPlanIT in March 2011.    LivingPlanIT have created Urban OS (operating system) which connects the ecosystem of connected buildings.    Watch this space.

I write this column on the flight out of Hanoi en route to London via Moscow.    I am on the Board of Vestergaard Frandsen, a for-profit, privately held humanitarian development firm, which has factories in Vietnam which we visited.

As an American, it’s slightly odd going to Vietnam – perhaps a bit like going to Cuba.    A bit of history, but life has moved on.   Still you can’t help but be aware of the past as you go there.

And yet, the country surprised me on many levels.    I was aware that the 90 million Vietnamese are experiencing a high-growth rate, and growing a middle class.     In cities like London and San Francisco, you can see their expats as industrious manicurists, restaurant owners, and dry cleaners in particular.    But in Hanoi this past week, I just was swept away by their niceness.   Yes, niceness.    Their attitude to life is fantastic.

I found at every counter and restaurant a very friendly, gracious Vietnamese person.    They were quick to be helpful, got me out of the Hanoi airport at 2 am when a flight cancelled, and I thought I would never get my bags out from the plane hold until morning (but they did).    The folks at the factory were professional, articulate, passionate, and just plain lovely.

Outside of the Intercontinental (where the Sunset Bar is a must go to place), the city is well – not clean and looks poor.     It would have been easy to say – “they’ve got a long way to go”.    You might find yourself even thinking a thought of, “poor Vietnamese”.    I even remarked at one point how friendly everyone was only to get the response back from one of my Board colleagues, “well, why wouldn’t they be?   They’ve won.     They routed everyone that’s tried to take over their country – the French, the Japanese, the Americans and the Chinese.     People who win feel great.  They have nothing to feel bad about”. 

Touche!

I thought about that the rest of the trip.     Here is a country where it seems the average person is  about 5’3’’; they are not physically imposing.      They’re growing rapidly.    The friendliness is not one of subservience at all, but one of magnanimous graciousness.    Love it.

Vietnam, as a country, is like an entrepreneur.     Playing a game of asymmetrical warfare.    You can underestimate them if you want; feel sorry for them if it makes you feel good.    But like with every entrepreneur, the fact of underestimating them gives them good road to accomplish what they seek to achieve. 

I’ll never forget sitting across from the then CEO of an incumbent telco in early 2005 as he was being condescending to Skype, one of Ariadne Capital’s clients at that time on a Radio 4 show.    I remember saying something along the lines of – “fascinating really ... your industry is in a trillion dollar freefall, and you have yet to explain how you are going to recover, and yet you scoff at Skype’s ability to change the rules of the game.     Let’s watch this play out”.

Entrepreneurs  must think big, start small, and move fast.    If you ever stop thinking big, it’s game over.   That’s what entrepreneurs do as a habit.   They redefine industries – first in their mind, then in the market.     They identify the way the market should work, and feel compelled to bring that vision to life.   

But you have to start small.    You have – typically – a grubby little office at the beginning if you’re lucky enough to have an office at all.     You convince yourself that the simplicity of the early days brings you closer together, and it probably does.    Your advantage is the mental game that you are playing.    You know that you can make a decision and implement it.    You don’t have to have it approved by 5 layers of management.

And you win – when you do -  by playing a better mental game than the incumbent or your competitor.   For life, really ultimately is all a mind game.    I play a number of games with myself every week from deciding that things I don’t want to do hold a total fascination for myself, to focusing on what my business will be like in 5 years time, and using that vision to keep me going in the rough times.

I ruthlessly eliminate negative people from my life, and I do mean ruthlessly.    I pretend that insults are really compliments, and I try to always be gracious to people who are not so to me.   Why?   It freaks people out.     They can’t figure out where your positive energy comes from.

When you are friendly and gracious – even when you don’t feel like being so, you realise that it helps you achieve what you want to.    It flips your mind into a field of – “I’m the one who has the capacity to rise above the pettiness, simple game-playing, mere childishness of what’s going on, and be the adult”.

Most of the world operates along pretty prescriptive patterns of  - master/slave, supplicant/provider, senior/junior, you versus me, incumbent/challener.    The really subversive stance to take is to be independent.    Defy the definitions.    Don’t react to the other side.    Imply a different standard of behaviour. 

This is what I came to love about Vietnam in the past week.    They seem to be saying, “it’s not perfect, but we’re working towards that.   We’re happy with who we are, and we’ve demonstrated a great amount of houtzpah.    We know what we’re doing, and feel how you want to feel about us, but we know who we are, and we are in the ascendancy.”

If we could bottle that, and sell it to anyone considering setting up a new business, I would.     While there are lots of theories about why some people are successful, and others not, why some get funded, and others don’t, why some change industries, and others are merely profitable enterprises, the older I get, and the more I see entrepreneurs in different parts of the world, I have reduced my recipe to success to an exceedingly simple – “Play the right mental game”. 

1. Be positive at all times – not a cheerleader, not a fantastist, not an airhead, but positive about the options for building from wherever you are.    Think of negativity as a killer virus that you must immunise yourself against.
2. Act like a winner.    Exhude warmth, graciousness, time for others.   This is what people do who feel great.   Even if you don’t, flip the switch, and fake it.... you’ll find that you’ll get there faster by faking this than working to genuinely feel it.
3. Underestimate no one.     And I do mean – no one.   The guy who smells.    The woman who speaks English poorly.     The older man who doesn’t seem like he is au fait with technology.   The older woman who seems well, old.    Everyone can have a card up there sleeve.    Everyone can be a natural ally.    Alliances can be built out of simple raw materials.  
4. Forgive and forget mistakes.   They happen, but make them history fast.    The more you try to assess and apply blame, the worse it gets.
5. Be a fighter.    It’s not over until it is.    Keep the faith that you can pull it through.     Focus on what you are achieving, not what you haven’t been able to do yet.    Eighty percent of the significant deals that I’ve gotten done in my career were No’s I had to change to Yes’s.   In some cases, I had to neutralise what was a negative first before even beginning to get to Yes.
6. Be thankful.    We can all focus on what we don’t have, and didn’t get, or what remarkable things we have to be thankful for.    The latter is a much better place to be.

Life is all about where you are going; not where you came from.     Build a position for 2012 in your mind of “abundance” and “ascendancy”, and watch through the year as that mental position becomes reality.