In March 2012, AIM-listed Technology Company Monitise took another significant step towards becoming a global leader in its chosen field of mobile handset-enabled banking. Bucking the trend of overseas companies buying up promising British innovators, Monitise turned the tables and acquired US rival Clairmail Inc in a deal worth around £109 million.
With a reach that already extended beyond the UK to India, Asia and Africa, as well as the US, the company’s acquisition of Clairmail created a mobile money business of unprecedented scale in the North American market while confirming its appetite for international expansion.
From start-up to market leader
Founded in 2002 by Alastair Lukies and business partner Steve Atkinson, Monitise has grown to become a sizeable business employing around 500 people. With a value of approximately £250 million, it is currently the 23rd largest company listed on the AIM. It is, quite simply, a success story.
But the road from start-up to market leader hasn’t always been a straightforward one. Perhaps surprisingly, the apparently simple concept of mobile money – or, to put it another way, the delivery of a range of banking and bill payment services via the ubiquitous handset – was relatively slow to gain traction, even at the heady peak of the dotcom era when anything seemed possible. So what was the reason? While mobile handsets offered a secure and convenient way to manage and move money, entrepreneurs entering the space had to establish credibility with the big banks and the telecoms companies, while also persuading those parties to partner with each other. Not an easy task.
As Alastair Lukies recalls, getting a foot in the door was a major hurdle for the young technology company. “We were close to striking a deal with LINK – the cash machine network – to deliver services, but because we were a young company and I look about 15, that didn’t happen immediately.”
Instead Monitise took investment from technology company Morse and set about developing the platform. By 2006, the company was ready for a joint venture that saw LINK and Monitise offering mobile banking services via the ATM network, with HSBC and First Direct on board.
That partnership helped establish a route map for the future. For an entrepreneurial company, working in the arena of banking and telecoms requires partnerships and, in addition to establishing the credibility of the company itself and its technology, Monitise also had to present itself as a non-threatening niche player. “We were in the middle of an industry that is characterised by very aggressive and competitive businesses,” says Alastair. “What we had to show was that we were offering something that was complementary to what they were doing.”
Monitise has proved itself adept at partnership. In the years following the LINK deal it has struck agreements with most of the major British banks and global credit card group Visa, while also entering into joint venture agreements with companies such as Metavante in the US and First Eastern in Asia.
While the approach taken by Monitise has been to some extent dictated by the realities of working in the interface between banking and technology, many of the challenges the company has faced are common to most ambitious businesses.
“There are very distinct phases that a business goes through”, says Alastair. “In the first instance, you need a concept and you need to validate that concept. From there, you move into the commercialisation and growth phases. What you work towards then is either an exit or sustainability.” And of course, the question facing many businesses is how to finance the journey that leads to that final phase.
Alastair acknowledges that businesses at the start-up face particularly acute problems because finding friends and family investors or a business angel is seldom easy. But, as he observes, funding can be equally hard to come by at the point when a company is bringing a product to the market. “At the commercialisation phase you are looking at all the practical issues, such as making the margins work and managing the supply chain. That may require substantial investment and at the moment the UK is not great in this regard.
Investors seem to require absolute proof that a product will be successful. We don’t really have the venture capital (VC) community that exists elsewhere.” Nevertheless, Alastair says Britain’s relatively small VC community is not the only game in town. “An alternative is to look at corporate ventures – businesses that invest in young companies – or joint ventures, as a means of funding commercialisation.”
Growth finance can also be hard to come by and Alastair welcomes Santander’s Breakthrough Initiative in its stated aim of providing ambitious entrepreneurs who are already experiencing rapid expansion, with the funding to move their businesses on to the next level.
But the obstacles to growth are not solely financial. Yes, the funding has to be in place, but as Alastair sees it, entrepreneurs should also be looking at the current team and asking if managers have the right skills and qualities to take the business forward. And, in particular, entrepreneurs should be honest in terms of their own skills. “If you look at a typical business, there might be six verticals, including finance, sales, distribution and marketing,” he says. “A company founder won’t be able to cover all those verticals equally well. So the founder should be prepared to bring people in to cover the gaps. That can mean bringing people in who are smarter than you.”
Bringing new people in at senior levels and giving them room to make their mark can be a difficult psychological hurdle to cross for owners who have hitherto ruled the roost. However, it can bring real benefits. “When you bring in talented people, you learn from them.”
Alastair is also a firm believer that more entrepreneurs should stay the course in terms of remaining with the business until it achieves its full potential rather than taking an early exit. He cites Facebook founder Mark Zuckerberg as an example of someone who has grown his business from university project to multi-billion dollar enterprise while remaining in the driving seat. “In Britain a lot of owners tend to sell out before the business gets really big,” he says.
Alastair’s own ambitions are to stick with Monitise. The company is already a leader in its market and with further global expansion on the horizon there is more to come.
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