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Bootstrapping to $20 Million From London: Guy Mucklow, CEO of PCA Predict (Part 7)

Posted on Monday, Sep 12th 2016

Sramana Mitra: What year are we talking when you became profitable?

Guy Mucklow: It was four years after we started, so 2005. It’s interesting because it begs the question of going down the VC route or bootstrapping. Increasingly, a lot of tech entrepreneurs that I meet who have taken funding regret doing that. I know you’re in the game, so you see the value of it.

Sramana Mitra: In our program, there is a very clear philosophy that you bootstrap first and raise money later, or not at all.

Guy Mucklow: I think that makes total sense, because I have seen so many startups start with a view of almost a load of mud, throwing it at a wall, and seeing what sticks. They’ve not been very pragmatic. If you’re living off your own capital, you are more careful about it.

Sramana Mitra: Let’s try to accelerate and cover a bit more of the story so that it’s a complete story. What is the next major strategic move or inflection point where your business accelerates and what was the driver?

Guy Mucklow: Over the next seven or eight years, we continued to build on that business. We grew our head count relatively slowly primarily because we were self-funded. We look to not only try and drive that self-service approach but also to establish our presence in the e-commerce market. During the course of those eight years, we added different data validation services.

We also experimented around a couple of other business models that we thought would be appropriate for us. We developed a root optimization solution, which we probably spent about half a million dollars on. That went nowhere, but we learned a lot of lessons from that. In 2010, we started development on the new search-based technologies. We launched that in 2012. We looked to use that to drive international growth in the business, but it has been fairly slow-coming.

Sramana Mitra: It’s your core business that drove the seven or eight years of growth.

Guy Mucklow: Pretty much.

Sramana Mitra: We are now talking 2012. What kind of revenue level did you get up to?

Guy Mucklow: We would have been about a $7 million business.

Sramana Mitra: What happens in 2013 to 2014. Did anything change?

Guy Mucklow: Our technology existed in a fairly mature market in the UK. We have a dominant share of the online market. The product is incredibly sticky, so that’s great in many ways. It does mean it’s much harder for us to displace the number one competitor in our market, so we looked to international growth, specifically in the US.

At the same time, we also recognized this key challenge which is, we have only a skin-deep relationship with our customers. What can we do in order to develop a richer portfolio of services to capitalize on some of the 10,000 odd customer relationships that existed then. We were incredibly fortunate in many respects that we have got a huge number of customer relationships. What can we do to capitalize on that and become more embedded in our customer’s processes – to increase the average revenue per customer from $500 and double that.

We set up, within a business, a Big Data business called That looked at predictive analytics and how that can be applied to improving the customer experience, particularly in the checkout process. We, obviously, had a major presence in the checkout area. What could we do to use some of the data that was being harnessed from the tags that we had on our customer’s websites to enable us to read some of that on-page data and be able to do something really useful with it.

We got approached, midway through 2015, by an M&A guy. We were looking at two core strategic options – focus on bringing the two businesses together or to separate the two and focus more intently on doing both jobs very well. That resulted in a series of offers from both private equity and also from two trade buyers. The best trade buyer offer was around $100 million. Bearing in mind that myself and my co-founder owned most of the equity, it was quite appealing.

On the other hand, we also recognized that we were losing control of the situation. There was a much bigger opportunity. Rather than looking to separate the two businesses, we needed to bring them much closer together. On the one hand, we have 11,000 customers who have huge amounts of data that we could take advantage of with the new services that we were looking to build. That is what led to our pulling out of the sale last Christmas and moving forward with a business that actually is looking to do those two things.

There are two core elements to our strategy. One is about wider geographic expansion with our core bread and butter services and selling those specifically to the US market. The key objective there will be ultimately to find a wider set of buyers. The second core objective is to become more deeply embedded in our existing customer sets. Rather than generating the equivalent of $1,500 annual equivalent revenue with those customers, we will be looking at doubling that over the course of the next five years. That is it in a nutshell.

Sramana Mitra: Where are you revenue-wise?

Guy Mucklow: We’ll do $20 million. We’re growing at 20% annually. We’re looking at increasing that growth rate to 30%. Just to look at one of the other questions you had about team building and strategy, we have an equity scheme in place whereby my co-founder and I are releasing up to 10% of the business. This has some great tax incentives in the UK market, specifically the enterprise management incentive scheme where we are looking at using that to provide incentives to our employees.

I want to get to a position where, in the next five years, that $100 million has grown to $400 million. I would like to think that I can give 10% of that or more, as the case may be, to my existing employees. The way that we’ll drive that valuation is to double our EBITDA and also transform the business from being a pure data quality play, which is largely what we are at the moment, to being a business that is best known for it’s predictive services.

Sramana Mitra: Thank your for your time.

This segment is part 7 in the series : Bootstrapping to $20 Million From London: Guy Mucklow, CEO of PCA Predict
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