Oliver Palmer helped start a mobile app development agency in Sydney, Australia that built simple apps for early mobile phones. When the iPhone launched, Tigerspike grew very fast by creating branded mobile apps for large companies with its high-end design and development services. Tigerspike grew into a large company with 400 employees and offices in Sydney, Singapore, New York. and London.
Tigerspike also created its own software product—a mobile application development platform with subscription fees—to try to transition into a product-based company to grow faster with VC funding. This was difficult as they prioritized their urgent custom software projects for big clients and chronically underfunded their software product development
Tigerspike eventually raised $11M of outside funding from strategic partners and kept growing. The software platform also grew, but Tigerspike never made the full transition to a product-first software company. They sold the company in 2017 for $85 million. Oliver is open about their vision and their challenges as they grew Tigerspike into a large and successful global company.
Best quote from Oliver:
“When we finally sold the company, we knew it was the right time. None of us were thinking, ‘Gosh, let’s give it another year,’ or ‘Let’s hold on for two more years.’
“We felt that it reached the end of that. There was a lot of consolidation in the mobile industry and many of our competitors had been bought. We’d seen some get not-great deals and we’d seen others get really good deals.
“All of the founders were in our late forties and not ready to retire completely and do nothing. But it gave us long enough to try something else and to be there for the next thing if we wanted to. Or we could decide we just wanted to sit back and play golf.”
Edited Practical Founders Podcast interview with Oliver Palmer, co-founder of Tigerspike
Greg Head: And we’re live with Oliver, one of the co-founders and former leaders, since you’ve sold it here, of Tigerspike, a pretty sizeable Australian company, funded and sold. Welcome to the Practical Founder Podcast, Oliver.
Oliver Palmer: Thanks very much. Good to be here.
Greg: Well, you don’t have a precise Australian accent. You’ve been wandering around a little bit here. Let’s just start with that, Oliver.
Oliver: Absolutely. I am originally from the U.K., from England, and I went traveling, traveling around the world after university and I got as far as Sydney in Australia and I never left. I arrived here in ’98 and I’ve been here ever since. And I really enjoy it here in Australia.
Greg: Yeah. The first hint of your entrepreneurial leanings, which is you can wander around and become an immigrant and start over and do that here. Let’s just start with your venture, Tigerspike, which went on for a while. It’s been a little while since you’ve sold it, but that’s what you’re known for. Leta’s just start with what Tigerspike was by the time you sold it, which is, I guess, 2017?
Oliver: That’s right. So I guess sort of starting from the end, when we sold in 2017, we had eight offices around the world, there were 400 staff, and we were predominantly focused on digital transformation. That was our thing. That was kind of the buzzword at the time. But we were really a sort of mobile and digital kind of development house. We built high-end applications for large companies around the world. A lot of people, when they were focusing on how to move from traditional web-based sort of software solutions and looking at how mobile could create efficiencies or solve problems with remote workforces and do things more efficiently using tablets and mobile devices, we came in as originally initially sort of consultants who would offer kind of practical advice about how to do things. And then also we had a team of very talented… mainly a UI/UX team. We had a big UI/UX team who could design really fantastic, efficient, wonderful mobile applications. And then a development team which would would put those into practice and then deliver them to our customers.
Greg: Right. And the reason we’re talking today, there’s all kinds of development shops all over the world these days. It’s a modern thing. It wasn’t so modern and typical when you got started, but you had kind of a technology platform play there and you actually raised funding, which almost no services agency slash development shops do. So there was like an interesting part of the journey there.
Oliver: Exactly what we did. I mean, I guess just sort of taking a step back and sort of where it all started, that was very much where it ended, but that certainly wasn’t what we set out to build. So we started in 2005. We were actually creating ringtones back in the day when ringtones were a big deal.
Greg: Back when phones rang, mobile phones rang.
Oliver: When people used their phones to call each other. They weren’t texting and they actually wanted an interesting ringtone. So my business partner was a partner at KPMG, but he was also the lead singer in a band and he had worked at how to create some ringtones and we were selling them to a business in Australia which was doing promotional marketing using sort of mobiles and selling the ringtones. And we were sort of the primary producer. We would sell the ringtone once and then they would sell it on those premium rate numbers for $5 a time. So we’d get our sort of $20 for a ringtone, and then the company we were selling it to would sell it hundreds and thousands of times to kids who were paying $5 a pop.
Oliver: And so through that we sort of learned a little bit about mobiles. More mobiles would come into the market, sort of 2005, 2006, and we ended up hiring two graduates from a university in Australia who were doing a computer science degree. We got them to write a game for one of the first color screen phones that came out, one of the Nokias that came out and that was our first sort of foray into something more than just ringtones.
Oliver: And so we were sort of plugging away. Before the iPhone launch there were many different devices out there. There was there was no real dominant handset; there was Siemens and Motorola, obviously Nokia. So whenever you built an application or even a ringtone, you had to create 20, 30, sometimes 40 different versions of it for each of the different handsets in order to get the kind of market penetration.
Oliver: So we were always talking to third parties about what we could do. We built a game for Coca-Cola called Fanta Man. It was sort of a take on Pac-Man. You walked around, you controlled the thing which ate Fanta bottle tops, sort of ad for gaming as it was, and it was for a new flavor of Fanta that they launched in Australia. And it was interesting that almost 50% of the budget was used to port the game to all the different handsets, which was a real challenge. And it meant that it really held mobile advertising back because you just couldn’t do one thing and then hope to get everybody.
Oliver: So we built a bit of a reputation for being in mobile and being the mobile guys, and mobile budgets started to expand. And in 2007, Apple launched a little device called the iPhone. And we were sort of known as the mobile guys, and suddenly everybody had to have an app. We created a couple of our own, but we were never really good at marketing or advertising our own stuff. We always, as I mentioned to you before, had this sort of follow-the-money type approach where somebody would pay us to build an app for them, then we would do that.
Greg: Oliver that’s like the service’s drug, right?
Oliver: That is exactly it. You get addicted to the money. And we were quite fortunate. We bootstrapped since 2005. We hadn’t raised any money, but we were making enough money. We’d sort of got an office and we got to 15 staff or so building mobile apps and mobile marketing kind of campaigns with all the major carriers and big companies who were just starting to see the value of mobile.
Oliver: And then when iPhone came along, we started to see that this was becoming the dominant platform. And there were also a lot of sort of common elements that went into building an app. You had to have a login page, you had to have a find password page, and the location was starting to become a big deal. So we sort of built this platform, as you alluded to before, which had the sort of standardized components of an iPhone app that we could very easily stitch together, use sort of the iPhone as a front end and connect into these elements of our platform, which meant we could much more quickly get your applications into the marketplace. If you said, I want an iPad app that is for a series of concerts or something, instead of having a sort of three or six-month development cycle, we could take that down to four or six weeks, and you would pay as a subscription fee for using our platform for those elements. So you’d pay a certain amount per month for using location, a certain amount per month for using the log-on, the retrieve password piece, all those sorts of things.
Greg: It wasn’t just reusable code that 50% of every new app is the same underlying code for login management and so forth, you actually had a platform that the app kind of connected to and it was separate software.
Oliver: Corre.t That’s exactly what it was. And that’s where we sort of moved into the early SaaS kind of model in that we were charging people. It tied them onto our platform. It meant the application kind of work as long as it was on our platform. Some companies kind of bought into this, they loved it, it was great and they were happy to pay the subscription fee. It was all tiered based on the number of users and that kind of thing and classical. And other people just wanted a standalone app, they wanted to pay us the money and build the app. And we sort of definitely didn’t turn anyone away. You said the addiction to the services revenue was the key.
Oliver: So when we went to raise money, in 2010 we looked at raising money in the States, and we went around Sand Hill Road in Palo Alto. We finally closed our Series A in 2011. And it was fascinating hearing VCs talk about our revenue because about probably 30% of our revenue was really good, repeatable subscription locked-in revenue, and 70% was this kind of like services revenue that we would talk about being long-term and they’d always come back to us and blah blah, but they would just disregard that. That wasn’t interesting to them.
Greg: They heard the services business lower margin. You know, back then SaaS was still relatively new, so not everything in software was, “And then we have recurring revenues that go on forever and a churn rate and so forth.” You kind of looked like a service business with some technology as opposed to a technology business with SaaS revenue with implementation services at the time.
Oliver: Exactly right. And it was interesting when we spoke to the VCs, we’d have this sort of line around how everybody needed to come back to us because the iPhone was being updated every year, Android devices were coming onto the market. There’d be a new version of iOS, which means that we sort of talked about this sort of long-term subscription and that they might spend $100,000 on an app with us, but then the next year, they’d come back and need to work on iOS 8, so they’d need to spend another $20,000 with us. But that didn’t really fly with the VCs. And a lot of them said to us, “Look, we love it. We think it’s a brilliant business, really great. And if you can flip your revenue so it’s 70% subscription and 30% this kind of services, bespoke stuff, we’re all in.” Whether that was a sort of a… you always get lots of excuses from VCs, but we heard that enough times to think, “Hey, maybe.”
Oliver: And one of the things, just to sort of carry on that story, we actually set up a separate office in Sydney that was focused completely on the platform. It didn’t do any subscription, it didn’t do any services revenue, it wasn’t beholden to anyone else.
Greg: Don’t even talk to the services guys. The service guys can’t walk down the hall and add a feature, right?
Oliver: Well, the biggest problem was that as soon as a big contract came in, we won some big contracts with one of the banks in Australia, and we needed developers. We had to put developers on this to service this customer, and suddenly we’ve got three really talented guys working on our platform over here, which is eating up our money. And we’ve got a big job over here that’s three developers short, and we’ve got to deliver to deadlines. And it was that tension between servicing our customers who were paying for an ever-expanding workforce and offices around the world, and then trying to say, “Hey, we’ve parked this money, we’ve put $3 or $4 million aside to build this platform, and then suddenly we need those developers. And iPhone developers or sort of J2ME people were kind of falling away and it was hard to find talent.
Greg: So is that why you wanted to raise money so you could fund the platform? It was always the starved business unit that wasn’t as urgent.
Oliver: Exactly. And that’s what resonated with the VCs because they could see that if we got the platform bit right, even though it was a smallish proportion of our revenue today, it was a use of funds that resonated well with VCs, and that’s an important thing to have. If you’re just saying, “Oh, I’m going to spend more money on marketing and I’m going to hire more staff,” it’s sort of, well, you know, okay. But if you say, “Hey, we sort of nutted out exactly what we need to build and we think this is going to be game-changing. We’ve proved that we can run a business. And if you take a stake in our business and help fund this piece, kind of the sky’s the limit.” That was our that line to the VCs.
Greg: Yeah, yeah.
Oliver: The biggest challenge with that, though, is that it comes down then to valuation because you’re sort of saying, I think we raised $11 million but, “Give me $6 or $7 million,” or whatever and they’re saying, “But we want a large portion of your services company as well because you’re not getting that kind of 10 times or 10x multiple that you really want, that you would have had you built the product in the first place.”
Oliver: It just becomes very much… we spent all our time trying to convince people that we were a product SaaS business and it was going to be amazing and we didn’t really care about the services revenue, but we were saying, “But by the way, we’d like you to value us on a multiple of all of our revenue, even though lots of it is services.” It’s very hard to pull the wool over VCs’ eyes, I have to say.
Greg: See you were pitching VCs, but you were also selling, so you guys were pretty good at selling. Not everybody can knock on the doors of big global companies, Coca-Cola, and I know you did an economist app company based in Australia, were able to sell companies around the world. You had some superpowers or high capabilities to sell this, you weren’t the only one?
Oliver: I think a lot of it was that sort of first-mover advantage. We built a reputation in mobile. We had sort of, where other companies didn’t, the sort of the classic outsourcing companies, the WhitPROs and the Persistent Systems and those guys…
Greg: Everything for everybody.
Oliver: Yeah. And they were kind of back end and it was all about bums on seats. And we were turning up with, you know, mobile was the future. And I think every year was the year of mobile from about 2005 for us. It’s still the year of mobile. And the other thing that I think played to our advantage was mobile emerged at quite different stages in different countries around the world. In Australia, early adoption, and so we built quite interesting in the way they were doing things. And then we took things to the U.K., which was a little bit behind and they were sort of blown away by some of the stuff we did. And then in the U.S., it was the same with cell phones. In the U.S., it took quite a while, things like you paid to send and receive SMSs, so it was expensive. SMS marketing didn’t really take off. So a number of things sort of held the U.S., back a little bit, and then when the iPhone launched, we were already there showing off our wares. We opened up our office in New York in 2008. And so we had some great examples of what you could do just as everybody started to realize that mobile was there. So there weren’t as many people knocking on the door, and a lot of people sort of saw some of the things we did and some of the marquee customers that we had and said, “We want a bit of that as well.”
Oliver: So we had a lot of people coming to us to build things, which meant we were able to kind of hire quite quickly. We were exciting and fun, and it was before the Essentias and the Deloitte digitals and everybody really got into this. I mean, they’ve recently been acquiring all sorts of companies and marketing businesses as well as mobile, and we were sort of at the forefront of that, we had that technical digital piece. And the other thing was that, as I said, we focused so much on the design. The UI and the UX people were the heroes in Tigerspike. They were the ones who brought things to life and could distill down kind of complex workflows and information into a very small screen and make it sort of really, really pop for the customers. And everybody liked that.
Greg: Now, you had a couple of other co-founders in this business. Was one of them the magical designer, another one was the technical engineer, and you were the sales guy? What did that look like?
Oliver: So there were four original founders. Luke and I sort of started the company, and Luke was a partner at KPMG, sort of chartered accountant, but also a musician in a band. He was also the world whistling champion. He won the World Whistling Championship in North Carolina in 2008, which is his other claim to fame.
Oliver: I can go in and talk to people about what the solution can do and how wonderful it is, and mobile is the future, and you can do things with this device that you couldn’t do with the traditional web, and it was going to change everything, but I was incredibly bad at telling people, “And that’s going to cost you an awful lot of money.” I would just want to do it and build it and get on with it. And Luke was very, very good at saying, “Everything Oliver says is true. It’s great. And here’s the invoice for the $50,000 it’ll cost you or the $10,000 for us to come up with a solution in the first place.” That commercial aspect is something that is invaluable in startups.
Oliver: And then I guess the third part of that was Dean, Dean Jezard, who was our CTO. He and I worked together since ’99. He’s a very talented web developer. I would sort of put systems together, but he would build amazing stuff and he has that design skill. He’s a developer and a designer, and he would just sort of single-handedly build stuff to demonstrate or to kind of show to customers what it was going to look like.
Oliver: So the three of us kind of started, but, one of the things we were rubbish at was marketing and telling the world about what we did. We were good at those one-on-one individual conversations. So Alex Hall came in, he came in about six months after we started into the founding team, and he was really good at getting the name out there, getting Tigerspike sort of front and center, whether it was articles about mobile, whether it was just a targeted campaign so that people actually heard about the things we were doing. And we sort of moved around the world. So I went and ran the Singapore office for a few years, Luke and Alex went and ran the office in New York because we really saw the U.S. as a huge opportunity for us, and Dean sort of bounced from different offices as the CTO looking after all the tech side of things.
Oliver: About a year before we raised money, we recognized that we’d gotten to about 20, 30 people, and none of us were particularly good at that scaling piece, that piece where you’ve got to put in the management team and you’ve got to bring in people who report to other people. And so we hired a chap called Alex Burke who is now a very successful CEO of a company called Education Perfect, but he was the CEO of Tigerspike. So he came in initially to run the Sydney office when we’d opened up other offices and we were all leaving. But he is an incredibly talented business builder and operator. So he builds incredible teams and can expand them and keeps growing and growing and growing. And I think it wasn’t a skill that we had and allowing him to do that and grow to the 400 people it was when we eventually exited, it just wouldn’t have happened.
Greg: What was that decision like for four founders to say… I mean, you were kind of frontiers people, you might say first mover advantage, but you were doing mobile software development like four years before it was cool and obvious, right? And then you realize we’re going to raise some money, we have the software element, we can get much bigger. Interesting decision to say, “All right, you get to run it from here because it’s a different sport,” or?
Oliver: It’s really interesting. I mean, it was more of an evolution than sort of a conscious decision, I’d say. The interesting thing was we sort of divided the world up into three. We had Europe or EMEA, as it’s called, Europe, Middle East and Africa. We had Southeast Asia, Australia and New Zealand, and then the U.S., and that was our sort of three things. And we had a sort of a GM for each of those regions. At the time we had about 20 staff, so it was one of those sort of global, one of those global roles…
Greg: MVP titles.
Oliver: Yeah, right. It was a bit of a weird one. And so we had Alex Hall, the marketing guy I mentioned, Nick in London, and we had Alex Burke who we’d brought in in Sydney, and they were sort of good operational people who were really just running those individual offices as general managers. But Alex really sort of had grown an incredibly solid team, his revenue numbers, and it was interesting because he was instrumental in the exit of the business as well, because when somebody comes to buy you, they want to know a whole bunch of different things than sort of the first mover, the kind of the entrepreneur people. They don’t really want to know about us anymore. They want to know that they’re buying a really solid business with revenues…
Greg: A machine, a factory that could run without anybody, these people.
Oliver: Exactly. And we’re not the factory people. We’re the guys who want to kind of look at the land and say, “Hey, that’s where we’ll build a factory. Doesn’t it look great?” And then hopefully somebody else will come in and build it. And I think that’s one thing that’s really interesting when you reach a point where you are having those kinds of exit conversations. It’s about how to get the most out of different people. Because yes, it’s yours, and you’ve been there from the start and you want to sell it, but people aren’t buying you. You’re out the door effectively. We sort of managed, we negotiated that we all left on day one. So we didn’t have an earnout period, which is quite unusual.
Oliver: And the reason for that was because we sort of said, “You are buying the factory.” It’s exactly as you said. It’s not about buying the vision that Oliver and Luke and Dean had necessarily kind of had 10 years ago, you were buying something that was real and here and now and doing lots of things. And mainly the staff. They really wanted the staff. They wanted to make sure they kept the staff and everything kind of carried on as it was. Not some sort of crazy new frontier that the entrepreneurs decided they wanted to leap towards.
Greg: We’ve skipped a couple of things here. Let’s talk about the funding. You went to Silicon Valley, Sand Hill Road, and they didn’t quite buy it, but you did raise for this platform vision, this mobile innovation, technology services and software growth company. Who actually funded you when you raised money?
Oliver: Dentsu Aegis, which is a global marketing advertising company like WPP, that sort of group. And they were just getting in. They saw it as a mobile advertising platform that they could use effectively amongst their huge customer base. So they would be, everybody would be advertising with them. And they saw mobile as a key component of it. So they had quite a hands off approach. They wanted the platform because they wanted to be able to sort of sit it alongside a sort of web advertising platform and just churn out applications for their customers.
Greg: So that’s a strategic investor, right? It’s not a classic fund investor. They’re saying, “Instead of just buying you, I’ll help fund you and we’ll have a special relationship. We could see how this could really help our company,” right?
Oliver: Yeah. So we had three people bidding for the initial investment. We spoke to, it must have been 80 companies. We had two VCs, one in Australia, one in the U.S. and the strategic. And the biggest challenge was valuation. So we used an advisor out of San Francisco who was amazing. Carlos is just one of our lifelong friends now. That was kind of interesting because if you go with an M&A advisor to a VC meeting in Silicon Valley, people are like, “Well, what’s this guy doing here? He’s just taking money off the table. There’s no point. Just turn up and tell us your story.” But our feeling was being in Australia, we just weren’t on the ground enough to know what was going on. So that was the sort of story. And Carlos was amazing at positioning us effectively and putting the target list together. And he stayed with us right the way through, so he assisted on the second raise.
Oliver: When sort of term sheets came through and one of the VCs in the U.S. kind of pulled out quite early on in the piece, the Australian guys were super keen. That was Ellerston Capital here. They were really keen, but they couldn’t quite get to the same valuation we had from the strategic just because they wanted to be a part of it. And we sort of, ummed and ahhed because our fear was that if we went with a strategic, would that kind of push us down a path we didn’t necessarily want to be if we’re sort of tied to Dentsu.
Oliver: So we limited the amount. They didn’t take a majority stake. They only came in at 25%, which is quite rare for those sorts of things. But it mainly came down to valuation. Well actually, it all came down to valuation in that we got a much, much better valuation from a strategic at the time. And then that was brilliant. They had a seat on the board but they really left us to get on with it. They were focusing on their bit. They introduced us to their customers and they wanted the technology in place and we kept sort of working on the platform and building the platform and then putting it in front of them. And it sort of just sort carried on.
Oliver: And then mobile advertising went down a slightly different path, and we kind of stuck to our building of large-scale applications for corporates, and that digital transformation, sort of 2012, 2013, 2014 was really where mobile became less of a nice to have, okay, I might look at a website occasionally and I might start reading something and it started to become part of what you used for work.
Oliver: We’d been going along fairly well but we sort of thought it might be time to start thinking about an exit and some sort of opportunity to change. Not that the business had outgrown us, but we realized we were adding less and less value. We’d forged the first path and we’d decided how it was going to be, and then it was becoming operationally a lot bigger and a lot more of a machine than we’d ever really envisaged. And so we started looking at certain things, and we felt that if we had a financial investor on board, that would kind of spur. They would want to exit in 3 to 5 years, and that would kind of really push us into getting the best value that we could.
Oliver: So we ran the whole process again, and again it came down to valuation. We had some really interesting people with interesting conversations with people in the U.S., but there was a boutique investment fund here in Australia that kind of really saw the potential for where we could go. And Australia’s quite conservative with investment. They don’t like to take too much risk and we were sort of the moonshot for them. We were the kind of the swing for the stars kind of thing. And that worked pretty well. So they were looking for an exit in 3 to 5 years. We went perhaps a little bit quicker than they would have liked, but at the end of the day in a very short space of time, they made a decent return on their money. We ended up exiting in July 2017. Sorry, I should say we did a strategic raise, a financial raise and then an exit.
Greg: By the time you exit, so you grew from the scrappy 20, 30-person team to 400 people, did the software platform, the software story side expand to become the 80%, or?
Oliver: Unfortunately not. I’d love to say that we’d put our heads down and we kind of went away and built something that really kind of took over and cannibalized the rest of the business. But like you said, that services revenue addiction is something that’s very difficult. Phoenix was the platform that we used, and it was a core component of almost all of the applications that we built. It became the way in which all of our developers built their applications and they used it, but it was just never something we kind of commercialized in the way we’d envisaged and in the way in which sort of today SaaS platforms do incredibly well.
Greg: Other developers could use it and get the leverage they wanted and that kind of thing.
Oliver: Exactly. And that was part of the thing, was to open it up, kind of allow third parties to develop on top of the platform. The challenge was that mobile evolved very rapidly. The first few years when we built our platform it was and here was how you did location and here was how you did userprofiles and all that sort of stuff. And then within a couple of years it was just much, much easier to do on the fly. A lot of things were built into the device, so the platform sort of didn’t quite become obsolete, but it just became something that was difficult to charge a certain amount of money for each month, because you could say, “Well, why can’t I just do it like this, if I build it this way?” We didn’t want to sort of tie someone into a platform when it wasn’t adding any value. I think that was the challenge. We were constantly trying to sort of keep up with what was happening in terms of technology and hardware.
Oliver: It’s gone very much the same way as all software development. Initially, it’s kind of a few guys hacking stuff together and sticking stuff up there on the web and making it look great, and now it’s sort of teams of 20, 30 people building marquee apps for $500,000 or $600,000 a time. So it’s amazing.
Greg: So what I’m hearing is that you were first to mobile. When mobile took off, everybody was like, “Well, who’s the top?” And you guys were already there. So you had the first mover advantage, first to the leadership position there. But on the software side, maybe early and it didn’t materialize like you thought it might. I’m sure it was a piece of your business going forward.
Oliver: If we had purely focused on the product… A couple of times the opportunities where we might have said no to, you know, not moved our developers from the product side onto servicing the bank and kind of not won that job or that hadn’t gone quite as well and focused on the platform and then kind of really doubled down on that platform piece, it would have been challenging because our problem was not only were we addicted to the services revenue, as you mentioned, but also we had quite a lot of staff, we had quite a lot of overheads, that sort of thing. And we’d raised money, but we hadn’t quite raised enough money to cover… Our runway certainly wasn’t a couple of hundred people in two or three years. Our runway was a small sort of 6 to 10-person office focusing on building a platform for sort of two years. That was kind of what we’d raised money for. And even though there were no limits on what we could spend the money on, that was how we kind of tried to focus.
Oliver: We never switched off the services. We were caught between the two. If we’d raised lots more money and could have funded the whole business from VC and not have had to worry about cash flow, then we might have been more focused on the product. But because we had to have this services revenue in order to keep the lights on, it meant that we never really had our backs to the wall with a product. We knew we could always go and win another contract with somebody else. We could always get that next job.
Oliver: That was the challenge of when you start out as a services company. It is so, so hard to become a product company. I think if you if you are a product company and there’s a little bit of services revenue, but you know you’re always a product company, then you’re sort of all right. But if you really are a services company to start with, which is what we were, and then you sort of have this brilliant idea and you do your best, we raised money for it, but we never really became the product company that we kind of envisaged. Like you said, it worked out really well and it was great and it was awesome, but that’s something that I look at now. And people come to me and talk about, “Hey, I’ve sold this a few times, an early stage business, I’ve sold it a bit,” and you look at the product they’re building and you decide, is it a product, is it a real product business that you’re building? Are you going to have SaaS revenue or are you going to do services?
Greg: Look at you, acting like the investor.
Oliver: Exactly right. I mean, I’ve heard it so many times. Looking back, I mean, we were a little bit naive because we had all these charts showing our subscription revenue and where it was going. The moment you sort of peel back the covers a little bit and you say, “Well, that’s definitely services revenue and that’s also services revenue.” I think you’ve got to… If you want to build a product company and be in that game, like you said, like a bunch of the people on your podcast, if you could do that from the outset and even if it’s harder if it means you can’t sort of hire those three people that you always wanted because you’re not going to take that services contract over there, I think that’s the way to become a product company. You have to be very, very disciplined.
Oliver: We tried it and we did our best. We had a separate office and it was down the road and it was completely distinct and we had VC money to do it, but we still couldn’t turn the entire ship to become a SaaS product business. We sort of kind of moved it slightly to the left, but we certainly didn’t manage to turn it all the way around.
Greg: Well, we talk about the services revenue, cash flow-profit drug. There’s also the funding drug. You were bootstrapped and you funded it and you went through the process there. You decided to grow fast. When you sold it, did the investors win the prize and did you get enough of a premium from this services product, hybrid company of size that the math worked out? The founders won the prize and the employees won the prize and the investors won a prize, or were you able to get that kind of deal that was a success?
Oliver: I think so. I mean, it’s an interesting question. It’s public knowledge what we sold for. I mean, we sold for $85 million. So the strategic investor had 22%. I think they diluted slightly. We only sold founder’s stock. We had no preference on any of our shares, which was one of the reasons that the U.S. financial investor pulled out initially was because that’s what we said. Our advisor said to try it, roll the dice and see what happens. We were convinced that nobody would take it. But both the Aussie investor and the strategic investor were happy to take founder’s ordinary stock, which was a big deal because there are a lot of horror stories of, you know, one time, two times 3x preferences…
Greg: Yeah, yeah.
Oliver: And for us that was a key part of the negotiation. So that meant that when the sale happened, everybody just sort of divided the spoils, which made a huge difference. So I guess the financial investor who came in in 2015, they wanted us to a bit more runway. They wanted us to stick it out for a few more years. And so they invested at a price, sort of not as far south of what the exit is than perhaps they would have wanted. But they still got a reasonable IRR because it was a good return on their money. So they were probably not as kind of blown away. They didn’t want to make three times their cash. They were sort of thinking, “Hey, if Tigerspike does what it says on the tin, then this will be like a 50 times our money sort of thing.” And we sold two years later for two and a half times their money, which was a great result, but it wasn’t the reason they put money into us in the first place. They weren’t thinking, “Oh gosh, let’s hope I get my money back plus X,” they were thinking, “Gosh, I want at least 10, 20 times my cash.”
Oliver: That was a challenging part of the negotiation because we were ready to leave. And so it was our job to sort of convince them as a financial investor that it was the right time. They’re getting a good return, it might not be quite the sort of astronomical moonshot that they’d hoped, but it was a good return and they saw it that way as well, which worked out. It all worked out in the end. So everybody did very well. We negotiated quite a substantial retention bonus for the staff as well, which was on top of the sale price. So it was actually just under 100 in total, but 85 to the shareholders, which meant that we had an options program and that all rolled into a staff retention plan. And a lot of the staff were still there two or three years later, which was really good. It’s great. I mean, Concentrix is winning all sorts of awards for their employees and they’ve done phenomenally well by Tigerspike. They’ve opened up other offices, and that’s been great.
Oliver: But it was quite strange, sort of literally August 1st not having a job because we pre-signed all our resignation letters. And suddenly that was it. It was being run by somebody else. And it was quite interesting. It felt like a natural conclusion for us. We did very well out of the deal. We were in a place that we hadn’t really sort of thought we’d get to in that time. And for a while, I was just going to play golf and not do anything. But that’s kind of not practical. You’ve got to carry on and do things, which is where DQ comes from, which is about helping startups, I guess.
Greg: First of all, congratulations. You grew up a company, you got the taste of the software, you got the taste of venture capital. You could look back and say, “I might have done something differently here,” but you actually grew a valuable company, returned money to investors, did well for the founders, did well for your employees, and you got to step off the ship at the right time. Most service companies that say, “I have this vision for a product,” don’t get there. And most startups who have a vision for a product don’t get there. And most funding that comes in doesn’t get to an exit that pays back investors anything. That’s why they have all the claws of preferred liquidation preferences and so forth. But what did it feel like when you signed the papers? Did the whole sales process, did the due diligence, handed in your resignation? Was that a big day for the founders, was that bittersweet or how did that feel?
Oliver: No, it was amazing. It was a phenomenal feeling.
Greg: Heck with the bitter part. Yeah, yeah.
Oliver: Yeah, exactly. We all felt, like I said, that we’d done what we could with Tigerspike. Whether rightly, wrongly, gone left, gone right, gone up, gone down. At the end of the day, where we were in 2017, it was the right time for us to step away. It was the right move for Tigerspike. There were a lot of bigger players coming into the market. The exit pitch we had was that, “Hey, the reason we’re doing this is that we’re losing out on deals that we know could win.” But Essentia comes in and says, “Hey, we’re Essentia and we’ve got 8,000 people sitting in India and we can build whatever you want.” And they would choose Essentia, whereas we knew we would do a better job with with 100 people or 50 people we might have on a development team, but nobody got fired for choosing Essentia, that was kind of the line we used to use IBM style.
Oliver: And so when we were speaking to potential exit opportunities for us, that was what we were saying. We talked about as being the tip of the spear. We’ll be the guys who go in and we can sell this phenomenal mobile solution, and budgets were expanding and getting into sort of $1, $2, $3 million for a mobile development piece, whether it was for banks or for trading platforms or that sort of thing. But we weren’t getting those $3 million jobs because we were considered too risky. We might be 400 people.
Oliver: And so a partnership with those kinds of companies made sense because there were lots of them who were sort of back end wasn’t being seen as innovative and as cutting edge in mobile, and we were. We were sort of the tip of the spear, the cutting edge, innovative…
Greg: Yeah, the sexy front end.
Oliver: Yeah, that’s it. That’s us. That was where we felt that it was the right time to sell because there’s a sort of a narrow window where we’d done all the cool exciting stuff in mobile, then we’d seen all the big guys here shooting arrows at us as being in the forefront. It was harder to sort of stay ahead from an innovation perspective with the size of the company that we had. We sort of had a big chat and we sort of sat down and said, “Right, if we’re going to sell it has to be now when we still can command a premium. We’ve still got real value, we’ve got good solid growth.” We were growing, top line revenue was really good. We had a path to profitability, which is what any startup whose trying to exit…
Greg: Here’s your funding and then here’s a slide for your next deck, our path to profitability.
Oliver: Always good to have a path to profitability. Our profitability was always low, mainly because we focused on being high-growth. We put everything back into the business, and that line works for as long as it works right up until it doesn’t. At some point you have to be a profitable business and you have to generate cash. And so we started on that and we were just sort of creeping up around that 18, 19, 20% kind of profit margin, which is really good, but it’s a more mature business, and it means consequently that you’re not going to get the same kind of revenue multiples. And so it’s that balance between do I have a 10% profit and I’m high growth and I’ve got an eight times revenue multiple or whatever it was, I think we were three and a half times or whatever, or do I suddenly focus on profit and then I’m trying to get a 20 times EBIT multiple to try and sell in that space.
Oliver: But back to your question. When we sold, we knew it was the right time. None of us were thinking, “Gosh, let’s give it another year,” or “Let’s hold on for two more years.” We felt that it reached the end of that. Lots of kind of consolidation in the mobile industry. Lots of competitors of ours had been bought. We’d seen people get not great deals and we’d seen some really good deals. And we thought that if we kind of put ourselves out there and got it right, then that would be the best thing for us. And it also meant that we were… all of us were sort of late forties. None of us were sort of ready to sort of retire completely and do nothing, but it gave us long enough to try something else and to be there for the next thing if we wanted to, or we could decide we just wanted to sit back and play golf.
Greg: What was it like for you? Were you always up in Queensland and Brisbane, the Gold Coast or do you move?
Oliver: Yeah, yeah. I mean it is interesting. I was never the CEO. I was sort of head of innovation and I was sort of always the special projects guy. I was always the guy that brought in to… So I never had lots of people reporting to me. And I think that does make a bit of a difference. I love ideas and my biggest thing is building. The first thing when I left I was like suddenly… If I’d come up with a new way of doing something, I could just walk down the corridor and I could speak to a couple of developers and say, “Hey, guys, I’ve got this idea for this thing on mobile.” And because I was the boss when I walked in they’d listen to me and we’d spend a couple of weeks and we’d build something and then someone would shout at them not delivering what they were supposed to do for a client. But then we’d have something new and it would look really cool and it would be… We were doing geo-fencing at the time where you could kind of map an area on a map and when you walked into that area, something happened within an app. The app would change. So if I happened to be on my app but I walked into a food court, then there would be a Subway ad. That’s a small example.
Oliver: The point being that I could command these two developers, I think it was two of them. They got really excited about it. I’d convinced them it was going to be great. We built something. We showed it to a client. They thought it was awesome, and the next thing you know, it’s part of a project that we’re doing. And literally on the 1st of August, I didn’t have anyone to go and ask to build these things. I had all these great ideas and I didn’t want to just set up a company and pay my out of my own pocket to fund developers for crazy ideas. So that part of you that can do that, that creative outlet suddenly can’t can’t go anywhere. That’s been kind of interesting. So I haven’t quite solved that yet.
Greg: I mean, this was a 14 year journey to grow this company and traveling all over the world, and sometimes you just need a little rest where you don’t have the quarterly number and payroll and all that kind of thing. Was there a life change there? Did you move and learn to play golf or, I don’t know. Like what was the biggest change that happened after you sold the company?
Oliver: Yeah, I mean, it definitely was sort of a time to step back and reflect. And I yes, I did. I started playing golf seriously. We were in Singapore at the time, so my wife had a startup there. So she had started a business a couple of years before we exited and she actually sold that back in November. So she built an e-commerce platform and she was very focused on SaaS. So hers was pure SaaS.
Greg: There’s another lesson, right? There you go.
Oliver: Yeah. And that’s one of the things we talked about a lot. She never took services revenue, she only ever charged for platform. And a lot of that was through conversations with Luke and I. I mean, she’s very focused and she’s now on a three year earnout though, because it was quite early on in the piece so she sold to Pitney Bowes.
Greg: Oh, my goodness.
Oliver: Pitney Bowes bought CrescoData in November this year. So she had her startup, which meant we were staying in Singapore. We weren’t going to go anywhere. She had about 15 staff at the time, so I was kind of looking after the kids and just kind of wondering what I was doing myself, playing a bit of golf. And she was working all hours at the time. So that was about sort of six months that I did that. And I wasn’t getting bored, but I had a conversation with a VC company called Investable, and they’re all about investing in early stage startups and one of the guys was like, “You can’t carry on like this, Oliver. You have to do something. You have to find something to fill your time.” And so I did the VC thing for a while. I became an entrepreneur in residence for them, and it was my job to find early stage startups in Singapore, Southeast Asia.
Oliver: And that was fascinating because I was suddenly on the other side of the table. I’d been the guy pitching to VCs. It had such insight, but I felt a bit of a fraud, because I wasn’t really a VC. And I felt that sort of the classic founder model is to start a company, sell it, and if you make a bit of cash, then suddenly you jump over to the other side and you become a VC. And I sort like was, “Well, who am I to judge these companies?” Like, I’ve built one business. And it’s great, and it was successful and it was really good. But that doesn’t necessarily mean I’m in any position to say whether, this e-commerce platform or this kind of SaaS company over here is any good.
Oliver: So my job was to really sort of just assess the people and try and understand what sort of individuals they were. Did they have what it took or what I thought it took? And then pass them back to Investable to their investment committee to understand more about the business. But the numbers are very difficult in VC. I mean, I saw 180 companies in nine months. Investable put money into two of them, one after I’d left. And I just thought, you know, those numbers are just… You’ve just got to see so many companies. It’s just about, it’s a volume game and there’s so many companies out there that that aren’t ready for VC, and for whatever reason.
Greg: Not everybody gets VC for the right reasons.
Oliver: Every VC has its own kind of criteria. The biggest thing was just were the founders in the right space. Did they have some sort of advantage over anyone else. They hadn’t just sort of come up with this idea last week and then started kind of creating something. There were people who had thought through the problem, understood that there was a genuine problem and then created a solution.
Oliver: Then the main thing for them was that they’d made 3 to 5 sales of their solutions. So that’s the point at which Investable got excited. So if you’ve just had an idea and you are sitting down with the VC, it can sound wonderful, but until someone else, some third party has said, “Here you are, here’s a check for your solution, whatever it is.” That was what they wanted. And there were some which had, you know, they might have already had ten staff and they’ve sold to ten or 15 people and they’re looking for a $20 million valuation. That’s beyond where Investable wanted to invest. They’re looking to invest at that sort of $3 to $5 million stage and they want to put in $500,000 to $1,000,000.
Oliver: So it’s a kind of a narrow window. But, you know, their whole philosophy was around getting people early enough that they get really good value for the capital that they put in, but also late enough that they’ve actually got a business. And there’s a lot of people who would talk to you who have a brilliant idea and a wonderful PowerPoint and lots of kind of market research and ideas, and everybody’s told them it’s great, but they don’t have a business yet. They haven’t actually gotten to the point where you can see there’s a sales funnel and there’s an opportunity to really scale that. And they are a lot riskier than someone who has actually started on that journey. And that’s what you’re trying to do as a VC.
Greg: Well, I’ve been telling people that and I’m helping VCs tell practical founders that. But you’re an entrepreneur and you had the suit on for the VC for a spell there, and that’s another reinforcement there. Get us a few customers, the traction discussion.
Oliver: Exactly. Exactly. I guess just to round it off, so I got a little bit frustrated with that VC piece because you couldn’t really offer advice. Your job was just to find them at the right time and move on. And that’s where, not to go into DQ, but just to touch on it briefly, that’s all about helping people get to the point where they’re ready for investment.
Greg: Well, what are you working on now? What is DQ Ventures?
Oliver: So DQ Ventures, like you mentioned before, it’s a venture studio, sort of like a sort of a Y Combinator. But we don’t work with cohorts. We work with individuals who have jobs, more mature founders, tends to be sort of people 30, 35 plus who have jobs but have an idea or want to start a business, and a business which is a VC style SaaS technology company, which they feel will solve a solution. And they’ve sort of worked in industry for a while, they’ve got a good idea of what’s going on, but they’re kind of getting to the point where they’re a little bit disillusioned with kind of working for the man for the next 30 years. And they’re looking for an opportunity to perhaps do their own thing. So DQ was started to assist those people to get that business off the ground, because if you’re 35 or 40 and you’ve got responsibilities and mortgage payments and kids in school and that sort of thing, you can’t sort of quit your job and live in your mom’s basement eating pot noodles for two years while you get a start up happening. So we come in and we de-risk that founder journey. We work alongside you as a sort of a co-founder as a service. We do a lot of market research, we build MVP’s, we ensure that there is a product and then we help you raise money with the view that you will eventually quit your job and start your own company with it all in place, and you’re off to the races.
Greg: Don’t quit your day job, but get to get across the traction gap. You’re not saying, “Hey, quit your day job, we’ll fund you.” You say, “We’ll work with you to help build you and get that flywheel going.” So a fund or seed fund like Investable would say, “Oh, they’re already. Well done.”
Oliver: And you have nailed it because it stands for “don’t quit,” because it’s don’t quit your day job because nine times out of ten…
Greg: Ahh, startup is don’t quit.
Oliver: Exactly. Because our advice to a lot of people who might be on 200, 250 grand a year, but, you know, they’re a bit sick of it all. And they want to start a startup because they’ve seen how amazing it is. And they’ll have all this money and they’ve got this great idea…
Greg: It’s amazing, isn’t it? And it’s so easy.
Oliver: Wonderful, it’s so simple. And often, we’ll sit down and talk about the product and talk about the market and whether they understand things like the TAM and SAM and that sort of thing, but we try and help them get it. And there’s been, I reckon, in the last probably six months four individuals for whom we’ve said, “Look, this is just not an idea that you should quit your job for. Like you would be crazy to give up your career, give up the potential of all that you’ve got for this business. There might be a business out there that you can do, but don’t quit for this one.” And that’s part of the service as well. We’ve started eight companies. Two people have quit their jobs. One guy raised $800,000 on a reasonable valuation and quit the next day when the money was in the bank. But often early stage VCs and the entrepreneurs will tell you, “You cannot do this until you quit your job.” And we’re sort of saying, ‘Well, make sure you’ve really got something worth quitting for first. Don’t quit.”
Greg: Well, I’d put that right in the definition of a practical funder. There’s bootstrap and do it yourself, self fund and don’t quit your job and so forth and never take anybody else’s money. And then there’s the naive form of, well, bet it all, all or nothing, quit your day job, run out of savings, which I don’t recommend to anybody. And so DQ is kind of, I was thinking don’t quit meant the entrepreneurial fierceness, but like don’t quit yet. Don’t quit your day job yet until you’ve gotten to the other side. That’s very practical. Do you take a little bit of equity or do they pay you for the time and effort for the counselling, therapy, and app building.
Oliver: That’s it. The therapy is the main thing. No, a hundred percent. So, sort of our mission is to own 10% of 100 companies. So we want to have 10% of the company as an early stage founder. We’re not trying to… And it’s got to work, like we’re very up front. If you’re 22, our proposition just doesn’t quite work for that kind of entrepreneur who wants to do something. But if you’re 40 and you’ve got a good idea and you want to work through it with people who’ve been there and can help you, then the proposition really works and they really like it. And we want to sort of spend five or six years founding companies, is the plan, and then kind of take a breath, breathe, and then five or six years kind of exiting those businesses because I’ve gone through two exits, and like helping people sell their business, I find that as much fun as starting them. I really like it. The bit in between, I don’t like the middle bit, but I love the start and I love the finish. And I’d love to in five or six years’ time, kind of have a change and start exiting some of the companies that are founding now. So yeah, it’s exciting. It’s fun at the moment. It’s still early stage, but…
Greg: All early stage is fun. And then you get in the firefight and then the reality hits. So you get it before the reality. When founders come to me with an idea and they talk about funding first, they actually don’t need money, they need the help, they need the savvy to say, “No, this is exactly the game and these are the filters you need to play with. Let’s help you do that.” They actually need the help, not the money, because the money, if it doesn’t buy the right help at the right time in the right way, it’s not going to be useful. Can somebody work with you and then not get funding to grow faster to quit their day job? Can they get to customers and play the bootstrap, more self-funded growth game and say, “Thanks I’ll let you know when I sell the company at $10 or $20 or $50 million ARR or something?
Oliver: Yeah, I mean, I had that conversation yesterday. That is exactly what this lady was saying. She’s not interested in raising money, she wants to get her business going. And I said, “Well, you know, we can be your co-founders as a service. We can help you with an MVP, we can help you understand…” And people want to dive into building stuff. They want their MVP to be an app in the App Store. And our advice is exactly, no, prove that people want it first. Decide what it is you’re going to build. Don’t waste money on even hiring developers, outsourcing it to India or whatever it might be. Just be much more kind of astute in your decision-making process. Understand what it is you want to build and where it is. The big thing for us is, again, we take ordinary stock, so we’re a co-founder with you if you’ve got a brilliant idea. And that means that we don’t want to really sort of build lifestyle hobby businesses. We’re technology people, and we understand tech, but if you can build a company and sell it for $10 or $20 million, that doesn’t really work for VCs. That’s not going to be a great exit for them. But for us, if we own 10% of a $20 million business and in seven years’ time we get a check for $2 million, I’m making the numbers very simple, but for us, that’s fantastic. You know, we’d love to be there with you and I’ll go on that journey and help you. And if $20 million is your exit and $18 or $15, $16 million after-tax, whatever it might be, that’s life-changing for a 45-year-old who sells it at 55. Suddenly their 401K is blown out of the water because they’ve sold their business and got a check for $15 million.
Oliver: And if we’ve got two of that, a hundred times, then we’ve built a solid business. And the thing I really like about it altruistically is that it is about people who want to do something more. And it’s not about us specifying what the business does, but everybody who sets up businesses these days is thinking about whether it’s climate change or whether it’s kind of doing good or whether it’s helping out, there’s so much focus on that. So it’s not about us saying, “We only invest in these types of companies,” we’ll help anybody build any business. But I would say 90% of the companies are in that sort of doing good social impact style. And that’s great. I love that kind of thing. So you’re helping an individual break out of the rat race and do something different. And the company that they’re building is often doing something that’s of benefit as well. So for me, it’s just sort of win, win, win all around.
Greg: You’ve grown a company, funded and sold it, had the time afterward, and experimented with some other things. Is this going to be able to sustain you to help 50 or 100 crazy entrepreneurs build products? So now you’re helping other entrepreneurs build their thing? Is that fun for you? Is that enough or do you need to go and drive your own startup vehicle again?
Oliver: See, that’s the interesting thing. I don’t think I could ever do another startup the same way I did Tigerspike. That 12, 14 years that start, build a team, all the challenges that go with that, I’ve kind of done that. I’ve been there, done that and I’ve got the t-shirt. And when we talk to founders who are starting on that journey, I’m very transparent and I talk about it. And there are good times and there are bad times and it might not go anywhere, but from my perspective, I feel like that creative outlet of going down the corridor and talking to developers to build something, I can help people with their ideas. And we hopefully are adding a lot of value and perspective to their concept of what they want to do. And because we’re getting them at a really early stage, they’re not on railway tracks. So when we’re talking about some of the things that we think would work or whatever, and they can disregard it or what have you, but then to see some of that be built into their products or their business ideas, that at the moment is the creative outlet that I’m enjoying and I really like. So whether it’s sustainable for the next sort of five or six years, I don’t know. But right now, seeing other people build startups and be successful and being a part of is fascinating. I really love it. I just get a real kick out of it.
Greg: Well, I can say that’s more than enough for me. I’ve got a crazy schedule helping tons of entrepreneurs and I’m a little bit older than you and don’t play golf. So it’s a version of what works for me.
Greg: Hey Oliver, thanks for being on the Practical Founders Podcast here, sharing the journey of Tigerspike and your own journey as an entrepreneur, little investor in there and now helper of practical founders who are building things that change the world. So we get to have an impact on the world through other people now.
Oliver: Wonderful. Thank you so much, Greg. I really enjoyed it. It was great fun.
In this episode, Oliver explains:
- How their mobile app design and development agency grew into a large global provider serving large companies
- Why they created a SaaS software platform product to grow faster and make their company more valuable
- How they struggled to invest in and grow their software app with their “addiction” to services revenue and custom development
- How potential VC investors viewed their services and product revenue streams
- Why they eventually took investment from strategic partners
- How they sold the company and what it felt like for founders to make that transition
- What he’s working on now to help practically-funded software startup founders in Australia and Southeast Asia
Tigerspike Company Facts
- Founded: 2005
- Description: Global mobile app design, development, and digital transformation services company that created a mobile app platform product
- Number of Employees: 400
- Funding: Self-funded and services revenues, then raised $11M funding from a strategic investor and then a financial investor
- Acquisition: Tigerspike was acquired by Concentrix in 2017 for $85M
- HQ Location: Sydney, Australia
- Oliver Palmer on LinkedIn
- Concentrix Catalyst (Tigerspike) on LinkedIn
- Concentrix Catalyst (Tigerspike) website
- DQ Ventures on LinkedIn
- DQ Ventures website
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