While business angels and venture capital firms can capi- talise businesses to help them achieve their goals, companies can also get involved. They can do this through corporate venturing, where a larger company provides finance and other resources to a smaller business in return for equity.
This was the funding option chosen by Monitise, which allows customers to manage their money with text mes- sages, applications and mobile sites on almost any mobile device. Monitise teamed up with Morse, an information technology services company, as it needed both funding and a partner.
Monitise founder Alastair Lukies said: ?An idea can be originated in a small company or in an individual?s mind, but for it to be delivered to the mass market there has to be this partnership with a big infrastructure.?
Working in the banking sector, Monitise needed to be taken seriously in order to achieve its success. Lukies did not just need funding, he needed to raise perceptions of size and scale from the outset.
He said: ?The problem was, we were going into the banking industry and we needed to appear much more robust and scalable than we were.
?And what Morse gave us was the perception that we were part of a decent-size company with £300m [$500m] turnover, a FTSE 250 listing, 2,000 staff, a good board, plus an excellent chairman and chief execu- tive. So you could go and tell the corporate story with instant credibility.?
Having started their business in a shed, Lukies and his co-founder, Steve Atkinson, were suddenly part of a huge organisation. Lukies? business card had Morse on it. So, when the procurement team within a bank was doing its analysis and checking on the size of Monitise?s organisation, everything stacked up.
?There is no way they were going to let a company of two people run infrastructure for their consumers,? Lukies said. Additionally, and perhaps equally importantly, Morse gave Monitise something that many entrepreneurs under-estimate ? back office. That saved Lukies the usual start- up issue of having to wear all the hats. So, rather than doing ?all that stuff which takes up so much of your time when you want to be out selling?, it was done for them. ?It was fantastic,? Lukies said. ?At the end of the month, as the chief executive of a two-person company, I was getting a report from my investor setting out what our big priorities should be.?
Lukies was also able to use the chief financial officer?s personal assistant, which gave him raised credibility when booking meetings with a senior director at a bank.
?Morse definitely gave us the perception of scale. They gave us the capital and the benefit of their balance sheet but did not try to subsume us into the Morse strategy. They let us breathe but within the incubator of a big organisation.? Monitise is now a publicly quoted
company. Without such support of its corporate venturing partnership, rather than growing strategically for the long term ?Monitise could have focused on short-term profits?, accord-
ing to venture capital firm Ariadne Capital?s founder, Julie Meyer.
She said: ?They could have tried to maximise revenues through licensing. But had they done so, they would have missed the overall market opportunity to build a global mobile banking industry.? Ultimately, corporate venturing or corporate partnering can provide the best of both worlds ? the flexibility of a small business together with the resources, credibility and connections of a large business.
Guy Rigby is a chartered accountant and an entrepreneur. He now leads the entrepreneurial services group at Smith & Williamson, a diversified financial services group.
This article was adapted from From Vision to Exit by Guy Rigby (Harriman House, 2011), available in paperback and eBook.
www.harriman-house.com/ fromvisiontoexit
