Cash isn't king

It isn’t easy for a start-up to turn down offers of money from customers or investors, but for the founders of Huddle, saying no has featured heavily in its marketing and development strategies. 

First, the company rebuffed requests from large users to customise its online collaboration service, fearing that doing so would leave it supporting numerous versions around the world and limit its scalability. Then it found itself in the privileged position of turning down funding from several investors, concerned that they didn’t share its vision or provide the extra support it was looking for in addition to pure funding. Both decisions took courage – and both were directly influenced by Huddle’s involvement in the g2i programme.

“What was great about g2i was that they really hand-hold you and give you lots of practice”

Set up by CEO Alastair Mitchell and product strategy director Andy McLoughlin in 2006, Huddle was created in response to the founders’ frustration with the limitations of traditional collaboration and knowledge management tools. Mitchell’s background was in the web world – he’d helped develop the first online market place for the global food commodities industry before joining dunnhumby, which provides web-based market intelligence for the retail sector. McLouglin, meanwhile, had worked in a knowledge management start-up in the insurance sector. “I had people in the US, London, Paris, South Africa – they were all using web tools, but they just weren’t working together very well,” says Mitchell. “Information was getting lost, and people were wasting time flying out to see each other.”

The two recognised that there were good collaborative models – but not in the business sector. Online social networking worked effectively, for example, but only in a consumer context. So they set out to build an online service that could connect people together just as easily, but also provide them with tools to manage information, handle projects, set up reminders and do the other practical tasks that make business-based collaboration effective.

The first incarnation of Huddle was built with around $500,000 of angel investment and the founders’ own money – and once it was released, they quickly realised that the business opportunity was different than they’d imagined. Huddle was being used by both small businesses and large corporations – but it was also being adopted by individuals for a wide range of tasks, including Mitchell himself, who’d used the service to plan his own wedding. Believing that there was a much bigger opportunity to grab, the company decided to seek out extra funding and engage with the g2i programme.

For Mitchell, that move proved to be a pivotal point in the company’s development. G2i offered practical help in crystallising their vision, helping them build a meaningful business plan to underpin the company’s growth and get the message across to investors.

“What was great about g2i was that they really hand-hold you and give you lots of practice,” says Mitchell.  The programme forced the directors to be “quite ruthless and rigorous” about exactly where the company’s revenues were going to come from – something that influenced its decision not to customise Huddle for individual clients. And it provided invaluable support on business planning. “It takes a lot of time and work to get the numbers together in a format that’s usable. But it’s a very good exercise,” says Mitchell.

After going through the programme, the founders ended up firmly wedded to their original vision. “We came out confident that we’d got a good idea and that it was well articulated.”

The networking component of g2i was also important for Mitchell, who believes London lags far behind Silicon Valley in terms of its support for entrepreneurs.  “In London there are a lot of start-ups, and a lot of people with ideas – but there are very few successful people around sharing their experiences and being part of the scene. It’s very different from Silicon Valley – there’s not nearly as much nurturing, not as much fertilising of the base.” g2i fills part of that gap, both in the form of its network of financial advisors, lawyers and other specialists, and through its informal g2i alumni club. “It was inspiring spending time with so many other entrepreneurs, because there are so many people going through the same thing,” he adds. “It’s a very useful process bouncing ideas off people.”

Having honed its pitch through g2i, the Huddle team did public demonstrations to investors at several different events, and was approached by a number of potential backers. That gave it the luxury of choice. It turned down one or two investors who it thought were focused too heavily on the financing and seemed to want to take direct control of both the team and the vision. Instead, it went with Bath-based investor Eden Ventures - a firm that understood its business, believed in the founders, provided practical support for recruitment and opened up its contacts book to the Huddle team. “It’s about mentoring as well as money,” points out Mitchell.

The recruitment component in particular was a big factor for Mitchell, who argues that ultimately, successful businesses are all about people. “You need patience, single-mindedness and vision – we waited until we found the best people,” he says. “You should never settle for half measures just because people are available.”
 
By Keith Rodgers, Webster Buchanan Research

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