In our fourth & final episode chatting to Phill Robinson, founder of Boardwave, the European network for the software industry, we talk about his experience working in a number of PE-backed businesses, including what value he thinks private equity can bring to a scaling software company. We also discuss why he set up Boardwave, it’s growing success, and how it’s helping European software leaders.
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Transcript:
Fiona: In our last episode of Season 3, I’m chatting with Phill Robinson, founder of Boardwave. I asked him to momentarily forget he’s speaking to a private equity investor, but talk about his experience working in a number of PE-backed businesses, including what value he thinks private equity can bring to a scaling software company.
Phill: I mean, operators of software companies are good at operating software companies, and investors are really good at understanding how to create value. And they don’t have a blueprint, or a way of doing it, or a thesis for the way they want to invest in a business, which is a well-trodden path for them, and they may not know exactly how to do it. So if you marry those two things together properly, you’ve got a winning combination, as long as everyone understands their roles and responsibilities.
So I think that they bring a real clarity of understanding of where they want and need the business to go in terms of value creation, and the CEO needs to understand their role, which is to build a plan and a strategy for the business that achieves that. So I think you’ve got clarity in terms of roles and responsibilities between the investors, and the team, and the management team, and the CEO. I think often, they are sectorial, they’re focused on particular sector, like technology investing. So this is not the first rodeo, right? They’ve done this many times before, and know how to do it. So whilst I might have been CEO of two or three software companies over the last 20 years, they’ve been on the boards of maybe 15 or 20. So they’re not in the detail necessarily, but they’ve got at least pretty good appreciation of how things have done elsewhere, and can at least lead you to other CEOs that have done it before, and help you.
And I think the other thing that is great, and I’ve worked with PE for 20 years, there’s a cycle that’s well understood. They’re going to be an investor for maybe four, five, six years, and it means you’ve got a period of time in which to invest in the business, which if you’re a public company, you wouldn’t have.
Fiona: Is there any advice you’d give to private equity investors when it comes to sort of tech investing, and adding value, maybe some common mistakes that you see?
Phill: I mean, there’s advice on both sides of the table. But I think we have to have alignment, we have to have the same common goals, and common purpose. And I think that means you need to understand what they’re thinking, from both sides of the table. So the investor needs to understand how the CEO is thinking, and the CEO often doesn’t take the time to understand how the investor is thinking, and what their motivation is. It’s really worth taking the time at the beginning of a relationship with a private equity company to just sit down, and understand what’s important to them, and why, and how they think about the asset and the business.
And you might be surprised, you know? You might be surprised about their motivation. It’s true that, you know, the CEO’s career is basically tied to the success of the business, but so is the investor’s. And a lot of CEOs don’t realise that if you’re an investor in a business, and you’ve gone to the investment committee and made a case for this company, and got a thesis about its growth, and it doesn’t happen, they’re in jeopardy with their career, too. So it’s as important to the investors as it is to the CEO, and they don’t realize that, necessarily. And therefore, that leads to certain ways in which they might behave, either on a personal level or a professional level.
So I think just spending enough time early days to just understand each other is really worthwhile.
Fiona: So in 2022, you founded Boardwave, so the network for European software leaders. So it’s gone from strength to strength since that point, so you’ve already got sort of over 1,000 members signed up, which I think probably indicates that there was clearly a demand for it. But talk me through what made you decide to set it up in the first place.
Phill: Yeah, I think we’re at 1,200 now. It’s growing really rapidly across Europe. It’s sort of back to the story we talked about before, about the difference between the U.S. and Europe, and so this idea that in Silicon Valley, there’s a concentration of expertise which creates a community of common interest. And so they’re very prepared to help each other out, very open to sharing new ideas and experiences, and mentoring and supporting one another, and so one business yields a set of teams, and those teams to go on to form other businesses from it.
So like, the example I always use is PayPal, which was very successful in the late ’90s, early 2000s, and from there, a couple of guys set up YouTube, a couple of guys set up LinkedIn, some of them went to Tesla. And from those companies, other companies have also come, right? So there’s a constant recycling of capital from the money they made the first time around and the second time around, but also expertise, recycling expertise, and sharing knowledge.
And in Europe, we’ve got a great number of really good founders and CEOs of software companies throughout the region, but they’re entirely fragmented and isolated by geography, language, distance, culture, size, portfolio. And so it’s a lonely place often, being a CEO in Europe, because you’re sort of on your own, trying to make the decisions for the business, without referring to anybody else for help.
So Boardwave was set up 18 months ago to try and solve this problem, which is to try and create a community of common interest in Europe, similar to that in California, so you’ve got a platform through which you can interact with, and share knowledge with, and mentor each other as software CEOs and founders. And so as I said, you know, there’s 1,200 people that have joined this group over that period of time, and it’s a social enterprise. So we’re independent and not for profit, which means we can give clear advice without commercial gain, and not wanting a commercial gain. We want the community to do well. We want European software to do well. We want the people in our communities to do better than they have before, and maybe challenge the Americans over time.
And so we focus on start ups and scale-ups, and that sort of scale from $10 to $100 million is an area of vulnerability, where a lot of companies don’t get that far. They’ve finished before they can get to $100 million, because it takes too long, or they can’t get follow-on funding, or they get fatigued because it’s taking a really long time, and every year that goes by affects the risk appetite. The risk goes up, but there’s no liquidity, so there’s a higher risk each year that goes by.
So a six-year journey for an American company, driving down Highway 101 in California, with the shining, gleaming buildings of Meta and Facebook and Google, and you know, Salesforce and Oracle, as you go down Highway 101, giving you the confidence to continue is very different to sitting in Delft, in the Netherlands, where I was, as the only software company, you know, trying to drive and carve out a niche for myself, without referring to anybody else for help because there’s no one around me. But they’re all hidden in plain sight, they’re just not next to me. They’re across Europe. And I need to be able to find them, and understand what knowledge they’ve got, and what expertise they’ve got, find people that can help me on my journey, and that’s what Boardwave is set up to do.
Fiona: Has being part of Boardwave over that period taught you anything about European tech generally, or anything about kind of software leaders, that you weren’t as aware of before?
Phill: You know, I was a CEO three times, and I made all the mistakes you can make. And I always felt it was quite a lonely place to be, because you don’t necessarily want to share that with your board, because they’re your investors, and they might think that you’re vulnerable, or you don’t know the answer. And you don’t want to share it with your team and employees, because they think you should know the answer. And so you make the decision on your own, and it may be out of your guts. If you’ve been doing it a long time, your might be right. But if you haven’t been doing it a long time, you might be wrong.
And so I think there’s a lot of us that have behaved that way, even great CEOs of software companies, and big companies would behave in this manner. And actually, just taking a step back from being on the dance floor, and then you step onto the balcony and think about it properly, you know, there are thousands of software companies in Europe. So if I was running a $5 million HR software company in Paris, and wanted some advice, there are probably no other HR software companies in Paris, but Boardwave’s got 26 CEOs that are HR software CEOs. So we’ve got a software platform that connects people together, and I could quite easily get hold of those people. And they might have been on the journey I’m about to go on before me, running a software company in the same sector, maybe in another country or another part of the market, and be very willing to give help and support.
So one of the things we do is it’s free to join for CEOs and founders, and there’s two things we ask them to do. One is to fill in a detailed profile questionnaire so that we know all about them, so that we can guide people in the right direction. And the other one is ask them if they’ll mentor somebody else, and pledge some time to help somebody else. So they can pledge 10, 20, 30, 40 hours a year, and so find them a mentor, find them someone that’s been there before, and done it before, and is one step ahead of them, and can help them on their journey.
Fiona: Yeah, and I suspect that probably feels especially helpful at the moment, because you set up Boardwave, I suppose, in quite a difficult period for many tech leaders. So in this sort of more challenging macro backdrop, what do you see the biggest challenge facing software CEOs today?
Phill: Oh, I think it’s not a long-term challenge, it’s a short-term challenge of access to capital, right? Because the macroeconomic climate is difficult. Maybe getting follow-on funding is more challenging than it used to be, or has been. You’ve maybe been pressed to grow all costs before by your investor, and now they’re saying, actually, you don’t really need that, we only need profitability. So maybe there’s a pivot, or a change in the cost structure that you need to make. So there’s changes you need to make, and that, again, you know, there are significant decisions you’re going to have to make about the viability and future of your business. And doing that alone is really difficult. But doing it together, with other people around you that have done it before is super helpful.
So one of the things we run is something called a breakout group, where we get volunteers, up to six or eight CEOs in a room, they get together quarterly, off-site, for four hours on half-a-day, and they just talk about whatever they want to talk about, completely in a trusted environment. And it’s been of the greatest help to a number of them, because they’re sitting there saying, I’ve got this issue, and I don’t know what to do, and there’s different ways of getting help than you might have thought about. But we’re trying to help them through that journey because I’m really sure that there’s a lot of money, dry powder sitting there, and an investors job is to invest, and so eventually, will have to invest. And when they do, they need to still be there to be investable, and to be growing, and being successful and viable for many years to come, hopefully.
Fiona: Yeah, and I think there’s a confidence point there as well. People will still look to invest. Like you say, that’s our job, that’s what we need to do. But there’s a confidence point in terms of you don’t want that just to be a few companies, while the others kind of struggle.
Phill: Yeah, exactly. We’ve had a great deal of success in the start up ecosystem in the last 10 years. There’s been this Tech City or Silicon Roundabout initiative. The companies collectively are worth like $100 billion to $1 trillion in value, so there’s great success in start up-land. The challenge is the next step, right, which is I get to $9, $10 million of ARR or revenue, and then all the help drops away. And because you’ve had some sort of initial success, and you’ve got a lofty valuation because it’s a software company, everyone thinks that you’re on your own, and you’ll be super successful.
But you couldn’t be more vulnerable on that journey than you are at that point in time, because you’re going from $10 to $100, or whatever the journey happens to be, and there’s less people that travel that path. There’s been issues before with access to capital, and growth and success and scaling, and they’re the people we really want to help. We want to systematically help more and more companies get to $100 million and beyond, because at that level, they earn the right to become a global company, and really do well, and really become a big company. But if you don’t get to this second base, if you like, then you won’t get to third and fourth.
Fiona: And if you had a wish list for 2024, is there anything you’d like to see in order to help those companies go from $10 million to $100 million in the sort of wider ecosystem and environment?
Phill: Yeah, I’d like to see the economy turn around, and turn into a better economy, with better access to capital. Because as soon as that happens, these businesses will get invested in, and we’re back to a place where we can build… And people call them unicorns. I don’t really believe in that, because a $60 million business three years ago would have been the unicorn, and today it’s a $180 million business.
But you know, successful viable businesses of consequence can get built from the environment we’re in now, and as soon as the economy begins to turn around, and I think it will by sort of spring/summer next year, then we’re into a place where we’ve got the opportunity to build some great companies in Europe, and a great environment in which to do it.
Fiona: The optimism there, I like to hear in these things, as everyone’s doing their sort of predictions of 2024.
So the last question that we sort of ask everyone, so what is your top piece of advice for CEOs and entrepreneurs when it comes to building successful businesses?
Phill: Well, there’s three things. There’s team, find the best team you can possibly hire, and let them do their job. The second one is listen to your customers. And then, build a painkiller, not a vitamin for the product. You need to solve real business pain if you’re building a viable business, and continue to listen to your customers, and let your team do their job.
Fiona: Phill, thanks so much for joining us today. Some great advice there. And yeah, we look forward to seeing you at the next Boardwave event.
Phill: Thanks a lot. I look forward to seeing you there, too. Thanks very much.
