Why aren’t small tech businesses willing to talk turkey? Philip Letts is the latest in a long line of technology entrepreneurs who don’t want to reveal their company’s turnover. He is, however, willing to offer a reason for the industry’s reticence.
“It’s either because they’re not very good or because they don’t want copycats,” he says. “Tech companies are quite binary – they either work or don’t, and 90pc don’t work. The 10pc that are working are flying and they don’t want to attract copycats.”
Unsurprisingly, he puts his own company, blur Group in the latter camp. An unwillingness to reveal sales aside, the firm, which runs a procurement website, makes for an odd sort of technology firm: its home is in a tatty corner of London’s Westminster rather than the voguish “Tech City” on the opposite side of the capital; and it hasn’t burned through a mountain of venture capital money to make some steady and promising progress.
In fact, it doesn’t have any institutional investors: instead it’s been backed with a £1.3m from 30 angel investors, including ITV chairman Archie Norman and Misys founder Kevin Lomax.
They’ve been attracted by the company’s ability to help small creative agencies punch above their weight, Letts says.
Without a track record or established sales force, getting in front of clients offering big jobs can be a forbidding task. Small creative firms are also full of tales of woe about their dealings with the big boys once they’ve won work – woolly briefs, stolen ideas and late payment are common complaints. Letts says that blur Group allows agencies to compete on the quality of their work rather than their marketing muscle.
“Small providers have three or four classic barriers to growing. It starts before your salesforce. It’s discovery and access to customers if you’re a niche player. Sales is just execution. You’ve got less sophisticated technology, less sophisticated project management, lack of ability to be able to handle customers beyond your local region. We tackle all those head on.”
blur Group’s approach is hardly revolutionary – a website which links agencies with companies that need a logo designed or an app or ad campaign created – but early indications suggest Letts has already been more successful than countless others who have had designs on establishing an online procurement network.
The company’s “Global Services Exchange” now has 20,000 suppliers from 133 countries, most of which are small creative, marketing and media agencies, competing in an auction for work from a more modest 900 procuring companies, including Disney, Warner Music and CNN.
Briefs worth £8.4m have been listed on the site since it launched in 2010, and more than two thirds of that amount has been in 2012. Before that, progress was deliberately slow: Letts has been building the site for five years, looking to enterprise software giants rather than social networks such as LinkedIn and Facebook for inspiration.
“If we do a business-to-business exchange right, we’re building something like a Salesforce or an SAP – it takes time and it’s not a trivial exercise,” he says.
It’s blur Group’s staff rather than its software which hand pick the best three pitches for work. The company acts as a prime contractor, typically sitting between small suppliers and large clients.
“In any major software company, your support people are just as important as your technology. That’s the bit most business marketplaces forgot. If everyone is doing it all for themselves online, it doesn’t work.”
The approach has a number of advantages for small agencies, he claims: clients are forced to create structured briefs (replacing the informal conversations and back of a fa*g packet sketches that are common in the industry), and blur Group handles payment, with successful firms getting paid around half their fee up front. “Instantly, we’re killing that 150 days to pay thing,” he says.
The record of communication the site provides, meanwhile, means any unscrupulous clients are prevented from simply stealing their suppliers’ idea.
Surely, though, a huge pool of eager suppliers means more power for clients and lower fees for providers?
“I don’t buy into that. We’re bringing transparency to the process — I think that means the right price and the right provider, which is good for everyone.”
The company charges a listing fee for tendering projects and takes a cut of up to 20pc of the final project fee. Letts is willing to predict that revenues will be almost $10m (£6.4m) next year, which sounds optimistic given the combined brief value of £8.4m that has gone through the site, although he points to plans to add legal and accounting services and the site’s rapid growth this year as justification.
If his growth plans prove correct, he’s hoping that having private backers onside rather than impatient venture capitalists will mean he can take the business “all the way”.
“We want to be the rare UK tech company that can be a global leader and remain an independent player. We’ve been taking on angels for two years — the angel route will probably take us all the way out to [flotation].
“If you treat angel investors like you would an institution, they’ll support you and not take your time in a negative way. We give them formal, written quarterly updates – we treat them like venture capitalists but they don’t sit on our boards. The experience is very different from working with venture capitalists and I’ve only seen the positives.
“Amazon and eBay changed the way consumers purchased goods. In the good old days we went to bookshops. They’ve changed that behaviour. Put simply, our job is to do the same for business. We’ve got a fighting chance of pulling it off.”
