Innovative Building Technology Company
An innovative small building technology company had developed intelligent control for home owners which could be centrally controlled inside and remotely controlled by smart phone.
The functionality is summarized below:
The potential marketing partners are companies in heating, home entertainment, security, lighting and energy sources which would use the company’s technology to enable their products to communicate with all of the other building functions.
A Market Executive was recruited who had previously been Marketing Director at a major UK boiler company which had been seeking to develop technology which enabled their boilers to integrate with solar panels and other energy sources.
He approached a number of boiler companies including a boiler distributor with a turnover of £2m. Within 5 months of appointment, the Market Executive concluded a marketing partnership deal between the distributor and the building technology company. The distributor then offered the building technology to the first of their major customers, a construction company which builds new houses at the top end of the market. The construction company has been supplied by the distributor for some time and so trusted its recommendation to switch their building automation supplier to the building technology company. Within 6 months of appointing the Market Executive, the building technology company was receiving orders at the rate of £360k p.a., over 3 times its previous total sales.
Home Entertainment Industry
A Market Executive was recruited for the home entertainment industry sector. He had been CEO of one of Europe’s leading home entertainment companies for 12 years before retiring. Approaches were made to all of the major players in the home entertainment industry in Europe and the US and several were very interested in the building technology company. A £50m turnover manufacturer/distributor was particularly interested. It sought a technical proof of concept program which was very successful. 9 months after first approach, Heads of Terms were agreed with the manufacturer/distributor for their purchase of £1.5m p.a. of the building technology products in year 1 rising to £3m p.a. by year 3. Reaching this stage had taken 9 man days over 9 months and put in place revenues which were set to be 8 times the company’s original sales.
Other Industries Market Executives were also recruited including a former director from a leading DIY superstore group, the head of building automation at one of Europe’s biggest contractors and a former director of one of the UK’s biggest home alarm companies. 61 potential major customers were approached and 41 showed interest. However, the building technology company’s production capacity was fully utilized with the first two major customers that were put in place.
Prior to Martin Kelly’s involvement, the founders were raising £0.5m for sales and marketing at a £1m valuation. It was agreed with the company that Martin Kelly would get share options for 40% of investment if he raised capital at >£6m valuation, in other words, a 6 times increase in valuation. After recruiting executives and trebling sales, Martin Kelly recruited a contingently funded corporate finance team who valued company at £8m. £700k of capital was raised – 40% (£280k) went to Martin Kelly’s team.
Instead of selling 50% of the company’s equity for £500k at £1m valuation, the founders only had to sell 9% of company for £480k cash. In addition to the cash raise, it had all of the executive resources and additional sales brought about by Martin Kelly and the executive’s involvement.
The business proposition for innovators from INNOVO has been considerably enhanced since this case study and now offers:
- Ongoing liquidity for shareholders
- A accelerated trade sale at a higher valuation
- Provision of wide range of services from many different types of suppliers
- Instead of taking a commission on sales generated by executives, INNOVO has increased its share of capital raise to 50% in order to cover its much more extensive range of services
- Introducing external innovation into the innovator itself