What does an entrepreneur do after he sells his successful company? Adrian Giles, the well known founder of Hitwise, is reinventing himself as an angel investor. He talks to AMANDA GOME
By Amanda Gome
What does an entrepreneur do after he sells his successful company? Adrian Giles, the well known founder of Hitwise, is reinventing himself as an angel investor.
Giles tells Amanda Gome about his latest investments, his investment plans for next year, and what he looks for in an investee company. He also casts an eye over the latest developments in search.
Amanda Gome: You sold Hitwise for $US250 million. What is life like after Hitwise?
Adrian Giles: I spent almost 11 years living and breathing every minute of the day and night in one company, and having sold it last year, I managed to then take all my eggs out of one basket and diversify them into a whole range of other baskets that I can spread my time across as well.
I suppose the nicest part of that is it brings a lot more diversity to my day activities. I might be meeting with three or four different companies each day, all for different reasons and all with different challenges, all with different experiences that I can share. That diversity is, well, not a lot more exciting, but a different excitement to the excitement I had at Hitwise.
Entrepreneurs love being challenged. What is your biggest challenge now?
The challenge that we have had is that since I left Hitwise, the market has gone sour pretty quick both from the public and private point of view, and so the satisfaction that I had at Hitwise was your own baby and all the growth was your own doing, and every decision was one that affected your own asset.
I suppose now there’s a lot more people involved, a lot more diversity in the businesses that I’m involved in; I am not the founder of them and so the dynamic is a little bit different.
So are they as exciting and as rewarding, I think collectively they will be, it is just Hitwise took 11 years, I am only one year out of it at the moment and so I think time will help answer that question.
You didn’t want to start a new business after leaving Hitwise?
No. I tried to take a few months’ break after leaving Hitwise. I decided that I really didn’t want to start another company very quickly. I’m quite enjoying spreading my time across multiple companies. It does give you the freedom to choose what you want to do each day, without being dictated by your own business focus 100%.
You share an office with other entrepreneurs: Andrew Barlow, your former partner at Hitwise, and Matthew Rockman, founder of Seek. Why not work from home?
I think because we are all doing a similar thing, which is we are all involved in a bunch of different companies that we have invested in and helping out, so we get to share ideas and deal flow and look at different companies together and invest in some of them together, and it creates a nice office environment to share those business ideas and those experiences.
And we’ve got a nice space (in South Yarra) that we were able to find and convert into an office; it is just a pleasant place to come and work really.
Tell us about one of your investments. Why did you put money into it?
One of the companies is a public company called Ansearch. Ansearch is a business that has gone through many faces over the years, it more recently is internet focused. It’s got three main divisions, one is a division called Webfirm, which provides online media services to predominantly SMEs.
In the first instance building their website then promoting them through search engine marketing and search engine optimisation. It’s also got a media division, which researches Australian and international website owners for their online advertising inventory, and it’s got a Searchworld division which monetises online search.
It is very much internet advertising and SME website marketing focused services company, but one that we got involved in because I was asked a couple of years ago to go on the board but because of my commitments to Hitwise I wasn’t able to back then.
But since leaving Hitwise, the opportunity came about again. And both Andrew and I got involved; we saw it as an opportunity to get more control and influence in the organisation and try and turn its fortunes around.
How is it going in this tough environment?
It’s been very challenging, mainly I think because of the broader market conditions not because of the business itself. We’ve almost been in it for a year now and we had to try and clean up a lot of the issues the business has had over the years and give it a much cleaner base from which to grow.
And I think we are nearly at that point now where we have cleaned up a lot of the processes and a lot of the areas that were not revenue focused and not the core strengths of the business.
What were the issues?
There were certain costs in the business that we could see could be cut in order to improve the revenue and profitability and also refocus the business on the things that it did well.
Who are its competitors?
Ansearch is quite unique in that there are not many companies that are looking for Australian eyeballs on international sites, which is where we focus from the monetisation point of view. And focusing website development and services towards SMEs, is also something that is not a big focus of a lot of companies. There aren’t really that many specific competitors that Ansearch has, it is quite lucky and quite unique in that regard.
And what is the opportunity?
Last year’s revenue was about $12.3 million, so the opportunity we saw with Ansearch was that is was quite a small company, had issues on its board had a lot of old shareholder issues and so on. And the opportunity was to go in there and get a little bit more control and equity of the company at a time when the share price was seriously deflating and try and turn it around.
We appointed a new CEO, David Burden, who is ex-CEO of Legion Interactive, and he has been fantastic so far in really helping to clean up the business, and we feel like it is a great platform now for future growth and capitalising on SMEs’ spending online and the continued robustness of online advertising as part of the overall ad spend of companies.
Who sells it?
There’s a direct sales force for selling to the SMEs and also for attaching new publishers both here and internationally. So it’s very much a direct sales model.
What share holding do you have in the company?
I am a minority shareholder. It is a publicly traded company. I’d be guessing but 1% or 2% maybe.
It was profitable; it hasn’t been for a number of quarters, but we are quite confident that that will turn around quite quickly.
Yeah, it has been challenging although online spend seems to have been able to weather the storm quite well which is good for Ansearch.
What else has caught your eye?
The other business is focused on the mass personalisation of rich media content online. So they have developed technology that can create thousands of versions of rich media content from personalisation data that they get from clients that they work with. So they’re really capitalising on this growth of personalising the ads that we see online.
It’s quite a unique technology, one that has been developed here and one that we are looking to grow here and take internationally.
How does it work?
It takes personalisation data from records that a company may have about their website visitors that may visit their website and it uses that information to create an advertisement that has been specifically generated for that user.
So it might include their name, gender, location in the actual ad, and that ad was specifically created just for the person and this technology is able to create the hundreds or millions of different ads automatically based on that person’s information data, so the ads server can pick the ads uniquely for each particular user.
How is that business going?
It is at very early stages, the technology is complete and they are now ramping up their sales efforts talking to agencies and direct clients to give the market an understanding of that technology can now do.
I’ve been involved for about, as a chairman for about two months and as an investor, six months, and the company is I believe about three or four years old.
Are you an investor in anything else?
At the moment I am quite happy with the investments that I have made and the amount of time that I am spending on these. And there are three or four other companies that I have invested in which I do spend some time on but not a lot.
I want to take some time off over summer, I am not really actively looking for anything else but that will more than likely change early next year.
What would you look for in an investee company?
I like to get involved in ones where experience I had at Hitwise is particularly relevant to those companies. I much prefer to be able to go along to a meeting with these companies and speak from experience rather than just give a consultant style opinion. So really the main criteria are companies that need the kind of experience I have had at Hitwise and are relevant to that kind of experience.
In what industries?
In a general sense it is internet-based technologies that have been built here in Australia that are looking for international growth. The key experience at Hitwise was building a software service platform and scaling that and taking it into the UK, US and other parts of Asia.
There are not many companies around like that. There are a few, and a few that I have looked at that for various reasons weren’t exactly right at the time. I think that will change and there is a lot of innovation and the number of business plans that I see within Australia is extraordinary, so you do see some companies that have had the opportunity to roll out that sort of platform, so I think there will be more and more business worthy of investment in the future.
IT start-ups are doing it hard with recent cuts by the Federal Government to several successful schemes.
Yes. It is a very difficult time to raise money for a start up and the unfortunate thing about a start up is that they usually need money. I have seen a lot of companies that have come though this office who are desperate for money and just haven’t quite got their business to a point where they are investment ready.
So I am sure a lot of those will be going out of business or are already out of business, which is unfortunate, but the problem is most investors nowadays have got their hands well and truly in their pockets and are not taking them out for anything, because they are coping such a battering on the sharemarket and so on.
Any high-risk investments are just being put on the backburner and that’s obviously to the detriment of these companies that need the investment. It is cyclical though, it is bound to change.
I don’t know I’d love to be able to predict that.
Well you can read the tea leaves. You sold Hitwise just before the economy when on a dive.
Well, I’d like to say that that was all foresight; partly it was, we knew it’s good to sell a business when it still growing fast, before it’s peaking, and I think Hitwise still has a long way before it peaks.
Eleven years is a long time, you want to start to diversify and get on to other things after that length of time in the one business, so it was partly that the time just felt right. And I think in hindsight, we were really lucky that we did end up selling at that time.
I think if we hadn’t sold we certainly wouldn’t have been able to IPO, or even if we had have floated on NASDAQ, we would have been suffering and I think I would have still been in Hitwise for another three to five years if we hadn’t got out when we did. In hindsight it was fantastic timing and partly just because the timing felt right for a whole range of reasons.
So why did you sell at that specific time?
Obviously all booms, the cycle has to change, it was more I suppose selling at the time when we felt that the revenue, the business growth was really on a good upswing. We were hitting all the right revenue hurdles, we were financially robust, the product was evolving rapidly and continuing to become more and more popular, everything was going really well. The advice we had always received and respected was that you want sell when the going is really going well.
So what’s next?
Keep working on the companies that I have invested in and I am doing a bit of research in the sustainability space and in the mobile sector industry, that interests me.
So you haven’t started your own business?
I looked at starting something small on the side, which didn’t get up for various reasons, I just worked out there was a fantastic competitor that I didn’t quite appreciate at the time. That stopped me doing that one.
I continue to find it really interesting, it is an area that I like to research, the whole sustainability alternative fuels sector and also the mobile sector. I think they’re, there are no short term plans to build businesses in those sectors but I will probably use that research to invest more smartly in those sectors in the future.
What have you done with your personal wealth apart from invest in companies?
When we sold Hitwise, what I tried to do was balance myself, when you go from having all eggs in one basket to suddenly being able to diversify, you like to be able to diversify. Obviously I put some money on the market, kept some money in cash, bought property and so on, so fairly well diversified, but as soon as the market started to turn, I tried to get back to cash as much as I could so I managed to avoid a lot of that more recent downturn, which was a blessing. It’s been a pretty challenging time. There’s been nowhere to really hide from a money making point of view.
I am quite happy to keep it in cash, although at the same time, there’s a lot of opportunity through investing companies on the market that are yielding well with good franked yields that may not have the greatest capital growth over the next few years. But their yields would be comparable with the way the cash rate is heading and so if you are looking at a long term investment horizon, which I would be with anything I put on the market, there are bound to be good investments long term.
So what is your prediction for the end of this downturn?
I don’t know. I have absolutely no idea. I would hope that we start to see some changes in 2009, it would be pretty horrible if it went on well into 2010 but I have no idea. Unfortunately logic doesn’t always flow through to the sharemarket.
Things are driven by fear and panic and the logic of some companies’ evaluations on the sharemarket are extraordinary. What Ansearch is being valued at today is well below what its true value is worth. I think shares are around somewhere around 1.2 cents, which is 80% to 90% off its highs of last year, which is more of the value of where it should be, which is a wonderful opportunity for people that want to stick in and hold it out. But there are a lot of companies like that I think.
So you’ll stay out of the market for a while…
Well yes, to a point, I am starting to put a little bit back on the market now that are long term, stable, blue-chip companies that are yielding well at the moment, while they still might go down a little bit, long term they are bound to go back up.
I suppose the new opportunities for search marketing within Ansearch are still coming out of SME appreciation of the ability of search marketing to drive traffic and I think it’s amazing when you talk to some SMEs about building a website, they actually also do recognise the importance of doing search marketing.
The education that you used to have to do to companies who wanted to market and sell online has really become a little bit easier as people accept that if they are going to build a website, they also need to search marketing. It used to have to be completely explained to everyone right from the start.
Buying key words are getting more expensive. What impact is that having?
In buying keywords? I suppose that is all a factor of the market and different sectors, I mean the more people that are coming on into different industries are going to push the price up because of the supply and demand challenge.
However, there are a lot of new search engines that you’re able to buy on, continuing to grow over time, there are going to be smarter ways of targeting key words that might not be attracting such high prices. I mean there are lots of smarter ways of doing search marketing that can reduce those costs and improve the return you get on your spend.
I think that there’s a move towards more self serve style advertising platforms online. I am seeing just recently what Facebook and MySpace have released where you can build an ad automatically online, have it targeted on the MySpace network or Facebook network, at a low cost CPC, I think MySpace is 25 cents or something, which is inevitably going to drive a lot more SMEs to use those kind of platforms and I think that is an opportunity for the development of technology that complement that and provide that to a whole range of publishers.