When I became CEO of tech-research business, Ovum, a few years ago now, our team focused on our exit strategy right from the start. Some thought we were putting the cart before the horse, but we knew that if we wanted to exit successfully, we had to factor it into our growth plans from the very beginning. It influenced all aspects of strategy.
I've been following the home improvement start-up Opun for a few years now, as part of Informed Funding, the platform I founded which helps connect businesses to finance. In five short years, Opun has grown from a team of two to a team of over 50 and has just been acquired by the British institution John Lewis.
Opun is a Workspace customer based at the Leather Market in London Bridge. Through our strategic partnership with Workspace which is home to over 4,000 fascinating and disruptive businesses across London, Informed Funding provides funding and financial support to directors, finance directors and entrepreneurs across their customer base. Following an Informed Funding workshop on how to plan an exit strategy to maximise the value of your business, I talked to Rod Brown, the Chairman and Co-founder of Opun. I wanted to find out more about how he and his partner John Cushing went about starting and selling their business successfully.
"We built the business from the outset to be attractive to brands in the UK"
As Services Director at Tesco, Rod was responsible for setting up Tesco Home Services in 2010, which was eventually folded due to internal pressures. Rod was convinced the idea had legs – the pilot in Swindon had received good feedback from both customers and traders. He met John for a friendly meeting, "lunch turned into dinner", and they formed the company the next day. This was 2013. They raised 750k from private investors ("by mining the seam of angel entrepreneurs"), built the tech, then started trading in 2015.
Just three years on, #Opun will now operate as a wholly-owned subsidiary under the John Lewis Partnership while retaining its brand. I wanted to know more about whether they'd envisaged this type of the exit from the beginning and the lessons they'd learnt which might prove useful for other start-ups embarking on a similar journey.
"One of the smartest routes is to team up with somebody else's brand and generate a dial-moving business in a £70 billion corporation."
As I suspected, the plan for the future has always been quite clear. Rod tells me: "We built the business from the outset to be attractive to brands in the UK." From his experience running Tesco Home Services, he knew that his model would work in the right circumstances. Corporations are increasingly thinking about new services to attract and retain customers. It's part of staying ahead of challengers, in a world where disruption is fast becoming the norm. For example, Rod was sure that banks would be interested (many people take out loans for home improvements or it’s the first thing they want to do after getting a mortgage).
In 2017, there have been a few notable start-up acquisitions to say the least. Ikea bought TaskRabbit (a marketplace for household chores) to help their customers arrange their flatpack furniture. The start-up has also provided invaluable data into how people live their domestic lives, and therefore can help Ikea shape products to suit consumers.
Rod and John thought about selling their product to bigger brands from the very beginning. They created a holding company with a subsidiary. Each subsidiary could, potentially, operate for different brands, perhaps with a white-label system. Other considerations included the computer system and making it "multi-tenantable", enabling the business to run various data sets for different clients at the same time.
They also knew that partnering with a bigger brand would guarantee survival. Their customers came at first from digital marketing (Rod is quite clear: "Pay Google, and they will come"). But he also realised they'd need another approach for sustainable and rapid growth. "One of the smartest routes is to team up with somebody else's brand and generate a dial-moving business in a £70 billion corporation."
After raising money from private investors, then by crowdfunding on Syndicate Room, and backing worth £3.4 million from Aviva in 2016, they approached John Lewis: "I just rang them up." They had already created competitive tension by talking to various brands, eventually opting for the department store chain because of its expertise and heritage in the home improvement space.
"Go high value, repeatable and ‘sticky"
There is obviously real synergy in terms of the service both Opun and John Lewis provide. But there's something else: they both share complimentary values and the desire to put the customer first. John Lewis must have looked at the scalability of the business, the high-quality service it provides (at a relatively high-price point) and the experience of its founding team, which would be brought in house. It’s worth noting that Rod has a wealth of experience: he was also part of the team which acquired the computer-support service PC Guys for Tesco in 2007.
In my experience, a product business is usually more attractive to potential buyers than a consultancy. Looking at the market, companies which are research and product based, are often valued far higher than consultancy firms with same turnover. Opun has developed a proven technology platform which matches suppliers with those looking to improve their home. But they don’t stint on service, making sure customers get a call back (although this isn't strictly necessary, the tech can do it all).
My mantra, when it came to selling Ovum, was to go high value, repeatable and ‘sticky’. The Opun model does this. Now it's up to Rod and his team to grow their business with the help of the John Lewis Partnership. When I ask Rod if he had considered leaving Opun to set up another start-up, he said: "I wouldn't miss this for anything." Though they may have exited, the journey to make Opun a house-hold name is just beginning.
If you’re thinking about developing the finance strategy for your business, sign up to the Informed Funding workshop, where you'll be able to discuss with experts and other business owners how to maximise the value of your business. The Workshop Sessions are free to Workspace customers and Club Workspace Members. Non-Workspace customers may access the Workshops Sessions for £50(+VAT)
If you would like to hear about Informed Funding and Workspace’s other selected partners, head over to the ‘My Account’ section of our website, log in and update your marketing preferences to ensure you’re only receiving the communications you want to, in the way you want to. To receive Informed Funding updates, tick one of the boxes under ‘Interested in Workspace’s selected partners’.
If your company needs an inspiring place to work we’re sure we have just the thing. Why not take a tour or check out what we have on offer? As well as having somewhere you’ll love to come to work every day, you’ll benefit from the Workspace Advantage.