Moving on up:
Mike Welling talking to David Longworth of Webster Buchanan Research
Camwood founder Mike Welling set out with plans to launch a hostile takeover of Microsoft. Back in the real world, he's found that timing - and listening - is everything in the software business.
Mike Welling is founder and COO of software migration specialist Camwood. The company he started in his loft back in late 1999 has a huge opportunity in front of it today as enterprises struggle to upgrade to the latest version of Microsoft's Windows operating system, Vista. Many cite application compatibility as their greatest concern: Camwood's recently redeveloped appTitude platform tells companies which applications are going to work fine with the new operating system, which will fail and which might work with a little tweaking. Welling always had lofty ambitions for the company and in 2003, he secured £1.5m investment from Foresight.
What prompted you to set up Camwood in the first place?
I had always wanted to start my own company and I'd been dabbling in various things before I founded Camwood. It was
partly just that I wanted to work for myself rather than a big corporation but it was also because I wanted to provide
something of value to the end user. My background is in sales in major IT businesses and I've always found that the big
companies just keep on working the same way, grinding out the same stuff. There's not a lot of innovation in the way they
approach things.
My co-founder and I started off working from our homes, making contacts and defining the services we were going to provide. We actually wrote our first business plan in my loft. We then made a leap of faith and decided that we had to set up an office. It gave us a feeling that we were actually going to work and provided us with a focal point. We took on a small workspace - it actually resembled a converted squash court - and set up a corporate network and we started making the company more professional and developing our brand.
How realistic was that first business plan?
Well, if I tell you that I wanted to do a hostile takeover of Microsoft, you'll understand that it wasn't perhaps entirely
achievable. I set my sights really high because I had a vision and a lot of ambition for the company. You learn so much
when you start your own business about so many different areas and what we started out doing was almost completely
different to the way we approach things now.
The key thing is listening to your customers. We've refined and developed our solution based on customer feedback. Consequently we have a more rounded service offering. Sometimes you might not like what customers are telling you - what you initially think is important to them in some cases turns out not to be. But it's critical to listen to the people who are funding the company's survival.
How difficult was it to secure your first customer?
It was the most difficult challenge of all, particularly in the space we work. Our mid-market or enterprise customers want
referenceability. They want to know where you have done it before and who you have done it for. When you're starting out,
it helps to get creative in making yourselves appear bigger than you really are.
We didn't get any business for the first three months. But I was in a relatively comfortable position financially having worked for a large company and so was my partner. Then we were introduced to Railtrack through a contact of mine. They were in the middle of a migration project with Unisys, and were having some problems. We put together a programme and an approach of how we would migrate their applications and we won the business.
Then came the difficult bit - actually delivering it. I remember interviewing contractors well into the night to staff up for the project. It helped that my partner at the time - who has since left the business - was a good project manager as well as being quite technical. We delivered the project on time and on budget and we actually made a good bit of business out of it. We referenced it and ploughed the money back into the business and it has helped us grow from there.
You've since won a raft of household name customers. How did you attract companies like BAe, Tube
Lines and Norwich Union?
We do still get companies that think 'call 999 for Camwood'. But mostly they are planning ahead now. Very few if any
enterprises have migrated to Windows Vista yet. But the first wave of migrations is coming in 2008 and lots of companies
are currently in the pre-migration phase. It's inevitable that they will migrate so they are planning ahead for that,
testing for application compatibility. Organisations in the finance sector in particular have thousands of applications
and to test them all manually for compatibility is impossible - that's where we come in, providing automated tools that
report on whether the applications are going to work on Vista. It breaks the mountain down into manageable chunks.
Why did you decide to go for funding?
Initially we funded the business ourselves and we didn't take a salary for the first couple of years. But as we grew to a
certain size, managing cash became an issue for us, just the basics of cash in cash out. It got to the point where if we
hadn't been paid by a customer or there was some kind of delay to the payment it could have jeopardised us making the
payroll that month. And the last thing we wanted to do was not pay our staff - partly for our reputation but also because
people need to be paid to meet their own outgoings. We also wanted to develop the business and develop our software, which
required an injection of capital.
So how did you approach investors?
I had worked with Frank Foxall at GE and he came on board as CEO with a view to securing the investment. We went to
investors as a team - with technical, sales and financial input. We did a lot of preparation - it's all about being
prepared. You have to know your numbers inside out. You need to be able to articulate your proposition very clearly and
stay away from talking too much about the technology because investors are not really interested in that. Obviously they
are concerned about IP - and we have significant IP both in the way we deliver our services and in our software platform -
but at the end of the day it's the profit and loss and your sales progress that they want to know about.
We saw a number of organisations and several were really positive. But they tended to ask for additional information and drag their feet and the time it took was longer than we thought - six months in all. It's very draining, you get fatigued by the whole process.
And will you be going for a further round?
We will need to go for the next level of investment because we currently see a real opportunity to create a global software
business in this area. We were founded as a services organisation and as we've developed we've taken that support service
and codified it into a software platform, appTitude, and there's an opportunity now to go for that next round of funding.
We don't have a specific timescale but I would say that I'll be a lot more comfortable about doing it this time around -
it's always easier when you've done it once.
How has your approach changed as the company has grown?
In the early days, you think you want to conquer the world and you think if you had the solution right away you would be
able to make more money. But bringing in the resources you need costs you more money. You have to do it gradually and
evolve it in a way that becomes self-funding. In the past we've burnt cash bringing something to market and then found
the market wasn't there. If you can get a customer to future buy it, and give you that commitment, then you're onto a
winner.