Tom Teichman: Britain's most successful digital startup backer

Many thanks to Chris Blackhurst and the Evening Standard for a great article with our Co-Founder Tom Teichman:

Britain's most successful digital startup backer

Hands up, who’s heard of Tom Teichman.

You haven’t? Well you should have.

Teichman, 68, is one of the most influential people in UK tech; the former investment  banker-turned-super investor, who made a fortune backing some of our most brilliant start-ups: lastminute, ARC, Moshi Monsters, Squawka, NotontheHighStreet, HardlyEveryWornit.

With his brushed-back, slick, silvery, longish hair, all-year tan, and taste in fine, dapper clothes, he could pass for an ageing rock manager or producer.

At Apps World at the Excel Centre, on the 18th and 19th of next month, when he makes a rare public appearance, alongside the developers and software geniuses, he will be one of the star turns.

The crowd will flock to hear him, because Teichman is far and away Britain’s most successful serial backer of digital start-ups.

He earns extra respect, too, because he did it by surviving the dotcom crash.

He’s chairman of SPARK Ventures, a leading investor in early-stage digital businesses and, with advertising king Sir John Hegarty, co-founder of The Garage Soho, a new incubator for tech ideas.

"‘We look for certain characteristics. Would we want to have Sunday lunch with them?"

Tom Teichman on picking which entrepreneurs to back

There’s no doubting his wealth. Just how great it is, he’s not saying.“I like to keep shtum about how well I’ve done,” he says, laughing.

Married, he has four children. He likes to “mess about with old cars and boats”, an understatement for collecting and — in his case — racing vintage cars at Goodwood. He also rows and cycles.

It was not always thus. He was born in Budapest. “My family came over here. It was the usual refugee story.” 

Teichman’s father was in textiles and at first helped Welsh coal miners to retrain and move to his industry. 

Subsequently, the family moved from Wales to London, to Marble Arch and St John’s Wood. 

“I went to state school, to grammar school, then to UCL and LSE, and came out an economist,” Teichman says.

His first job was in insurance, at Willis Faber. 

“I decided I wasn’t using my economics and education.” 

So he went to Bankers Trust as an economist, then to Credit Suisse, then to Bank of Montreal Nesbitt Thomson, where he finished up as head of European banking.

A relation was in advertising. “He was working with a young guy who had come up with the idea of downloading information across big pipes from databases,” says Teichman.

“It was the mid-Eighties. Ad agencies wanted research, and he had the idea with my relation to put the information on large mainframe computers and then allow people to get the information by accessing the computer.”

This was the beginning of MAID, which went on to become one of the world’s biggest online business information providers. 

MAID’s rise coincided with the advent of the internet. Teichman could see the potential and quit banking. He floated MAID in London and on Nasdaq, then sold out. 

He decided to become a full-time investor in dotcoms. Two people came to see him: Martha Lane-Fox and Brent Hoberman. 

“They were an amazing couple — very bright, very commercial, very determined, very smart. As soon as they walked in, I thought ‘wow’. And I loved the name they’d chosen for their business: lastminute.com.”

It was a crazy period. 

“Lastminute was over-hyped by the press. When we floated it we raised £120 million, but we had demand for £4 billion worth of stock.”

He invested in other internet businesses. The pattern was the same. 

“When we went public with our stake it was quite extraordinary. Every time we invested, the price went up.

“We invested in internet gaming, we invested in some new travel thing or a new idea for doing 3D planning. Each time, the price went up. 

“We were spending cash and trading in a huge multiple of cash and anything you could think of, all on hope.” 

Then, the bubble burst. 

“It was a shock — having been in the position where every time we invested, the price went up, to suddenly, nothing was happening. Some of these companies weren’t doing anything. 

“Companies were hyped but actually they weren’t making any money. 

“They were far from being cashflow break even.”

The backing, he realised, was going into adding to the hype. 

“I remember standing at a bus stop in Oxford Street and counting the buses going by. Guess how many had internet businesses on their side? Nine.” 

He shakes his head. 

“The investment money was all funding advertising agencies.”

Teichman survived. “We were quite well funded compared with other people and had some good businesses, which have come through. We sold some and soldiered on.

“We just kept on going and watched the competition fold and disappear.”

He met Hegarty through his children — they were both parents at the same school. 

“John and I love creating new businesses. It’s what I’ve been good at and of course he’s the great brand builder. So we got together.

“We’ve known each other for 25 years. We thought we must do something, so we started The Garage in Dean Street, just opposite The Groucho.”

Since they started last November, “deals have come in from all over the place. Every day, people are coming in, from John’s advertising world and from my investment world”. 

So, what are his rules? First and foremost, he says, they’re looking for something that will “disrupt” a sector.

“Our aim is to disrupt which is very fashionable at the moment. Second, the people. Without the right people it’s never going to work.”

Every business he’s ever supported then successfully exited, he says, don’t chop and change their management.

“When we see the people we try to imagine what they’ll be like in a few years’ time. If an idea is fantastic, but the people are awful, we don’t do it.

“We look for certain characteristics: commitment, sharpness, and commercial ability. Presentability at all levels. Are they decent human beings? The Sunday lunch test — would we want Sunday lunch with them? It’s quite emotional.”

In return for the cash, they will take stakes of “between 5% and 40%”, depending on the size of the business.

“And we may take options, depending on the amount of help we’re giving”.

Their aim “is to build a brand, to  mix financial discipline with the creative side”.

So, what are his tips for spotting the Next Big Thing? He gives me his top five: “First, the people have to be sparky, very awake, very commercial and very committed. Without that nothing can work.”

And second? 

“The founding team has to consist of two people at least where one is the Ying and the other is the Yang. They need to argue with each other, to have very different skills, so for example, one is financial and one creative. One can be CEO and the other MD or COO.” 

Third: “Operating in a decent-sized industry — where there are economies of scale. So not sailing boats in Suffolk, but areas such as the online gaming, property, transport and the travel industry.

“They should be businesses you can expand abroad eventually, preferably to the US, without having to re-engineer them.”

Fourth: “The early-stage business has to be very local to the investor, so probably the UK for us as it’s very difficult to manage an operation and give good input if it’s far away working in a different legal and business culture.

“You need to be able to look the founder in the eye on key issues, which come up quite often in a new business.”

And fifth: “There has to be total commitment. None of this ‘I will leave my job if it takes off’, or ‘let’s see how it goes, and then I will jump ship into the business’.

“It has to be full commitment right now and no excuses like ‘I’ve got to pay my mortgage’. None of that cuts the ice. You need to have total belief from the founders from day one.”

There they are. From the oracle himself. The very best of luck.

 

Words: Chris Blackhurst

Published: Evening Standard, Friday October 30th