It’s been just over a year since Taylor Hopkinson closed our 7-figure funding round with our VC partners, SEA Equity so I  spoke with our CEO, Tom Hopkinson to reflect on our first year as a VC-backed company.

Tom shared how the company has evolved, the challenges of managing rapid growth, and what we learned from the venture capital process. It should be a great resource for other growth-stage companies, so you’ll know what changes and challenges to expect when you’re looking for investment.

Let’s start at the beginning…

What’s the backstory and why did you decide to take on a private equity partner?

In July 2015, I bought out the original investors to regain ownership of 100 percent of the business.

We both agreed that moving forward we needed something different. We agreed that that journey had naturally come full circle and it was time for me to regain full control of the company. They exited with a 6X return on their initial investment.

So, from July 2015 to June 2017, I was the only person on the board. There was no one other than the senior management team to bounce ideas off and to discuss the growth of the business, which was quite a difficult arrangement.

The second part was that we always had a plan from day one that, in 2017/18, we would go to market and bring in investors. We had team members that were on our options scheme and we’d always promised them that at this point we would go to market.

We took the view that if the right partner came along, we’d do something and if they didn’t, we would carry on. But I did think that we needed a bit of help in terms of scaling the business, so we were looking for someone with the expertise to internationalise the business, and business management to help us get the best results.

So, we went to the market and when SEA Equity came along, with Stewart (Cantley) as part of the package, it just made sense in terms of what we were looking for. We went out with a brief of what we wanted and they met that brief.

How did the board structure change after funding?

Previously the board only ever consisted of two people – our original investors and me. The board meetings were every quarter. It was a little bit more ad hoc, a little less formal and structured.

After they exited, it was just me.

Since the SEA Equity deal the board now consists of five people. The new chairman, Stewart Cantley comes with a wealth of experience running global staffing businesses in the energy sector with multiple hundreds of millions in turnover. His experience at the CEO level within those businesses is invaluable when we think of ideas and how to do things, when to do things and where to do things.

A representative from the investors sits on the board every month and they’re obviously very keen to understand the financial performance of the business. That demands a huge amount of diligence and clarity around the reporting. With that in mind, our Head of Finance and CFO attend the board meetings, as well as myself.

So, there are a lot more people, there’s a board report which is much more structured and detailed. Part of the challenge after receiving the investment was putting in place all these measures, checks and balances. The first time we prepared the board report, it took us two or three days to gather the information and we still had to decide on the right KPIs to measure.

All of a sudden, the board would agree on a new metric that might be interesting for us to measure, then we’d have to implement a process that would allow you to monitor and measure it and pull the information quickly. It took us a good nine to twelve months before we were able to produce a board report in three hours.

So it’s gone from three days to three hours.

There’s also that trial and error learning process of figuring out which KPIs are useful and which KPIs aren’t. One of the things the incoming chairman said to me is that running the business like flying a plane. If you don’t have any dials to look at, you’re flying in the fog.

These KPIs that we’ve spent a lot of time developing now essentially give us the dials with which to fly the plane. Before, we were looking at the past using what happened before to predict the future. Now, the KPIs help us predict more confidently what the next three to six months are going to look like.

And as a by-product that, we understand how to influence our metrics. You can see what you’re in control of and know which of those dials you can affect more than others. It allows you to focus on the right things but it’s taken a long time to get all those things in place.

What did you learn during the fundraising process?

One of the big learnings is around the due diligence process.

When we started, I never dreamt how detailed and in-depth that due diligence would be. It took nine months – we started this process in September and we did the SEA Equity deal in June. And after signing terms, it took another three or four months to proceed.

The due diligence process is hard work. The scrutiny is tough. We learned a lot about the process, the kind of information we needed and what is important. We’ve been diligent in recording the right way to do that process so that next time we do a transaction the information will be at the tips of our fingers, so we won’t have to go digging around in filing cabinets.

The whole process highlighted to us what’s most important to investors. It also brought to light a lot of things that we weren’t doing very well in terms of running the business.

But more than anything, it highlighted to us the things that we were doing well.

Do you have any examples of what was going well?

An external consulting business was employed to carry out a survey as part of the due diligence. They spoke to 100 of our clients and candidates and we gave them access to clients we felt we might have had some challenges with, not just those we knew would speak highly of us. We wanted the challenging cases because we wanted that honest feedback. We wanted to know when it went wrong. Why did it go wrong? And what was the lasting impact?

It was actually a cathartic process because a lot of those people that we thought might have had issues to overcome in the past, weren’t actually as put out by it as we were ourselves. It highlighted that we put as much pressure on ourselves to deliver the highest standards as anybody else does. The feedback was overwhelmingly positive. These consultants have done thousands of these commercial due diligence surveys and the results that we got were in the top 5% that they’d ever seen.

We also learned that we’ve got the right strategy in terms of being a specialist.

We’re not trying to be all things to everybody. And that means avoiding some potentially lucrative opportunities to remain focused on what we do. Ultimately if you focus on what you are passionate about, what you’re good at, and what you love doing, you’ll be successful.

Can you share some of the challenges?

I had a feeling, rightly or wrongly, that once the investment had come in, I needed to get out and invest heavily.

We asked ourselves ‘how do you grow when you’re only an inch wide and a mile deep?’

We decided to bring in a small team to explore contract opportunities in other verticals, but the results demonstrated to us that the markets weren’t there. Or if they were,  the barriers to entry were too high, and our capital would be better deployed in doing more and being better at what we were already doing.

We are the market leaders in what we do, so why not focus on doing that even better?

So, we took that strategic decision to focus on our core markets in onshore wind, offshore wind and solar. We looked overseas for growth which was much more successful and now have clients in over 30 countries.

The most significant growth came from inside. We’ve increased revenues in the last 12 months by 25%, turnover increased by 40%, and profitability by 30%, although headcount only increased by 10%, so we’re getting more with what we already had.

The key is to avoid getting distracted. When we stopped looking at other things, we found we could become better more aggressive about what’s already working.

What was the signal that told you that you were hiring too quickly?

I was spread too thin across 14 direct reports which meant I wasn’t able to give everybody the time they needed. We needed to rationalise the structure and adopt a process for managing. Now that we’ve put that in place, we can focus more intensively.

You have to increase headcount at a sensible rate that the business can handle, the cashflow can handle, that managers can handle. If you do that, you get much more engagement, and the team can deliver revenues faster.

Take your time. Don’t feel obliged to go out and invest externally. Instead, use your newly-gained business management techniques to get more out of what you’ve already got.

How has your role evolved in the past year as you’ve taken on a full CEO role?

It has probably been the hardest part because it has required a total change in leadership style. My job has changed remarkably. Whereas before you could almost see it as a player-manager type role where you would be on field scoring goals, scoring tries as well as doing the coaching and the management. It became very clear that I was almost part of a bottleneck to growth and I needed to step away from that, become a full-time coach and manager as opposed to trying to score all the goals and do the coaching.

Luckily, we’ve built a team of people that are more than capable of scoring the goals now. And I contribute more direction. I’m involved in business development but less on the delivery side of things. A lot of my time is now taken up with growing the business, setting up offices, looking at strategy, helping coach the managers to then grow their own little businesses within the business. As someone who loves placing people into great jobs and helping companies grow and meet their targets, it took a bit of adjustment.

What’s the most unexpected thing you learned from the experience in the past year? Any surprises?

The level of detail and scrutiny that we went into through the process was a big surprise. It was intense. It was one of the toughest things that I’ve done. But the benefits were huge at the end of it. Most things that are worthwhile are not easy. But other than that, we’ve been very lucky in that we’ve got a great investor. They let us run the business, they don’t get overly involved.

Having a chairman who understands our business is critical because he knows that there are ebbs and flows and there are seasonal issues to consider. There are lots of recruitment industry-specific or search industry-specific things that affect month to month performance and growth and I think it would be much more difficult without that person almost translating between the investors and the business and setting expectations which makes it a much easier relationship than without that person. Getting the chairman on board as an equity holder was a good move.

All in all, if anything surprised me, it’s the extent to which they have just let us get on with it and manage the business. They bought us because we’re the experts in what we do, not them. And it’s refreshing that they trust us to get on with it and our job is to repay that trust and keep hitting the numbers that we’ve agreed to hit in the plan that we’ve put together with them. Which is ambitious, and it’s going to be increasingly demanding as we move forward but so far, so good.

I’ve grown a business with no real business training. I studied English Literature. It’s been very much me and the other members of the team. We’ve dealt with the issues as they’ve come up and we’ve made mistakes and we’ve had to put those mistakes right. Now, having the experts on board who know how to run businesses, gives more confidence that what we’re doing is the right thing and it’s going to help us avoid some of the mistakes that we’ve made in the past that we might not have made if we’d had this type of support from the beginning.

Do you think having that sort of scrutiny of your numbers and going through the due diligence has given you this extra insight in terms of metrics?

What I do like about it is that it took us a long time to get all the metrics set, to introduce the software and the processes for reporting those metrics quickly, in real time. There was a lot of work to get the business to where it needed to be but in the last three or four months, we’ve seen it all come together and we’ve been through that process of working through the metrics. We now know the key levers to really home in on.

The change has been dramatic. Everyone is more motivated, everyone can see it more clearly, everyone knows where they can have the biggest impact and where to focus their energy.

We did a huge amount of work on the KPIs and on using the processes of the management system and it’s lead to a much more efficient business. We have more control and more certainty around what’s coming down the pipe whereas before, although we had a plan and we knew where we wanted to go, month-to-month was always ‘first of the month, here we go again’. It’s still like that to some extent in recruitment but now we’ve got a much clearer view of what it’s likely to end up looking like, if that makes sense?

It does. If you had to pick one KPI, what have you found that’s the most important leading metric?

That’s the thing, it’s never just one metric, it’s always a combination. We’ve got a part of the board report around our KPIs that runs to 15 pages and we don’t necessarily look at any one KPI in isolation. They’re all inter-related, and that’s why you need it. If you just focus on three, there are nine that you’re missing. It’s looking at all these things in combination with each other which gives you a clear picture of what you’re doing and where you’re going.

It forces you to really think it through, and it’s actually not that obvious. It’s quite challenging and we went through about three or four different combinations before we landed on something that made sense and that everyone bought into.

And the thing is, it’s a living, breathing thing. As we expand and add more layers to the business in different places, those KPIs will evolve. It’s not going to sit like this forever. You’ve got to be constantly monitoring it and thinking about it and being open to change if needs be.

We’re a year into this growth phase. What’s next?

Now we have another five-year plan.

In 2022/23, we’ll potentially be looking for a strategic partner to give us a global footprint that will allow us to then follow those markets more quickly than we have in the past. It’s all about timing.

I think in five years’ time conditions will be right because there will be still a long runway ahead of us. I expect the market to reach another level of maturity and there’ll still be new markets cropping up. The predictions are that offshore wind especially will be as big an industry as oil and gas by 2030.

How will that look? An exit through a full acquisition or another VC round where an investor buys into Taylor Hopkinson?

We’re going to keep all options open in terms of who and why and when. There are pros and cons to both. If we have another investor who can bring us a different set of skills for a different time, we’re open to that.

Or there could be a trade buyer with a global footprint in the markets where offshore wind is maturing – India, Australia, Asia, Americas – which would allow us to continue to grow our business at a rate that we achieved in the past, which is upwards of 30% per annum.

If in 2022, we’ve employed 80, 90, 100 people or more and we’re still aiming for 25% growth, we’ll need a lot more activity to maintain that growth level. Partnering with someone that has a global infrastructure, that has management process systems, training and everything else already set up in those countries, will allow us to maintain that level of growth. And that’s what will be required to remain the number one business in our industry.

How did the last round work financially? Did the management team get to take some money off the table?

We did, a little. But there was also a typical private equity structure where the majority of it is done as loan notes. So the lion’s share is done on earn out.

It’s also coming up for a year since we introduced the partnership program, which was another kind of incentive and to share ownership. How does that fit into this whole picture of the structure of the company?

The partners program has been really positive. It has engaged people with more purpose, more ownership, and more accountability. The way in which we run those partner meetings and the reporting that we use gives people a chance to shine and a chance to ask for help. Every time we meet is getting better, we’re finding a better rhythm of what to focus on, what not to focus on and it’s allowing us to be much more efficient and effective and again, steer the business in the right way.

All the partners have got that buy-in and a bit of skin in the game. From my perspective, the more people you can bring through the business and into the partner group, the better.

But it’s got to be for the right reasons. There’s got to be a defined and proven, consistent value generation through them which is bigger than the individual. Everybody knows what that is now. We have a very clear mandate for what people need to do to grow into that. So, yes, it’s been positive overall but we’re working on it to continually make it better, more effective, more productive. Every time you do it, it gets better.

Do you have any advice for other growth-stage companies looking to raise venture capital?

I would say be prepared for the level of investment of energy, time and resources it’s going to take, pick your partner well and go to market with a plan.

It’s not just about you selling your business to the investors, you’re asking the investors ‘what are you going to bring that’s going to help us get where we want to go?’

And if you don’t see that, keep looking. I think we were very lucky to find that in our first round.

The other thing is to avoid the trap of thinking that once the deal’s done it’s back to business as usual. There’s still a mountain of work to complete all the actions agreed in the 100-day plan, create and implement the systems and processes required for management and reporting. And do all this while still growing your business and keeping everyone engaged.

It’s not for the faint-hearted but a rewarding learning experience that can only improve your team and your business.

Hopefully, we won’t be going through that all again too soon and we are much more prepared for that challenge next time around, whenever that may be.