John O’Connell is a high-profile London-based technology entrepreneur, investor and philanthropist. He founded Staffware, one of the then leading software companies in the UK, which he sold in 2004. Since then he has personally invested in fourteen technology businesses, having chaired the vast majority of them. He also chaired and co-owned the professional rugby club then known as London Wasps. At present he is Chairman of Active Navigation, and he is the founder and Chairman of ScaleUp Group.
With impeccable timing, as the second world war was coming to an end, in June 1945, John O’Connell was born in Cork, Ireland. His mother and father moved to London in 1947, looking for work and to start a new life, abandoning Ireland which at the time was one of the poorest countries in Europe.
John went to Harvest Road Primary School in Kensal Rise, London, which he describes as then being part of an Irish ghetto. The school religion was Church of England, something his Catholic parents had not realised at the time. John says: “My parents, like the rest of my Irish family, were fiercely republican and Roman Catholic. My mother mistakenly sent me to the ‘wrong’ school, which turned out to be a tremendously lucky break for me, because I came to realise that these English Protestants actually were quite nice people! Contrary to what my family thought.”
He says that while at school he led something of a ‘double life’ pretending at school as best he could that he wasn’t Irish- who were very unpopular immediately after the Second World War – ‘No Irish’ being a common sign in windows of buildings looking for tenants – and then pretending he had no English friends at school, when he came home. He says: “Whilst stressful for a while, it was a very useful lesson in my life, avoiding one of the deep-seated problems of many societies, whose children get educated in a narrow, one-dimensional, world and so not getting exposed to other people’s culture and attitudes. I was lucky, accidentally, to avoid that bigotry.”
Having passed his 11+, John attended Willesden County Grammar School, where he stayed until the first term lower sixth. He explains: “Regrettably because of my parents splitting up, I had to go out to work as a breadwinner at sixteen, as well as bring up my younger brother, who was eight, which for both of us, was not a great experience. I had no parenting skills, as he often discovered (!), but we actually got on very well, all things considered. One of the great ‘advantages’ for me at the time was that I had no one to live up to, having come from a humble family background of labourers, painters etc. Perverse though it sounds, zero expectations meant any achievements, no matter how modest, were disproportionately applauded by my mother for instance. So ‘the only way being up’ I think is a great advantage if you’re an entrepreneur, especially in a start-up situation. This has been a very important factor in my life.”
Early Career in Accountancy
John’s teachers helped him find a role as a management trainee at Sainsbury’s where he was also encouraged to study part-time via a correspondence course for accountancy examinations. He passed each phase first time to become qualified at the age of 22 as a member of the Chartered Association of Certified Accountants. John worked for a small firm of chartered accountants ‘trying to create a set of Accounts from a bunch of blood congealed receipts from the local butcher was not what I was expecting to do!’. Unsurprisingly he moved onto a not much more glamourous role as the ‘Factory Accountant’ for an engineering group.
Bunzl Pulp and Paper - the release from being a 'Boring Accountant'
By contrast, his next role was in the City of London at the HQ of the international Bunzl Pulp and Paper where he was the Group Accountant. This is where he first got into IT. “I was phenomenally busy for two weeks every month, preparing the group accounts from 100+ subsidiaries, but then for the other two weeks, I had not much to do. Proving idle hands do make work, I was asked to go on the newly formed computer committee. The ‘catch’ was that the board of Bunzl had had some terrible experiences of a failed mainframe system in one of the subsidiaries (a common problem in the 70s, justifying the phrase ‘ computer aided bankruptcy’ at that time ).”
“So the computer committee’s terms of reference started with not being allowed to recommend getting any more computers, which was also a bit perverse! Not being deterred, the committee creatively redefined what was a computer! The description ‘Automatic Data Processing Machines’ served to confuse our senior management! So we recommended these ADP machines (not computers), which they went along with somewhat naively. In fairness this in the early seventies was the coming of age of the ‘minicomputer’ from Digital Equipment ‘DEC’ and others, which were far more justifiable than the expensive, inflexible mainframes. Even more surprising than that decision however was the fact that, they asked me to set up the whole thing from scratch! Frankly I knew nothing about computers at a technical level, but apparently t I was the only person the board understood (and believed) when I explained the business benefits to come. Another important lesson in appreciating it’s not what you say but how it is said which is important.”
So John learned what he could about this new technology ‘on the job’. He attended a short course on ‘programming in machine code’ which he describes as “completely obscure and quite depressing in terms of the effort required to achieve very little”. He adds: “Those were the days when there was a lot of naivety about technology, especially at senior business levels, which was not used by the vast majority of people, unlike now with the Internet, smartphones, iPads etc. One of my favourite phrases is, ‘in the land of the blind, the one-eyed man is king’, and certainly at that time I was the one-eyed man, working with blind senior management, without question.”
John hired technical people and tried to promote non-technical people into computer roles. To overcome his managements resistance to the high cost of the failed Mainframe system, he had set up the new Computer Dept. as an internal business unit, recovering its costs by selling its computer time by the hour – called time-sharing then – the forerunner of cloud computing – to the subsidiaries in the Bunzl group. Users accessed it over slow, 30 characters per second teletype devices – “ridiculously slow compared to wat we are used to nowadays”, observed John. He says: “I then persuaded my senior management to set up a more commercial business selling software time-sharing services and hardware, to other organisations outside the group, which was great fun. We hit, amazingly quickly, high revenues, but not amazingly good profits, but it was an exciting time, and I learnt a lot about running a computer business, mainly what not to do! I recommend you make sure you get your mistakes in early, and if you’re going to lose money than ideally make it other people’s!”
Financial and Corporate Modelling Consultants (FCMC)
In the early eighties, Bunzl management decided to close down the external to the group element of the business as it was not part of their their core business. John decided rather than going back into the secure, corporate world of being the Group Accountant, he would join the people who were developing and selling the financial planning software he had bought for Bunzl in the tiny company Financial and Corporate Modelling Consultants, ‘FCMC’.
He explains: “I joined these three people who had developed the financial planning software, called Finar. They decided they wanted to go off to ‘conquer the States’, so I became ‘Head of Rest of the World’, a grand title, but basically, it was just me.” The remuneration package was 50 per cent of all revenues John generated, but no fixed salary or any other benefits so John says that he “learnt very quickly that if I didn’t sell anything, I would starve – more pressing – that my family might starve.” This was in 1980 when John was 35, he adds: “I didn’t let on to my wife and children that that was the financial deal. I thought, best not to cause them sleepless nights too.”
Staffware – 20-year 'overnight success'
John describes how FCMC became Staffware, he says: “The FCMC business was going well and it was relatively stable financially. It had a clear, well-defined market, which I knew and understood because of my financial background, selling to large corporates in the UK. We had also survived the impact of microcomputers on our business model, previously based upon the more expensive mini computers. Micro software such as ‘VisiCalc’ ‘overnight’ reduced the cost of computing by a factor of 10 or even 100 in many cases, which we had to acknowledge in our pricing too. However all this didn’t have much interest technically for my colleagues, now in the USA. So they came up with an ‘off the wall’ idea that, we should develop an intelligent email-based system. This was at a time when email itself was very nascent only in use in a few large organisations who had their own private email system, such as IBM’s Profs. However undaunted with the notion of creating a whole new market sector, we launched not software but Staffware!”
This was the era of ‘Open Computing ‘– UNIX – designed to overcome the tyranny of being locked in for ever into proprietary systems from the mainframe manufacturers. John and colleagues tried to create a new market called ‘Procedure Processing’ but they discovered that they were way too early into the market. John adds: “We burnt a phenomenal amount of cash, for us anyway, and it drained the successful FCMC business of working capital – a bit of a crazy strategy in hindsight, resulting in us raising cash from Merchant Bank as they were called then – in 1984.” A lack of a well-defined market was added to by the complication that the first versions of Staffware didn’t work!
Recalling some of the memorable moments of the early times in the Staffware, John says: “I remember my CTO getting his lapels seized by one of our clients, who pulled him across the table and threatened to punch him if he didn’t get the software working. I remember the small programming team in the US at the time, thinking it was quite unreasonable for me to expect the software to work. …I remember getting personally sued, along with my two partners, for a million pounds each at the time, when a million pounds was serious money. This was the time that triggered their decision to actually move away from the business entirely, realising what was thought would be a sprint to success would be a marathon, if at all.”
Now solely in charge, in 1985 John persuaded the company, who was threatening to sue him and/or the company (both worth next to nothing at that time) that they should work together to generate something of real value by becoming a shareholder, which they did, eventually, realising they would not get any return from pursuing a legal action.
After another ten+ years of the business living from hand to mouth, even after raising some cash from two Angels (who unlike many Angels did materially help in the development of the business); almost selling the company in that barren period, Staffware became an ‘overnight success’ in 1996, by floating on the new London Stock Exchange ‘Alternative Investment Market ‘AIM. He says; “We suddenly became hot as the originators of ‘Workflow Automation’ software , beefed up to 40 people, by buying one of my resellers. By then also, we had some real customers, not just enthusiastic resellers, who were happy to pay us because the software worked – that was quite a nice thing.”
The change saw the company grow more than 11 fold in eight years from £4 million revenue to £45 million. This came about because John says, they had learned how to crisply articulate – what they did; the benefits in both business and technical terms and how to deliver on its Forecasts by managing its sales opportunity pipeline – vital for a listed company. John adds: “We grew up. It’s not good to grow up in the public eye, but we did, and that probably forced us to grow up faster.”
In 2000, ‘Workflow Automation’ itself had morphed into ‘BPM’ Business Process Management. Staffware moved from AIM to the FTSE main market. However we were regarded, wrongly, as a dotcom business by a undiscerning stock market. The market cap was a billion dollars at one stage. John says: “My colleagues thought they were multimillionaires. The hardest thing actually was when the whole dotcom market crashed, trying to manage people who thought they were super rich one day and then super poor the next was quite draining. Staff, family, clients, shareholders, all thought the company was going broke, but in fact it wasn’t. Actually, it was a very solid business by then, geographically widespread as we were directly in sixteen countries, with an international reseller channel too. At our peak we had 500 staff, although we reduced that to 350 overnight following the dotcom crash, when businesses stopped buying technology post the Y2K inspired boom.”
The company operated in the US, throughout Western Europe, all the Nordic regions, Australia, South Africa, Hong Kong and had representation in the Middle East. John found himself spending 50 per cent of his time travelling and the other 50 per cent managing investor relations and the board. John says: “Not a particularly balanced lifestyle. Regrettably, to be successful, one has to be a little unbalanced I would say.”
John says he was run ragged and experiencing dramatically high to low moments, such as celebrating a record deal in Australia whilst at the same time being told by other colleagues around the world that they had missed their forecasts. He says: “This was the first half of 2001, so, having celebrated with my Australian colleagues, in time-honoured fashion, I then spent the next eight hours on the phone in a car outside a colleagues house from about midnight in Sydney to 8.00am, agreeing with my advisers in London what we were publishing by way of ‘a profit warning’ whilst trying to pacify our major shareholders and my board.” He describes it as “a kind of Alice in Wonderland existence, which either kills you or makes you stronger. Selling one-off perpetual licenses is a crazy, inherently unstable business model, he observes. ‘The current SaaS model is far more customer aligned and reflects the reality of business which is a continuum not a one-off event.”
Having reacted fast to a new more sensible era in technology growth, we regained profitability by the second half of the year. John adds: “We then focused more on making profits rather than growth. We ended up having £25 million of cash in the bank, no debt, and profitable.” The situation created interest from other companies including TIBCO, the Nasdaq-quoted software business out of Palo Alto, and John did a deal directly with Vivek Ranadive, the founder of TIBCO for a valuation 60 per cent above the then market price.
After selling to TIBCO, Staffware was kept as a separate business within the group for a while and John remained as ‘Officer’ of the NASDAQ company. But by then he had decided to move on. He explains: “It became pretty clear to me that the acquisition wasn’t going to achieve its potential, without being fully absorbed into TIBCO. It made no sense to have a country manager for Staffware and also a country manager for TIBCO. So, I recommended, perhaps somewhat self-servingly in the summer of 2004, that they didn’t need to have Staffware as a separately run business and therefore they didn’t need me anymore to run it.
Chairman and co-owner of London Wasps Rugby Club
Having been a keen rugby fan, John moved from software to getting involved with London Wasps Rugby Club. He explains: “I followed Wasps, who were my local team and I seized the opportunity- one of these boyhood things- for what I thought was going to be just an expensive season ticket when I could get the reflected glory from sitting on the board without any real responsibilities.”
Unfortunately, it did not work out that way as at that time the very existence of professional rugby clubs in England was in doubt facing severe challenges being accepted by the Rugby Football Union. In addition, Wasps itself was a payroll away from bankruptcy. John says of the time; “I ended up constantly having to work out how to keep the Wasps club going. We continued to make significant losses, which a chap called Chris Wright, the music entrepreneur who basically founded London Wasps and myself, were funding.” Despite the financial difficulties off the pitch, the club won numerous English and European trophies between 2004-2009. John adds: “It was a great period to be associated with London Wasps, but I wish I had not had all the off-the-field pressures. I was eminently unqualified to be steering a professional rugby club, although, I’m quite a fast learner and my accounting background helped a lot.”
In 2009, both John and Chris Wright sold their shares. John is now officially a ‘Wasps Legend’!
Investor – More hands off, rightly or wrongly
In parallel with his involvement in Wasps, John was drawn into working with relatively young software technology businesses, trying to help them become maybe another Staffware, or even better. He says: “I then went back to my roots, mainly away from the public markets and became an investor in, to date, about fourteen businesses.” Among these some were AIM listed. Successful exits included Portrait Software – a phoenix from the Ashes of one time AIM darling AIT Software, InforSense – the first spinout from Imperial College and Opta Sports Data.
Having got start-ups and turn arounds out of his system, as John describes it, he then got into slightly more mature businesses with a head count of say between 30 and 100, who are typically looking for Series A type funding. He explains: “I’ve concluded that start-ups, exciting though they are, just have too many variables, where too many things can go wrong – and they usually do. So, whilst exciting, and keeping you ‘off the streets’ so to speak, I wouldn’t regard it as being the most sensible of investment paths. Some of course come good and we all know the one or two which do extremely well, but most flounder, unfortunately.”
In 2017 John founded the ScaleUp Group to help young businesses grow and to ironically scale up his own investment and leadership activities. It now has 26 members who are either successful entrepreneurs or seasoned senior executives or both. In their previous lives, some have led MBOs, floated on public markets inc. Nasdaq etc. We help young companies “to scale the mountain” as John describes it including personally investing ourselves. He adds: “This means our interests are aligned as we are there for a long haul, say 3-7 years. We help entrepreneurs secure the appropriate sources of funding; find talent; introduce trading relationships, particularly overseas (my colleagues have connections from China to South America) and generally bring them into our ‘eco-system’ such as the Enterprise Awards which he founded 8 years ago. All this significantly enhances their profile amongst investors, customers and channel partners. None of these guarantee success, but they all help to maximise its chance.”
John says one of the challenges of the UK sector is that we’ve been phenomenally good at starting up businesses but are not as good as scaling those businesses up. He explains: “We seem to be too ready to sell too soon. One of the things we do in ScaleUp Group is often to elevate the ambition of entrepreneurs and maybe a few will not sell out at all, or sell way later than they would otherwise have done.”
ScaleUp is currently helping five companies to raise cash, getting nearer to its goal of being responsible for about ten per cent of the Series A funding of tech companies in the UK in a year.
Voluntary roles – Rewarding for the Soul and the Community too
John has been active in the Charity sector since 2005, when he was asked to help set up the Prince’s Trust Technology Leadership Group. Since then, with other vertical industry Leadership Groups, this concept has raised tens of millions of pounds for the charity, which targets getting young people in a position to maximise their opportunities whenever possible.
In 2011, John founded the ‘not for profit’ Enterprise Awards, the ‘Oscars for Technology Entrepreneurs’ which was originally an offshoot from the Worshipful Company of Information Technologists, the WCIT. As a result, nominated charities receive £10,000 -£20,000 every year.
He is also Chairman and Founder of the Ambassador Group of the Co-operation Ireland charity. John explains: “In 2010 I was approached to see what I could do to help, given my Prince’s Trust track record. A ‘hearts and minds’ charity is more challenging, as it is not say building schools or hospitals or housing, but instead in this case persuading young people in Ireland to not go down the path of bigotry, reinforcing their prejudice against the republicans or vice versa, the unionists. This harks right back to my early school days in the nineteen fifties.”
Aside from his charitable interests, since 2011, John has been Chairman of Active Navigation, a fast growing mainly US based business in Privacy File Analysis. He has been recognised as a ‘Master of Information Technology’ by the US-based trade association AIIM International, which he also chaired for a while. As mentioned earlier, he is also a Fellow of the Chartered Association of Certified Accountants and a Liveryman of the WCIT.
Brexit and entrepreneurship
On the subject of Brexit from an entrepreneur’s point of view, John says: “Change creates opportunities, but I think this regrettably is an unnecessary change, which we’re going to have to figure out how best to make something of. What I hope doesn’t happen is that, as everyone gets more mobile, especially entrepreneurs, they decide to relocate either themselves or much of their operations to, say Europe, or elsewhere. I think that’s a big danger, so all of the incentive schemes which the UK has, including the EIS one, will be even more important than previously.”
Lessons learned – TOO MANY TO MENTION!
John says: “I think my start up mentality means I’ve always been at risk of getting into ventures too soon, going back to my Bunzl days and onwards, and therefore potentially leaving them too soon too. Staffware is the best example of that, as I must confess I became slightly bored with it, leaving it too long to plan for my succession I suspect, before receiving an unrefusable offer to sell it. There are now some very large BPM companies out there, billion pounds plus, so if we had kept going, we could well have been in the same category as them now? However, I am not one to have regrets so maybe those thoughts are mere self-indulgence after all!”
Proudest achievement - TOO MANY TO MENTION!
Joking aside, ”Historically Staffware has to be number one-going from zero (or even minus!) to no.1 in the world in our field and then being bought for $230 million after hitting a low point valuation of $12 million, post dot.com crash – and giving a great return to all those who had invested in it and remained loyal throughout. John adds that while Staffware was his proudest moment it was a long time ago, saying: “I don’t really want to rest on my laurels on that one. Right up to date, I’m proud now that Scale-Up Group is up and running and that we are making a big difference to many entrepreneurs.”
Challenges and opportunities for IT for the next ten years
BECOMING SO UBIQUITOUS AS TO BECOME ‘INVISIBLE’
From a UK perspective, John says that a challenge for the IT industry is whether there’s going to be a separate industry at all in due course. He says: “At one time, everyone had their own electricity generating plants in their factory, but now it would be ridiculous to think you’d do that. IT is everywhere, so as it is becoming so prevalent, will the IT industry become like say the Electricity Industry, dominated by a very few, enormous organisations, squeezing out all of the smaller more entrepreneurial ones?”
As well as ensuring that people have employment if robotics were to take over, John also believes that the internet “needs to grow up”. He says: “The problems of cyber bullying and child grooming, not to mention online fraud, have to addressed. I think the major social media businesses will have to front up. They will have either to accept self-regulation with similar responsibilities to publishers or they’re going to have to be, ‘controlled’ by a higher authority. This is a serious problem which appears to be getting worse.”
Cyber security is also a big issue to be tackled. John says: “The hackers seem to be by and large as clever or cleverer than some of the people they are hacking, and there’s state-sponsored cyber security too. One’s a bit sceptical of whether or not some governments are playing on this as a fear factor and that the threats aren’t as great as we’re being told. But I think state-sponsored hacking seems to be prevalent, and if we don’t attract the right people to protect us, because they can get paid more by the hackers, then we’ve got a serious problem on our hands, as the fundamentals of life, such as electricity and water supply and so on could be turned off, completely destabilising society in the process.”
Seriously, for those thinking about a career in IT today, John says: “Whatever path you choose, make sure you’re working for the right organisation, that you’re properly rewarded and suitably trained. Avoid getting exploited – the most successful IT companies in the world are some of the most demanding of their workforce. If you are going to be a workaholic, think if you’d be better off all round working for yourself?
Maybe Scale-Up Group could help you in that respect!”
Interviewed by: Elisabetta Mori on the 14th February 2019 at The Ivy, London
Transcribed by: Susan Hutton
Abstracted by: Lynda Feeley