TWO’S COMPANY: TIM CRITCHLEY AND DAVID SEAR OF SEMAFONE
It was common for the equity investors of yore to demand a complete overhaul of a management team as part of the terms of a fundraising deal. The received wisdom was that the people who had built up a company in the early days of its operation were rarely the right people to lead a much larger organisation. Luckily, some investors now take a more informed view.
In Semafone’s case, not only was chief executive Tim Critchley identified by us as precisely the right man to grow the secure payments business, but his choice of non-exec, David Sear, was also given the seal of approval.
It’s this kind of hands-off, respectful investor-investee relationship that gives other entrepreneurs the confidence to seek outside funding. The business is now in the best possible position to embark on its new contract with BT, one of the world’s largest telecoms companies, and to take Semafone to the next stage of growth.
Tim Critchley – CEO, Semafone
I first got involved with Semafone in 2009. The two founders, David Jackson and Charles Cooper-Driver, came to me with the idea and said they were thinking of setting up a business. I have known David and Charles for more than 20 years. We’d always talked about doing something together but they were busy running a big call centre business – one of the reasons they had the idea for the Semafone technology in the first place – and so they didn’t have time to run with it themselves. It seemed like a great idea and a great opportunity.
We got to a point where the business was making a small profit: we had over £5m turnover for the year and we were growing 35pc-40pc year on year. We had some great customers in the UK but almost by accident had started to win customers overseas: we were being reactive to enquiries through the website and had ended up with around six clients in North America and one in Australia. It was pretty clear to us that we were sitting on a potential global opportunity.
We were keen to try to capitalise on that with external investment. We wanted to get some bodies on the ground overseas, and set up a North America sales team and one in Asia Pacific to go out and be proactive in those regions. We also had just signed a major deal here in the UK with BT, and we realised that it was going to need quite an investment from us to really deliver.
During the process of seeking funding, BGF was head and shoulders above everyone else, really. Its interest in us was exciting; it could help not only with money but also with support and a strong business network.
Bringing BGF into the company has changed the dynamic, but that is as much of a reflection of our development than anything else – we realised we had to grow up a bit and the governance changes that BGF has brought in would have happened anyway, so it worked out really well.
We got David involved about three years ago, before BGF’s investment, as non-executive chairman. I’m delighted to say that BGF felt that he was the right chairman for us and that the relationship he and I had was a strength – so they didn’t feel a need to replace him. I was really pleased that they were happy for David to stay on.
David’s got a fantastic track record and is incredibly knowledgeable in the payments sector, and he’s also a very smart bloke. David and I have forged a great relationship over the years – we’ve done some big contract negotiations and fundraising, and we’ve also had to grapple with litigation over patent infringement. David’s experience has been a huge help in all of that. It is a formal relationship, but that works for us – and the business.
David Sear – non-executive chairman, Semafone
I’ve got 20 years’ experience in payments, and I’m a serial investor in payments companies, so I know the space very well. Three years ago I was approached by a third party in relation to Semafone when it was at a relatively early stage of its development.
It piqued my interest because this is a business with a vital role in protecting consumers and their data. These are really important things to consumers – people want to feel secure when giving out card details over the phone.
This was a business with strong technical capability, and scope for further development in secure payments. It was exciting from an intellectual and investment point of view. Early on, I put my money where my mouth was and invested in the business, and it paid off as the business has since made significant progress.
You wouldn’t invest in a business unless you strongly believed in the people, and that always comes down to the CEO. If you don’t think they can grow with the business, you really shouldn’t invest.
My assessment of Tim when I came in as chairman and investor was that he has a lot of energy, and that he was definitely capable of running the business as it became bigger. I also thought that with my experience – I run Skrill Group, which is a €250m (£179m) business – I could help him as a chairman and create the kind of board that the business needs.
Tim had so much potential, and he has become a mature player as he’s dealt with the challenges that you face in business – making sure you make the payroll, and all those other wonderful things you have to deal with as CEO. Tim is one of those guys who soaks up pressure too, with grace.
I’ve tried to help Tim with strategy and coaching himself in terms of what he can do, but all the time without trying to run the business for him. I understand, having been a CEO myself, the real difference between executive and non-executive: he’s firmly in the seat, he just needs the right kind of advice and support from his board, when he asks for it.
The fantastic opportunity with BT is going to be the next massive step change in the business. You can’t underestimate how important that kind of deal is. But there is an investment required in managing big partners such as BT, and so we knew we needed to go to market and raise money last year.
We were looking for a complementary shareholder and BGF came through the process fantastically. When you get to this kind of stage you benefit from a fresh look at the business and its governance. It has been very firm in its views, but very nice to work with. It is good to have such a direct and clear relationship with a supportive investor.
Semafone, a UK company specialising in fraud prevention software used by call centres taking payments over the phone, is looking to increase the size of its operations following a £4m growth capital investment from BGF and a further £1m from Octopus Investments and other existing shareholders.
BGF invested in Semafone in October 2014 to support delivery of recent large contract wins and expansion in overseas markets.
Semafone’s DTMF masking payment method is patented in the US and UK and allows call centre operators and other businesses taking payments by phone to reduce Payment Card Industry Data Security Standard (PCI DSS) compliance costs by up to 80 percent. The technology anonymises sensitive credit and debit card details as they are keyed in by the customer during a telephone transaction and sends them directly to the bank, by-passing the call centre itself. Semafone also allows the call centre agent to maintain a dialogue with the customer during the transaction process, which reduces abandonment rates and provides a better customer experience than a fully automated service.
Based in Guildford, Semafone employs a team of over 50 and was founded by David Jackson and Charles Cooper-Driver in 2009; the board of directors is chaired by David Sear who is also group chief commercial officer at global payment specialist Skrill. The business, which has turnover of circa £5m, is on a high growth trajectory. In May 2014, Semafone became the first vendor to achieve three of the highest levels of accreditation in the payment security industry, PA-DSS, PCI Level 1 certification and being a registered Visa merchant agent.
Semafone’ s software is used by a host of blue-chip customers including Sky, Virgin Holidays, Talk Talk, Aviva Canada and Capita. In October 2013, Semafone signed a partnership contract with BT which will see it become a core part of BT’s call centre technology offering for its corporate customers.
The market for Semafone’s product has grown strongly in recent years, driven by high profile data breaches around the world that have dented consumer confidence and the reputation of major companies. The most recent large-scale attack was in September 2014 on US retailer Home Depot, resulting in the theft of 56 million customer records with an estimated “street” value of $3 billion.