By David Hart, co-CEO and co-founder, ScreenCloud
It was Christmas 2014 and David Hart, Mark McDermott, and Luke Hubbard, Co-Founders of digital agency, Codegent were catching up. The consultancy they had started was now 10 years old, and while it had been great to start with, the treadmill of winning work, doing work and winning more work to replace the work they’d done was starting to wear thin. By contrast, the success that they’d had launching several side projects had led them all to the same conclusion: Their future was in product, not in consultancy.
As Hart explained, “we’d been experimenting with our own products and a couple of Joint Ventures with clients, some of which had done pretty well.” One of their businesses, a series of language apps had had 20 million downloads. Another, they’d sold to a Private Equity company. Yet all ended up coming second to the agency’s clients. They had started working on their latest idea, ScreenCloud, a digital signage software business, and were buoyed by what they saw as its potential. Hart recalled, “I remember Mark saying, ‘imagine the damage we could do if all we had to focus on was ScreenCloud’”.
They realised that if they wanted to move from a consultancy to product company and give ScreenCloud the best chance of success, they had to do two things: firstly, go and raise outside investment as soon as they could, and secondly, commit to selling the agency so the three of them could be 100% on ScreenCloud.
Hart cites three big challenges when it came to making the transition:
Raising funding form one business while trying to sell another
One of the first questions they were asked by potential investors was about the relationship between ScreenCloud and the agency. Nobody wanted to invest in ScreenCloud if they thought that the founders would also be trying to run an agency. At the same time, they weren’t just going to walk away from a business they had spent 10 years building up. The agency was also bank-rolling the development of ScreenCloud prior to them securing funding, so it needed to be managed carefully.
“Although on the face of it, selling the agency seemed quite daunting, once we’d made the decision, it then became another part of the overall plan we were all working towards.” ScreenCloud’s early investors were happy with their commitment to achieve this and in the end they concluded the sale of the agency in the same month that they closed their Seed Round.
Changing the mindset from a margin-first company to a growth-first company
The agency had grown entirely out of profits: as the company grew, they took on extra staff. But when it came to building a product company, it was different. Here, the focus is much more on rapid product releases and acquiring customers as quickly as possible.
“You have to be sensible, but ultimately this is about producing a solution that people want. If you have happy subscribers who stay with you, profits will come later,” explained Hart. “But it wasn’t easy, as we’d grown up being highly capital efficient. Hiring the best candidates, even though they were paid more than you, or spending tens of thousands of dollars on Google is a shift in approach that we had to work hard on. The temptation was always to revert to type and try and cut corners to save a few bucks.”
Underestimating the scale of the task at hand.
They’d built hundreds of digital products in the past: for their clients as well as for themselves. But they’d never built an entire product business on the scale of ScreenCloud. “When I look back on my initial estimates at our future monthly outgoings, it’s laughable,” said Hart.
A fast-growing product business builds momentum and the plans you need to make are not for today or tomorrow, but for 6-12 months down the line. Will the product be stable when you have twice as many customers? How does your sales and marketing function need to evolve to keep up with your revenue projections? Do you have the right leaders in place to allow the founders to move away from the day-to-day running of the business?
Ultimately this comes down to experience and good counsel from your investors and peers in your industry who have been there and done it. The temptation is to look at others and think you could achieve the same with half the people and funding, but the reality is that it always takes longer and costs more than you think.
At almost 100 staff and 10,000 customers, Hart is grateful for the journey that he and his Co-Founders have had. Agreeing a plan and sticking to it, even if that plan takes a few years to achieve, is what has allowed them to keep progressing. “It’s been tough at times, but we’ve come out of it stronger and more focused on what we need to achieve.”
David Hart is co-founder and co-CEO of digital signage company ScreenCloud. David has pioneered a number of digital businesses, including the digital product studio Codegent and online real-estate agent Tepilo. He previously served as former Vice Chair of BIMA and sat on the BBC’s digital advisory board.