As Director went to press, big data company WANdisco announced interim results and an 86 per cent rise in orders. We discuss strategy and stockmarket success with its chief executive, David Richards
When WANdisco floated on the London Stock Exchange in June 2012 it marked a turning point for the Silicon Valley business that David Richards had co-founded seven years earlier with colleagues Yeturu Aahlad and Jim Campigli. The IPO, which was over-subscribed by 300 per cent, raised £15m and valued the company at £37m.
Prior to its listing, WANdisco – an acronym for Wide Area Network Distributed Computing – enjoyed rapid growth with positive industry uptake of its ground-breaking data replication software, which allows two people on two different servers to edit the same data at the same time.
Sheffield-born Richards switched the company’s European base from London to his home town in 2009. That same year, he says, a “massive” £2m deal with Hewlett- Packard funded the business through a period of “exponential growth”.
Launching on AIM
Turnover from its subscription model hit £2.5m in 2011 and, as the business prepared for flotation, he admits that listing on the London Stock Exchange might have taken some onlookers by surprise.
“Although we were already based in the US, we chose AIM not just because of our relative size – we were too small for a Nasdaq listing – but because we knew that we’d have a much better chance of standing out. Over in Silicon Valley we’re one of thousands of software companies but on AIM we were a refreshing change. It was a decision that paid off and we raised more than £15m.
“When we launched on AIM, most other UK tech firms were looking to the US, claiming that London investors would never back hi-tech enterprises. Unfortunately, that’s a trend that continues today,” explains Richards. “Also, our share register would look almost the same as a Nasdaq-listed business with finance firms, such as BlackRock and Fidelity, investing in our IPO and follow-on investments.”
Five months after floating, the company made the bold decision to buy big data software business AltoStor for $5.1m (£3.2m), allowing WANdisco to harness the skills of the founders and accelerate product development in this area.
“Purchasing AltoStor allowed us to steal a march in the big data marketplace,” he says. “It might seem a lot for a firm that consisted of two people (Jagane Sundar and Konstantin Shvachko) without revenues, but we were buying Hadoop’s inventors – the open-source software used by Facebook and Amazon to store and move vast stores of data.
“Even before the float we knew that Hadoop was going to be the future. We started to do a lot of investigation about application technology in this space, but it was only late in 2012 that we decided the time was right. With hindsight, it’s clear the [AltoStor] deal is one of the key moments in WANdisco’s history – £3.2m seems an absolute steal.”
By January 2013 and a relatively stable share price over the winter, WANdisco announced it was setting up a base in Chengdu, China, that helped spark a surge towards a high of 835p the following month.
“We’ve employed solely Chinese staff and have already seen the pay-off. Last year, we signed a hugely significant agreement with Miaozhen – China’s leading online advertising platform. They have data processing capability of 100 billion ad requests a day, so for them downtime is unacceptable. Huawei, one of the world’s leading networking and telecommunications companies, have also purchased significantly more software from us after we could provide local support.
“China is a high-growth market for us. It was a natural progression to establish our Chengdu office and ramp up staff there as so many firms operate in the country. The number of companies that still have the ‘set up an office and send in a westerner’ mentality is staggering. It doesn’t come as a surprise when they fail.”
Paul Harrison joins as CFO
In May 2013 the market reacted favourably to the news that Paul Harrison was joining WANdisco as chief financial officer, after 16 years at Sage.
“Part of our scaling strategy looking forward is to assemble a management team that has experience of running companies much larger than WANdisco is today. Much has been made of our growth journey, but we need to be thinking with one eye on the future. If we are going to keep growing then the business needs the right team in place to cope with that growth.”
From an opening of 942.5p, shares hit 990p and closed at 977.5p the day of the announcement.
“I think Paul was looking for a new challenge. What made him leave a £4bn company for a £300m firm? It’s about growth. The big data space has enormous potential and I think he recognised an opportunity to play his part in building the firm,” says Richards.
“Having someone with his experience come on board has made others sit up and take notice. It’s also a reflection of his confidence in WANdisco’s ability to dominate the market – I can’t think of many chief financial officers of FTSE100 firms doing the same, without a resolute belief in what we’re trying to do.”
Share price jump
Shares hit a high of £11.75p on 11 September 2013. Fifteen days later WANdisco announced it had raised £19m with two million shares sold to new and existing investors at 950p each.
“Had we stood still we would only have lost ground – while the prize for acting first is market domination. The cash injection allowed us to continue growing at a fast pace while maintaining our strategic path. Our original products played an important part in helping WANdisco get to where it is today. However, we see a massive opportunity in becoming the leader of the big data market space.”
“Our shares had risen fivefold since the float and we needed more staff to support the big data arm of the business,” he says.
The raise coincided with first-half results – revenues up by 20.3 per cent to $3.5m – and a partnership with tech company Hortonworks. Last month WANdisco announced that government IT provider Carahsoft will distribute its Non-Stop Hadoop for Cloudera product to US federal agencies – “a huge foot in the door with the US government,” says Richards. On 20 March, as Director went to press, WANdisco posted its interim results – orders up 86 per cent to $14.76m and deferred revenue up by 106 per cent. It also announced a major big data project with British Gas, which will see the energy company using WANdisco’s technology to store and manage sensitive business data.
With ambitions to become a leader in the big data marketplace and confident of winning more government contracts, it’s clear WANdisco possesses nerves of steel.