Net profit as Twiss scores with Panini stickers and Zeus
As a child Adam Twiss was always entrepreneurial – although he is not sure where he got this from “as I don’t see my parents being that way inclined.” He remembers as a 10-year-old buying Panini football stickers that were spares off friends at a heavily discounted price and selling them on – either in packs, or on demand.
He was soon shooting at more lucrative goals. Adam’s first company was Zeus Technology – a story that began in the summer of 1995 when he was studying Computer Science at Cambridge University.
The 19-year-old Twiss and friend Damian Reeves became interested in the nascent World Wide Web (as people called it at the time).
“We were very fortunate with our timing,” he recalls. “Mosaic, the first ever web browser, was released a month before we started university and Churchill College gave us a 10Mbps symmetrical internet connection to our bedrooms – and this was in 1995!
“During our second year we had set up some of our own websites and they were getting lots of traffic that was being served by our PCs (486 DX-2s with 16MB of memory, and 400MB hard disks, around 1000x smaller than a typical PC these days).
“Our machines couldn’t cope with the load and our hard disks and fans were keeping us awake at night. We had three choices:-
- Buy bigger machines – which we couldn’t afford
- Take down our websites – which we didn’t want to
- Write better web server software – by elimination the default option
“So after our exams at the end of our second year we decided to have a go and write some software. We had 11 days before we left Cambridge for the summer and we got our first release out after eight days.”
Twiss recalls that Damian made this post to a Usenet newsgroup.
‘We are currently reaching the finalising stages of writing a high
performance WWW server for Unix and are looking for beta testers on a
variety of platforms. Anyone who is interested in beta testing this new
software should reply to this message specifying the system which they are
using, number of accesses per day etc. for consideration.’
Twiss continued: “At that point the major server vendors of that era – Compaq, HP, Digital, Sun – were all hoping the web would help create a new demand for servers and were trying to position their solutions as ‘great for servers.’ Our software was much faster than everybody else’s so soon we had performance engineers from these companies downloading and using our software!
“Towards the end of our third year at university we realised our software had value and we set up a website for our software with a price on it – and people bought it.
“Our second customer was Steve Kirsch, the founder of Infoseek, one of the top search engines of the day. This was a bit like selling to Larry Page of Google today.
“We collected the cheques from these sales but never cashed them. We had one pile with cheques and another pile with brochures from recruitment fairs etc. In the end our pile of cheques seemed like more fun and neither of us applied for any form of job.”
VCs will probably throw up their hands in horror but infant Zeus did not have a business plan in the early days. “Never really needed one,” says Twiss.
“We made our software better, added the features that early customers wanted and sold more. Zeus sales grow exponentially and we achieved 200-300 per cent year-on-year revenue growth for the first five years.”
Twiss summoned up the figures :-
1996 – £11k (when we were students)
1997 – £40k (year after graduating)
1998 – £110k (we wrote our first business plan at this point)
1999 – £300k
2000 – £1.3 million
The added beauty of this cash-centric business model was that Zeus was self-funded from 1995 to 1999. It raised one £300k angel round and then went on to raise Venture Capital. But life was far from a bed of roses as casualties built during the technology sector’s perfect storms.
“The period 2001-2003 was particularly tough with the fall-out of the dot.com crash – a lot of our customers were Internet companies – and then worse still with the telecoms crash that followed,” Twiss recollects. “We saw customers default on huge amounts of money, suffered from massive politics among our VCs and the company very nearly died several times.
“It got so close at one point that we had letters in envelopes to shareholders – stating that we were going to wind up the company – sitting in the post-tray waiting for the postman to arrive. Fortunately our VCs sorted out their differences before the postman turned up.”
In retrospect that has to be viewed as a first class postal service as Zeus went on to be sold to Riverbed for $140m in 2011and lives on following California tech company Brocade’s acquisition of Riverbed.
The staying power of the company was matched by that of the co-founders who were equals in every sense. Twiss says: “We largely played symmetrical roles from 1995 to 1999 and then I tended to focus a bit more on the business side and him the technical and it worked well.”
Twiss unashamedly hands a lot of credit for his own entrepreneurial approach to peers on the other side of the Atlantic.
“I found the most useful thing was actually reading books that told the stories of Silicon Valley startups. These provided more inspiration and relevance than speaking to most UK people.”
Twiss was suitably inspired to find life beyond Zeus as a serial, Cambridge based but internationally aware, entrepreneur. After Zeus, he founded a technology consulting business called Saviso in 2012. “We promised ourselves we would never raise any VC but self-fund the business through consulting revenue, he says.
“Out of a consulting project with Telewest – now part of Virgin Media – we saw a need for technology to help ISPs manage P2P traffic on their networks. Out of this we developed the technology that we spun out into a business called CacheLogic.
“CacheLogic was the type of business that needed VC funding, so we went back on our promise and raised VC money. We later pivoted CacheLogic into Velocix and after a rocky period it was sold to Alcatel Lucent.” The value of the sale was never published but it was millions of dollars.
After Velocix – in 2008 – the tireless Twiss set up another consulting business called Versio4, out of which he then founded a spin-out business called SwiftServe with one of the venture’s customers. Savisio was sold in a management buyout while SwiftServe and Versio4 are both actively trading and Adam splits his time between those two businesses.
Twiss says that both at Zeus and CacheLogic/Velocix there were issues caused by VC/board politics and the different objectives of VCs, founders and angels.
“It is too simple to just dismiss this as blaming the VCs,” he says. “The reality is that VCs have a portfolio approach and often wider motivations than just the company (e.g. raising their next fund) that puts them in a different position to the other stakeholders.
“In both companies i think the VCs were too slow – or I didn’t do a good enough of a job about persuading them – to change the course of the business when the markets we were in didn’t evolve quickly enough.
“Marc Andreessen, co-author of Mosaic and co-founder of Netscape, wrote an excellent blog post about product market fit... I would pin this to the wall of any startup.
“At Velocix we made the mistake of scaling up before we had got the product-market fit correct and were not focused enough on fixing that. At Zeus we had product-market fit, but we made the mistake of scaling up the business (hiring more sales people) without understanding that our leads were all viral/word of mouth driven. So hiring more sales people (after raising lots of VC) didn’t have any affect on our revenue growth at all; it grew, but no faster.
“I think the other thing that Cambridge startups tend to do is spend far too much time worrying about the product or business plans rather than engaging with customers and partners.
“I’d suggest new wannabe entrepreneurs read a book like A Good Hard Kick up the Ass – basic training for entrepreneurs.
“This removes some of the popular misconceptions and reminds people that selling and engaging with the market rather than too much focus on just writing code or business plans is what makes great businesses.”
What Cambridge startup scene?
Looking at the broader picture and the environment for starting and building businesses in Cambridge and the UK, Twiss identifies a number of issues.
“This might sound like a strange comment given Cambridge is one of the largest technology hubs and has some illustrious success stories but I still think Cambridge lacks a startup scene. Compared to the Valley, San Francisco (in itself), Los Angeles, New York and even Shoreditch there isn’t the same buzz of lots of young startups in Cambridge.
“We also still have issues over funding – particularly a lack of early stage funding – allied to a lack of VCs who are actually entrepreneurs.
“Investment bankers, accountants and MBAs typically don’t make good VCs. There is a lack in Cambridge of VC funds and angels. There are angels, but they operate in a handful of groups, and it’s on a different scale to Silicon Valley where $1 million is considered a small angel round. Arguably there is also a lack of really good quality startups to fund as well.
“I don’t see these as government issues. I think that as a cluster we need to do more to encourage and promote more startup companies and try to create the same kind of buzz that Shoreditch has with an active startup culture.”
Twiss believes it is a popular misconception that Cambridge companies ‘sell out too early’ or are limited in ambition. “I think the problem is we don’t have enough startups,” he insists.
“Even in the Valley only perhaps one in a thousand startups ever gets to the billion dollar mark. The reason there are so many billion dollar companies there is largely because there are just so many startups.
“We now have several billion dollar companies in Cambridge and more big names than at any time in the history of the cluster. The real value of having the likes of HP, Microsoft, Brocade, Amazon, Apple, Qualcomm, Oracle, Broadcom, Alcatel-Lucent etc in Cambridge is that they are now far more likely to buy other Cambridge companies – which provides better exit opportunities.”
The incentive is there if more young guns in Cambridge want to go for it, Twiss believes.