String of hits for Ives after Microsoft near-miss
Ever since he charged for tickets to a puppet show in his garage at the age of six, Steve Ives has been pulling the strings of some iconic Cambridge technology businesses.
His first enterprise – Torus Systems, founded in 1983 – piqued the interest of Microsoft but the board didn’t heed his exhortations to sell. A sale at the time would have been historic for Cambridge and Britain as it wasn’t until July 1995 that Microsoft would make its first UK acquisition – indeed its first outside of North America.
Torus would live to rue the decision – and die for the want of it: The company went bust a year after Steve left it with £1 million in the bank. Undeterred, Steve went on to sell Trigenix – one of two spin-outs from his technology consultancy Ives & Co – to Qualcomm for $40 million. His passion for startups endures with his latest venture Hoverkey, a mobile application security company. He is also chair of Teamstudio, previously a wholly-owned subsidiary of Ives & Co.
His CV also includes spinning Aspective out of Ives & Co and founding social media company Taptu. He worked as VP Business Development for Qualcomm Europe until mid-2005 following its capture of Trigenix.
So it all began in short pants! Steve recalls: “My brother and I held a puppet show in our garage and charged for tickets – I was six at the time and he was four. We sold about 50 tickets.”
His business affairs got serious soon after leaving college. “I’d been working for a year in a consulting firm after graduating from college and I happened to meet up with a college friend – Steve Jolley – who’d graduated in computer science from Cambridge.
“The PC industry was just getting started and It turned out we’d both been thinking about product ideas so we decided to choose the best idea and join forces. I was working in the US in Washington DC for a firm called Strategic Planning Associates. I was an associate helping the managers and the partners carry out different kinds of business and market analysis for their clients.
“They had one of the first IBM PCs which I started using for spreadsheet work. That’s when I realised that PCs and PC software would be big business. I was 25 and it was back in 1983.”
The business the two Steves founded was Torus Systems, which developed networking hardware (a plug in board) and software (an icon-based office system) for IBM PCs. He had picked up useful knowledge and experience in a project for Acorn Computers founders Hermann Hauser and Chris Curry.
“I’d completed a market research project for them in the summer of 1980 after I graduated from Cambridge. They’d asked me to look at how Acorn might enter the US market. I went to talk to several retailers and distributors in the US, then wrote my report which I presented back to Hermann and Chris. Hermann and Chris were very helpful in the early days of Torus and introduced me to many great specialists who helped us to solve our various challenges.”
The birth of Torus
“I had already accepted a place at the Wharton School in the US at the start of the summer so I was tied up for the next two years studying for my MBA, but that was when I first caught the startup bug,” Steve recalls.
“We had a business plan for Torus which I wrote: One thing that business school does teach you is how to write a business plan!
“Steve Jolley and I had some personal savings which we used to get Torus started in 1983. Walter Herriot was the manager at Barclays in Chesterton Road in those days and he agreed to lend us £85,000 under the government-backed Small Business Loan Scheme. This was enough to get our first product into production. Later, when we had substantial sales, Acorn came in as an investor.
“I think we got lucky with Barclays. I don’t remember being hugely stressed by that initial fundraising. When you’re in your twenties you don’t see the possibility of failure nearly so much. You just see the opportunity.
“The second round fundraising was more stressful. We had a team of developers and payroll to meet. We initially accepted an offer from a venture capitalist who decided to change some key terms just before completion. The initial trust that we’d built up with him went out of the window. We had just enough money in the bank to be able to walk away and find a new investor.”
There were other issues: “The software development went really well, but we had a lot of problems manufacturing our hardware to the required quality level. We eventually found excellent suppliers but we wasted too much time with second-rate suppliers in the early days.”
And so to Microsoft. Steve says: “About five years in, the Torus business was going really well but our US competitors were growing fast. They were beginning to move in on our market in Europe with much greater financial resources than ours. I told the board of directors that we should find an acquirer or we would risk being squeezed out of the market. Microsoft was very interested in buying the business.
“The other directors were gung-ho to keep going as an independent company and couldn’t understand why I was being negative on the future of the business. I felt I had no option but to resign. That was very stressful.
“The company went out of business 12 months after I left – despite leaving it with over £1m of cash in the bank, which was a lot of money for a startup in those days.”
Undeterred, Steve went on in 1989 to found IT consultancy Ives & Company which soon built kudos and momentum. He says: “I was a sucker for punishment but Ives & Company was highly successful and grew to about 120 professionals. From this we subsequently spun out a couple of other companies.
“The first was Aspective, one of the first enterprise cloud application companies, which was subsequently acquired by Vodafone. The second was Trigenix, which developed user interface frameworks for mobile devices. This company was acquired by Qualcomm for $40 million in 2004. I worked at Qualcomm for a short time in the handover phase.”
Did he see any of the same old problems from Torus regurgitated in his follow-on ventures? “They were mainly different problems. The subsequent companies were all software businesses so there were no manufacturing problems to worry about. The biggest challenge was always recruiting enough really talented engineers, and this got more difficult as the Cambridge cluster grew.”
Given a fresh start what would he do differently? “Agreeing to be acquired by Microsoft in the very early days would have definitely been a smart move!”
Steve believes the environment in the UK is generally supportive to the startup community but he questions the commitment to new business of some of the larger banks and reckons founders these days need to be built from strong material. He says: “When things are going well with a startup it’s unbelievably rewarding. When things are going badly it’s extremely stressful and you have to have the right constitution to deal with that. Luckily I’ve almost always been able to sleep at nights even in the tough times.
“Ever since the early ’80s I think the UK environment has generally been supportive to new ventures. The one aspect that has got a lot more difficult is bank lending to small businesses.
“Since 2007 the bigger banks have almost completely removed themselves from the scene as far as entrepreneurial ventures are concerned. This means that founders need to be even more efficient with the capital they invest.”
So do enough Cambridge businesses scale to their maximum potential? “I’ve seen that many Cambridge entrepreneurs do indeed have the ambition. However, their growth is limited by the fact that the experienced operations, marketing and sales people they need to move to the next level are thin on the ground around Cambridge.
“These kinds of people haven’t generally wanted to move to Cambridge for various reasons. To scale more easily, a Cambridge-based venture should plan to move its commercial operations out of Cambridge after the startup phase – like ARM did. I don’t see this as a failure of Cambridge – it’s just the way that the city operates.”