Whilst there is recently much focus on Unicorns (Venture backed businesses worth more than $1bn), the reality is that more financially moderate exits can be equally – and on some levels more – rewarding, for us as Venture Capitalists. Zynstra, an Octopus Ventures portfolio company since 2013, was recently acquired by NCR for over £100m. Hard decisions, bold pivots and even the tragic death of a key member of the founding management team, make the Zynstra journey a case study of resilience and determination of true entrepreneurs, within which Octopus Ventures is genuinely proud to have played a small, but very rewarding role.
At Octopus Ventures we are fortunate and proud to have backed some very successful entrepreneurs multiple times. Indirectly, this is the case with Zynstra, which we were introduced to by some of our co-investors in Swiftkey, acquired by Microsoft in 2016, including Jon Craton who was a significant angel investor in SwiftKey and Chairman and Co-Founder of Zynstra.
Zynstra “powers the retail edge”. This means it provides a retail-specific IT infrastructure that breaks the software dependence on hardware. For example, with a simple swipe of the screen a device can change from being a POS terminal to an inventory management console. NCR – a global enterprise technology company for the retail, hospitality and banking industries – had been adopting Zynstra’s technology as a key part of its retail strategy before the relationship blossomed into M&A interest in the company itself.
But as any founder knows, the route to success is never smooth. So, what were the key challenges the Zynstra team overcame?
When we first met Nick East (CEO, Co-Founder Zynstra), co-founder Brian Buggy, and the team, the company followed a direct sales model to the SME market. By 2015 it became clear that a new approach was required, and the company switched to a channel sales model. This was via a partnership with Hewlett Packard Enterprise whereby HPE packaged Zynstra’s virtualisation and cloud management software targeted at small business, education and branch offices, mainly in the UK and North America. After an extremely promising start, this opportunity failed to deliver against the aggressive sales targets so, come 2018, a further pivot was required.
Crossing the Chasm
The annual Octopus Ventures CEO Summits in Silicon Valley are designed to connect portfolio CEOs to partners who could help them grow their businesses. They also get to derive inspiration from entrepreneurial CEOs who have done it hugely successfully before. Nick attended several summits at which he was able to fully re-engage with the Crossing the Chasm principles, as expounded by then Octopus Venture Partner, Philip Lay. This, together with a project with specialist B2B positioning experts, Firebrick Consulting, helped the Zynstra team identify a very specific sector (convenience fuel retail) in a specific geography (North America), as their sole market focus.
It seems wonderfully simple, summarising the process in a couple of sentences, but to commit and then persuade an entire company, not least of all the sales team, to focus down on a single, narrow vertical, seemingly ignoring other opportunities, is the boldest of decisions. Entrepreneurs and VCs alike can often be distracted by going broad and horizontal rather than narrow and deep. Zynstra was willing to commit, persuade and laser focus – and it worked.
As a result of this focus and given its market position, NCR became a natural partner. NCR is intent on transforming from hardware to SaaS-based software revenues and Zynstra is helping it achieve this.
It’s worth noting here that for any company to pivot not once, not twice, but three times, is testament to the superhuman resilience and determination of the team – its individuals and its group dynamic. Arguably the most important attribute of an entrepreneurial CEO in challenging times is an ability to unemotionally assess, listen, hear the best advice and be decisive in taking action: at this Nick excels.
The tragic sudden death of Dave Ettle, Co-founder and CTO in 2017, whilst on holiday with his family, added a blow that only the strongest team could survive. Dave’s legacy lives on through the software he developed as well as the company’s culture of challenge and vision innovation.
Octopus led each of Zynstra’s funding rounds, strongly supported by various angel investors. They were not always easy decisions, but we believed in the team despite the challenges that the company had encountered. VC backing goes far beyond financial support and we see our role as a partner to pioneering entrepreneurs across all aspects, through the good times, and the inevitable challenging ones. Nick attended several of our CEO trips to Silicon Valley, exposing him to some of the most successful and experienced minds in business, and we hope that we provided other help where needed, including the contribution of Ian Perry, Octopus Venture Partner, as a Director of Zynstra and a trusted advisor to Nick and the rest of the team.
The best make it happen
Zynstra’s is a story of resilience. True pioneers have a quality that’s hard to name. But when things get tough – and there’ll always be tough times in any startup’s journey – it’s this quality that digs deep, resets the dials and pushes through to the next stage of growth. Decisiveness, vulnerability and the willingness to commit to a new direction are the common components in all the best startup-to-exit stories.
Congratulations to Nick, Brian, Jon and the entire Zynstra team for your fantastic success. Thank you for letting Octopus Ventures be a part of it, and we wish you all the best for your exciting future with NCR.