Richard Muirhead: Walking the line
Article Date: Jan 15 2008There must be easier ways to make a living than creating a global software company in the UK. But Richard Muirhead, the chief executive of Tideway Systems, wouldn’t have it any other way.
Richard Muirhead was still in his early 20s when he and his brother Charlie created software company Orchestream. In five years it went from angel funding of £20,000 to a dual listing on Nasdaq and the London Stock Exchange, with a market cap of over £1 billion.
‘That was $1.4 billion back then,’ says the older brother, ruefully. ‘When you think of the exchange rate now, it’d be over $2 billion.’
As impressive as this may sound, Orchestream, which managed and secured online networks, is now synonymous with the boom and bust of the dotcom years. ‘In spite of what we did achieve, the company wasn’t a full success. By being more fine-tuned in our strategy and not getting distracted by growth for growth’s sake, we could’ve weathered the storm successfully,’ he insists.
Clearly, Muirhead has mixed emotions about what happened between 1995 and 2001. He’s quick to note that the product sold by Orchestream – which was bought by Metasolv in 2002 for a relatively humble £6 million and then sold to Oracle in 2006 – is still going strong, and is used by the likes of Vodafone and AT&T.
In hindsight, the two brothers were not victims of a faulty, over-hyped product, like so many of their contemporaries at the time, but of their own sizeable ambition.
Although investment from backers including Intel, Amadeus and Deutsche Bank provided the funds for growth, it meant that the founders lost control, and this proved to be their undoing when a Full List IPO was on the cards. ‘The investors didn’t all have board seats but there was a certain burden there,’ he concedes.
In 1998, a mentor was brought in for Charlie. Inevitably, that person went on to become the chief executive, leading to the younger brother’s departure, while Richard found himself with various titles ‘of arbitrary distinction’ before leaving in April 2001.
‘I was 26 and Charlie was 23. The board members wanted more experience,’ he says. ‘I was working hard to build the value of the company, but the song and dance of the markets and financial engineering were, to me, a distraction from the nitty-gritty of creating a successful company. I think I was proven correct.’
The picture today for Muirhead – who has an MA in engineering from Cambridge University and is a former consultant – is brighter; and the experiences with Orchestream stand him in good stead for his software company, Tideway Systems.
Indeed, when we meet at his office just off the King’s Road in Chelsea, he’s in high spirits after a meeting with US venture capitalists – who’ve pledged $25 million (£12.2 million) in a third institutional round of investment for the software company he set up in 2002.
The additional funds set the seal on an excellent year. Tideway has bagged a range of awards and recently made number 11 in the Sunday Times Tech Track 100. Turnover has risen 82 per cent to £10 million and some significant partnerships have been formed with the likes of consulting giant Capgemini and software provider Sun Microsystems.
Muirhead is targeting sales of £15 million to £20 million for year-end 2008, assuming the new investors formally agree the deal. ‘We’re in due diligence so I don’t want to jinx myself,’ he says warily, adding that the ‘funding should finance our growth to break-even point’.
That rings alarm bells. The company is five years old, there are a number of backers who are making significant investment, and yet profits remain elusive. While all this may sound a little too familiar, Muirhead is adamant that the company is going in the right direction.
‘We’ve bounced close to generating cash a couple of times but we’ve continued to re-invest,’ he comments. ‘About 18 months ago we were nearly there and we’re close again now, but by design we’re continuing to grow the business.’
Tideway’s software tracks the performance of various business applications within an organisation. Given the atomised state of such applications, Muirhead is confident that the need for Tideway’s software can only continue to grow. ‘There is a lot of pain in IT departments at the moment. They’re dysfunctional due to a lack of shared intelligence, and the categories of product out there are continually evolving. The problem isn’t going away, if anything it’s getting worse over time.’
If the demand for the types of applications supplied by Tideway is so acute, one wonders how accurate is Muirhead’s assertion that the company has outlasted its direct competition. ‘Partly due to the nuclear winter in technology-buying at the turn of the century, none of our competitors achieved the commercial success we did, and so got bought up by the big guys.
‘One thing that’s a truism in new technologies is that the big guys don’t come up with groovy stuff. What we’ve observed is that companies that acquired our competitors have withered on the vine whereas we’ve continued to innovate.’
Muirhead, who remortgaged his apartment to launch Tideway, retains all the ambition of his 20s: what he wants is to build a great UK software company. ‘If I was only interested in money, given that I have an engineering background and was a management consultant, I could easily go out and earn some.’
Not that an ordinary career would be acceptable in the Muirhead family. His brother Charlie has gone on to be a serial entrepreneur, as has youngest brother William. It’s easy to imagine awe-inspiring levels of competitiveness and one-upmanship between the three of them, plus a genuine appreciation for what it takes to set up and run your own business.
It’s this understanding and readiness to face risk that he finds lacking in the UK. ‘The often-heard statement is that more support is required from Government, or you need more people to invest in ideas to encourage entrepreneurs. In reality, what’s missing is the willingness to give it a go, manage risk appropriately, and cope with and benefit from your failures. People are so recriminatory when a project doesn’t work out; they’re unable to see it’s not all bad.
‘In the Valley, when they look for the ideal entrepreneur to back, they often go for someone with the battle scars of failure as that person will still have the hunger.’
