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Headline: Bank e-leaders - Bankers turned e-entrepreneurs
Source: Euromoney
Date: June 2000
Tim Horlick, managing director, nCoTec
I meet Tim Horlick at his South Kensington home. He has just come off an overnight flight from New York, and I am rather late. If he is irritated, he does an excellent job hiding it. In fact, he is notably friendly and easy going, the perfect foil, one might think, for his famously forthright wife Nicola.
Those who know him say Horlick is indeed affable in most situations, however he is the first to admit that in the workplace he can be "very demanding". "He's a very punchy guy," says a former colleague. "His great strength is that he wants to do things quickly but he also has a tendency for hiring and firing that suggests 'If you're not for me you're against me.'"
At his former employer Salomon Smith Barney, Horlick wasted no time getting rid of people he considered not up to the task. But he was also clearly very good at getting business. The industrial group that he set up in 1997 became the biggest contributor to Salomon's investment banking revenues in Europe within 18 months. He subsequently made a big success of running the technology group in Europe, originating two huge deals last year - the IPO of ATNS (now valued at over $1 billion) in June and the sale of Giga AS to Intel for $1.25 billion.
This track record alone would have been sufficient to win him a high reputation. But in Horlick's case the achievement was all the more impressive given that for much of 1997 and 1998 he was taking it in turns with his wife Nicola to spend nights sleeping on the floor of the hospital where their daughter Georgie was being treated for leukemia.
Georgie died in December 1998. Apart from anything else, Horlick says her death reduced his tolerance of "corporate bullshit". It wasn't long before he had decided, along with former Salomon colleagues Alasdair Warren and Lars Lindell, to go it alone. His new venture, nCoTec, is a private equity fund that will invest in communications infrastructure and the enabling technologies supporting wireless data and wireless-internet convergence across Europe. "Its focus makes it different from many of the recently launched dot com investment vehicles," he says. nCoTec has so far raised around e16 million to make direct investments in both start-up and later-stage companies requiring development capital. In addition, it expects to close its first investment fund of up to e150 million during the Summer, and when we met it was about to announce its first serious investment, in a company Horlick hopes will become the next ARM.
Tim Horlick was born in 1961 in Weymouth where his father was serving in the navy. His childhood included spells in Singapore, Malta and various naval bases all over Britain, before the family finally settled in Bath. He went to Wellington School in Somerset, where he was in the rugby XV and the tennis team. He later played for Bath rugby club's second team. After Exeter College, Oxford, where he read PPE, he was unclear what to do next, but opted for accountancy at Price Waterhouse.
Leaving as soon as he qualified three years later, he joined Flemings in the technology group that was then led by Strone McPherson, now deputy chairman of the software company Mysys. "Strone had an excellent strategic sense," recalls Horlick. "He was ahead of his time in seeing that technology was a major opportunity."
After two years of doing M&A deals for buyers and sellers, Horlick moved to Kleinwort Benson for "more experience of doing more public market hostile takeovers". Before long he was one of those advising Boots on its infamous hostile bid for Ward White (Boots won the deal, but it cost a lot of money and the market didn't like it).
In 1990, he became a director in equity capital markets and over the next four years he and his colleagues built Kleinwort Benson into one of leading equity capital markets houses in Europe. Deals that Horlick worked on included the IPOs of Orange and Telewest, and the $6 billion secondary offering of National Power and PowerGen. From nowhere, the firm had risen to the top five in the league tables by the time he left in 1996.
Kleinwort had been taken over nine months previously by Dresdner Bank, and several of Horlick's colleagues had left to go to Salomon. They persuaded him to join them, and he was hired by Peter Middleton to become chief operating officer of investment banking. After a year and a half he shifted back onto business side, responsible for overseeing all industry groups and most recently he headed the new technology group in Europe.
"I like the fact that technology companies tend to be more receptive to new ideas and tend to be faster moving businesses," he says. "You don't have to spend a lifetime developing a relationship. If you've got good ideas, then they're prepared to listen." He had also, he says, grown "bored of working for a large company which necessarily has to move more slowly than a smaller more entrepreneurial business. I also wanted to be a principal and at the same time I saw what I think is a huge opportunity in Europe for European venture capitalists to help build the wireless technology business."
Philip Eade
Maurice Thompson, managing partner, European Digital Partners
In 1998, after 17 highly successful but equally strenuous years in the City, most recently as global head of investment banking at Deutsche Morgan Grenfell, Maurice Thompson opted for a break. During his year off he went horse riding in Pakistan and skied the haut route from Chamonix to Zermatt. Now 41 and back at a desk as one of five founding partners of European Digital Partners (EDP), Thompson is doing what, professionally at least, he enjoys most. That is "working directly with companies and having some impact on them, doing deals with clients and helping them to build their organizations" - as opposed to "sitting in the middle of an 84,000-strong organization".
Thompson had perceived that "beneath the radar screens of these big behemoths that I was all too familiar with, there was a very interesting emerging economy that was not properly serviced". After helping his friend Andrew Wilkinson, one of the managers of the Rolling Stones and numerous other rock acts, set up a rock music portal - music3w, a virtual shopping mall for the official sites of the likes of Robbie Williams and Elton John - he decided that "finding gaps in the market and building businesses based around internet and internet enabling technologies" was what he would do for his living.
"I was falling back on my service background," he says. "At the end of the day I am not a rock entrepreneur, but I do find it interesting to apply some of the financing skills I have learned to other businesses." In the middle of last year, he joined Arkwright, which had been set up by Erik Fällström, Hakan Gomér and Peter Bahrke in the 1980s as an entrepreneurial strategy consultancy and investor in internet opportunities in the Nordic region.
EDP was launched in March this year with $100 million of capital. It is designed to be a "top performing early-stage new economy investor" and has five offices across Europe and a marked Scandinavian focus. As well as with early-stage companies, EDP boasts close relationships with the likes of Nokia and Ericsson, and according to Thompson is "pretty good at navigating companies through pan European roll out". The partners of EDP own 60%, another 30% is held by Kohlberg Kravis Roberts and 10% is owned by the internet consultancy Halogen. It is the first time KKR has backed an external management team in Europe, a reflection perhaps of the breadth of credentials of EDP's five managing partners. Besides Thompson, they are Jonathan Asquith (former COO and board member of Deutsche Morgan Grenfell) and Arkwright's founders Fällström, Gomér and Bahrke.
"It had become clear," says Thompson, "that to invest in the new economy, we needed four skill sets, a strategy consulting capability, venture capital - advice without money is a pretty weak cocktail - financial advisory and financial engineering techniques, and a technology solutions capability, which Halogen provides." The partners all wear suits. "The entrepreneurs like it because we are offering a professional service," he says. EDP achieved its first successful exit in May, when QXL acquired Bidlet, a Scandinavian online auction service which Arkwright had invested in in August 1999 through a share swap valuing Bidlet at $550 million. For EDP itself, the intention is to float "at an appropriate time".
This is not the first time Thompson has found himself working in uncharted territory. In the mid 1980s, as global head of equity capital markets at SG Warburg, he had experienced life at the leading edge of the emerging European equity markets. Thompson had joined Warburg in 1981, after studying history and languages at Oxford (including a two-year stint in Nuremberg researching the role of the protestant church in the Third Reich). "Warburg was the best university course in finance you could possibly get," he remembers. In 1983, the bank sent him to work at Rowak, which had been given permission to operate as a pilot integrated broker- dealer a year before Big Bang, but in non-UK securities. "By pure luck," he recalls, "I stumbled into the very early stages of the emerging euro equity market, when companies looking to diversify their shareholder bases, investors looking to diversify their portfolios and information technology all came together. It was a very unstructured and interesting business, which I was lucky enough to be in on the ground floor of." Warburg became the leading European firm in this business while Thompson was head of equity capital markets. "Rather like the new economy today, it was unstructured and the prize was very high. We all felt that we were pioneers in building something pretty valuable."
At EDP, Thompson relishes the fact that so many of his client companies are "extremely young and moving extremely fast. Of course its for real, but its pioneering country, which is why its so much fun."
PE
John St John, chief executive EO
Guests at the EO launch party on June 1 included a lively melange of venture capitalists, bankers, technology geeks, dot com entrepreneurs and at least one member of the government - Peter Mandelson. "Perhaps he wanted to see the beginnings of a British success story," suggests John St John, the portal's chief executive. "He may also be interested because what we are doing democratizes shareholding." The idea of EO is to enable retail investors to buy new issues and private placements in early stage companies online. The initials stand for "electronic offering".
With the first offering due to appear on EO's web site at the end of June, St John is happy with progress so far. "In eight weeks we have a site up and running, a management team in place, deals starting to come in, and a friends and family offering about to launch. Before long we should be shaking hands with investment banks as partners. The way we have been greeted by everyone has been phenomenal."
Such euphoria contrasts sharply with St John's initial reaction when he first was told about the job by his former banker friend Jacob Kinder (one of the founders of the internet incubator New Media Spark). St John remembers thinking: "Why would I want to leave one of the big global investment banks to come and work for something that doesn't exist?" At the time St John was ensconced in his job as co-head global equity capital markets at Lehman Brothers, and had seen a tenfold increase in revenues in a little over a year.
"But then the more I got into it," he recalls, "the more I realized that the world is changing very quickly in this area, and that there are very big opportunities with the changing technology. New issue distribution is something I've been doing for the past 10 years, and it seemed a great challenge to basically redesign the way in which new issues of equity operates."
John St John was born in 1963 in Shipston-on-Stour, Gloucestershire, the son of an army officer. After a peripatetic childhood - his parents moved 24 times in their first 21 years of marriage - he went to Eton, where he rowed for the Eight, then University College, London, to read philosophy.
He thought about the army but with three elder brothers already in the City he soon decided that merchant banking - where "you didn't need to take any exams and you got paid the best" - would be more rewarding. His first job was at Baring Brothers, doing corporate finance ("everything from privatization pitches and bond issues to overseas advisory work"). In 1988, he moved to Kleinwort Benson and by the early 1990s he was concentrating on debt structuring and tax-based work, helping to design new types of bond finance for the likes of Pubco and Trustco. He became involved in pitching Kleinwort's expertise in international equity offerings to other companies overseas, and in 1993 oversaw one of the first book built offerings on continental Europe for the Finnish paper company Metsa Serla. This was followed by a string of IPOs and privatizations right across Europe.
St John was appointed to the board of directors of Kleinwort Benson Europe in 1995, but left the following year for a new job as head of the equity capital markets at Salomon Smith Barney. After increasing his team's head count from three to 28, and helping to multiply the revenues tenfold (the firm rose from number 22 to number 10 in the league tables), he moved on again at the beginning of 1999 to another team-building job at Lehman Brothers.
St John is of course not alone among bankers who have been lured over the fence to the world of the web. Over the next year or so, he anticipates hiring "several hundred" more, who will be paid, like him, a combination of salary and equity (his own salary he says is the same as it was at Lehman Brothers).
In attracting bright talent, St John may hope to benefit from a mild sense of frustration he detects within banking. "Investment banks have slightly outgrown their culture," he says. "They were born as partnerships and premised on a culture whereby individuals would make as much money as they could, if they where entrepreneurs in a very successful entity. But at the size they are now, it's increasingly difficult for them to continue to generate the reward structure or interest or sense of joint-ownership.
"The promotion structure now means you have to go through a very long haul working your way up a corporate ladder. As they merge or are bought up by commercial banks, investment banks are struggling to maintain an entrepreneurial culture within the large corporate structure. One of the great attractions of the internet environment is that it is so much more entrepreneurial. There is a sense in which a lot of the territory is uncharted. So for people who are a little bit more adventurous and want to establish new models of doing things, it offers very interesting challenges."
Potential recruits may also be persuaded by the confident way St John expresses his optimism in the new venture. EO, he argues, possesses a "massive competitive advantage" through its link to Globalnet Financial.com (its other parent company), Europe's largest financial services portal with 30 million page views per month. "There is no single retail financial services institution with a pan European customer base. But as soon as we go online, we can deliver an issuer distribution right across the continent."
Rather than a competitor, St John portrays EO as a partner for investment banks, brokers, new issuers and investors. "We're more like a stock market than an investment bank."
PE
Philippe Buhannic, President and CEO, Trading Screen
On a dismal Sunday afternoon in May, I bumped into Philippe Buhannic in a French café in New York's east village. He'd just taken part in a demonstration march organized by a friend to save the small communal gardens which are dotted all over Manhattan.
But he had even more surprising news. "Did you hear that I left CSFB this week," he asked. A stunned "no" was my reply, for Buhannic always appeared wedded to the firm. Or perhaps it's better to say he appeared wedded to the system he developed for the firm, PrimeTrade, an electronic soup-to-nuts trading and settlement platform designed at first for listed derivatives, but now also for Eurobonds and foreign exchange and soon other debt products. It's linked to major exchanges around the world, and is the first comprehensive multi-product, multi-currency, multi-country trading system. "Not one client who we've shown this to has then not signed up for it," he told me on more than one occasion. "Once we went to see a client in the mid-west. He sent his order in before we even arrived back in New York from the airport."
And this success didn't come easily. He started work on it six years ago, many years before CSFB recognized its potential and put it on its agenda. "Electronic trading threatened the traditional methods, so my ideas were not the most popular. We persevered, but it was like changing the engines on a plane while it was up in the air."
But now he was leaving, and for a start-up. "But I can't tell you what it is yet," he said. "I'll give you a call in a few weeks." Three weeks later he kept his promise, revealing that he had been lured to become president and chief executive officer of a start-up called Trading Screen. "What we plan to do is build a platform to provide global connectivity to global users of institutional financial products," he says. The offices are in an intriguing location, on Bleecker Street in New York, an area straddling Greenwich village and the east village which is better known for restaurant-supply warehouses than for technology start-ups.
In effect, he's trying to do at Trading Screen what he thought would be the next stage for PrimeTrade: offer an all-encompassing solution. "I'd often get asked by PrimeTrade users whether they could get, say, Goldman Sachs quotes on it, and I'd have to explain that it was purely a proprietary CSFB system. But then I started wondering whether that ought to be the way we go."
That this was unlikely to happen, at least for now, coupled with Buhannic's increasing frustration with the shift in emphasis of his workload, led him to leave. "By the time I left I was responsible for four businesses," he says. "Futures and options broking, fixed-income prime brokerage, the CSFB-end of the Futures Funds link with our asset management division, and PrimeTrade. And more and more of my time was spent managing the system rather than working on new ideas."
Now he feels refreshed, free from a large institution, and focused on one project. But it is no small task. Trading Screen's strategy is to offer a trading platform to benefit the large institutional asset managers, be they hedge funds, mutual funds or pension funds. Built as a virtual front end for trading, with electronic straight through processing for the middle and back office functions, Trading Screen has to be able to link to all buy-side and sell-side platforms for any securities anywhere around the world. It already has an office in Japan, and plans to open in Europe shortly. Although it will be designed as a tool to benefit the buy-side, "we plan to be a friend to everyone", Buhannic says.
But what of all the consortia that are being set up by the investment banks, - don't they present too large a threat to his idea getting off the ground? "Actually, it's a very inefficient process," says Buhannic. "At the Futures and Options Industry conference at Boca Raton a couple of months back some analysts from the Tower Group gave a presentation in which they revealed that 17 of the top 20 futures brokers were going to spend $662 million building their own electronic trading systems over the next two years. That's unsustainable."
Two other matters go in his favour, as well. First, with no legacy systems or small army of brokers to worry about, Trading Screen can concentrate on its project. And second, "I work in a very specialized world, and there are only so many people who can do this. From a technology point of view this is a very big challenge, which in a way is an advantage for us as we're gathering around us some of the best, including some who I knew when they were at CSFB and then left."
First things first, though. Buhannic is in the final stages of the first round of funding, which should close in July. Another round follows in September when the firm hopes to get institutions involved - from both the buy-side and the sell-side. "We'll probably lose money for the first six to nine months, but by then we should be up and running and start to bring in some revenue."
Antony Currie
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