When you’ve built a business up from scratch, the idea of relinquishing ultimate control in return for inward investment can be alarming. But as Simon Cooper, founder and CEO of On the Beach, discovered, it can prove to be the catalyst you need for explosive growth.
Cooper launched the online travel agency in 2004, after founding a ski business called On The Piste some 10 years before and realising that the potential market for beach holidays was significantly larger. He was proved right. Within three years, the business was employing more than 200 people and turning over £100m – and Cooper was working 100-hour weeks.
“It was a classic start-up, founder-led business,” he says. “I had committed staff, but there wasn’t a whole load of structure around me. There was no marketing department, just me. There was no IT department, just me. There was one person in the finance department. It was a top-tier kind of business, and without a significant reduction in reliance on me, it was never going to grow.”
It’s a position many business owners find themselves in, and often the motivation to look for inward investment is a desire to move up to the next level.
“In 2006 I started to get phone calls from one of the big four accountancy firms inviting me to dinners and stuff,” Cooper recalls. “I said, ‘No, I’m far too busy to attend a dinner.’ I decided, however, that it would make sense to find a partner to help me take the business to the next stage, but I didn’t need to use one of the big four to get there. I worked with a smaller, boutique firm, so the ease of access to high quality, experienced people was much better. We pulled together an information memorandum, circulated it and waited for the offers to come in.”
Although On the Beach was undeniably successful, the pool of potential investors it was able to attract was somewhat specialised, Cooper explains. “Alarm bells ring when a company that’s growing as fast as we were has a massive over-reliance on its founder. Also, travel has a reputation as a bit of a volatile sector, and back in 2007 most investors saw everything to do with Google as a kind of witchcraft.”
After receiving two very similar offers, Cooper opted for the one he believed was more deliverable, from the private equity company Isis (now Livingbridge). Many business owners agonise over how much of a stake in their business they should retain in order to stay in control, but Cooper saw the decision as a straightforward one. “It was made clear to me by my advisers that in extreme scenarios, even a minority partner would be able to exert a majority influence. So it made sense to me to sell 50.5% – if someone is going to have majority control, then they can pay for majority control,” he says.
So, having run the business entirely independently, how did Cooper adjust to working with his new team?
“Bringing in people was a welcome relief,” he says. “It took me time to use them as more than just people to execute my will, and build a more collaborative dynamic. But things needed to change. For instance, our marketing was totally reliant on page search. We were extremely good at it, but we couldn’t focus on content or CRM or anything else. When we recruited a CMO and a smallish marketing team, we were able to broaden into SEO, social, meta, affiliates, and to start building a strong brand. It’s very easy to trust people to get on with something that you hadn't the time to tackle before they arrived!”
Cooper emphasises that his partners at Livingbridge took an arms-length approach to their involvement in On the Beach. “They’ve been able to add value through their network, through their experience, through the depths of their pockets,” he says. “I find it inspiring to work with people who have such strong intellect and spend their lives trying to optimise the performance of the businesses in their portfolio. But they're not setting the strategy, they're not overseeing the execution, they’re not recruiting the people.”
By 2009, Cooper’s management team had expanded to include a CFO and CTO as well as the CMO. In 2013, Livingbridge sold its stake in the business to Inflexion, which, interestingly, had been one of the underbidders in the 2007 sale. On the Beach debuted on the London Stock Exchange in a £240m listing in September 2015, and the focus is currently on expanding within the UK and looking at opportunities internationally.
So, 10 years after the original sale, does Cooper have any regrets?
“The decision, for me, was absolutely the right one. I was careering down a very steep slope and the wagon was nearly off the rails, I was working that hard. The journey I went on, running my own business from 1995 to 2007 as a standalone founder, was a really exciting one. But the journey from 2007 to 2017 has provided every bit as much excitement and far, far greater rewards.”
The opinions expressed by third parties are their own are not necessarily shared by St. James’s Place Wealth Management.