Piers Linney: If you're not gunning for £100m, get out of cloud

Outsourcery boss and Dragons' Den investor says scale is everything as he prepares to float his cloud services firm on AIM

Eyebrows were raised this morning as Outsourcery - a Microsoft cloud services provider with revenue of just £3.6m - announced it will float on AIM on Friday with a market valuation of £34.6m, raising about £13m in the process.

CRN caught up with co-founder and CEO Piers Linney to talk through his ambitions for the channel-focused outfit and how his involvement in Dragons' Den can help raise awareness of cloud.

CRN: Why are you floating the company at this stage in its development?

Piers Linney: Essentially it's a fundraising so we haven't sold any shares. We have built a very credible business in terms of infrastructure and capability, but if we are expecting some very large customers to buy from us and channel partners to transition their customers into cloud services from us, we have to have a robust financial position. This fundraising makes us robust and credible and also gives us access to capital markets. Going public and bolstering the board also gives us that governance and transparency.

We are the first Microsoft-focused cloud services provider to be listed in the world. There may be some others that do one product, but no one that does the complete piece.

The IPO values Outsourcery at about 12 times revenue and you are loss-making. How did you arrive at this valuation?

The historic revenues have no bearing on our future business. The valuation is based on what revenue should look like in two years and multiples of comparable companies. What most people do not realise is that we rebuilt our entire infrastructure from a blank sheet of paper in 2011/12. We have not been focused on revenue for the past 18 months, but instead on building out platform and channel and winning global tenders for some big companies to resell our services. Our business is the full IT and comms piece, and that is unique and we have some very large SIs and telcos, such as Atos Origin, BT and Vodafone, that underpin our growth potential.

On that note, how ambitious are you for the firm?

Our view is that if you are in the cloud business and you are not gunning for £100m or even £500m [annual revenue], you're in the wrong business, because it's all about scale. You cannot be a cloud business in three or four years' time with £3m revenue and growing at 10 per cent. People like us can grow smaller numbers now, but we have to have foresight if we are to scale, and our focus is solely on that.

Our business is built for the SME channel but because we have made a £30m investment [in developing the business and its O-Cloud platform] we are now able to integrate and engage with very large partners as well - the integration process for some of these large partnerships across sales, services, network integration and go-to-market has taken six months. To scale this business, we want it to be a business with £100m revenue - we are not playing. And now we have some of the world's biggest investment funds behind us, including BlackRock and Soros.

You recently finished filming your first series of Dragons' Den. Will your heightened public profile help you evangelise the market to a British public still largely unfamiliar with the concept of cloud?

The opportunity came along and what are you going to say - no? In terms of my profile [the programme] does tend to talk about what I'm doing with Outsourcery and cloud and that will raise awareness. I think SMEs would adopt cloud services en masse if only they understood they are available. At the moment they're all too busy running their businesses but why buy a PBX or server when you consume services from a company with robust SLAs? The way forward is selling services and not technology. Cloud is the future.

Do you have a more tech-focused investment strategy than your fellow dragons?

There are some businesses that have had nothing to do with technology that I have invested in. I am hoping that, if it goes forward and I'm still involved, we will see more tech entrepreneurs involved in the programme as historically there has not been a lot of them. Hopefully in me they will see a Dragon they can have a conversation with.

Are there any channel trends that have made you sit up and take note?

We are seeing more entrepreneurs establishing cloud business to supply SMEs, rather than the traditional telcos and IT suppliers. We are seeing those businesses doing very well, and it will be very interesting to see how the channel shakes out.