When Your Startup Gets Bought

The dilemma of the successful tech acquiree: Push paper for a year, raise chickens or lead a $1-billion company?

The dilemma of the successful tech acquiree: Push paper for a year, raise chickens or lead a $1-billion company?

A few months ago, I wrote about the need for serial entrepreneurs in B.C.’s technology scene. While I can hardly blame someone with a few million dollars in their jeans if they decide to farm chickens on Salt Spring Island or open a winery in Oliver, it would be nice to take the experience and recycle it into another success. This got me thinking about other sources of experienced and successful entrepreneurs. What about homegrown individuals who have taken their talent elsewhere and enjoyed huge success? Would they come back and share their experience and/or start something new here in B.C.?

Some B.C. expats of note have had huge success in the California technology mecca, Silicon Valley, including Jeff Mallett, ex-Yahoo; Stewart Butterfield, Flickr-Yahoo; and Penny Wilson, ex-Macromedia and ex-Juniper. Butterfield has elected to come back and start his new company, Tiny Speck, and Mallett and Wilson are actively helping startups in B.C.

Another candidate who has been on a great ride of late – someone with whom many of you may not be familiar because his success has taken place in the U.K. – is Steve Munford, CEO of security software leader, Sophos. I caught up with Munford recently to talk about his ride to the top of an $830-million company and ask him if a return to B.C. is in his future.

Munford was working in senior management at Seanix Technology in Richmond in the late 1990s when I first met him. A few years later, Dick Hardt hired him at ActiveState as COO. ActiveState developed an email spam filter product for corporations and started to ramp up its revenues until it was acquired by Sophos in 2003.

I asked Munford where he thought his career path was heading when Sophos acquired ActiveState. Specifically, I wanted to know why he elected to keep working for Sophos rather than start his chicken farm. By way of answering, he outlined four steps for a typical senior manager whose company is being acquired:

(1) Drive hard to get the deal done, which demands significant energy.

(2) Relax when it’s done – for a few days.

(3) Declare victory and celebrate. 

(4) Honour the commitments of the inevitable lock-in for a year or two.

In Step 4, Munford saw that interest often lags for an acquired employee because there is no intense desire to succeed anymore. Lock-in sometimes means you fill space at a desk for a couple of years. Munford made a key decision at this point. He wanted a meaningful role. He wanted to be engaged. So he took over all of the North American operations for Sophos. Shortly thereafter a big change was offered: Sophos kept the office location here in Vancouver but asked Munford to move to the U.K. This was where Munford started to forget about leaving and got very engaged with the direction Sophos was headed. He became COO and joined the board of the company in late 2005, and when the company ran a search for CEO soon after, Munford put his name forward and the company picked him.

The chance to have scale and reach in a business backed by a premier private equity firm (TA Associates at the time) had Munford interested in “going long.” Revenue has grown from $135 million to $335 million under his stewardship. An IPO plan was shelved and the company is currently working through an announced transaction with Europe’s largest private equity firm, Apax Partners, reportedly valuing the company at $830 million.

Munford is very excited about taking Sophos to a billion in revenue. That would be rarefied air for a B.C. technology CEO. When I asked if he would come back and share all of this experience, he simply said he hoped to someday. Meanwhile, as Sophos continues to grow, so does Munford’s stature as a B.C. technology success story. n

Brent Holliday heads the technology practice for Capital West Partners, a Vancouver-based investment bank.