10 years to $3bn — ten things I learned from Zoopla
Wow, Mr Chesterman loves dropping these big surprises, and none bigger than the announcement of a $3BN acquisition by SilverLake today.
I don’t like to talk about lessons learned from the companies I backed whilst they are “in flight”, but with this one being so mature, I think it’s fair game to shamelessly newsjack the SilverLake announcement and share some thoughts on what I learned working with Alex, Simon and the team. Seven years to IPO, ten years to $3BN. Not shabby.
Let’s go. Investor lessons first, management lessons second. Saddle up.
INVESTOR LESSONS
You can build massive value in a single market, single vertical …whilst not even being number one.
I wrote the seed check in Zoopla alongside angel Robin Klein in June 2007. The company went public for about $1.2BN in June 2014, seven years to the day. Now, it’s exiting for $3BN. This is a company built on a mere $20M in capital raised, a bunch of acquisitions and a large merger, in a single geography and focusing on a single vertical. Proof, if that was needed, that you can nail venture scale in a single market.
Dilute your way to success.
When I first backed it, Zoopla was facing a massive incumbent (RightMove), five large publishers and over ten proptech startups. The team put distance between itself and the other startups by outperforming massively on SEO and features, with free pricing tools being the key differentiator. We gradually caught up to the publishers.
From that point on, we were playing chess. Alex immediately opened up the capital structure to the largest estate agents and put significant equity on the table, in a move similar to what Spotify smartly planned from day one with the record labels. Alex also went on an acquisition spree, culminating in a company defining merger with DMGT’s FindAProperty in 2012.
In short, he turned the tables on everyone by aligning first with the power brokers, then with the only available player with significant agent revenue.
Bottom line : just focus on building something sustainable with real strategic value, not on the last percentage point of ownership.
Lean into your winners (external pricing be damned)
In 2008, when Alex and I were on the warpath to raise Series B for Zoopla, we weren’t getting a ton of love. We finally locked in with a good lead and set about closing.
I will always remember that call I got from Grant Park in Chicago, on the day of Obama’s election victory. It was November 2008, the markets were crashing hard around us, and I got a two minute call from our lead investor: ‘We’re out. We’re freaking out about how bad this is going to get”.
Partly through (retrospectively) luck and partly because of my unwavering conviction in the management team, this ended up being great for us. Ha, I now remember it as one of the best phone calls I ever got. I went right back to my team at Atlas Venture and we decided to double down on the company, to write the Series B check solo. A tough discussion, but everyone rallied. I think it’s the best “ticket” I ever wrote.
We scrambled around for cash and through William Reeve managed to get Octopus Ventures to complete the round.
Today, I’d just put an offer down without going through all that drama. With a team that good you just have to lean in.
Market size is overrated.
OK, ok, of course being in big markets matters. But in the case of Zoopla a number of investors passed because they felt the market was too small (real estate digital advertising was about £250M with the prospect of doubling).
The point many investors missed: over 60% net profit margins and incredible revenue quality (near perfect recurrence, no churn, no concentration risk). If you can build a £100M recurring revenue with over 60% margins, that’s a £1bn business almost by definition.
IPOs in Europe don’t look anything like IPO’s in the US
Zillow went public about 3 years before us, and man did our profiles look different. In the US you can take a company out with massive losses as long as it’s growing fast. 70% growth whilst deep in the red is just fine. In the UK, not so easy. You need $100 odd million in revenue and either profitability or a very clear short term path to it, even if you’re growing “only” 20–25%. The public markets are a source of competitive advantage too, and here’s to hoping that will continue to improve.
MANAGEMENT LESSONS
Radically focus and only do what you do best
Did you see Zoopla try to launch into second hand cars? No. Laser focused on real estate from the outset, the company never deviated from its mission. When they did acquire, as in uSwitch, they were purely expanding into their core vertical. Better to pay dividends to your shareholders than to start diluting your efforts.
Build your own stack.
I am a big believer that e-commerce companies should build their “core” themselves. Zoopla took it far, even building its own billing system.
But once it’s built, you can really control your own destiny, get a 360 view of your users and iterate incredibly fast. This experience, in part, influenced my discussions with Pillpack when we decided to build PharmacyOS.
Integrate your acquisitions ruthlessly.
When we acquired FindAProperty from Newscorp, Alex set a target of 90 days to full integration including switching over billing. I think no one believed it could be done except him. Well, at exactly 90 days the migration was complete. The company developed a conviction that it could execute these types of operations fast, and it became a core skill that Zoopla used to consolidate the market.
Run your business on fewer KPIs.
You can build endless reports and slice and dice your data a million different ways. And there is a place for that. But at the board level; run your business on a few KPIs and make sure you are incredibly clear about why you chose them. I think Alex and I designed the KPI set in 2008 and didn’t change them much if at all for about six years.
Lead by example
Alex never showed up at conferences in the early years of the business. He never took his eye off the ball and focused insanely hard. Zero entropy. He defined the vision, repeated the vision as many times as needed, and focused only on that vision. He delegated extensively, yet could go down to a minute level of detail when he felt any aspect of the operation was at risk.
He was and is the clear undisputed leader of this operation. His tireless commitment to success was a joy to watch and an inspiration to us all. At the end of the day, we all worked for Alex, and were glad to do so.
