Profile - John Laurie

Succeeding against the odds

by Bipin Parmar

In this issue, The Chilli profiles someone who we believe is one of the most seasoned entrepreneurs, mentors and angel investors we have profiled. John Laurie is currently chairman of Oxford Innovation Ltd, a universal entrepreneurial support organisation with services ranging from business support, consulting, incubation and innovation centres, access to angel investors and networks. He is also a director of Oxford Venture Management Limited. His rich and varied history in the entrepreneur world and his experience provides very practical advice as well as some important lessons for today's entrepreneurs, founders, executive teams, business developers and investors.

First job at 15

High-tech venture files for Chapter 11

Startups shouldn't waste time in filing IP patents

Turnaround at Oxford Instruments

Laurie's top tips

First job at 15

Laurie's entrepreneurial career began at a very early age, when he was thrown out of school at the age of fifteen with no qualifications. His first paid job of £6 a week was at a blotting paper factory [editors note: blotting paper is a thick, bibulous, unsized paper, used to absorb superfluous ink from freshly written manuscript, and thus prevent blots]. But due to the dust in the factory, he fell ill and realised his career wasn't meant to be on the factory floor.

After taking an alternative office job, Laurie had eleven different jobs before he reached the age of 21. Although he wouldn't recommend such a route for today's entrepreneurs, this experience was a force in shaping his future and taught him a great deal about people, motivation and their drive. Through this he learnt a lot about people management, the ins and outs of different industries, how to recognise and utilise different people and their strengths. Through part time studies he became a qualified accountant.

High-tech venture files for Chapter 11

His first venture in the high-tech industry came when he joined Potter Instruments - at that time a very successful US based designer and manufacturer of IBM/ICL compatible tape drive peripherals. Their success was soon recognised, when they decided to sue IBM for patent infringement.

Laurie's career took a big turn when the management team at Potter Instruments were removed and he was asked to take on the role of CEO. John spent most of his first executive role in filing for Chapter 11, endless time flying across the Atlantic, fighting the patent suit in the courts and managing the huge legal bills. The most ironic part came when, in order to save more costs, he had, after seven years, to make himself redundant.

This was a very dire time for Laurie, as he was also going through a divorce and worse still, his business partner died from an operation. As they say, leadership is sometimes borne out of very stressful conditions. The lessons from all this was that trying to fend a patent suit against a well-funded company was fruitless.

Startups shouldn't waste time in filing IP patents

His recommendation to startups is that the best way to protect their IP (intellectual property) is to get the products utilising the IP out onto the market, and not get into a false sense of security by patent filing. If people are going to copy you, don't make it easy by disclosing all the information - you are only providing useful information to your potential competitors.

Also, keep innovating and stay one or two steps ahead of the competition, get an ally from a low cost producer to pre-empt this competition and become their partner, instead of competing with them, but first be very certain they are safe. Very few startups have the resources to win a patent war, which are distracting and could destroy your company as the attention moves to the courts, instead of the market place. Many readers have surely joked about the last employee switching off the lights, but Laurie has actually experienced it. It's a very hard thing to do, especially when you have spent considerable amount of time, effort and energy in building your startup business. But all negative experiences have a silver lining.

Turnaround at Oxford Instruments

Laurie started applying for assistant accountant jobs, so he could take it easy for a while, but the interviewers couldn't understand why somebody with all that experience wanted such a job. Nine interviews later, he found a job at Oxford Instruments with responsibility to preserve the cash and improve cash flow. The company was growing at a massive pace and used up a lot of highly expensive materials before customer shipment could be made.

Most of Oxford Instrument's products at the time were high value with very low labour content, except for one product. This product had relatively low value and high labour cost. The company decided that this didn't fit well with the rest of the product and decided to shut down the division that employed forty staff. Laurie and a few of his colleagues decided to do a management buy out (MBO) of the unit. Laurie stayed on at Oxford Instruments, to see through the company's initial public offering (IPO), which was very successful.

The buy out unit, Newport Components, subsequently went from £300K in revenues to £2 million in 1990. In 1987 Laurie left Oxford Instruments to form Oxford Ventures Group. They raised two seed funds and made 16 investments and in 1990, when raising a third fund was impossible, they decided to perform a second buy out of the other two partners in Newport Components. In those days raising money after a track record of delivery, was quite illuminating. Over a dinner, he persuaded 3i, Flemings, Nat West bank and Barings, and raised enough money over the meal for the buy-out, with each taking a mere 3% equity each. The buyout company, now Newport Technology Group, with Laurie as CEO made acquisitions and became four divisions, with turnover then £25million, when the main company was sold for $50million and the rest of the group demerged.

That turned out to be one of Laurie's most successful investments. But he has had his share of bad ones too. He recalls a company inherited from some partners. This company was basically shifting boxes (distribution), which was very good at selling and spending money and bad at generating profits. One of the partners took his family on an expensive holiday on the company credit card. Laurie had to lock up the company doors to stop the partner coming back and subsequently wound down the company and had to preside over the creditors meeting.

On a lighter note in 1987, a new company that was referred to him via Lloyds Bank claimed something about people using computers on railways (read laptop computers), which was looking for some angel funding. They liked the founders and invested in the company, but ditched the idea of laptops and concentrated on encryption software, which was part of the original product. The company turned out be very successful and was last valued at over £200m as a highly successful anti virus operation.

On the subject of business plans, Laurie's advice is that none of the businesses he has been involved in meet or exceed the original business plan or goals. Business plans are good navigation guides, rather than fixed points or milestones. Business plans are live documents and need to be constantly updated in light of new information.

Laurie's top tips

John Laurie has helped and nurtured many companies and he has the following advice to give to current entrepreneurs, founders, management teams, executives and investors:

• A deal is only finished when the cheque is in the bank. Anything and everything does happen at the last minute, which could derail a well thought out plan, so be prepared for all eventualities, stay tuned and persevere, until it is done.
• People are the most important asset. Surround yourself with good people, hire people who are better than you, people who bring complementary skills and experience. Take references and be straight and honest with people. Ensure that everyone is accountable.
• Get and pay for good advisors: they may be expensive, but can make a whole lot of difference to you and your company. Only use those advisors that you like and trust, make sure the chemistry is there before you proceed.
• Forget about patents - startups don't have the resources to defend them, so concentrate on designing, making and selling the product.
• Copy the copycats - manufacture in China, if necessary, instead of fighting low cost vendors; become one yourself.
• The structure of your company and organisation is more important than the technology. If the structure is not right, the company will fail, regardless of how good your technology or products are. Having external shareholders is good for your business, as it puts pressure on you to perform. A large controlling interest is not the key, but the value of the whole company is, as it means more absolute dollars in your pocket than mere percentages.
• The best entrepreneurs are the ones who have nothing to lose. They have nothing to start off with, so they have no choice but to go forward, and gain from the calculated risks that others in their comfort zones will not take.
• Take risks, but in a controlled way, anticipating and planning for potential pitfalls. Know when to take a risk, identify which risks will sink the ship so you can pull back.
• Know how to and when to sell out your company or your share.

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© Chilli Publishing Ltd 2003

11NOV2003