10th Birthday Part Three: The Turning Point
It’s one year after the launch of CLX and things are going well. But success of the business brings one big problem: the core messaging platform can barely handle the continuously increasing traffic.
Company Update · 05/09/2018 · 4 min read
by Kjell Arvidsson
Here, Kjell Arvidsson recalls how CLX’s radical ‘fix’ would change the company forever.
We formed CLX because we believed two big things about enterprise messaging. One, it had tremendous potential to grow. Two, it was a technical mess.
Twelve months into our journey, it was obvious we were right on both counts.
Almost everyone was interested in our services, because we had addressed the technical problems. We were offering pure reliable high-quality connectivity.
And the commercials were working well for us too. At the time, most of our customers pre-paid their traffic, so we were getting paid straight away. Meanwhile, we were normally on post-pay terms with the operators we were buying connectivity from. Because of this, we had a positive cash flow.
Business was great, but we knew this would bring its own problems. As traffic grew, so did the strain on the underlying messaging platform, which we had built from shareware. Long term, we knew it wouldn’t scale. We had to find an alternative that could. That led to us to approach Symsoft.
At the time, Symsoft was providing its technical infrastructure, including SMSCs, to several of the operators we were working with. Our original intention was to acquire a license for the Symsoft platform software and to develop on top of it.
However, the Symsoft board couldn’t agree about our proposal. There was a ‘misalignment’. In the end, something unexpected happened: two main shareholders said they were willing to sell the whole company to us.
We had to think hard about that.
Buying the company was not our original intention.
But it was such an incredible opportunity. Symsoft had an amazing brand and a fantastic reputation amongst mobile operators. Symsoft would enable us a solid and proven technical platform. It was exceptionally capable not only for mobile messaging, several mobile operators trusted Symsoft to manage their mobile communication and business-critical processes.
We just had to find a way to make it happen. We needed a huge bank loan.
But here’s the thing: CLX had only just completed its first financial year with a profit of 100,000 euros – and there we were asking the bank for a loan of several million.
Eventually we got it, but only on the basis that the founders all put up our personal savings including our homes as collateral. The bank was basically saying: you need to know that if this goes bust, it will hurt you personally.
In the end though, buying Symsoft became a major turning point for many reasons. First, it made us credible. Yes, we knew a lot of operators already. But those we hadn’t worked with all knew and trusted Symsoft.
CLX as a company really leapfrogged and became more professional.
Before Symsoft there were only about 12 of us. Symsoft employed 140 people. It had an administrative structure. It had finance, legal, marketing and so on. By contrast, we worked in excel.
And Symsoft had an office! Two floors in a skyscraper! I remember when a couple of new colleagues came to the Afro-Caribbean travel agency we were working from. They said: ‘Wait a minute. You’re buying us?”
It was obvious we had very different cultures. So we were careful to keep things independent. We kept the two companies on different sites, while we waited for CLX to grow and for the combination to work.
Another way that Symsoft helped to professionalize CLX was due to ownership. One of the Symsoft founders had joined our board, but soon after he decided to leave. He sold his shares to the investment firm Neqst.
Interestingly, we had looked at bringing private equity into the company before. But everyone we had spoken to wanted preferential shares. By contrast, Neqst was comfortable to accept the same shareholding agreement we as founders had signed.
So suddenly we had investment professionals on the board. They changed our approach. The truth was, we had been six friends around the table. We were the owners, the board and the operational team. We were always focused on the details of the business. Neqst helped us to see the big picture. We had proper board meetings that helped refine our strategic direction.
There was one more difference Symsoft made: the most important difference of them all. It turned the development of our core platform, typically a cost center, into a profit center.
As enterprise messaging grew, our competitors would all end up paying SMSCs to route their traffic. By contrast, we owned our communications platform. It was the core of our business – and yet it made money.
Buying Symsoft changed everything for CLX. It fueled and accelerated our amazing growth. Within six years, our turnover exceeded 100m euros. And it was all organic. By 2015 we were ready to take another leap – to seek external investment that could take us to the next level.
To find out more, check out the post entitled ‘The Big Time‘.
First published by CLX Communications