Tough lessons, planning for your exit, and blowing up San Francisco's IT

Podcast transcription - 12th september 2018

Peter Cowley:                  Welcome to another Invested Investor podcast. Today we have Shirin Dehghan, who joined the Cambridge Angels only about nine months ago or something like that. Actually I don't know Shirin very well at all so I'll learn a tremendous amount from this interview. Let's talk about your background, education, etc., and what your first job was as an electronics engineer, I believe.

Shirin Dehghan:               Yeah. I'm Shirin Dehghan. I was born in Iran. I moved to the UK when I was 14 with my parents. Went through part of my schooling in the UK and did electronics at Southampton University. I then joined the professor who ran the communications department and had a effectively a side company. That was my first taste of joining a small company and I absolutely loved it. I did everything from signal processing, coding, to writing the first ray tracing algorithm in the world and bringing math as a product so basically followed the technical career.

Peter Cowley:                  Were there many women on your course?

Shirin Dehghan:               Well there were two girls who started, including me. After three months I was the only girl standing. The reason the other one left was she got pregnant so she took a year out.

Peter Cowley:                  Oh dear.

Shirin Dehghan:               I followed the technical career, joined Vodafone research and development, again in the mobile communications industry, focused on third generation mobile networks. At the time that was all new.

Peter Cowley:                  This was the-

Shirin Dehghan:               This was back in-

Peter Cowley:                  The mid-90s or something?

Shirin Dehghan:               Yes. It was. Again, really enjoyed working for a bigger company and got the taste of what it was like so went from really small to really big and as I was working for Vodafone I got my idea for my own business for my own software start-up. It was in the area of mobile telecoms and selling software to mobile operators to specifically focus on solving the third generation mobile network problem. The idea at that time was that well internet on the move was not really a thing. We could only make voice calls and we could only send SMSs and that was it.

Peter Cowley:                  And WAP was around, was it?

Shirin Dehghan:               Yeah but it was just really bad so nobody used it but everyone in the industry absolutely believed in that vision that eventually some day we were going to make this happen. I'm sitting as part of that, shall we say, long term look into the market. I knew that data was going to be absolutely critical and it was going to completely blow away some of the networks are stable right now because they're just handling voice. Once you put data on top of them it's just going to-

Peter Cowley:                  Was this the days of GPRS or edge?

Shirin Dehghan:               Yeah so there was GSM, there was GPRS, basically very low data. Very slow, very low data. But if you were going to go towards video calls towards streaming and all of these things at that time just vision, then clearly mobile network operators were going to have big problems. There wasn't anything out in the market, no software tools to really address this. Engineers were all GSM engineers. All the software products were all GSM orientated, voice orientated.

Peter Cowley:                  Which year? '98? '97?

Shirin Dehghan:               Early 2000.

Peter Cowley:                  Oh really so just as a dot com bubble was bubbling I suspect.

Shirin Dehghan:               When I started my business, yeah the dot com happened. Talk about bad timing. Which meant that I literally couldn't raise any money at that time so I just developed the product on my own with a couple of engineers.

Peter Cowley:                  Were you a sole founder or did you have a-

Shirin Dehghan:               No what happened was well I founded the company. I was the sole founder at the beginning and then a year later when I got some seed money then my husband joined me because he's also an engineer and then we hired another engineer. We were two founders kind of ish.

Peter Cowley:                  From that.

Shirin Dehghan:               Yeah from that.

Peter Cowley:                  The company's is Arieso?

Shirin Dehghan:               That's correct.

Peter Cowley:                  Is that an acronym?

Shirin Dehghan:               No it's actually a star constellation. At the time I was searching for company names. I wanted something that was different and a lot of companies in the telco space were soft com or com something else. It was a lot of acronyms like that and frankly it was very difficult to stand out. I thought I wanted a company name that begins with an A so it comes up on the Google search and I wanted something different.

Peter Cowley:                  This is pre-Google almost wasn't it?

Shirin Dehghan:               Well no there was-

Peter Cowley:                  Yahoo.

Shirin Dehghan:               Oh yahoo yeah.

Peter Cowley:                  Yes. Google was around but only about three years old at that point.

Shirin Dehghan:               Yeah exactly.

Peter Cowley:                  You raised some funding. Was it from angels?

Shirin Dehghan:               Well yes. It was my chairman who put some money in, my brother. It was friends and family and so we got about I think 100,000 pounds together. That's how we managed to actually learn some salary and start paying a few engineers and so on. Once we were developing the product I was also selling as you do when you're in very early stage as CEO founder if you will. You do everything from selling, fundraising, developing the product, testing-

Peter Cowley:                  Buying the milk...

Shirin Dehghan:               Writing documentation, everything there was to it. Yeah that was quite good fun and started building a pipeline and actually got a lot of the mobile operators in the UK interested in the product which was unheard of because these are multi billion pound gorillas and they were interested in this little company.

Peter Cowley:                  Was the product more than slideware at this point? It was an MVP almost or not?

Shirin Dehghan:               I would say that when I raised the funds from my chairman and also brother and friends and family it was a prototype stage. It wasn't something we could put in a customer's premise but by the time I managed to get O2 UK, Vodafone UK, and various other UK operators interested, it was becoming a real product that you could actually put in the hands of engineers.

Peter Cowley:                  How many staff were you at that point when they started?

Shirin Dehghan:               Three.

Peter Cowley:                  Still three?

Shirin Dehghan:               Yes. Then we had a couple of people who did sort of accounts and sort of part time.

Peter Cowley:                  So, you're already getting a bit of product market fit and you're getting income as well from are you?

Shirin Dehghan:               No, it was still very much pre-revenue but I was also searching for funding because it takes time to sell to mobile operators. Anyways we managed to get our first VC funding just before we closed O2 UK which was ...

Peter Cowley:                  Who was that from?

Shirin Dehghan:               That was from Ad Partners who doesn't exist anymore and Top Technology who sold to IP group.

Peter Cowley:                  Top Technology was-

Shirin Dehghan:               Harry Fitzgibbon and Martin Fiennes in London.

Peter Cowley:                  How much was that round?

Shirin Dehghan:               We raised one and a half million pounds so three years after I left my job and started a company. When we raised the funding then we had some real money to go and actually hire people rather than just having three full time and then some people working part time for free and that kind of thing. We were at that time , we wanted the UK but we were working on a very very large contract which was Vodafone group. That was a 12 million euro contract. The O2 UK was nice. It was like 250,000 pounds which we obviously closed and that was fantastic but it was really the 12 million euro that was going to completely change.

Peter Cowley:                  They were willing to give you, this little company who had an under capitalised balanced sheet, a contract?

Shirin Dehghan:               We were in the RFP process and our software was in the hands of the Vodafone engineers and they were loving it and that was when I learned my very biggest lesson of my life because I lost that contract to a competitor in Germany.

Peter Cowley:                  Why did you lose it? Not on price? On something else I guess.

Shirin Dehghan:               No it was purely because as a technical founder I was naïve commercially if I'm candid. Also I focused a lot on the engineering and technical side of things. I was making sure all the engineers were happy with my product but I really didn't have any clue about some of the politics that was going on within the Vodafone group where Germany had more political clout than the UK, and of course that wasn't apparent to me at the technical level when I was working for Vodafone and of course I really didn't think to think about those kinds of things when I was selling to them and the other thing was that I was really selling to the engineers but I wasn't selling to the people who were the budget holders and who had the money and so on. I wasn't doing all the schmoozing.

Peter Cowley:                  And also probably your balance sheet did kick in at that point, to be seen as a small British company. I don't know who the competitor was

Shirin Dehghan:               Oh they were small as well.

Peter Cowley:                  Oh they were? Okay.

Shirin Dehghan:               Yeah so this was purely my personal sort of inexperience in selling a large enterprise software to a very complex company.

Peter Cowley:                  Well that might have been a huge piece of luck. You might have gone bust because of this contract. You never know.

Shirin Dehghan:               Except that the product was very robust. It was already being used by 50 engineers within the UK.

Peter Cowley:                  So technically you solved it and the price was right, therefore you would have made money.

Shirin Dehghan:               Yeah exactly. We didn't have a product that had a lot of bugs, we had done a good job on that. Our product was delivering far better than the competitors' products and in my unfortunate naïve technical world I thought the best technical product of course is going to win.

Peter Cowley:                  The better mousetrap.

Shirin Dehghan:               That was a big lesson and losing that contract was obviously a massive blow to the company. Not only did I lose that contract but with that contract gone 70% of my pipeline now disappeared because what happened was, and inevitably happens in any sector that's fairly closely knit, is when the market leader, in that case Vodafone goes with a company, everyone else want to go with that vendor. We had O2 UK. We managed to close a couple of Vodafone sort of operators who went against the group decision.

Peter Cowley:                  In other countries.

Shirin Dehghan:               Yeah other countries but frankly like Vodafone Romania, Iceland, like basically we got the crumbs. Really the German competitor they were cleaning up in Europe literally. Wherever we went we were being faced by them. Why did you lose Vodafone again? It's like oh come on. You have to keep explaining yourself. At that time I thought well there's no point in messing around in Europe so I switched my attention to US because they weren't in US, so I thought let's go over there.

Peter Cowley:                  You're an early stage company with a few employees

Shirin Dehghan:               Yeah literally about you know-

Peter Cowley:                  That was a dangerous move potentially.

Shirin Dehghan:               Well I had to because I was literally just losing reference. Our win loss analysis was just brutal. Every board meeting so I thought all right that's it I'm going to US and I literally went and lived out there for a year and I took my best presales guy who I had in the UK and he came with me. He was a young guy and fantastic energy and work ethic and everything else that you need to go and set up your office.

Peter Cowley:                  How many operators over there?

Shirin Dehghan:               There are four of them, very large.

Peter Cowley:                  Sprint and yeah.

Shirin Dehghan:               AT&T on its own is equivalent to any Vodafone group. It's massive. That was the best move I made because I don't think I'll be here talking to you if I didn't make that move. Went out to the US. Took a long time to sell and getting to AT&T I had no idea who they were, who the executives were, but I had learned my lesson. I was now focusing on budget holders and trying to get my relationship-

Peter Cowley:                  They were using CDMA were they still at that point?

Shirin Dehghan:               No.

Peter Cowley:                  No they'd moved to GSM.

Shirin Dehghan:               Verizon and Sprint were using ice 95 technology, but AT&T and T-Mobile were using the normal stuff, 3G and so on. Really we had only pick of two so I went for the biggest, AT&T. We were quite lucky because at that time there was AT&T and Cingular and they had just merged to make a bigger AT&T company. Because of the merger of two networks, they had a lot of size on both sides to bring together and our solution was the only one that allowed them to do that. We won some really nice service contracts, managed to win a couple of million of contracts in working for them using the product. As we kept using the product, their engineers kept liking what the product did and eventually we got into an RFP and won a massive deal.

Peter Cowley:                  Which dwarfed the 12 million I guess did it?

Shirin Dehghan:               Well by the time we got there it was about 5 million that we managed to get out of AT&T so not quite as much as what Vodafone ended up doing but still it sort of saved the company.

Peter Cowley:                  Where are we now? In about-

Shirin Dehghan:               About 07.

Peter Cowley:                  You've grown to about 20 or 30 people at that point, have you?

Shirin Dehghan:               Yeah. Less than 20. Something like that.

Peter Cowley:                  Yeah because you hadn't raised another round at this point.

Shirin Dehghan:               No. That really saved the company frankly and 95% of our revenue was AT&T which was not a good thing-

Peter Cowley:                  Tut tut.

Shirin Dehghan:               But I soon realized that frankly that AT&T because I was just ... The market was gone. The competitor cleaned it up, and they dropped the prices, and that's another thing they did in the market that frankly it wasn't worth it any more to go to Asia, go to Africa, the pricing just wasn’t justifiable.

Peter Cowley:                  Was this other company still in existence.

Shirin Dehghan:               Oh yeah. They were doing amazing. The exited in 2006 so if I had executed like they did I could have exited in a hurry, but anyway. I thought okay, well either, there are really two choices I've got, either I come up with another product, or it's a fire sale for this company because frankly this isn't going to go anywhere, and the only way is down. So I met with my investors and said, "Look, you know the vision that I started the company with? Well that vision needs to become reality. I need to actually develop it." Because you know how you raise money, you tell them what you're doing now, and then you paint this amazing picture in the future, and everyone's like, "Okay, well they've got something new." You say, "You know that mail thing? Well that didn't work." So you got to really go for the hard stuff. And that's when they supported me.

Peter Cowley:                  With some more funding?

Shirin Dehghan:               With some more funding to bridge to the A-B round.

Peter Cowley:                  So the original investors put more money, another million or so less probably.

Shirin Dehghan:               So yes, they put another couple of million, and then I needed a really big grant, like five million pounds to really invest in the second product that fulfilled the vision, shall we say.

Peter Cowley:                  So, let's talk about that product first and then we'll talk about the financing of it. So what is this new vision, or change of vision?

Shirin Dehghan:               So, basically when I raise money I raise money on the premise of enabling self-optimising networks. So what that meant was a mobile network effectively was figuring out exactly what was going wrong with the quality of service that subscribers were experiencing, and it would fix itself. So completely auto pilot basically changing the network parameters, and everything else, and all of the data was going to come from the actual subscribers from the handsets.

Peter Cowley:                  Quality of service signal and signal strength, etc.

Shirin Dehghan:               So it was all going to be automated, auto pilot, and that was the vision. And that's how obviously it starts coming, the first product had elements of that so we had the automated optimization, but it was an off line product where the engineers had them on their workstations, but the collection of data wasn't coming from the handset it was coming from drive testing’s. It was very much in the offline tools for engineering.

Peter Cowley:                  Get the data as soon as you got data basically.

Shirin Dehghan:               Exactly. So it was for engineers, and then engineers would figure stuff out, and they would put it in the network. So it was very much off line tools thing. And that was our first go in the market, but clearly that market went away, and so we had to go for this enterprise grade, real time, big data, before big data became sexy, we had to build probably the first big data company.

Peter Cowley:                  As did the competitor. Or not? Or were they-

Shirin Dehghan:               No they had sold to another bigger company, which were focused on drive testing, so they were doing something else. So, developing this would completely wrong footed all of our competitors. So, I managed to convince Corecocentra and OCP, which are Marsh.

Peter Cowley:                  David Marsh and his father particularly in those days.

Shirin Dehghan:               Exactly. And so together they put in five million pounds into the company, and because I knew that I had to build a completely different product, the engineering staff just didn't have the experience, so my husband was the CTO at the time, so I asked him to step down from the CTO position so he became Chief Science Officer and actually hired in a CTO, a really fantastic guy and very bright, literally a Rocket Scientist, he used to work for NASA, and he was working for Bell Labs. I have no idea to this day how I managed to convince this guy to leave his amazing job and come and join us tiddly little company.

Peter Cowley:                  He moved from America to here.

Shirin Dehghan:               Well he actually stayed in New Jersey so he was remote, but I thought he was so good that I didn't care where he was at. So I managed to bring him on as CTO, and also I brought in a Chief Architect who had to build big systems for billing system and also performance management, traffic things, because I knew I had a completely different problems so I started augmenting and changing the technical team in order to build what we needed to build.

Peter Cowley:                  This wasn't public land was it? Or even private land. This was on premise was it?

Shirin Dehghan:               It had to be on premise because mobile companies still today has been fairly suspicious of their data leaving their premise. It's a bit like banks unfortunately. So yeah, we embarked on building this big beast, and we started selling it in, you would not believe this, but in 2008/2009 when there's another financial crash happens. So I'm at the start of the company coinciding with the dot com. My second product launch.

Peter Cowley:                  But you had some cash in the bank from investors, that's the important thing.

Shirin Dehghan:               Absolutely, so we were fine. But we were launching this product over to a very uncertain environment, and a lot of customers cut back, specifically AT&T who we were obviously very dependent on-

Peter Cowley:                  This was something that customer would notice, quality of service is critical to all of us

Shirin Dehghan:               Absolutely.

Peter Cowley:                  So either you have pull from the market or churn of customers don't you?

Shirin Dehghan:               That is exactly correct. And the other fortuitous thing was that because iPhone came out in 2008, and as I had predicted data really hit the network so essentially we got AT&T's CEO coming and apologizing for basically the network going down. OTUK came to apologize, and these were my customers, so that was fantastic. I can go and sell this product because our product was the only way they could tell where things were going wrong because we were gathering all of the data out of the handset, and the network were autotomised the day we were effectively crowd sourced from all the handsets, and figure out exactly what was going wrong at a very granular level, much better than drive testing, because drive testing can't drive test inside buildings, so we could tell them exactly where things were.

Peter Cowley:                  And you thought it was ready to be pushed out as the iPhone was being launched, or had launched?

Shirin Dehghan:               Yes, so it was a minimum viable product at a sort of level, and we were doing something massive because no one had ever tried this before, to gather every single signal and message that was going from a lower handset to a base station, and vice versa. So we were handling billions of data records, and with that comes some interesting challenges, which meant that my Chief Architect was literally chained to every installation that we had to make.

Peter Cowley:                  To tweak it.

Shirin Dehghan:               Well yeah. Literally on premise we were fixing bugs. Obviously not telling the customer we were doing that, because we didn't have a network to test it with.

Peter Cowley:                  No because so you couldn't.

Shirin Dehghan:               Exactly.

Peter Cowley:                  Exactly. You had to test it on a live network didn't you?

Shirin Dehghan:               Exactly. So there was some midnight hairy moments. I was out there, some testing with the guys, and they were fixing bugs. Anyway, we managed to do this without the customer really knowing. I called it human shield. At the beginning our product had to go with a number of people around it.

Peter Cowley:                  Which is probably true with many software systems isn't it?

Shirin Dehghan:               Correct. But when you're playing with someone’s live network it is a bit scary.

Peter Cowley:                  Especially if you can bring it down and read a cell I suspect. Or a more than one cell or a city.

Shirin Dehghan:               Yeah… we did blow up the IT in San Francisco. Because our processing power is just using up so much electricity.

Peter Cowley:                  Of their system.

Shirin Dehghan:               Not the network. We probably shouldn't have plugged it into where the kettle was. Anyway we did what we had to do, but it just went viral. We deployed in Los Angeles, the AT&T Los Angeles market, and then they loved it. We went to Dallas then to San Francisco literally within six or seven months all of the different big cities, and as you can imagine San Francisco itself is like a country in Europe, it's so big.

Peter Cowley:                  Los Angeles Silicon Valley together is isn't it?

Shirin Dehghan:               Well exactly.

Peter Cowley:                  It uses the tech.

Shirin Dehghan:               Dallas is like a small European country. So we were literally going around, and selling, and we were doing it on a SAS model. And extracting millions and millions out of these guys, and HQ hadn't even realized what was going on on the ground.

Peter Cowley:                  So it's a low enough budget they could sign off for a million dollars after it falls.

Shirin Dehghan:               Well because every city has such a big budget anyway, they are like a little mini billion dollar businesses, so Dallas has got a billion for example, as expenditure.

Peter Cowley:                  With one network?

Shirin Dehghan:               Yes just Dallas. So the head of Dallas could write checks for two or three million easily, no problem. So HQ hadn't realised this was going on, and we didn't want them to realise, and we kept it quiet, and we just went viral amongst all the different cities. And I think we were extracting about 12 to 15 million out of AT&T, and then we also went and sold it to MTM in South Africa because the World Cup was coming up in 2010, and they bought it for the World Cup, and they used it to make sure that the network didn't go down due to the World Cup. And then straight after the CEO bought it for all of South Africa, and that was a three-million-dollar deal. And then made a deal with us for the group, and went to America Movil. America Movil bought it for four of their operations in all their countries, and that turned out to be a 20 million contract. So basically it just grew from there. And having learned the lessons of technology is an important piece, but not the only thing.

                                             You've got to do all the go to market, your marketing is competitive positioning.

Peter Cowley:                  Because the competition wouldn't be starting to think about moving to your space yet.

Shirin Dehghan:               Well competition first started just rubbishing what we were doing, and then eventually they realised we were just going off. And they started switching and following us, but we were two to three years ahead of them, and it was very difficult for them to catch up because fundamentally it was a very difficult problem to solve.

Peter Cowley:                  The series B had happened, and you didn't need any more cash, it became profitable apparently.

Shirin Dehghan:               Yeah, we just needed a little bit of top off to increase our sales in marketing. I think we just another million and a bit just for a little bit more cash buffer, but that was it. So we'd raised in total  seven/eight million pounds.

Peter Cowley:                  Pounds? Yeah, okay. And you're now what? 58 to 100 people?

Shirin Dehghan:               Yeah, we were coming up to 2011, and in 2011 we were about 50 people, roughly speaking, and we had AT&T, Vodafone-

Peter Cowley:                  So, before we talk about the Exit which is coming up shortly in your journey, talk about the board and how they've assisted, or maybe not assisted. What's gone wrong in relationships at board level? And right of course.

Shirin Dehghan:               Yeah so I was very lucky. I had very supportive investors. For example Richard helped a lot because he had operational background, and I think that counts for a huge amount. I think he sees who have operational background can appreciate what's going on in the company and be very helpful on not just money terms, but in other ways.

Peter Cowley:                  Because he had Datanomic which he sold to Oracle.

Shirin Dehghan:               So that was really good to have him on the board. And also the other thing was when my Chairman retired I brought on board a lady called Terry Vagert as Chairwoman, and she was absolutely brilliant, and her and I clicked just from the first moment we met. Very similar people but she was obviously-

Peter Cowley:                  A technical background was she?

Shirin Dehghan:               Yeah, she ran all of Lucents basically infrastructure.

Peter Cowley:                  And she'd gone portfolio at some point had she?

Shirin Dehghan:               She was Chairwoman of IP Access, she was Chairwoman of another Cambridge company.

Peter Cowley:                  Cambridge broadband?

Shirin Dehghan:               Yes. And then she was Chairwoman of Arieso. And she moved from US to here to get married to her husband Mike Mctyre, who was also portfolio, but more on their PLC type companies. She was a great mentor to me. I don't know if this was a woman to woman thing, I have no idea, but it was just brilliant and that relationship ... And she taught me so much. I was first time CEO and frankly had not been in any kind of leadership role, and just to have her to bounce ideas off her and things like that.

Peter Cowley:                  There must be some lows in terms of hiring and firing, I suspect.

Shirin Dehghan:               There was. So, I mean early on, I made a lot of my mistakes sort of in the product number one. So, I hired VP Sales who, on the face of it, looks really good. One of my VCs suggested it. He was a very senior person at Ericsson. He was a GM, I think, general manager, and became VP of Sales. That was, I think, not a good idea, because big company, and then they come to a small company. It doesn't quite work. I think that was my first-

Peter Cowley:                  And high-level sales guys or girls can sell themselves well, but whether they can sell the product-

Shirin Dehghan:               He was a lovely guy, and I enjoyed working with him, it's just knowing what I know now, I certainly wouldn't have made that hire. I think that some of the really hard ones were sort of changing the technical team and manoeuvring that whole sort of transition. That was challenging, but needed to be done.

Peter Cowley:                  Including your husband, of course, right? You had to move him.

Shirin Dehghan:               Exactly. Exactly. I'm still married to him. We managed to get through that.

Peter Cowley:                  Well done.

Shirin Dehghan:               I have fired a few people.

Peter Cowley:                  Let's move onto the exit, then. So, were you approached or did you decide to sell it or did the investors try to sell? What was that process?

Shirin Dehghan:               So 2011, I want to say we were really successful. I mean, things were going amazing. We were executing flawlessly. I knew that there were companies that were kind of hovering around. You kind of get a feel that-

Peter Cowley:                  To purchase rather than compete?

Shirin Dehghan:               Well, when you get attention from Oracle or IBM, when you get a certain level of attention, you know that you're on their radar. They're watching you, kind of thing. We were profitable in 2011, we were positive. We were growing at 60 or 70% a year on year. There was no sort of stopping that. You could see that growth continuing. So, I knew that there was going to be potentially interest, so I started without knowing when I was going to exit the company.

                                             I started doing a lot of preparation probably 12 months before the exit actually happened. I actually asked Richards to give me his list of stuff that he needed to prepare for Oracle, because I thought if I prepared a data room that meets Oracle's needs, then I can meet anyone's needs. So, he helped me, and he gave me the list. So, I went through item by item. I mean, frankly, I was absolutely surprised by the amount of information they wanted, but I'm glad that I saw the detail-

Peter Cowley:                  Because it was already available when you needed it.

Shirin Dehghan:               Exactly, so I got my exec team together. By that time, I had a full exec team, so effectively complete. There was no other sort of major slot that needed filling. So basically carved out the various bits and gave to them and said, "All right, we need to get this data room sorted out within the next six months." I actually put a project together to review and make sure that that's all done. Then once we got the data room and everything sorted, I also invited folks who had purchased companies on behalf of other bigger companies, so we brought in, for example, you probably know of Phil Claridge.

Peter Cowley:                  No, I don't, actually.

Shirin Dehghan:               No? Okay, so Phil was chief architect for a major billing company in Cambridge.

Peter Cowley:                  Geneva Technology?

Shirin Dehghan:               That's right, and they had acquired a number of companies, so he had been the person that did the due diligence on all the technology and everything else. At that time, he wasn't working. I said, "Hey, would you like to come and give my guys a practice run?" So effectively, we did practice runs, and then the first sort of practice due diligence, my heads of products and development completely fell apart, as we would expect, which was good, because it was in a friendly environment. Then we went back and said, "Okay, so here's what we need to do." We did sort of-

Peter Cowley:                  This was before you'd identified somebody to sell to, even, wasn't it?

Shirin Dehghan:               Well, I was talking to-

Peter Cowley:                  You were talking to the potential buyers.

Shirin Dehghan:               I was talking to these guys who were paying attention to us, so about partnership and sort of carrying on some of those conversations. We were never for sale, so if anyone said to me, "Are you thinking about exiting," I said, "No, we're not. We're completely focused on execution. We're doing so well. We've got this customer going." All I talked about was our success and how we're going to go and dominate the world, i.e., if you move too slow, you will then become really expensive for you to get. Whilst I was doing that externally, internally, I was making sure that the team was prepared for eventual event.

                                             So, we did a bunch of practice runs. We looked at bankers. So, we went through the process of the beauty parade of bankers and so on. We chose one, but we didn't appoint them officially. So, we chose Armour Partners, so shook hands and whatever, but they weren't officially appointed. They were told very strictly they are not to say anything about shopping the company or anything like that, however, they were meant to help us prepare all the financials and the position anchors-

Peter Cowley:                  And you paid them for that?

Shirin Dehghan:               Yeah, it was like a monthly retainer, and that was good, because it got us CFO-ready.

Peter Cowley:                  In your mind, you were moving towards exit at this point, weren't you?

Shirin Dehghan:               Well yeah, but I was kind of preparing, but I didn't know. The exit could have been two years away. It could have been three years away. It could have been six months away, but I didn't have a crystal ball, but I knew the company was so successful that eventually, we would get there, but I wanted to be prepared when it happens. So actually, interesting, when the first offer came in, it was on my birthday, September 10th, 2012.

                                             It was a first offer, and as soon as that came in, we appointed Armour officially.

Peter Cowley:                  They came in, they just wrote an email saying-

Shirin Dehghan:               I literally got an email.

Peter Cowley:                  Did they put a price in that?

Shirin Dehghan:               Yes.

Peter Cowley:                  The amount they were going to pay?

Shirin Dehghan:               It was a proper offer, and I'd been talking-

Peter Cowley:                  Right okay

Shirin Dehghan:               I'd been talking to the CEO of that company about partnership, how do we get together. We had some great meetings, that kind of thing. Eventually, he just went, "Right, we want to buy you."

Peter Cowley:                  How did you work out what to pay, though? He knew your figures? Because you hadn't released those.

Shirin Dehghan:               No, I hadn't, but he just came in with an offer.

Peter Cowley:                  Was that the one you took?

Shirin Dehghan:               No.

Peter Cowley:                  Okay, fine. Let's carry on with the story.

Shirin Dehghan:               We needed that first offer to go and then kind of for the banker to do whatever he needed to do. So, the banker then took the first offer and went to everybody who I had been talking to, warming up, having dinners and that kind of thing, and then went to a whole bunch of companies and said, "By the way, Arieso's going."

Peter Cowley:                  So, an auction? Did it become an auction?

Shirin Dehghan:               Yeah, and then in the end, we had Amdocs. We had JDSU. We had Oracle, and then we had this other company. Smaller, but they put the first offer in. Then basically, Oracle dropped out. Then, it was between Amdocs and JDSU, and then, Amdocs wanted earn-out. JDSU paid us cash early. They were announcing, in fact-

Peter Cowley:                  Similar numbers, were they?

Shirin Dehghan:               Similar numbers. One with earn-out one without and one with golden handcuffs, so not only were they paying us cash, they were actually paying us some more cash just to be with them-

Peter Cowley:                  To keep you there

Shirin Dehghan:               ... and to keep it going.

Peter Cowley:                  So then you went into, you each had the offer and went through DD, and ...

Shirin Dehghan:               We signed, essentially, just before Christmas or just after Christmas. We signed the exclusivity. The exclusivity was only meant to last for two weeks, because we wanted that to be as short as possible for obvious reasons, because we wanted to keep pushing them. The thing that, again, we did really well, I think, was to essentially keep that whole process really, really tight and make sure that we deliver on the numbers as we're going through that due diligence process.

                                             So, the last thing you want is for you to falter on your sales quarter numbers when you're doing that. So, we were smashing the numbers. We were doing the sales numbers whilst we were going through that due diligence process. So, we signed just after Christmas, and then all the legals, all the due diligence, everything was done by 7th of March, and we closed the deal on 7th of March, and we announced it.

Peter Cowley:                  They didn't chip at the price?

Shirin Dehghan:               No. We made sure that we put in provision in the terms sheet at the beginning to make sure that they're not going to chip at the price.

Peter Cowley:                  Well done. I found the number on the Internet, so are you prepared to say what it is? I mean, it is out there.

Shirin Dehghan:               It was $85 million.

Peter Cowley:                  85 million.

Shirin Dehghan:               Plus the cash that was in the bank plus all the sort of golden handcuffs, and so I think the total came to $92 million.

Peter Cowley:                  How long did you stay for?

Shirin Dehghan:               I was meant to only stay for 12 months, and that was kind of the deal. I stayed for 18 months to make sure everyone was handed over.

Peter Cowley:                  One question before we move on to your next stage of life. We talk in Cambridge about not growing gorillas. Are you not growing big companies? We talk about that in the UK. Think if you hadn't exited, I mean obviously you had investors there, probably VCs that wanted to exit, and you're in that industry now. Could this have been a $500 million or a billion company?

Shirin Dehghan:               Not this business. I think the business that I built could have gone further. I mean, in fact, we could have continued growing. So, we didn't have a red face after acquisition, which was important to us because I wanted that legacy to continue. The business is still doing well. It wasn't a billion-dollar business. Let's put it this way. We could have grown it, and we probably could have gotten more money for that, but it was the right time to sell, and also, the other thing to say is that because I'd been doing it for 10 years, frankly-

Peter Cowley:                  You wanted a break.

Shirin Dehghan:               I was tired, and if I'm being totally honest, and the exec team, and some of them had been with me for as part of that period. So, it was the right time for all of us.

Peter Cowley:                  Thank you for listening to part one of Shirin's podcast. I hope you've found it as fascinating as I did to hear how Shirin built and sold Arieso. I was particularly intrigued to hear how she learnt so much from the pitfall of a lost contract and how much time and effort she spent to ensure the company was ready for a potential buy-out. Be sure to visit our website, to hear more podcasts and find details on how to buy our first book.