MessageLabs brothers get £100m Notion

Co-founders of email security success donate proceeds to develop a VC fund supporting UK tech start-ups

MessageLabs was once a UK startup but is now owned by giant tech provider Symantec

MessageLabs founders Jos and Ben White have launched a £100m venture capital fund aimed primarily at supporting UK-based service and solution provider start-ups.
The White brothers sold MessageLabs to security giant Symantec for £400m in early October and are contributing around £20m of their own £100m proceeds to their new tech fund, dubbed Notion Capital.

About another £80m is expected to be contributed by other backers, including other former MessageLabs executives and former UBS Investment corporate financier Stephen Chandler, according to Jos White.

“Over the course of the next six months … We are hoping it will reach around that amount,” White said. “We are particularly interested in supporting recurring-revenue services and Software-as-a-Service (SaaS).”

He said that services in the cloud are an inevitable development but many excellent ideas and quality UK-based service providers could yet fall by the wayside due to an inability to get funding locally.

“We see very strongly that there is an unstoppable shift towards the internet for communications and we want to find businesses that can play a role in that transition,” White said. “It is really a move away from software being locally hosted or on computers or private networks.”

He said that Notion Capital is the brainchild of MessageLabs’ early experiences of trying to source funding within the UK in 2000. It had been – and still is – difficult to find start-up funding for technology companies in the UK, compared to the US.

“[In the UK] we would say, ‘we are thinking of raising about £10m or £15m’ and they would try to talk us down. People were not thinking big and also did not understand our technology company so we raised money in the States,” White said.

“In the US, people would say, ‘why don’t you raise £25m?’.”

Notion Capital will go beyond offering funding to suitable candidates. It will also try to support the recipients’ business growth where appropriate for s everal years or more, White said.

“You have got to be realistic: things are going to be tough in the next few years. But if you have what it takes when the economy picks up you can do well. The internet and the industry are not going away,” he said.

The fund will put businesses it invests in into an acceleration programme with a number of modules – including sales and marketing, financial management and people performance – that the partners believe are foundation stones to successful growth and scale.

The White brothers founded RBR Networks, Star Internet and MessageLabs and grew all three firms into market leaders with revenues in excess of US$100m a year.

Chandler at financial giant UBS advised leading global technology companies on funding and mergers and acquisitions before becoming chief financial officer for Star and MessageLabs.

Ian Milbourn, vice-president of corporate finance at MessageLabs, has led various mergers and acquisitions and financing transactions.

“Ian and Steve provide the real financial firepower, while myself and Ben see ourselves as the entrepreneurs. We feel we can provide help that way,” White said.
“I think very often financial people in suits can scare off entrepreneurial types – they certainly scared us off, in the early days.”

Other partners include Chris Tottman, who joined the group in 1999 and has served in management positions within Star and MessageLabs.

British Venture Capital Association chief executive officer Simon Walker said private equity could be a great help to smaller businesses in troubled economic times, in a speech to the recent Conservative Party conference.

“What private equity does is try to make the businesses they buy more profitable – by fixing and repairing problems, by expanding into overseas markets, by cutting costs, by investing in new products. Then they sell that company – either to another buyer, or by floating it on a stock exchange. And they return the money to their investors,” Walker said.

“The whole exercise typically takes around six years – sometimes quicker, but anything up to ten years. So unlike what we have seen in recent weeks, it’s a long-term investment.”