When Hampus Jakobsson founded The Astonishing Tribe in 2002 in Malmö, southern Sweden, with five friends, it was not so much as a viable business but as a group of young people wanting — in his words — “to hang out and work together… to do some fun projects. It was a hobby.”
They were, he says, comparable to “glassblowers”, creating exciting designs in the world of mobile phone User Interfaces (UIs) without worrying about funding, growth or — even further from their minds — an exit strategy. It was a bootstrap venture with no external funding; which is lucky because the management team was inexperienced. Jakobsson says that there were plenty of problems when the business moved into hyper-growth. Jakobsson and his co-founders had a flair for developing and designing great UIs for smartphones — an early claim was that they pioneered the first mobile phone colour screen — and they leveraged their talent with some big players: Astonishing Tribe is credited with shaping the look and feel of early Android devices and they are widely hailed as being the design flair behind the BlackBerry 10. Within a year, the company had doubled its revenues and its number of employees. This pattern continued for several years. The business worked with every major mobile phone operator in the world except Apple, and of all the mobile phones produced globally in 2010, 13% ran The Astonishing Tribe’s software. Johan Lenander, chairman from 2004 to 2010, recalls that in those early years, plenty of would-be investors came calling but the company declined for one simple reason. Leander says, “we didn’t need the money”.
This changed in 2007 when the company decided upon aggressive expansion, most notably by growing their business with new offices in the US and South Korea. The company’s first and only share sale was valued at €3m, with the shares being purchased by Jan Barchan of Briban Invest. Barchan also acquired some of the founders’ shares, thereby becoming the single biggest shareholder. By October 2010, the company was considering an IPO after a failed and bruising M&A discussion with a would-be purchaser when it received an overture from Research In Motion (RIM), manufacturers of the BlackBerry device. What started as discussions about The Astonishing Tribe continuing to work with RIM very quickly became an M&A process; and six weeks later, on 2 December 2010, RIM announced that it had acquired The Astonishing Tribe for $150m. Jakobsson is a graduate of the Faculty of Engineering at Lund University, southern Sweden. He now devotes his time to being an angel investor; he set up Hajak AB in 2010 after the RIM deal to handle his investments. In July last year, he co-founded Nordic Makers, “a group of ten Nordic angels working tightly together to be the best angel/early seed investor in the Nordics”.
Don’t compromise your principles for the deal. I remember a crazy meeting with Mike Lazaridis, the founder of RIM, and his technical management. We had been called over to Canada with only a couple of days’ notice for an introductory meeting. Everyone was really nice and we felt we really wanted to work with them. The meeting started with us presenting, and after a couple of minutes, Mike interrupted to say that he didn’t want to buy Astonishing Tribe, as he preferred to use Adobe [technologies]. We argued that that was the wrong approach. In fact, we fought over it for about 20 minutes. The technology team was really impressed, but Mike just seemed to be completely anti. Suddenly, Mike asked us into the office, privately. ‘Thank you for putting up with that show – I didn’t want to work with Adobe, but some people in my team think that’s the way forward and I wanted to test you and let them hear it. I just gave you guys every argument they had given me.” Be true to yourself, even when you’re negotiating for a massive sale.
Not everyone wants to stay for the ride
By 2007, the team dynamic had changed. Four of the founding team had moved to employee status and it was really just me driving the business. We knew that the management team needed an upgrade. When founders become employees, they are de-risking their relationship with the business. They are a different category of participant in the journey.
Sell to someone you’ll be proud of in ten years’ time
Several acquirers came knocking. Two weren’t a good fit. The third was a European company, but they were already public and just looking to boost revenues. I found the situation deeply challenging: they were offering a lot of money, but it was a company we didn’t like. As it turned out, our lack of passion really damaged the sale process. They moved on. We felt relieved that we’d passed it up because a lot of our people would have ended up working somewhere that wouldn’t be fun. Later on, when Mike Lazaridis of RIM asked why we hadn’t been acquired, we honestly said we were building an astonishing business. And if we were going to sell, it needed to be too similar people. You need to appreciate that when you are selling a company, you are still fundamentally selling yourself. If you’re not enthusiastic then the deal won’t happen. It was as painful as sending your children to a bad school. Why would we want to sell the business to a big corporation who would just take our ideas? But RIM was an incredible home for us, we wanted to work for them and they wanted to work with them. And in particular, Mike was incredible.
Get professional help – especially when things move fast
The sales process started on 15th October 2010. The head of M&A for RIM made contact. It was a Tuesday. He spoke to our CTO on the Friday, and then on the following Monday asked our pre-sales team to help prepare for a meeting with RIM at the end of the week as though it were a normal business development approach – in fact, we did an amazing prototype for their new tablet in just 2.5 days. In those two weeks, we knew that something big was happening, so we got a corporate-financier to help us; the legendary Peter Globokar of Mooreland Partners. He’s a magician. We wanted someone who had been in the trenches and was entrepreneurial, and also knew mobile. We felt comfortable that he could earn his fee with incremental value, and he certainly did. And Lazaridis just kept saying, “These guys are going to be wearing Blackberry badges in 6 weeks”.
Treat an acquisition like an everyday customer engagement…
We needed a term sheet. So we asked RIM to treat us like a supplier, and they would pay us an hourly rate to work on the project. It worked really well and it also meant that life was normal for the majority of staff. Treat the M&A process like a customer engagement. It makes a huge difference: the acquirer sees what you are like first hand, and you can mobilize resources. We even got BlackBerry to pay our hourly rates for the work we did.
The big regret…
We were on a path we couldn’t change and I’m not sure I would do anything differently. We just set out to do astonishing work. But there wasn’t a rulebook for anything we did…
And the big takeaway…
Sell to someone you believe in, that you would want to work for and that you trust holding your baby in their hands.
First published in The Art of Exiteering: In conversation with European tech founders.