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Former soldier risked everything on cloud mission

Tim Mercer, CEO of Vapour Cloud, on has been under the spotlight in an interview with Comms Dealer… 

How does your previous work/personal experience come into play in your current role?

I don’t perhaps have the ‘obvious’ career background that you’d expect for the head of a tech firm. I began my career in the Forces – an experience that taught me what it truly means to be a team player.

Following seven years in the army – including active service during the Gulf War – I took on a few sales jobs and in 1996 decided it was time to go searching for fame and fortune in London! I ended up working in a commission-only role for a managed printing company for three years, before heading home in 1999.

I secured a job selling data networks at what was then TeleWest. They merged to form NTL then Virgin Media, and by 2011 I’d worked my way up to the position of regional sales manager.

At the time I wouldn’t have called myself an entrepreneur – and I still don’t particularly like that over-used term now. But I think I always knew I’d own my own business, I had a knack for spotting a market niche, and I had the drive and passion to deliver it. Having experienced poor customer service delivery within the IT space, I realised there was a huge opportunity to exploit. I was also convinced that the cloud revolution was coming.

I sold everything I had and my wife gave me five years to make it work – failure was not an option.

History of Vapour Cloud

My aim was to provide agile business communications services without the ‘baggage’ and corporate restraints typically imposed by competitors. The focus would be great tech delivered with even better customer service. It sounds so simple, but what began as a leap of faith has clearly proven to satisfy a market gap.

I knew I needed some funding to get the business off the ground and came upon the Finance Yorkshire ‘Dragons Den’ style tendering process. I pitched the same core services that we offer today, fuelled by next generation webRTC capabilities, and was extremely honest in outlining the £1m I required to build a network and make the vision a reality.

I needed an FD and five months later our finance director Jason was on board, bringing further commercial acumen to the team. This was back in 2013.

We attracted third party investment from Seneca – which totals £4m to date – and our growth began. We were joined by cloud director Steve Dempsey in 2015, and the same three-strong board remains in place exactly three years later.

And what have been the main turning points/milestones for the business since inception?

Growth stats often define a business journey (and these have been provided below). But I don’t think the turning points for Vapour are evidenced in our customer numbers, headcount or profit and loss account.

I think here’s more of a story in the people we’ve recruited – best-in-class talent from throughout the industry, many of whom I have known for a long time. Other colleagues are at the very beginning of their career but I know they’ve something extremely special to add. For me this is a quality not quantity battle.

Our first year was challenging – not least because I’d sold my wife’s car! But slowly but surely organisations were trusting us with their comms infrastructure. They were putting their investments on the line by going with Vapour rather than a more established yet traditional provider, but the fact that these customers remain on board today – and they have re-signed for a second term – hopefully speaks volumes.

Securing finance felt like a huge achievement, for someone who had never done that before. Balance sheets were not my bag – at the time!

And the achievements have – thankfully – kept on coming. We moved into our new office in 2016 and as we entered our fourth year of business I’d say the shape of our industry profile and reputation really started to change.

General growth stats... staff numbers, revenue/turnover, sales projections/targets over last year and the coming year, size and profile of customer base.

OK so I am proud of the growth stats too! Originally a 3-strong team we now have a team of 31, over 100 clients, £4m of investment under our belt and sights on £12m turnover by 2020.

We’ve established a 96% net recurring revenue rate to date, so our business development model is easy to maintain. We had a 64% seed of growth in 2017, and hope to realise 65-80% by the end of this year. That’s if we focus on organic growth alone, but we announced a £10m acquisition trail only a few weeks ago, to accelerate our expansion with a buy and build strategy.

In terms of customers, we work with end user organisations as well as trusted partners. Our client base is made up of growing SMEs and blue-chip brands that are familiar household names. I personally love this mix.

What have been the main changes in the Vapour Cloud business over the past two/three years and why?

I think the size of the customers we are able to acquire says a lot about the reputation we have amassed. We were early adopters of cloud tech which – whilst a risk at the time – now sees us pick up extremely sizable contracts. The market has shifted and clients now seek cloud-first solutions. They don’t want to work with organisations that claim to dabble in this complex space. They want to invest in businesses that live and breathe this world, and have done all along.

We still remain true to the services we wanted to offer at the start – secure voice comms, network connectivity and storage. That will not change. But our cloud product suites are evolving and becoming more exciting all the time. We invest constantly, and the breadth of our offering means we can now attract clients of all shapes and sizes.

There are two huge new channel collaborations that I am dying to reveal to the market – I’m literally days away from being able to say what’s next on the cards for Vapour! But all I’m allowed to mention at this stage is ‘watch this space’.

I’m extremely proud of the awards we’ve started to secure too – not because they fuel the ego but because they’re welcome recognition for the efforts of the whole team. We’ve got entrepreneurship and shooting star trophies under our belts, with three more potential gongs in the pipeline over the next three weeks alone. Busy busy!

 

In a broad context please summarise your proposition, key vendor partners, target markets and growth areas - and how do you expect these to develop? 

Our solutions sit under three brand names – Hӧllr (unified voice comms), Sanctm (secure storage and backup) and Tunnl (network connectivity). How these products and services take shape and are deployed to clients, differs depending on the brief and budget, but our portfolio triangulates around the brands you see here.

We’ve worked extremely hard over the last 18-24 months to develop our channel partnerships too – a model that will prove pivotal to our further expansion. The key to cementing a mutually-beneficial partnership is to find a specialist IT brand with similar values, but a gap that we can plug. Rather than fighting with each other for business that doesn’t 100% fit either of us, we therefore work together on tenders knowing we can almost offer cartel-like protection of the customer relationship.

Our partners know, for example, that we’re not going to start selling mobiles. We know what we’re good at and we want to help them concentrate on where they can add value. But together we’ll secure the big deals. We’ve helped generate £2m of additional revenue for one partner since 2016, which I hope evidences what I’m talking about.

We’ve made a (relevant) noise that is being noticed – and I hope it will only get louder. We’re choosy in the partners that we seek however. It has to work for both parties. It’s quite rare in the channel – usually the competitive space is just battling with itself for orders.

What are the factors that are influencing the evolution of Vapour Cloud in terms of market/channel approach, portfolio development and customer/partner engagement?

The channel approach I’ve outlined above is clearly crucial, and I’m excited about how we may spend £10m on acquisitions. And there’s lots of new tech on the horizon too as I’ve outlined below.

Which new technology areas are on your radar and why? Are there any gaps in the portfolio to fill?

I wouldn’t say we have gaps, but there are definitely enhancements we’re able to make. Unified/multichannel comms is becoming pivotal for many organisations – particularly those with contact centre operations – and we have a lot more to offer in this space. The on-prem to SaaS shift is also paramount, across the piece.

We’re investing heavily in securely recorded video but I’ve got to keep some things up my sleeve.

What are your current priorities and what are the main challenges and opportunities associated with your priorities?

My priorities are to fuel our onward growth, aided by our buy and build strategy, without ever weakening the service levels that we’ve prioritised from day one. We’ll use our investment fund to fuel further product dev, and we’ll look for more people too.

Great talent is always hard to find, and that challenge feels extremely real as we look to the future. But we have to think of it as though we’re building a great football team – we’ll pay more for an incredible player, rather than spending our budget on colleagues that may not deliver the service we pride ourselves on, or keep up with the pace.

I think we have to give a nod to the North-South tech divide which unfortunately remains extremely evident, irrespective of the Government’s claims. I don’t think this has held Vapour back to date, but it is a frustration nonetheless given the degree of innovation and disruption we see in the region. They may be vocal about the fantastic things that go on in the North but their actions don’t mirror their praise.

What trends are you seeing/tracking in the market generally (and your core markets) that interest you most and what is the significance of these in terms of Vapour Cloud's future direction?

Digital transformation is a growing element of our marketplace, moving into much more secure services. Otherwise, I don’t think the key trends are product- or tech-specific, but we are increasingly seeing organisations move away from the hunt for a one size fits all vendor, in favour of defined sector specialists – which suits us fine!

This emphasises why our partner-led approach to servicing client tenders, is currently working so well.

What have been the main strands of your growth strategy and how do you expect your strategy to evolve?

It’s more of what I’ve said really – deliver on promises, be honest as to what we can and can’t deliver, and think cleverly about the solutions we can devise and deploy for clients so that they get real value out of our support.

Our net recurring revenue figures put us in a very healthy position as we undertake our financial forecasting, which means our organic growth looks very exciting before we even factor in any company acquisition success. I’m particularly looking for a Northern IT security company – ideally with a Microsoft public cloud speciality and Partner status – plus a traditional voice specialist, particularly a PBX (Private Branch Exchange). These two acquisitions would bring people, tech and a bigger base into our business.

Then there’s the partner hunt as I’ve outlined above. I don’t want 500 ordinary partners – I want 15-20 awesome ones.

How do you think the role of resellers/SIs will evolve over time, and what strategies and roadmaps should VARs/SIs adopt to succeed in today's market?

When it comes to resellers, we’re increasingly starting to see big players buying up smaller companies. They’re buying traditional bases and working through them. Private equity funded brands are buying multiple firms and pulling them together to form strategic SIs. Both trends create movement in the market, which I welcome. But I think the potential lies with the organisations that place innovation at the heart of their roadmap, rather than just talking about it. Customers are getting savvier – they don’t just accept things on face value any more (thank goodness!)

What is your biggest opportunity?

If we get our next partners right – and give them the tech they need to satisfy the needs of their base – the mutual growth will be phenomenal.

Where do you see Vapour Cloud in three-five years’ time and how will you get there?

My hopes are for a £15-30m recurring revenue-run organisation, still in this space, delivering the same services but with a best-in-class portfolio that will inevitably look a little different as we develop, test and release new cloud products.

Looking back across your career, what is your biggest achievement?

Surviving. We took a huge risk and put everything we had into making Vapour work, but we called it. The cloud revolution came and now I’d say the latest strand of that achievement is employing a talent-rich team hungry for more.

Posted by Emily Fewtrell
on August 10, 2018

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