Like most teenagers, the young Jonathan Burrows had grand ideas of how he would make his mark on the world. His masterplan struck him as an 18-year-old driving home to Sheffield for the weekend from his job down South.
His was no teenage daydream, however. This was an idea which would shake up the technology industry and create what is now a £13.5m-a-year empire on the cusp of global expansion. His eureka moment gave birth to Ask4; today one of Yorkshire’s fastest growing technology firms, which earlier this year was bought out and refinanced in a £21.5m private equity deal.
It was conceived in 2000 when Jonathan was part way through an IBM placement in Winchester which had him disillusioned. Feeling like a miniscule component in a vast machine – far removed from “doing anything to help customers or have a positive impact on the business” – he sought a new path.
“Driving home I started thinking about the way in which people were getting connected to the internet,” he tells BQ over coffee at the Sheffield HQ of his 100-staffed business. “Broadband was just starting to be launched in the UK but if you wanted it, BT engineers came out and physically installed it in your house for hundreds of pounds and with rental costs of £50 or £60 a month.
“Recognising that the internet was absolutely going to be the future, I began thinking about how to step past the use of phone lines to connect buildings and connect people because it really wasn’t the right technology. Telephone lines have limited bandwidth and, although we’ve seen broadband speeds increasing over the last 10 years, there is a fundamental physical limit that can’t be exceeded. It was taking an existing network and applying it to a different purpose, which was far from ideal.”
But at the IBM campus he had seen how 6,000 staff reaped the benefits of a fibre optic connection. The challenge for Jonathan was applying this expensive technology to the residential market. He says: “A single fibre optic into a house didn’t make sense because of the cost equation. You had to have enough density of users to make it work.”
In the backdrop northern cities were in the throes of revival, with European cash being fed into cultural re-development and young professionals being driven into gleaming new central apartment blocks. And so Jonathan’s plan was born; to provide fibre optic broadband to such residential buildings; assuming he could find the finances needed to get it going.
“A couple of weeks after the initial idea, through a family connection, I was able to pitch to a bunch of high net worth individuals.
“Looking back that was just one of those lucky times. Anything to do with the internet was sexy back then so the fact that it was an internet business was all they needed to hear. In total I raised about £450,000 through two tranches, which covered me for a couple of years.” He quit his IBM post and, within weeks of his initial idea, was working in the basement of a Sheffield estate agency, piecing together the building blocks of a business.
“What was different about my model was that it enabled users to self-provide. The idea was that when you moved into an apartment, you could pick your package and get connected without needing an engineer to be sent out or to even speak to a human being, which was quite cutting edge at the time.”
Ask4’s target market was developers of multi-tenanted residential buildings. Jonathan’s firm would install the infrastructure and support the technology and customers, while the developer would have an extra pull factor to buyers or tenants. But, says Jonathan, getting started wasn’t easy.
“Because the property market was so buoyant, developers weren’t having to work very hard to sell their buildings. They weren’t particularly interested in anything that was going to add cost or risk. So it took a little while of knocking on the same doors to persuade developers to put the technology into their buildings.”
Eventually a 70-apartment block opened up as a pilot location, followed by Ask4’s first commercial site – West One in Sheffield – which the company actually inhabits today, having expanded into it in 2012. Generally the firm agrees long-term contracts to provide its technology to a building’s tenants, outsourcing the fibre optic installation but managing every other aspect such as customer service through its handful of staff. By 2004 the company was flourishing, with the internet gaining traction among residential users and broadband take-up in its buildings twice that of the proportion of the general UK populous.
“We were targeting the right demographic; generally younger, more affluent and tech literate people living in city centres,” says Jonathan. Despite Ask4’s positive start to trading, however, its creator believed it wasn’t living up to its true growth potential at the time. “We were modestly profitable and could see that the model worked but it wasn’t growing quickly enough. If we could have got it deployed in a hundred buildings per year then we would have had a very nicely profitable business. But it was a question of how we got it to scale quickly enough so that we didn’t run out of cash.”
Enter, in 2004, Jonathan Hudson, founder of Horizon Telecommunications. His company offered a similar service to Ask4, but in the student market. He and Burrows saw the benefits of working together and, the next year, Ask4 made Horizon its first acquisition.
“That was the catalyst for the exceptional growth. Our compound annual growth rate going back to 2005 is around 70%.
“The UK purpose-built student accommodation market was receiving huge interest and investment. We had a growing student population that needed accommodating, while you had universities with ageing residential stock recognising they should not be in the accommodation business.
“Taking all these trends together there was this really buoyant market for purpose-built student accommodation. Very early on we identified and sought to become a supplier of choice to the biggest, most aggressive operators – those that were going to grow their businesses very significantly. A huge amount of our growth has come from being an engaged partner of those companies.”
This year Ask4 expects turnover to come in at around £13.5m, 25% more than last year, with the company serving 300 student buildings spread across the UK from Aberdeen down to Exeter in the South West.
As well as providing services to an additional 5,000 residential users, it also has a growing stable of business centres among its customers. This market opened up slowly when the firm realised it could make full use of the capacity it needs to have in place for peak times. Instead of its infrastructure being underused during the day, with most students in classes, business centre traffic could fill that gap. This division was built on the back of the acquisition of Sheffield firm W2 Networking in 2009. That deal also saw the company assume ownership of an initially disregarded bonus – a data centre. But after converting a more suitable site in Attercliffe, Sheffield, into a ‘tier-2’ data centre, this is now a central part of another growing aspect of the business.
“We were taking data centre space in cities all over the UK and we weren’t really in control of our own destiny. We also had clients asking us if we could provide them with co-location services, taking servers out of cupboards in back offices and providing an appropriate environment,” says Jonathan.
Ask4 grew by 73% between 2011 and 2013 and is aiming to double in size within five years. A powerful ally in this growth plan in the coming years could be Darwin Private Equity, which bought a majority stake in the business in January this year for £21.5m.
The transaction was the culmination of months of talks with around a dozen investment groups that had shown an interest in the company. The deal allowed a number of shareholders to step back from the business and provided returns for the original investors.
Burrows’ long-time business partner Jonathan Hudson had also decided to take a step back from the business, with a young family in the background. Despite being just 32, Burrows himself briefly considered cashing out. But his belief in the future potential of the business meant dreams of a remarkably early retirement were only fleeting.
“It’s a journey I could see continuing. What’s been great about my career is that I’ve been having new problems all the time and have always been at the outer limits of my experience and that keeps it interesting.”
Choosing the right private equity investor was a process fraught with danger, however. “We met with a dozen private equity firms and there was a lot of interest in our business. Darwin had done a huge amount of homework on the market and they really understood the dynamics that drove our business. There was a real meeting of minds from day one and they weren’t just interested in the numbers.
“That was in fairly stark contrast to some of the other people we met who had done minimal work to understand our market.”
With the dust settled on the deal, has the decision paid off? “Our relationship has been very positive so far. We were quite careful in picking a partner that we felt had people we could work with. There were situations with other private equity investors where I would not want the person on the board of my business and felt I would be in conflict with them from the start.”
Looking forward Ask4 expects to continue along its upward trajectory in the student, residential, business and hosting markets. It also has an eye on taking its services abroad. “We have aspirations for very significant growth in the next five years and we see that coming from growth in the UK.
“We are then looking very, very hard at a number of international territories.
“We are also looking at other residential markets, such as elderly and infirm care or the military.”
With everything seemingly in place for further diversification and global expansion, Burrows’ decision to stay with his business looks a wise one.
And having turned a simple idea into a fast growing business, he is proof of what can be achieved by looking at an existing market from a different angle.