While I must admit to a certain amount of schadenfreude when it comes to the spectacular rise and fall of one of our business rivals King Content, here at The Copy Collective we’re shaking our heads at the litany of missteps, widely reported in the popular press.
From paying close-to $40m (reportedly $35m after earnout wasn’t met) to a recent drop in iSentia’s market capitalisation of nearly half a billion (yes, billion), the whole train wreck has brought up a heap of questions around the acquisition and management of the merger and the diversification play by iSentia’s top brass.
But I have to admit, the biggest question we’re asking ourselves is: Why didn’t they buy us?
It’s hard to know what due diligence iSentia went through when they were looking to acquire King Content (although indications are ‘not enough’) but if I had to guess, I’d say these are just two of the reasons they didn’t approach us:
The Copy Collective is run by women
My experience after some 14 years running my own business (five of those years with a female business partner) is that female-run businesses are seen as, well, a bit ‘feminine’. A recent article in Forbes Magazine quoted Bloomberg analysis, which found that just 7 per cent of companies that received $20 million or more in funding between 2009 and 2015 were owned by women. Companies founded by women also get less money – an average of $77 million compared with $100 million for male-led start-ups, the Bloomberg report found.
Yet Forbes also published an article arguing that women make better entrepreneurs for three key reasons:
- Women are better-calculated risk takers
- Women are less prone to over-confidence
- Women are more ambitious than men.
Generalisations aside, when you unpick the King Content tale of woe, you have to assume that ‘over confidence’ abounded on both sides – not to mention an enormous appetite for risk, which in this case clearly didn’t pay off.
Established businesses are not very sexy
Been in business for 10 years or more? You’ll know how hard it is to raise capital unless you are tech-based. Now we use a lot of tech in our business – it’s how we’ve scaled enormously in the past five years while keeping staff numbers and overheads low – but we didn’t invent the kind of app or widget that seem to attract VC funding by the millions. King Content erupted into the market with a cool $10m in backing in 2013 spruiking ‘content marketing’ as a buzzword and getting everyone hot under the collar.
Of course, companies like The Copy Collective or Mahlab Media, for instance (another successful, female-run business) had been quietly providing content and content marketing services for years – we just didn’t necessarily call it that.
Having lived through the dotcom boom of the late nineties and early 2000s, it comes as no surprise to me that iSentia paid too much for King Content. I saw how much money was being thrown at IT companies that were 90 per cent bluster. At the time, I was living in Hong Kong as Managing Editor of FinanceAsia.com covering mergers and acquisitions, a beat which taught me a lot about how important cultural fit is when it comes to company buyouts, in particular. It’s really hard to get it right – and it appears that iSentia, no doubt in an effort to recoup their hefty investment, went pretty hard regarding global expansion. There were also mutterings about clashes between approaches at senior management level, which no doubt would have made it hard to keep all the balls in the air.
So why should iSentia have considered us? Let me count the ways.
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We’ve been around a while
The Copy Collective had been going for twice as long as King Content when they were bought for $38m, growing organically at first then faster as we automated more processes and consolidated, investing profit into growth at a manageable rate. We’ve been through some tough times and come out the other side stronger than ever – and while we’re happy to take risks, we always aim to do so with a Plan B as a backup.
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We’ve bootstrapped from Day 1
A massive cash injection such as King Content had not long after launching obviously helped them scale quickly – but at what cost? Having a bucket of cash to draw on can sometimes make you a bit careless about how you spend it, and more to the point, track the effectiveness of that spend. While I wouldn’t say no to someone throwing $10m at us, having grown off our wits has helped us see the value of every dollar and forced us to ensure that our investments are working for us and the long-term viability of the business.
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We have repeat business and long-term clients
In spite of King Content and iSentia trumpeting 4 ‘new’ clients in April 2017, as it transpired they ended up with only about four main clients on their roster, which might partly account for a drop in revenue from an estimated $15m to a $4.4m loss over just two years. In contrast, we’ve built our company largely on repeat business and word of mouth with around 100 active clients and new ones coming on board every week or so. We know that between staffing changes, changes to communications strategy and budget shifts – not to mention fierce competition from freelancers and other content agencies – can mean that year-to-year our client roster can change a fair bit. That means we always need to have a good pipeline of prospects and projects, both small and large, on the horizon. Even a freelancer won’t survive long with only four clients.
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We’re scalable with low overheads
In contrast to King Content’s reported 100 staff, 2000 copywriters and $15m in turnover, The Copy Collective has a lean, core staff of 6 FTEs and 80 copywriters with turnover of around $1m. We’ve found that keeping overheads low and automating as much of our backend as possible; we’re able to spend a lot more time keeping clients happy. We only add copywriters once they’ve been vetted and survived our probation period. We’ve had some 400 people apply to join us – most don’t make the cut.
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We’ve expanded overseas slowly
It took us nearly two years to establish ourselves in New Zealand, with an approach to overseas expansion that takes nothing for granted. While you would think that NZ and Australia are pretty similar when it comes to language and culture, for obvious reasons you can’t just set up shop and expect people to trust you. It takes time. Ditto in Asia, arguably even more so, which is why we’ve been following a similar path in Hong Kong, opening an office there and slowing building credibility with a view to expanding to China when the time is right. Given the time differences, while we have the occasional US or Europe-based client, we have opted not to push into those markets at this time.
Conversely, I was agog to read about King Content’s push into multiple markets simultaneously so soon after the iSentia buyout – I can only assume it accounted for much of the haemorrhaging of money from the coffers, which resulted in the write-down.
Over the years we’ve been approached three times by potential partners wanting to buy into The Copy Collective. The most recent negotiation went for six months and resulted in a mutual agreement that the fit was not quite right. Looking back, my business partner and I are confident we made the right decision. Sometimes, you just need to read the writing on the wall.
So, iSentia, if you’d come calling – we might have said no.