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UKCloud takes on Iain Patterson as CDO

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Iain Patterson and Simon HansfordIt’s not unusual for senior civil servants to leave their public-sector positions and land at a private sector organisation. And so, it has come to pass for Iain Patterson… The former Director of Common Technology Services (CTS) at the Government Digital Service (CTS), who left that position in May this year, has joined infrastructure-as-a-service provider, UKCloud. He will be the company’s Chief Digital Officer (CDO).

According to UKCloud CEO, Simon Hansford, “I pounced quicker than others to get him here! It is a great validation of our platform and the opportunity that an ex civil servant from GDS sees in what we are doing.”

Initially, Patterson will help review UKCloud’s technical platform and operations, its product propositions and its external messaging. UKCloud has launched several new products and platforms over the years to meet the demands of different types of workload, e.g. cloud native apps, big data platforms or specific applications (such as Oracle). Most recently it launched a new healthcare division addressing some of the specific concerns of that sector (see UKCloud launches healthcare division).


Micro Focus FY: final one before HPE Software merger

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logoWe may be waiting for the Micro Focus merger with HPE Software on September 1st but in the meantime business continues at the UK HQ’d provider of infrastructure software.

As it reports final full year results prior to the combination, Micro Focus’s performance is in line with expectations. With four acquisitions plus two additional asset purchases over the year (to end of April 2017), including the significant Serena purchase, a pro forma constant currency comparison provides better insight into performance. On that basis revenue slipped 0.9% to $1.38bn, with adjusted EBITDA up 3.4% to $651m. The effect of acquisitions was clear because on a reported basis revenue was up 10.9%. While revenue from licence, maintenance and the small consultancy line declined, subscription revenue grew a reassuring 22%.

These results are the last to show the business in its current form and highlight its prowess at driving business from the legacy and infrastructure section of the software market, and keeping cash flowing. The next set will reflect the new entity and be the starting point for future comparison. On that note, Micro Focus will be altering its financial year end to October 31 and its next set of full year results will cover an 18 month period from November 2017 to October 2018.

Poorer than expected HPE Software performance has pulled Micro Focus’ share price down in recent months. Operationally, Micro Focus is experienced in completing acquisitions and making them work, having closed ten in the last six years with a 10-fold increase in revenue according to management, so post acquisition it will be in a good place to start reassuring customers and generating value from HPE Software. Key metrics across the group will be low single digit revenue growth in the medium term, ‘industry leading margins’ and strong cash conversion.  Keep watching.

Live music soars

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I have written many, many times over the last decades about the changing shape of the music industry. In 1963, I attended many concerts by the likes of the Beatles and the Rolling Stones where the ticket price was 8/6d and a single costs 6/11d. Now a ticket can easily cost £100+ but a single costs 99p - or less/nothing if you stream it.

KillersI know that many HotViews readers are both music fans and gig attendees. Indeed, one of my Facebook friends who is also a HotViews reader asked last Saturday if he was the only person not attending a gig! Well, I could only manage The Killers in Hyde Park but it seemed that most of the tech sector went to Twickenham to see U2! Indeed I know one person who went to both!

This week it was announced by UKMusic that the number of people attending gigs in the UK had soared by 12% to 30.9m in 2016 and thereby generated an incredible £4b.  12.5m were tourists and it is estimated that they generated 47,445 full time jobs in the UK.

It just shows how business models change. We all think that the technology industry leads in disruption. But just look at the complete change that has taken place in the music sector. The good news is that, having adapted to the change, the music industry - in particular in the UK - is flourishing.

AdEPT revenue up 19% after UC acquisition spree

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AdEPT revenue up 19% after acquisition spreeUnified communications (UC) provider AdEPT Telecom grew its revenue 19% to £34.4m in the financial year ending March 2017 is it continues to build out its managed services capability through acquisition. Net income grew 15% to £2.8m, with EBITDA up 27% to £7.8m. Adjusted earnings per share rose 20% to 23.09p.

Those positive numbers are founded in the continuation of an aggressive expansion strategy that saw AdEPT buy three companies during the year, starting with UC firm Comms Group for an initial consideration of £3.5m (with another £3.5m due depending on performance).

We estimate that deal added around £3.8m to AdEPT’s turnover with another £1m or so coming from the purchase of UK UC players Cat Communications and Progressive Communications. And in February AdEPT paid nearly £4.8m for London-based 24 hour computer support business Our IT Department.

By our calculations, that buying spree boosted AdEPT’s revenue by as much as £8.5m in total (though it also expanded net debt by 150% yoy to £15.5m). With reported FY16 revenue reported of £28.9m, that indicates AdEPT’s business declined organically in FY17 and indeed turnover from its traditional fixed line voice and data business shrank 4% to £15.4m.

That is nothing new for a UK telecom provider (read our assessment of Alternative Networks, since acquired by Daisy), faced with the inexorable contraction in voice revenue over the last decade. And it is the reason why AdEPT is pushing so hard to rebalance its turnover away from fixed line voice/data connectivity and into recurring managed IT services fees, which now account for 55.4% of revenue compared to 44.3% in the previous financial year.

UC is a natural conduit for customers moving away from AdEPT’s traditional fixed line voice services. It remains a competitive market though populated by a diverse mix of telcos, MSPs and IT service suppliers, and AdEPT will have to stay on top of its game if it is maintain forward momentum.

Darktrace raises US$75m, valued at US$825m

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Darktrace raises US$75m, valued at US$875mCambridge-headquartered cybersecurity start-up Darktrace raised an additional $75m of Series D funding, bringing its total to US$180m since its inception in 2013.

The company is now valued at US$825m having enjoyed something of a stellar rise in its short history. Contract value grew 140% to US$200m in the last year and headcount doubled to over 500 people across 24 offices worldwide.

Darktrace’s Enterprise Immune System platform uses artificial intelligence (AI) and machine learning algorithms to automatically detect and respond to cyber threats by monitoring and analysing a huge mix of endpoints, networks, industrial control systems, IoT devices and users in real time for behaviour patterns that suggest suspicious or unusual activity.

The company now boasts 3,000 deployments worldwide (seemingly up from 1,000 a year ago) having cut a number of deals with managed security service providers, particularly in the US, Latin America and Asia Pacific regions. Darktrace’s latest partner is Hong Kong based CITIC Telecom, which will use its platform to deliver security services to its own corporate customers. Other clients include an unnamed NHS agency, Spanish telco and 02 parent Telefónica, and US parcel delivery giant FedEx.

We estimate that investment in cybersecurity hardware, software and services will drive healthy, double-digit growth over the next four years (see our Market Trends & Forecasts 2017-2020 report). Darktrace’s predictive threat intelligence (TI) and analytics approach is ideally placed to capitalise on that demand as public and private sector organisations look nervously over their shoulders at successful cyberattacks (like WannaCry, or the hacks at Tesco Bank and TalkTalk) that wreak havoc on their operations, revenue and reputation and beef up their defences accordingly.

Does Curve backing indicate new banking partnerships?

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curveFinTech start-up, Curve, has reportedly closed a $10m Series A funding. The company’s Money Hub can link all of a consumer’s bank cards to just one Curve MasterCard. It means individuals can see every transaction across all of their bank cards on one screen.

The London based firm looks to have received funds from backers including Santander InnoVentures, owned by Santander and launched three years ago. Santander InnoVentures has a $100m fund to enable the bank to tap into FinTech innovation. It will be very interesting to track how Curve’s relationships with banks such as Santander plays out given that what the start-up does puts it into a competitive position with the banking providers. We can equally see, however, how Curve's technology could be used by the providers to improve the experience of their consumers, which is a serious priority for the banks. Further industry regulation on the horizon (see Clock is ticking on PSD2 and Open Banking) adds yet another layer of complexity to an already complex situation.

Great British Scaleup Unilink: A prison success story!

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Unlink logoPrisoner self-service and offender management specialist Unilink Group took part in our Little British Battler programme in 2016 – see Little British Battler Report 8– and has grown so quickly that it was selected to be part of our inaugural Great British Scaleup event, run in association with ScaleUp Group and Cogeco Peer 1, just a year later.

Group revenues have almost doubled over the last twelve months, thanks in no small part of a significant new contract with the UK’s Ministry of Justice (MoJ) on the Digital Prisons project. The contract was secured through G-Cloud in September 2016 and represents a step change for the SME. Until this point, Unilink was working with all 17 private prisons in the UK (and others in Australia, New Zealand and Europe) but struggling to break fully into the UK public sector prison market.

GBS logoWe met CEO and founder Francis Toye and Head of Business Development Zaneta Whitworth for an enjoyable Great British Scaleup session earlier this month. Their passion for the sector remains palpable and it’s clear that Unilink’s software, prisoner self-service kiosks and now prisoner tablets, have quantifiable benefits for both prisoners and prison staff above and beyond improving the efficiency of prisons and saving money. A study by York University found that by automating processes such as meal choices and visit requests, Unilink’s offering reduced prisoner frustration which in turn made prisons safer, increasing the rehabilitation success rate and reducing staff sickness by as much as 12%. We particularly liked Unilink’s latest initiative, which sees prisoners building the custom-made kiosks that run the software themselves.

As for Unilink’s plans to scale up further, having successfully secured the MoJ contract with English prisons we expect it to turn business development attention to Australia and then continental Europe - both of which present significant opportunities - and to continue expanding its product set, adding capabilities in online education for example.

Needless to say, we look forward to following the progress of this Great British Scaleup - and of all the other fast growing companies we have met during this inaugural session of the GBS programme - over the coming months.

Microsoft steps up search for generalised AI

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logoThe holy grail of AI is general purpose AI, a development that is taxing the minds and drawing the investment budgets of the big hitters in the sector such as Google via Deep Mind and its Brain project. With the announcement of its Research AI lab, Microsoft has stepped deeper into the competition.

Operating as a research and incubation hub within the existing Microsoft Research operation, this is an intensification of existing efforts and brings 100 scientists from the several arms of AI together, drawn from the existing Microsoft pool and new hires. Expertise in areas such as natural language processing, and learning and perception systems is being brought together with adjacent skills in areas like cognitive psychology. There will also be a formal partnership with the MIT’s Center for Brains, Minds and Machines.

Cracking generalised AI will be a major breakthrough. Currently, AI enabled solutions are narrowly focused and can only address one problem. A different use case requires a completely new system, an approach that is far from flexible or scalable. Generalised AI ought to play a part in the democratisation of AI too. Given the complexities, we shouldn’t be holding our breath but should certainly be expecting to see movements in this direction which will help AI make it into the mainstream and promote more volume use.

But volume and mainstream use makes ethical questions more pertinent. There is almost a new industry in groups devoted to assessing the ethical, personal, societal, political and economic impact of AI. Microsoft is already involved in multi vendor ethical AI groups but has also introduced a new AI principles and Ethical Design Guide for AI aimed at helping its own developers make AI accessible and inclusive so humans can make the most of the opportunities it will create. This is as important an area as technology development; suppliers need to be seen to be considering the human impact - to tackle nascent problems head on.


MOVE Guides moves on with major funding boost

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logoLondon-headquartered, though perhaps more influenced from San Francisco (witness picture of Lincoln the dog as part of its management team – Chief Puppy Officer, if you please) MOVE Guides has once again captured investors’ attention with its SaaS-based employee relocation software.

Some 20 months after raising nearly $16m in a Series B funding round (see MOVE Guides mobilises more funding), the startup, founded in 2011, has received a massive $48m in a Series C round from new investor Future Fund, and existing backers New Enterprise Associates (NEA) and Notion Capital.

Move on up!

nDreams dreams on with £2.7m funding boost

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logoFarnborough-based VR-for-games rising star, nDreams, has got a further funding boost with the injection of £2.7m in a funding round led by Mercia Technologies, the academe-focused, AIM-listed Midlands-and-all-stations-north tech investment firm, along with its new chairman and various angels.

Mercia had previously led a £2m round in nDreams at the end of last year (see nDreams VR gets more real with £2m funding round) which brought Mercia’s stake to 47% at a valuation of some £23m. The new funding round slightly dilutes Mercia’s holding to under 46% and brings the total it has invested in nDreams to £7.1m. nDreams was originally incorporated in 2002, but refers to its founding being in 2006. nDreams received its first external investment in 2014 (from Mercia).

I am far from being a master of the gaming universe (or even an apprentice) but apparently nDreams is hitting the right buttons with titles such as Danger Goat and, more recently, Bloody Zombies, which won a ‘Best of VR Game’ Award at the 2017 E3 event in Los Angeles last month.

Goggles at the ready?

NVM invests £3m in Knowledgemotion

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NVM logoLondon-based edtech company Knowledgemotion Ltd has secured £3m investment from NVM Private Equity LLP (NVM).

knowledgemotion logoKnowledgemotion was founded in 2013 and launched its boclips platform in 2015. It provides a curated collection of over two million short videos tailored for the education sector. It has secured the rights for content from the BBC, Getty Images, PBS, Bloomberg and Associated Press, as well as from many other education content providers and news channels across the world.

The NVM deal follows funding Knowledgemotion secured from publishing service provider Ingram Content Group last year. Knowledgemotion has had success in the publishing sector, with deals to integrate their platform secured with Pearson Education, Hachette and Bloomsbury.

These sorts of deals represent the best opportunity for Knowledgemotion, particularly in the UK. With the huge quantity of free resources out there, including video, cash-strapped schools are increasingly reluctant to pay for resources. However, with education publishers focusing on a more digital future, we think there will be more partnership opportunities.

Currently, content on boclips is tagged to the English National Curriculum and US Common Core, but we see potential for Knowledgemotion outside of these regions, particularly in Asia. We also see future opportunities in VR and AR content.

Payments-to-banking startup Revolut banks another £51m

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logoWhat is almost as interesting as its ambitions in global finance is the way that London-based fintech startup, Revolut, mixes crowdfunding with traditional venture capital investment.

Founded in 2015 as a cross-border payments platform and increasingly moving into banking services, Revolut recently closed a £51m Series B funding round led by Index Ventures, with existing backers Balderton Capital and Ribbit Capital also participating. This round reportedly values Revolut at some £300m.

Revolut had previously raised £1m on Crowdcube at the same time as its £6.75m Series A funding round in July last year at £10 per share. The founders are said to plan to switch crowdfunding platforms to Seedrs in order to raise a further £4m later this year.

Revolut has recently launched a new service for businesses, a market finding increasing interest from fintech startups (see Tide rises with $14m funding round). Each has its own angle – Revolut with international payments, Tide with accounting functionality – which is probably appropriate for SMEs with different business models.

Payments is a hot area and subscribers to TechMarketView’s FinancialServicesViews research stream can read our regular updates, the most recent of which being FintechViews: Apple P2P – Crossing the Line. Do contact our client services team (info@techmarketview.com) if you’d like to learn more.

Will you join us for dinner on October 5?

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Join the TechMarketView team for drinks and dinner on the 5 October as we spend an evening Unlocking the Intelligence with leaders from the UK software, IT services and business process services sectors.

This year’s Evening with TechMarketView will see some 250 CXOs from the world of UK tech meet at the magnificent Royal Institute of British Architects (RIBA) in Portland Place, London.

TMVE 2016The evening is TechMarketView’s flagship annual event and a fixture in the calendars of many a UK tech CEO. After a welcome drinks reception, the event kicks off with an hour of insight and analysis from TechMarketView’s leading analyst team centered around our 2017 research theme, Unlocking the Intelligence. This is followed by more quality networking during the pre-dinner drinks reception and then a sumptuous three-course dinner.

Tickets are already selling quickly so we’d recommend booking early to secure your place. As in previous years, TechMarketView research subscription clients are eligible for a 20% discount on standard ticket prices. 

For full details and to book your place visit tx2Events here or contact event coordinator Tina Compton at tx2Events (tina.compton@tx2events.com).

TCS – a time of transition

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logoIt is interesting to observe how the Indian pure-plays (IPPs) are trying to transition their businesses away from traditional application and infrastructure services and towards ‘all things digital’ while aiming not to throw the proverbial baby out with the bathwater.

TCS, the leader of the India-centric offshore services suppliers, is still ironing out aspects of this transition, witness some notable changes in its vertical industry segmentation metrics, and a complete absence of ‘horizontal’ service line segmentation in preparation for future re-presentation of its activities by theme, such as Cognitive Business Operations, Cyber Security and ‘Internet of Things’. I shall return to this in later commentary, as it begs many questions, such as how you actually measure this – and more fundamentally, how does this help you manage your business better?

But perhaps the most significant transition was in headcount – which decreased sequentially for the first time in seven years, albeit by ‘only’ 1,400 people in a total population of nearly 390,000. This reflected a dramatic fall in new hires, particularly ‘freshers’ (new grads). Even so, TCS’ headcount still grew faster than revenues on a yoy basis.

Headline revenues for Q1 (to 30th June) rose by 5.2% yoy to $4.59b, about 3% higher than the prior quarter. Margin pressure increased, with operating profitability down over two points qoq to 23.4%, the lowest for many years (bar one quarter when a ‘One-time Special Employee Reward’ knocked margins down to 16.4%).

TCS is a big ship to turn around – but its mass and momentum also help it remain stable in choppy waters. However, this is not just a passing storm.

The rest of the IPP ‘majors’ report over the next few weeks. It is likely that few will be as relatively resilient as TCS.

'Making Tax Digital' delayed

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MTDI suspect that there will be great relief by accountants and SMEs alike that HMGovt has given in to pressure and delayed/altered the introduction of digital tax submissions. These were due to start for everyone from Apr 18. Now those under the VAT threshold (£85,000) will be able to choose ‘a pace that is right for them’, i.e. possibly never. Companies above the VAT threshold will only have to keep digital records for VAT purposes from Apr 19.

I don’t think there was too much opposition to encouraging companies - small and large - to keep proper (and nowadays that really means digital) accounting records. The real issue was the implication that they should both prepare and submit P&Ls to HMGovt on a quarterly basis which would then force them to pay tax on a quarterly basis too. We at TMV were ‘rather unhappy’ by that prospect. Although we have very accurate monthly management accounts, they are only scrutinised by our accountants once a year who, for a significant charge, do all the tax computations on the more arcane bits. The thought of doing this every quarter appalled me.

As every VATable business already has to submit and pay VAT on a quarterly basis, having to submit the details digitally is not a huge or onerous step.

So the concessions announced yesterday seemed sensible. But, there again, why were these policies and timescales put forward in the first place?


*New Research* Taylor review: raft of potential tech opportunities

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Matthew Taykor, report authorEarlier this week, the UK Government published ‘Good Work: The Taylor Review of Modern Working Practices’ (commissioned by Government and written by Matthew Taylor, pictured). You can read the tome here, and, it is indeed worth a read, because technology runs as a theme throughout: as a key driver of the review, as a solution to many of the issues raised, and as something that needs to be handled with care.

Firstly, technology was one of the key drivers of the review. The Gig Economy, which has broad meaning but has become synonymous with the likes of Uber and Deliveroo, i.e. people using apps to sell their labour, has given rise to new business and employment models. This new way of working has raised questions about the suitability of current employment law in addressing the needs of people working within those models. In addition, still Government needs to understand with more certainty how many people are working in the gig-economy (and how many are doing it just to supplement other work); that’s going to require a focus on reliable data and analytics.

Secondly, technology is highlighted as a solution to many of the issues raised, i.e. ensuring that all workers, regardless of the type of employment they are in, are treated fairly and decently, and “with a realistic scope for development and fulfilment”. Here, ICT providers should be able to identify a fair number of opportunities.... Read more here...

Cisco buys Observable Networks for security monitoring

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Cisco buys Observable Networks for security monitoringCisco will add to its security portfolio with the acquisition of US start-up Observable Networks, an endpoint protection specialist that uses behavioural modelling to scan users, devices, networks and public/hybrid cloud infrastructure for cyber threats.

Terms of the deal (expected to be completed in Q118) were not disclosed but the purchase price is likely to be low. Observable has raised around US$6m in funding since being founded in 2011.

The start-up clicks two important boxes for Cisco - software and cloud - as the networking company continues its mission to shift more of its revenue off hardware and into ‘software-centric’ solutions and services.

Like TechMarketView (see our Market Trends & Forecasts 2017-2020 report) Cisco anticipates strong investment in cyber security defences amongst public and private sector organisations following a spate of high profile hacking attacks this year (with more certain to come). Those companies are likely to need comprehensive security solutions which plug every conceivable hole in their IT infrastructure backed up by early warning systems which anticipate and mitigate cyber threats in advance of them being able to do any serious damage.

To meet those requirements, Cisco and other large suppliers (including SymantecandMicrosoft) have been steadily buying up start-ups to build out their security portfolios, and we expect more acquisitions in a similar vein over the course of 2017.

Observable's cloud-native platform is delivered under a software as a service (SaaS) model and uses machine learning and dynamic behavioural modelling of all devices on the network, both on- and off-premise, to identify internal and external threats more quickly. The business will be incorporated into Cisco’s Stealthwatch service (previously Lancope), which offers a cloud license that extends visibility into Amazon Web Services (AWS) and Microsoft Azure public clouds.

Cognizant brings digital workshop to London

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logoI can just about forgive the branding for New Jersey-headquartered, but Indian-centric offshore services major, Cognizant’s, growing network of digital workshops – or Collaboratories as the company calls them – as they sound like a jolly good idea.

Basically a combination of showcase and dare I say ‘innovation’ workspace, the newest has just opened in Paddington under the auspices of Dr Sanjiv Gossain, Senior Vice President and Head of Cognizant Digital Business, Europe. Gossain, previously head of Cognizant’s UK business, returned to Cognizant a year ago after a stint at the erstwhile CSC (see here).

TechMarketView will hoof it up to Paddington in coming weeks when we shall tell you more.

New backers plan cyber buy-and-build for The Bunker

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bunkerForesight Group has sold ultra-secure managed services provider, The Bunker, to Palatine Private Equity for an undisclosed sum.

The Bunker builds, hosts and manages high security, high availability IT infrastructure platforms. Foresight first invested back in 2006 when The Bunker had acquired data storage facilities in Ash and Greenham Common from the Ministry of Defence. At the time it was loss making on revenue of £1.8m.

Over the past three years, The Bunker has registered compound annual growth of c14% on recurring revenues, with the top line now standing at around £9m. It’s built something of a reputation for itself as a high security expert in the FinTech space, benefiting as customers in the mid-market look to move to the cloud and increase security levels around hosting. 

New owner, Palatine PE, says it plans to use The Bunker as a buy-and-build vehicle to create a “full service cyber security” player. Several acquisition targets have apparently already been identified, suggesting Palatine will move quickly to achieve its objectives. There are certainly numerous small cyber firms out there and many of the quality ones are fast-attracting investment attention. Take for example Cambridge-based Darktrace, which we wrote about yesterday - Darktrace raises US$75m, valued at US$825m.

Palatine’s strategy reminds us of the move late last year by BC Partners and Medina Capital to buy CenturyLink’s data centre estate (it had five data centres in the UK). The new owners said they planned to create a global secure infrastructure platform by combining CenturyLink’s data centres with Medina’s existing portfolio.

Suggested reading: The London data centre market: Shaped by cloud and corporate activity (subscribers to InfrastructureViews only – contact Deb Seth for more information).

Quill pens further funding

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logoOnce you strip away the marketing speak – which is in fact its very business – London-based QuillContent is a freelance-based multilanguage marketing agency with a souped-up content management system.

Founded in 2011, Quill recently completed what appears to be its third funding round, backed by existing investor Smedvig Capital and Panoramic Growth Equity among others. The sum raised was not disclosed, however, they did say that total funding raised so far is £10m. From what I can see, Quill raised £1m in May 2013 and a further £5m in March 2014, suggesting this was in fact a ‘down’ round for £4m.

Quill claims a global network of over 2,000 freelance content creators, and boasts marquee brands such as John Lewis, Google, eBay, Zalando and Mothercare in the client mix. I can’t find reference to a pricing model but its proposition appears to be around ‘speed and scale’, though whether they can charge a premium - or charge the same at lower cost - compared to traditional marketing agencies I really have no idea.

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