Surviving Near-Death Experiences and Going Public in London: Michael Hughes, co-CEO of LoopUp (Part 4)

Sramana Mitra: Timeline-wise, from when you started with the initial investment and went through these pivots, how much time has passed?

Michael Hughes: We started in 2003. We realized we were running out of time in late 2005. We pivoted in 2006. We started selling with this Blackberry bit. We had very strong growth in 2007, moving into 2008. We had a little bit of money that came from Andy Scott who was a friend from school who had made a lot of money doing GSM licenses in emerging markets. He came in and invested about $1 million.

We had another friend of ours who was someone I knew from my time in Spain. He went on to start one of the two VC funds in Spain. They invested about $800,000. That had taken us through the transition into what we were doing. We were expanding and hiring people. We were selling while growing at a very rapid clip.

Then we went out and raised a significant round. We went around to both London-based VCs and Bay Area VCs. We had around, on the table, $8 million of capital with two new investors. At that time, there was that Sequoia presentation that went around just after the housing crash.

Sramana Mitra: Yes, I think it was called, “RIP: Good Times.”

Michael Hughes: We were almost coming to the crescendo of our fundraising just as the market collapsed. That money was pulled from us. Nothing was signed but it was at the point where it was about to be signed. We were in a real conundrum because we had started to gear up our team. We were spending a little bit of money on some marketing. There was just no more money.

We then talked with our Board. They said, “We don’t have that much money but we can give you a little bit.” It was about $1.9 million. That’s all we’ve got. You now have to get profitable on that money. Between late 2008 and 2010, what we did is basically drive the company to profitability as vigorously as we could. We actually had a meeting that was quite extraordinary within the organization where we got everyone together and said, “Our funding has fallen through. We have some choices here. We either lay people off or we are going to agree that we’re going to take a 20% pay cut.”

Sramana Mitra: How many people did you have at that time?

Michael Hughes: Low 20’s.

Sramana Mitra: What was the revenue level? You were bringing another $1.9 million.

Michael Hughes: We probably had about $1.25 million.

Sramana Mitra: Were you close to profitability? Were you burning a lot of money?

Michael Hughes: At that point, we were burning close to $100,000 a month. We had to make some capital investment as well to support the growth. We had this meeting where we asked everyone what they thought. What was really good is, it was a unanimous vote to everyone taking a pay cut. I personally was nervous about that experience. I felt like a bit of a failure. The result of that meeting was exactly the opposite to what I would have anticipated where everybody was way more fired up coming out of it. That drove us into profitability. We got to profitability in seven or eight months.

This segment is part 4 in the series : Surviving Near-Death Experiences and Going Public in London: Michael Hughes, co-CEO of LoopUp
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