Monitise and Morse: a corporate venturing success
Corporate venturing or partnering can accelerate business growth. Guy Rigby takes a closer look at the idea through one success story
While business angels and VCs can capitalise businesses to help them achieve their goals, companies can also get involved. They can do this through a process known as corporate venturing, where a larger company provides finance and other resources to a smaller business in return for equity.
This was the funding option chosen by Monitise, now a worldwide leader in a brand new industry, allowing customers everywhere to manage their money with text messages, apps and mobile sites – on almost any mobile device. They decided to team up with Morse, the large IT services and technology company, as they needed both funding and a partner who was prepared to join them on their journey.
“An idea can be originated in a small company or in an individual’s mind, but for it to be delivered to the mass market there has to be this partnership with a big infrastructure,” says founder Alastair Lukies.
Working in the banking sector, Monitise needed to be taken seriously in order to achieve its success. Lukies didn’t just need funding, he needed to raise perceptions of size and scale from the outset. “The problem was, we were going into the banking industry and we needed to appear much more robust and scalable than we were,” Lukies explains. “And what Morse gave us was the perception that we were part of a decent-size company with £300m turnover, a FTSE 250 listing, 2,000 staff, a good Plc board, plus an excellent chairman and CEO. So you could go and tell the corporate story with instant credibility.”
Having started their business in a shed, Lukies and his co-founder were suddenly part of a huge organisation. Their business cards had Morse on it. So, when the procurement team within a bank were doing their analysis and checking on the size of their organisation, everything stacked up. “There’s no way they were going to let a company of two people run infrastructure for their consumers,” adds Lukies.
Corporate venturing’s liberating effect
Additionally, and perhaps equally importantly, Morse gave Monitise something that many entrepreneurs underestimate: back office. That saved Lukies the usual start-up-issue of having to wear all the hats. So, rather than doing “all that stuff which takes up so much of your time when you want to be out selling”, it was done for them. “It was fantastic,” says Lukies. “At the end of the month, as the CEO of a two-person company I was getting a report from my investor setting out what our big priorities should be.”
Lukies was also able to use the chief financial officer’s PA which gave him raised credibility when booking meetings with a senior director at a bank. “Morse definitely gave us the perception of scale. They gave us the capital and the benefit of their balance sheet but didn’t try to subsume us into the Morse strategy. They let us breathe but within the incubator of a big organisation.”
Monitise is now a publicly quoted company – the result of a great corporate venturing partnership. Without such support, rather than growing strategically for the long term “Monitise could have focused on short-term profits,” says Ariadne Capital’s Julie Meyer. “They could have tried to maximise revenues through licensing. But, had they done so, they would have missed the overall market opportunity to build a global mobile banking industry.”
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Ultimately, corporate venturing or corporate partnering can provide the best of both worlds – the flexibility of a small business together with the resources, credibility and connections of a large business.