Jonathan Moules talks to two brothers, whose London-based internet business is the talk of the town across the Atlantic.
Andy and Mike Mindel's introduction to entrepreneurship was the corporate equivalent of being given the keys to their father's car and driving into a motorway pile-up.
The brothers had only recently graduated when they were put in charge of Arrowfile, a photograph storage business in which Maurice Mindel, their dad, had invested most of his working life.
This was a decade ago when dotcoms were all the rage. Internet picture sharing made Arrowfile's business model redundant and sales plummeted.
Andy and Mike managed to sell the company but the trauma of ditching their dad's business clearly still leaves some scars.
“We know what it is like to have to sell a business, we just don't want to go through that again,” says Andy, who as a child spent every weekend working for his dad.
“The business was actually dying for some time. It needed a lot of investment. Mike and I had to make a choice.”
The experience has shaped the brothers' much more positive experience in creating what is a world-leading internet business from their north London home.
Wordtracker, their company, made a profit of £492,000 on a £1.3m turnover last year.
It pinpoints the best words to use to attract people to a website by developing complex software tools that can analyse the most popular phrases keyed into internet search engines.
For example, people looking for a budget airline might tend to enter the words “cheap flights” in a Google search, making this phrase a much better bet than, say, “low-cost fares” to get people to go to Ryanair's website.
In spite of the fate of Arrowfile, the Mindel brothers' father has been a solid support for his sons, providing the £20,000 they needed to get the business off the ground in return for a third share of the company.
“He has inspired the entrepreneurial spirit in us,” says Andy, who has taken the chief executive's role in the new company while his elder brother focuses on the technology. “He has made us believe that we could do it.”
The idea for Wordtracker came to the brothers while they were still running Arrowfile and were trying to attract people to their corporate website.
Their good fortune was to be seen as the first to market in the US after speaking to some key people in the American technology industry.
“When we go out to the States, we are treated like rock stars,” Mike says, noting that at American trade shows they are pestered for autographs and mobbed by the business press, while back in London they remain relatively unknown.
The US now accounts for about 85 per cent of their sales and a Google search on Wordtracker throws up more than half a million mentions of the business.
Given the adulation that the men receive on the other side of the Atlantic it is perhaps a surprise that they choose to remain in the UK and not up sticks to Silicon Valley.
“We like being back in London because it keeps us real,” Mike says. “We work with people who tell you when you are being a twat. It is much better than playing the fame game.”
They also have “the best pub in the world” around the corner from their Kentish Town office.
Given the growth of search companies such as Google, it is also surprising that the Mindel brothers have not turned Wordtracker into a much larger company during the nine years it has been trading.
“We didn't want to get too big and impersonal,” Mike says, “One of the things we enjoy is our Wordtracker culture. People thrive here. They don't feel like a cog in a machine.”
Working at Wordtracker certainly has its perks, not least a company policy that ensures none of the 15 employees needs to work longer than a four-day week. Several of them use the time to run their own consultancy businesses, the brothers admit.
“We encourage people to have their own outside interests because we often benefit from that,” Mike says, noting that it was during one of these days off recently that a senior programmer hit upon a new data mining technique that helped Wordtracker become “700 per cent” more productive at spotting search trends.
The brothers are planning a significant expansion of Wordtracker over the next few years by starting to rent data gathered on web users' behaviour by internet service providers (ISPs).
Unlike the data they have been using, which just shows what searches took place, the ISP information shows what websites people go to after doing a search.
The new opportunities created by this kind of information should enable Wordtracker to increase turnover from about £2m this year to £20m in 2011 and double its workforce to 30 people.
However, the brothers still seem reluctant to make Wordtracker too big.
“Making a mistake is not a tragedy when you are this size, making a high profit margin is,” Mike says.
Caption: Net benefits: Andy (left) and Mike Mindel are treated like rock stars when they go to the US, but remain relatively unknown back home in London. (Photo: David Parry)
The most important question Andy and Mike Mindel must ask themselves is what they want from the business personally and where they want it to go, according to our panel of experts.
Serial entrepreneur and co-author of The Beermat Entrepreneur
“It looks like a perfect little boutique business. It is a personal question for them whether they want to keep turnover less than £20m and have fun with it for the rest of their lives, or push it past £25m when they will have to hire pointy-headed people who have worked for large corporations to do all the boring stuff of creating systems and processes.”
Visiting fellow on Cranfield University's Business Growth Programme
“Wanting to grow to a £20m turnover is absolutely wonderful, but it is not exactly Microsoft. They could benefit from an 'institutional mentor', who could stimulate them to think big. Both Mr Southon and Mr Glassman believe there are better ways for the Mindels to raise extra than a private equity funding... Mr Southon suggests bank debt.”
Partner at Grant Thornton
“They are going to be fairly dependent on their staff, who could easily walk out the door and set up in competition to them. A simple Enterprise Management Incentive scheme, which would allow employees to buy shares at a fixed rate and avoid capital gains tax when it is time to sell, should cost between £10,000 and £20,000 to set up.”