Digital media group E3 made sure that investors were on board before chasing cool clients, and it has paid off. Lynda Relph-Knight talks buyouts, return on investment and sell-offs with its two entrepreneurial founders
Tough times bring out the best in E3. Not only is the Bristol-based digital media group thriving, with full order books and a name for good work, its founders have just effected a management buyout from the four non-executive directors who have backed the consultancy since its inception 12 years ago.
‘We gave too much away,’ says co-founder Mike Bennett of the backers, ‘but their investment helped us enormously.’
His partner Stuart Avery adds that the buyout package included cash from himself and Bennett, a loan from HSBC and loan notes to existing shareholders. ‘We’re one of the minority of businesses that have managed to obtain new lending from the banks in the current climate, which says positive things about E3,’ he says.
Avery and Bennett set up E3 six months before they left university – Bennett was studying politics and ‘heading for a career in TV’, while Avery’s degree is in genetics.
It was 1997, and while Avery describes the Internet as ‘a cool and interesting place to be then’, Bennett adds that it was tough. Just ahead of the dotcom boom of the late 1990s, with only some 25 000 domain names registered, you really had to sell the idea of the Web to potential clients, he adds.
But the two had a vision. ‘We suffered from classic naivety. We wanted to work with the coolest brands out there,’ says Avery, with Orange, French Connection and motorcycle company Triumph high on the list. ‘We decided we were going to work with them no matter what.’
‘There wasn’t a huge vision or strategy,’ says Bennett. ‘We just set out to be little terriers.’
That blend of passion and naivety paid off. ‘We just hit the right person at the right time,’ says Bennett of the early breaks. Twelve years on and Orange and Triumph are regulars, as well as the equally hip BBC, Victoria & Albert Museum and Disney. But they are balanced by the likes of the National Osteoporosis Society, insurance group Axa and the Environment Agency.
E3 sometimes works with advertising agencies like Saatchi & Saatchi and TBWA, but also directly with clients.
The team is now 50-strong and ensconced in Bristol’s fashionable Paintworks creative complex, with eight more staff in London’s Shoreditch – ‘It’s a “mini” version of what we have down here,’ says Bennett.
The decision to bring in the four backers at the outset was a masterstroke. ‘People who know about clients have a head start,’ says Bennett. ‘We didn’t have the slickest presentation back then, but people buy people. We were really keen and very excited.’
While many of the key digital players were suffering from the 2001 dotcom bust, E3 benefited. ‘Clients which still had the budgets were prepared to be experimental,’ says Avery. And, as work came in, there was no shortage of experienced digital talent, made redundant by bigger agencies.
Most of E3’s work is still Web-based – the V&A projects, for example, have been microsites for blockbuster shows such as Surreal Things, The Art of Lee Miller and The Golden Age of Couture. But Avery and Bennett have ambitions beyond that. The Light Up Bristol initiative last year was partly their doing.
One of the keys to E3’s success is the entrepreneurialism of its founders. In Bennett’s case this extends beyond the consultancy – he developed the Goldbrick House restaurant and bar complex in Bristol city centre and is the leading light behind Bristol Media, a burgeoning networking group for local creatives.
Another asset is E3’s focus on making clients aware of the return on investment they can achieve, because measurability is one of the key features of website design.
So, what next for a group that is definitely going somewhere? Though Avery and Bennett have just completed the buyout, they don’t rule out a sale in the longer term. ‘We get about two enquiries a year [about selling to a bigger concern],’ says Bennett. ‘We’d like to unlock the value of our hard work at some point.’
But that point seems a way off. Bennett was just off to the South by Southwest games festival in Austin, Texas, when we spoke, filled with energy and enthusiasm. Watch this space for how that experience pans out.