A discussion on the B2B data and information sector with Jonathan de Pass, Founder of Evaluate
In what turned out to be one of the last face-to-face events prior to the Covid-19 lockdown, FPE Capital hosted a group of leading founders and CEOs from across the B2B data and information landscape for the latest instalment of our “Unlocking Growth” event series. We were joined by guest speaker, Jonathan de Pass, Founder and Chairman of Evaluate, a leading provider of commercial data to the pharmaceutical industry, who shared his experience of building a market leading subscription data business.
During the event we discussed a range of commercial and strategic issues, including market sizing, pricing, and investing in new service lines. We also discussed how the most valuable companies in the sector have transitioned beyond the “B2B information 2.0” model (digital, subscription, customer centric) to the “B2B information 3.0” model (embedded in workflow, part of the industry structure, outcome based revenues, solution centric).
After the event, Jonathan joined David Barbour, FPE Capital Managing Partner, for a brief conversation to further explore how B2B data businesses can unlock growth.
David Barbour: Jonathan, thank you very much for joining us.
Unique and hard-to-replicate sources of commercial data and information can be extremely valuable to customers. As growth investors, we often meet companies who have built a leading data set or publication in their starting niche over the course of many years. To assess the future potential of their business, we often ask entrepreneurs where they see the expansion of their “Total Addressable Market” (TAM). What is your experience of this?
Jonathan de Pass: In B2B data, market sizing can be misleading. I first looked to raise investment for Evaluate back when the business was making £600k in revenue. During that process, prospective investors conducted various market sizing projects and the feedback I received was that my TAM was limited, given that I had already sold licenses to most major pharmaceutical companies. I was told that in order to maintain growth I would need to look at opportunities in new customer segments or launch new products or services.
Personally, I felt there was still significant opportunity to grow in my direct market, and I ultimately decided not to raise investment at that time. Fast forward to now and it is clear that I was right, as we are now making >£30m of revenue from a very similar set of customers!
DB: So where did the growth come from?
JdP: My belief has always been that if you continue to add valuable data and improve your platform, then customers will pay you more money for it. In our case it meant penetrating deeper and wider into our customers across multiple departments both functionally and geographically. To enable this, we are in constant communication with our customers, most of whom have global organisations, in order to understand how they are absorbing and analysing our data, so that we are able to identify and develop growth opportunities for the platform.
In my experience there are two types of data propositions; those that are “levelling”, where access is necessary for customers to play on an even field, and those that are “unique”, which are more differentiated and offer customers a competitive advantage. In order to build a unique proposition, continuing innovation is also required.
Optimising pricing has also played a significant part in Evaluate’s growth. Many small businesses set low prices in the early stages of their development in order to win customers and generate much needed revenue. However, as their product develops breadth, depth, and functionality, companies often fail to ascribe commensurate value through price increases. That’s because any price increase greater than inflation can be a daunting prospect in a small business, especially when serving larger enterprises. However, with the correct strategy and execution plan, pricing can be brought in line with the value that the product delivers to customers.
To illustrate my point, we’ve grown some accounts by as much as 50 fold over two decades by a combination of broader and higher quality content and expansion of our footprint into multiple departments across global organisations. In this way we have steadily increased our value to those organisations.
DB: In our own data industry investments – Defaqto and IWSR - we have spent time innovating to drive growth. Defaqto introduced its ‘star rating’ product when we were invested and IWSR has been producing data around interesting areas such as low/no alcohol drinks and the impact of legal cannabis sales on the US drinks market. Have you been tempted to invest in new services?
JdP: At Evaluate opportunities to develop consulting revenue was often tempting in the early days because we had the data and these projects can bring in large chunks of revenue. However, we always came to the same conclusion that we should not be allocating time and resources into consulting projects away from our core platform, which was the key value driver for both customers and our shareholders.
Having said that, about 6 years ago we reached a size where it made sense to offer a number of “services” for key customers. These are bespoke solutions that draw heavily on our data and are aimed at informing strategic decision making. They are valued by customers, and having our work drive board room discussions is strategically valuable for us.
We have also looked at running events, but we have always decided against the idea given that there are others out there much better placed to do so!
Ultimately, we aim to invest all the time and resources into continuously improving our core data platform, as the marginal value for our business is greater than investing elsewhere.
DB: thank you very much for your time, Jonathan.