INTERNET SERVICES COMPANY GAINS £1.5 MILLION FROM FUND
Baxi Partnership Limited has made its first investment from its £20million dedicated to promoting employee-owned organisations
A £1.5million deal between Baxi Partnership Limited and Poptel, the UK’s leading co-operative Internet services and solutions provider, is set to revolutionise the way in which employee-owned organisations secure funding in the future. The investment is from Baxi’s £20million fund to promote employee-ownership in the UK.
The first of its kind, the Baxi-Poptel deal illustrates that employee-owned organisations can secure investment finance even in difficult markets, without losing control of their business.
By investing equal amounts in shares in Poptel Ltd and a loan to Poptel’s employee benefit trust which was used to buy further shares, Baxi ensures that Poptel retains its majority employee-owned status (51%) at the same time as securing essential funding for the growth of the business.
Baxi Partnership Limited was left with £20m in November 2000 following a forced sell out of the employee-owned boiler company, Baxi Limited. It is owned by a trust for its employees, ratified by its own Act of Parliament with a mandate to develop successful businesses for the benefit of their employees. The investment in Poptel’s business marks its first investment since the sale of the boiler operations.
Poptel was founded in 1985 and in November 1999 it became the first co-operative in the UK to receive venture capital funding, successfully managing to keep its mutual status. Since then the company has become one of only seven businesses across the globe to win a new Internet top-level domain. ‘.coop’ is aimed at co-operative businesses around the world and will join ‘.com’, ‘.org’, ‘.net’ and the other new domains later this year.
Prior to this announcement, Poptel had been in discussion with existing funders about future investment but rejected the offer in favour of the Baxi Partnership Limited deal to secure its integrity as a co-operative.
According to David Erdal, a director of Baxi Partnership Limited, “The deal underlines Baxi’s faith in employee owned businesses. We are confident of seeing a healthy return on our investment over time and glad to have been instrumental in keeping Poptel in the control of its employees.”
“Poptel are equally delighted,” added Shaun Fensom, Poptel’s founder and chair. “This is a milestone for co-operatives and other employee-owned businesses. For the first time we have a fund that can act with the speed and flexibility of venture capital and yet fully supports employee ownership. It is really tremendous.”
Employee-ownership makes businesses more successful research published earlier this year by Martin Conyon of Wharton and Professor Richard Freeman of Harvard and the LSE shows that UK listed companies which gave their managers share options during the 1990s obtained an extra boost in productivity - but those which gave shares to all their employees achieved a boost nearly 50% greater.
For organisations like Poptel where intellectual property constitutes much of the value of the company, employee share options are commonplace. Poptel takes this one step further by giving its employees majority ownership on a one member one vote basis for all major strategic decisions.
As Fensom puts it: “The only real asset in our company is the people. We employ intelligent adults and we treat them as intelligent adults – it’s as simple as that.”
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o Poptel was founded in 1985 by a group of young programmers who had created their own co-operative, Soft Solution. Poptel has been offering online services ever since and is one of the best know Internet companies in the non-commercial sectors. Tony Blair's first email address was with Poptel and many big name organisations in the charitable and trade union sectors use Poptel's services.
o Poptel is regarded as a leading edge co-operative both in business terms and financially. In November 1999 Poptel became the first co-op in the UK to secure venture capital funding without compromising its mutual status.
o This funding allowed Poptel to treble in size in 12 months to 60 staff, to re-equip and build a new Network Operations Centre in Manchester, to create a new Professional Services team of web and database developers and to extend its e-business and hosting capabilities.
o In November 2000 Poptel in partnership with the US National Cooperative Business Association won one of the seven new Internet top level domains approved by ICANN, “.coop”. This was won against fierce competition from established global brands such as Nokia and Novell among others. Forty four groups and consortia bid for over 180 new Internet domains. To be one of the seven approved was a tremendous success.
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