Success of Autonomy is all too rare

AS success stories go, the tale of Autonomy has everything. Its chief executive, Dr Mike Lynch, began work on the mathematical formulas that underpin the firm’s software in the early 1990s, when he was completing a postdoctoral thesis at Cambridge University. In 1996, he founded Autonomy as a tiny startup, and spent the next four years building it into a FTSE 100 company, which he has led ever since. Its software, which enables computers to understand human interactions such as emails and phone calls, is an undisputed market leader. It is used to catch terrorists, solve problems at NASA and crack down on insider trading. Autonomy’s client list – which includes the BBC, Coca-Cola, the SEC and most big banks – reads like a who’s who of the private and public sectors.

To cap it all, the firm is about to be snapped up by HP, one of the titans of the computing world, for a staggering $10.2bn (£6bn) – a premium of 50 per cent on its pre-bid value. Lynch is set to make a cool $820m.

So Autonomy stands as a testament to the quality of Britain’s top universities; it is the best in its class; and it is still run by its founder, who will become a dollar billionaire when the sale goes through. In the US, Lynch would be a household name. Parents, keen to instil their children with a hard-working entrepreneurial spirit, would tell his story as an example. The media would take notice when he commented on debates of national importance.

In Britain, however, Lynch is virtually unknown, even among educated professionals. With the exception of Sir Martin Sorrell, he is the only founder-chief executive in the FTSE 100, but most people would struggle to pick him out of a line-up of one. He has never been asked to appear on Question Time, or any other mainstream TV show, and is rarely interviewed in the press. The firm’s sale to HP might have led newspaper business sections, but barely garnered a mention in the mainstream press.

On the handful of occasions I met Lynch, I got the impression he felt the scale of his achievement had gone unrecognised – not just in the media, but also in the City and Whitehall. One particular sore point was Gordon Brown’s decision to close a tax loophole, which allowed businesses that were still being run by their founder to pay a lower rate of capital gains tax.

Yesterday, I had a quick chat with Lynch to congratulate him on the deal, and he told me that Britain “doesn’t encourage entrepreneurship as much as it ought to”. When he was starting out, the prevailing view was that he should put his intellect to work as an investment banker rather than risking it all on Autonomy.

In the City, Autonomy is known as the Marmite stock – analysts either love it or hate it. The bearish ones have often drowned out the bullish ones, however, which has taken its toll on Autonomy’s stock price. When we spoke yesterday, Lynch was good-humoured about the bears, quipping “I love them dearly and look forward to socialising with them in the future”, but friends say he was becoming increasingly irritated at those he thought were talking down the company without really understanding its business model.

In the US, he was always received more warmly. Over lunch once, he told me the most depressing thing about California was that he could dine out with Brits every night, his point being that the brightest British tech minds had all fled to Silicon Valley. Unless we start treating our entrepreneurs differently, many more will follow. david.crow@cityam.com

• Allister Heath is away