TheChek News Flow

Property boom pushes Reuben brothers to top of rich list

Booming property values have helped to bring a series of real estate billionaires up the roster of Britain’s richest people, replacing steel and mining magnates whose fortunes have shrunk in the commodities downturn.

David and Simon Reuben, Indian-born brothers whose property portfolio includes the Millbank Tower and dozens of West End properties, topped the Sunday Times Rich List for the first time this year with estimated wealth of £13.1bn.

The Reubens’ fortune increased by £3.4bn over the past year, said the compilers of the list, partly thanks to “hidden value” in their London portfolio, which they value internally at cost but whose potential sale values will have benefited from rocketing real estate prices in the capital.

The duo made their first fortunes trading aluminium in London, New York and Russia, but later built up their property interests; they also own stakes in the newly floated Metro Bank and in the data centre operator Global Switch.

As holders of the UK’s largest fortune, they replace Len Blavatnik, the Ukrainian-born magnate with interests in coal, aluminium and petrochemicals, whose wealth fell 12 per cent during the year to £11.6bn.

The Duke of Westminster, Gerald Grosvenor — owner of the Grosvenor Group, a private international property company — saw his fortune increase by £790m to £9.4bn, moving up to sixth place on the rich list from ninth. This was partly thanks to steep gains in the value of the company’s investment properties, which include swaths of Mayfair and Belgravia in central London.

But the duke’s company warned last week the property boom was probably drawing to a close. Nicholas Scarles, finance director, said “we continue to expect and plan for a slowdown, particularly in high-end commercial and residential property”.

Citing a December Bank of England report that said commercial West End property was overvalued by up to 30 per cent, he added: “There is a risk that sustained low oil prices could lead to sovereign wealth funds reducing investment in high-end commercial and residential property in London and elsewhere. Other major international property markets could be similarly affected. All of this points to a correction in the near future.”

Britain’s richest 10 people and families also include industrials, retailing and pharmaceuticals billionaires; the Hinduja brothers, Sri and Gopi, second on the list with £13bn, run an international conglomerate but have also bought the Old War Office in Whitehall for conversion to a luxury hotel.

The Barclay brothers, David and Frederick — property tycoons who also own Telegraph Media Group — moved up one spot to 13th as their fortune increased £500m to £7bn, partly thanks to the sale of stakes in three central London hotels, Claridge’s, the Berkeley and the Connaught, during 2015.

The Earl Cadogan, Charles Cadogan, was 16th with a £900m increase in his wealth to £5.7bn after steep increases in capital values and rents on about 200 London properties bought in 2014.

Among the relative losers were the steel magnate Lakshmi Mittal, chief executive of ArcelorMittal, and his family, whose fortune dropped by £2bn to £7.1bn over the past year thanks to a steel price crash. The Russian billionaire and Arsenal football club part-owner Alisher Usmanov shed £2.2bn from his wealth because of the mining downturn, landing at 7th place, down from 11th last year.

For someone who is responsible for one of the biggest financial leaks in history and who now faces the prospect of jail, Antoine Deltour is remarkably calm.

The quietly spoken Frenchman, who faces trial in Luxembourg on Tuesday, merely admits that he is “quite worried” that he could be behind bars for up to 10 years for his part in sharing 28,000 pages of documents from auditor PwC.

The files blew apart the methods used by some of the world’s largest corporations — ranging from Ikea to Pepsi — to reduce their tax bills to as little as 1 or 2 per cent.

Since the so-called LuxLeaks revelations, Brussels has proposed legislation that will rein in some of the corporate world’s excesses. Other leaks, such as the Panama Papers, highlighted the sometimes nefarious means by which individuals masked their wealth offshore, triggering political ructions from London to Moscow to Reykjavík.

But this swing in public and political opinion has not affected Luxembourg’s justice system, which is determined to bring Mr Deltour and the two others alleged to be behind the leaks to trial.

Mr Deltour faces charges of theft, violating the Grand Duchy’s secrecy laws and illegally accessing a database. Also in the dock is another former PwC employee — who has not been named — and Edouard Perrin, the French journalist who first broke the story in 2012. They all face similar charges.

“It is classic tax haven behaviour,” said Nicholas Shaxson, the British author of Treasure Islands, an award-winning book on tax havens. “When malpractice is exposed you don’t go after the person who did it, you go after the person who exposed it.”

Mr Deltour has avoided the limelight sought by other whistleblowers such as Edward Snowden, who has amassed 2m Twitter followers while hiding from US authorities in Russia. The French accountant has been able to maintain his low-key existence as a civil servant in Nancy, a two-hour drive from Luxembourg.

“I try to have a normal life,” Mr Deltour said. Unlike other whistleblowers who have faced financial ruin, a popular campaign in support of Mr Deltour attracted more than 100,000 signatures and his legal fees being covered.

Mr Perrin — the French journalist who faces charges of “domestic theft, violation of professional secrecy, violation of business secrets, laundering and fraudulent access to a system of automatic data treatment” — has kept an even lower profile, spurning offers of a similar support campaign.

“That is the way Edouard is,” said Paul Moreira, the editor-in-chief of Premieres Lignes, whose Cash Investigation programme first aired the LuxLeaks allegations in 2012. Mr Perrin declined to comment for this article.

Although Cash Investigation regularly received legal threats from its subjects, the firm response from Luxembourg’s authorities stood out. “We were surprised it got this far,” Mr Moreira said.

So are many of those involved in Luxembourg’s financial sector, who simply want the case to go away. LuxLeaks sullied the grand duchy’s name and a stiff sentence for Mr Deltour or Mr Perrin, they worry, would simply bring more unwanted attention.

But there is not much sympathy for Mr Deltour elsewhere in the duchy. The tax decisions in Luxembourg were, after all, legal. As far as they are concerned, the only person who broke the rules was Mr Deltour.

Mr Deltour goes unrecognised when he returns to the often socially suffocating duchy. He says his relative anonymity is a blessing. “Part of public opinion is really angry against me. Lots of people want to see me in jail. They do not understand why I disclosed these practices.”

Understandably, his lawyers are keen to paint a broader picture. “He opened the eyes of millions of citizens,” said William Bourdon, a French lawyer who also represented Mr Snowden. “Antoine is a very pure whistleblower. His act was motivated deeply without any ambiguity by his willingness to protect the general interest.”

Still, martyrdom does not appeal to Mr Deltour. “I cannot say that I am happy to be charged,” he said. “I would prefer not to face the court, but it is normal — I have to face the reality of what I did.”

Last year was a big year for unicorns. According to Venture Beat, there are now 229 unicorn startups, with $175 billion in funding and $1.3 trillion in valuation. In 2015 alone there were 81 new entrants crowned as the legendary beast.

However, the glory did not last. We are starting to see the first signs of a tech slowdown. CB Insight reported startups raised $27.3 billion globally in the fourth quarter of 2015 — $11.4 billion less than what they raised in Q3 2015.

We are also seeing a major dip in mega-financing rounds. There were only 38 deals with more than $100 million in financing in Q4 2015 compared to 72 deals in Q3 2015.

These findings all raise the question of whether the valuations of unicorns ever made sense in the first place. Many of these companies are now pressured to find new revenue streams.

For the time being, things are cooling off a bit, but the bloodbath has already started. Here are a few wounded unicorns:

Square: previously valued at $6 billion, valuation dropped to $3 billion

Snapchat: previously valued at $16 billion, valuation fell by 25 percent

Gilt Groupe: previously valued at $1.1 billion, sold for $250 million

Good Technology: previously valued at $1 billion, sold for $425 million

Foursquare: previously valued at $650 million, estimated at $330 million

While the unicorns are licking their wounds, a new type of startup has gained massive attention. Some people call them cockroaches, but I prefer “water bears.”

Water bears, or tardigrades, are water-dwelling, eight-legged, segmented micro-animals. They are celebrated as the world’s toughest animal as they have been known to survive in space and withstand freezing temperatures, long periods of drought and high doses of radiation. There’s no better name that’s more fitting for startups that have shown true resilience and have weathered the storm of global economic climate.

Water bears are stealthy. They cannot be seen at the moment, but they are preparing for a big comeback. Here are three key things they are focusing on right now.

Jumping on new distribution platforms early

Piggybacking distribution platforms is not a new strategy. We’ve heard how Zynga took advantage of Facebook’s ad network early and achieved the same astronomical growth as Facebook. We’ve also heard how Airbnb reverse-engineered their product into Craigslist and tapped into its 10 million users. But most of these growth stories are no longer applicable because the window of opportunity has closed. What are the new platforms we should be paying attention to?

Slack: At its new $3.8 billion valuation, Slack launched an $80 million fund to invest in new app integrations to grow its app directory. With more than 2.7 million daily active users, the team communication company is keen on enabling developers to create bots to help users automate their day-to-day tasks, such as expensing or scheduling meetings. The app ecosystem is still in its infancy stage, which makes it a ripe opportunity to establish first-mover advantage. Workato is a good example of a company that is leveraging Slack’s network to acquire new customers. They created Workbot to help users like H2O.ai sort leads from apps like Intercom, Eventbrite and Dropbox into Salesforce, then cleanse/triage these leads in Marketo so the data is constantly up to date and in sync.

Messaging apps: By 2020, 5 billion people on earth will have a smartphone. Many of them will be using WhatsApp (~900 million users), Messenger (~800 million users), QQ Mobile (~860 million users), WeChat (~650 million users) and Line (~215 million users) to communicate. The messaging ecosystem creates endless possibilities for app developers to create tools that will help users collaborate on projects, pay bills, sign contracts, find a date, livestream, bet on sports, play game and more.

Virtual reality apps: In the 1980s, the ambition was to have a PC on every desk. Then it was to have a laptop on every lap. Now it’s having a smartphone in every pocket. But could the future hold a possibility where we can have a VR headset for every head? It’s still speculative at the moment as to how VR will reshape the way we interact with information. Perhaps the aesthetics of a VR headset will be much different than what we understand now, but it’s definitely an exciting new space to be in.

Growth-hacking customer success

Hacking customer success for growth requires balancing both the acquisition and retention growth levers. This takes some creativity because you’re trying to increase the customer lifetime value while reducing your churn rate. If you focus too much on user acquisition and neglect retention, you’re stuck in chasing your own tail. And vice-versa; if you focus too much on retention, you’re not growing fast enough for customer advocacy to snowball.

Are you leaving money on the table?

This is why success hacking requires a sophisticated understanding of who your customers are, how to segment them and how to empower them to become advocates for your product. Later is an Instagram post management company that has more than 600,000 customers, including brands like Yelp, GQ, Disney, Etsy and Lonely Planet. They were able to achieve this type of growth within a short amount of time because they’re excellent at both optimizing the build-measure-learn cycle and building lasting relationships with their early customers through personalized service.

Here are some strategies that companies like Later are employing:

First impressions matters! Nail user onboarding via engaging emails, helpful tutorials, timely support or rewards.

Reward customers when they achieve a milestone within your product. Offer virtual high fives, premium features, discounts, credits or badges.

Build customer success into the culture of your company by having support rotations so the engineers, marketers, management and designers on your team all get a chance to speak to customers and support them.

Putting a price tag on value

Are you leaving money on the table? Patrick Campbell, CEO of Price Intelligently, broke the news that “the average amount of time spent on pricing amongst SaaS companies is approximately 8 hours in total.” This is nothing compared to the hundreds, if not thousands, of hours we spend on user acquisition.

After collecting data from 512 SaaS companies, he found that improving monetization by 1 percent would result in 4X the impact of focusing on acquisition. So how do we improve monetization?

Find a persona-pricing fit and get the full picture of your customers, including their most-valued features, least-valued features, willingness to pay, cost of customer acquisition and customer lifetime value.

Implement a pricing process where you’re constantly validating your pricing strategy by conducting customer/market research and impact analysis, and by forming a communication plan. Patrick suggested you need to evaluate your pricing strategy every three months and make changes every six months: Utilize a multi-price mindset and align your pricing to your customers’ needs so that they’re only paying for the features that are most valuable to them.

A good example of a small team that is monetizing well is Carb.io, a sales productivity tool company that merged with Aaron Ross’s Predictable Revenue. Carb.io spent the majority of its early days understanding how to help salespeople be productive and finding niches where they could have a big impact. They didn’t hit the gas pedal until they had a good understanding of the value that their product brings, and are now nearing $2 million in ARR.

Watch Patrick Campbell’s incredible talk on monetization at Traction Conference here. He will be speaking again at Traction Conference in Vancouver on June 23, 2016.

The water bears that survive the turmoil of our current volatile markets will be the ones that have equalized all three growth levers (acquisition, retention and monetization) masterfully. They may be small. They may be quiet. But don’t underestimate their tenacity to survive and drive to build products that customers love.