Michael Lynch - can Britain’s Bill Gates bounce back?
He was our first internet billionaire. But with accusations flying across the Atlantic, his reputation is on the line
The seats were already filling up when Mike Lynch slipped into the white-stuccoed mansion on Carlton House Terrace in central London six weeks ago. The founder of technology company Autonomy mounted the stairs and, when he reached the auditorium, filed soundlessly to the back and hovered by a window.
Even though it was the middle of the working day on a bright October afternoon, the event had proved popular. The Royal Academy of Engineering, in whose renovated headquarters Lynch stood, was renaming the building Prince Philip House in honour of its senior fellow, the big draw whom the audience of silver-haired academics and executives had gathered to hear from. The cream of British industry was there: the academy's president, Sir John Parker, defence contractor BAE Systems' chairman Dick Olver, National Grid boss Steve Holliday and Sir Peter Bonfield, the former BT chief who now sits on a range of boards, from Sony to Ericsson.
If he thought he needed to melt into the background, Lynch, 47, was wrong. Just before the speeches began, a young woman escorted him to the front where a seat was waiting. From there, Lynch could watch at close quarters as Prince Philip grimaced in fake horror when a triptych-style portrait of himself by the award‑winning artist Paul Brason was unveiled. The inference was clear. Lynch, a rare beast who crossed successfully from academia into the corporate world and created vast wealth from his ideas, is one of the establishment now. For the massed ranks of engineers in the room, Britain's industrial future is more about harnessing brain power, not horsepower, and Lynch is one of Britain's shining examples of doing that.
So last week's corrosive row with Silicon Valley giant Hewlett-Packard puts not only Lynch's reputation on the line, but Britain's, too. Could the country's first internet billionaire, the closest thing we have to a domestic Bill Gates, really have had the temerity to cook the books in order to inflate the sale price of Autonomy last summer?
The fallout has captivated the business world. Lynch, bald but less severe-looking since he shaved off his beard a few years ago, was cock-a-hoop at selling his life's work. Not only had the Cambridge firm extracted top dollar from one of America's biggest technology names – including £500m for its founder – there were even stories that he could eventually end up leading HP, which was desperately trying to expand its software base as sales of hardware such as its trademark printers and personal computers dried up.
Almost immediately, it was clear the deal wasn't working. German-born Léo Apotheker, HP's boss, was ousted last September, barely a month after the transaction was unveiled. By May, Lynch had followed him out of the door, amid recriminations that the two cultures jarred and Autonomy wasn't sealing enough big deals. Many of his lieutenants quit, too, including president Sushovan Hussain and chief financial officer Steve Chamberlain.
There had already been an unseemly row with Oracle software billionaire Larry Ellison, who questioned how much HP had paid and said he had "taken a pass" after being invited to bid for Autonomy himself – a version of events disputed by Lynch. Then came the bombshell: HP wrote off £5.5bn linked to the deal, and Meg Whitman, Apotheker's replacement who had sat on the board as a non-executive when the takeover was approved, accused Autonomy's team of "serious accounting improprieties, misrepresentation and disclosure failures". Thanks to information from a whistleblower, the Serious Fraud Office and US regulators had been called in.
Lynch's response was instant, saying on a tour of the broadcast studios that he was "shocked" by the claims, adding: "It's completely and utterly wrong and we reject it completely." Wouldn't the 300 people who carried out due diligence work on his company before HP signed it off have spotted anything untoward?
With the prospect of lengthy investigations on both sides of the Atlantic, Autonomy may come in handy for HP after all. Hewn from a Cambridge PhD and subsequent fellowship studying the pattern-recognition techniques of an 18th-century vicar, Thomas Bayes, Lynch developed technology that could sort unstructured data such as emails and phone call records for crucial information. As opposed to Google's simple keyword searches, Autonomy helps corporations to find a needle in a digital haystack – handy if they need to turn up evidence for a court case, for example.
When asked about why he went into business, Lynch's answer is that he didn't know any better. Born in Tipperary in Ireland, Lynch's family moved to Chelmsford in Essex while he was still young. His father was a fireman and his mother a nurse. So while his Cambridge contemporaries chose a profession such as accountancy or law, his knowledge of white-collar work was limited. It seemed natural to build his own company around the ideas he had conjured in the lab.
It was hard going at first, but a breakthrough came when Essex police began using his system to sift four years of crime reports to hunt for matches between seemingly unrelated incidents. Lynch also secured backing from well-known investment firm Apax Partners. When Autonomy listed on the stock market in 1998, American shareholders, better versed with technology firms' high-growth model and with more peers to compare it with, got it first.
Lynch, who set up a second office in San Francisco so that US firms would take him seriously, showed frustration at how hard it was to gain acceptance. "Silicon Valley is completely and utterly self-referential," he said several years ago. "They do everything by proxy. You could turn up with a working time machine and be ignored unless you have the right person on board."
Autonomy wasn't ignored for long when its shares attracted a racy valuation and soared in the dotcom bubble. But after the stock crashed, it took Lynch a long time to fashion a renaissance. "It is nice to show that there is a real business there after trudging through the blizzard and coming out the other side," he told me three years ago. Alongside the plaudits, as Lynch pulled off a string of acquisitions, was a vocal minority of City analysts who thought the mushrooming revenue streams were too good to be true. What didn't help was an early bust-up with analysts at investment bank Merrill Lynch when he disputed its research.
Lynch – hesitant, wary, with a dry, intellectual wit and usually dressed in blazer and chinos as if to prove that he wasn't just another business "suit" – maintained a tight-knit group of advisers. He batted off the critics, pointing to Autonomy's soaring share price as validation of its success. He also flew the flag for Cambridge, keen to offer alternative employment for local science graduates, instead of watching them just board a plane to Silicon Valley.
For someone who divided his time between Britain and America, he was keen to give something back. Lynch views his non-executive directorship of the BBC since 2007 as a form of public service. He is one of two "board boffins", along with Brian McBride, who used to run Amazon in the UK and now chairs fashion website Asos, who take a keen interest in the Beeb's technological developments. With success came wealth, but the father of two has chosen to eschew the high life, instead retreating to his Suffolk farm for peace and quiet. He keeps a herd of red poll cows, whose ranks were swelled when the HP cheque cashed.
The sale of Autonomy was initially met with surprise, then resignation. Most of Britain's technology success stories have been gobbled up by far larger American corporations, after all. Describing the scale that being part of HP afforded him, Lynch said: "Imagine fighting a war with a gun and someone shows you into a hangar where there is a fighter jet." And if it meant he scored one over the American entrepreneurs that used to cold shoulder him at cocktail parties, all the better.
Post-Autonomy, Lynch has been working on plans to put his wealth to good use – setting up a technology investment fund with some of his former colleagues to back start-up companies. There is talk he'd like to buy back virtual reality firm Aurasma from HP. It was a promising part of Autonomy, best known to the man on the street for its sponsorship of Tottenham Hotspur's football shirts.
These latest allegations will undoubtedly set back what Lynch does next. The outsider boffin, feted for his genius, must win the doubters over once again.
A Life in Brief
Born: Michael Richard Lynch, 1965, Carrick-on-Suir, Co Tipperary, Ireland.
Family: His father was a fireman, his mother a nurse. He lives in Suffolk and has two children.
Education: Won a scholarship to private school Bancroft's; studied physics, maths and biochemistry at Christ's College, Cambridge.
Career: He formed his first company in the 1980s, producing audio products for the recording industry. Co-founded Autonomy in 1996 to exploit the problem of unstructured data before selling it to Hewlett-Packard in 2011 for £6.7bn. Science and technology adviser to David Cameron, trustee of the National Endowment for Science, Technology and the Arts, and a non-executive director of the BBC.
He says: "It's hard to be cleverer than a human being, but you can beat human beings because they get bored."
They say: "Mike has known he's had to keep running as fast and as hard as he could." Unnamed adviser
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