The Big Interview: Colin Farquhar, co-founder and CEO of Exterity

Colin Farquhar says the sale of an Exterity system to big player Barclays in 2004 was a turning point for the company. Picture: Greg Macvean
Colin Farquhar says the sale of an Exterity system to big player Barclays in 2004 was a turning point for the company. Picture: Greg Macvean
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Colin Farquhar of Exterity was ahead of his time with video streaming, but he’s grateful global success didn’t arrive too quickly.

Colin Farquhar appears to be a man ahead of his time. The tech entrepreneur was early to spot the burgeoning potential of the video streaming industry almost two decades ago and wasted no time in launching Exterity to capitalise on the market gap. Headquartered in Fife, the firm boasted revenues of £14 million last year, including a thriving export portfolio that sees it sell to clients in more than 50 countries.

Exterity specialises in internet protocol television (IPTV) – a way of distributing television around an organisation via its network – and digital signage. It provides software and hardware to blue-chip clients across sectors such as hospitality, media, stadiums, and financial services. With teams based on five continents, its customers include Bayer, BBC, BNP Paribas and Sanofi.

The group also has a partnership with industry heavyweights Sky, which has seen the two groups integrate their technologies to protect the broadcaster’s content, and has links with tech giant Intel to enable content streaming at a lower bandwidth.

Corporate clients were far from Farquhar’s mind when he first began to designed his products, with the original idea of a network system to empower homeowners. “When we started our initial vision was for consumer products,” he says. “So it was things that would deliver live TV, radio, video around your home network, and that would enable a whole range of services within the home. It turns out we were about 20 years too early for that.”

Farquhar quickly realised that despite technology moving forward quickly, wireless networks at the time were not well enough developed to support such a product, and everyday folk weren’t wiring up their homes to host high-speed networks. His vision was similar to the internet of things products which have only recently begun to gain traction in the domestic market.

Timing is everything and, with the consumer market not quite ready, Farquhar turned his attention to the corporate world, instead offering integrated video streaming in offices, hospitals, and other buildings with a big network and a need for content. “I was pretty convinced that I could do something that could be significant. The reality of what I did has changed quite dramatically – I’m sure that’s a common experience for people,” he says.

The sector has proved rewarding; pre-tax profits at Exterity more than quadrupled to £1.7m in 2018 and it now counts investors Shackleton Ventures, the Scottish Investment Bank and a network of angels among its financial backers. But it was a struggle making himself heard at first. Live streaming, IPTV, closed networks: these were still relatively unfamiliar concepts 18 years ago. With hindsight, as he recalls the barriers to accessing funding in those early days, he realises it was actually a blessing in disguise. The fight to win support even drove his decision to change strategic direction and focus on the corporate world.

“I think maybe people take more risks now but certainly back in 2002 when we were talking to people about what we wanted to do, it was hard to get attention. We were probably quite bullish about asking for loads of money and expecting people would just say sure, no problem, here’s loads of cash guys, go and do it. The reality was more scepticism and questioning how well we could address the market, and whether it was ready. That process helped us refine what we were doing.”

Investment for the venture came in dribs and drabs at first, offering Farquhar “small chances over a few years”. He thinks this is what kept him so hungry, driving the focus to achieve his goal. He feels that getting “too much, too early” can take away from that.

In early 2002 he had met with Mike Allan, a fellow alumnus of remote access and network technology firm Shiva, where Farquhar had previously worked in the product management team. Allan, who became Exterity co-founder and chief technology officer to Farquhar’s CEO, was working for a Livingston company that was in the process of winding down its operations.

Farquhar says: “Mike was busy laying people off and the last person who was going to go was himself. He decided to come and join me, which was fantastic because I was able to marry my product definition and external facing skills with his knowledge of actually building a product, delivering it physically. We’ve been together ever since.”

Farquhar’s own drive to establish a new venture had come from a similar position to Allan’s. In 2000 he had been recruited to head up the European side of a US tech start-up aiming to build a presence this side of the pond. Within a matter of months he had been made redundant, at “pretty much the point when the dotcom bubble burst”.

He suspects that being kicked out of the corporate nest gave him the necessary push to set up his own shop. As he puts it: “If you’re in a good job, you’re getting paid well, you’re given the chance to travel, you’ve got interesting, challenging work to do then it’s quite safe. The idea of leaving all that behind and doing your own thing is quite alien. So I found a bit of adversity helped.”

He also found the kind of jobs he was after tended to be based south of the border and, having relocated back to Edinburgh, he wanted to stay in Scotland and build a career. Dalgety Bay became his base and remains Exterity’s headquarters, housing more than 80 of its 116 staff. As well as being close to home, the area’s links to the Scottish capital – especially its airport – made it handy to keep overheads down. Farquhar says this frugality worked in his favour when now chairman David Thomas first came to visit the firm in 2005. At the time, Thomas was deputy chief executive at Jarvis Hotels hospitality group and chair of Chesham Building Society.

He recalls: “This was a guy really at the top of his game. I guess he’d imagined tech firms as having fancy offices and cool cars out in the car park. He came to visit us at our first office in Fife – a small, old place – and we picked him up in a Volkswagen Polo. He said the fact we were focused on the business, not ourselves, impressed him.”

Farquhar had originally set up Exterity to offer consultancy work, and continued to do this while the business was in its infancy, which is how he dreamed up the Exterity name, taking dexterity and losing the first letter. “I was using the idea of being dextrous, left and right-handed, being involved in lots of different ways and helping people be flexible.”

A defining moment in the Exterity journey was one of the firm’s first major sales, he says, significant in terms of name rather than deal size. It was around 2004 when he sold a system to a Barclays call centre in Northwich, Cheshire.

“We had a customer of this class and category, and we’d been able to deliver what they wanted. We had to make a serious decision whether we would continue to do other work to help fund everything. We were gathering major customers. We had to make the switch from doing our own development with other things to generate revenue to all the revenue coming from selling our products. That was one of the scary things.”

The firm has scaled across the globe since. Last week Exterity announced the expansion of its US headquarters, relocating to new premises in New Jersey to keep pace with rapid growth in the American marketplace. Sales in its US arm soared by 33 per cent last year, with 30-per-cent-plus growth projected for 2019.

Its overseas presence has spiralled since the launch of its first overseas location, in Dubai in 2007, with bases in London, Paris, Sydney, Singapore, Hong Kong and Johannesburg.

“Our revenue growth has driven a very aggressive hiring plan,” says Farquhar. “We’ve been hiring aggressively for the last two years and continue to do so. We’ll probably add 15 or 20 people to our team this year, the majority of those will be based out of our office in Fife.” The group is also in the process of opening up a second development centre in Porto to fulfil its engineering needs.

Farquhar is now focusing his energies on expansion in the accommodation market, with the likes of hotel groups and cruise operators, and is aiming to deepen his understanding of customer needs to further develop and integrate the product.

The lesson he learnt early on has stood him in good stead, and it’s his top tip for aspiring business leaders in the tech sector. “To me, the most important thing for any entrepreneur is to know that what you’re doing has customers. One of my biggest concerns for lots of technology in my industry – which is creative, it’s what we do, we come up with great ideas and create things – is where are the customers for them? If you can’t sell it, it’s not worth doing.”

Having said that, he admits: “I don’t think of myself as a technology entrepreneur, I think of myself as the guy that runs Exterity.”