Technofile Europe: Cramer Systems and efficient uses of capital

Today we announced one of our bigger exits -- the sale of telecoms software company Cramer Systems to Amdocs for $375m, net of cash. See the brief note in The Deal.com here and the Amdocs press release here. We're particularly excited about this one because (in addition to being a good exit for our fund):

it represents one of the highest cash prices ever paid for a European software business; and,
it is a great example of a European technology business using not much external capital to become a global market leader.

While Cramer is hardly a bootstrapped company (it raised around $27m in total), it was in fact run like a very capital-efficient, owner-managed business. And much of the raised equity was never actually spent, remaining on the balance sheet to this day. That capital-efficient cost culture was a key part of the company's success during the "nuclear winter" of telecoms spending. A few years ago I wrote in Real Deals about Cramer in the context of capital efficiency:

[...] Cramer took its time to establish credibility with a handful of early customers, such as Diax and Cegetel. But the founders had broader ideas for a new way of visualising and managing the networks and service offerings of large telecoms operators. In 1999, they raised a small amount from angel investors and Kennet to test this vision – and so the category of “Inventory Resource Management” was born.

Then, in late 2000, Cramer was able to raise $25m to take its business global. What is critical to Cramer’s success is that a large chunk of that investment round is still in the bank. Cramer expanded its US market presence carefully and – in spite of the usual setbacks during initial US market entry – relatively inexpensively.

Capital efficiency was – and still is – core to Cramer’s culture, and it is this culture that secures the steady improvement in operating performance. Its customer list now includes BT, Vodafone, Bell Canada, KPN, Cable & Wireless and Japan Telecom.

[Source: Real Deals, Guest Comment, 20 May 2004]

So here we have at least one data point to support our theory about captial efficiency generating better returns. How many data points do I need for an informal proof?