Riding the SwiftKey Rocket Ship from Startup to Acquisition | Jon Reynolds, SwiftKey | BoS Europe 2017

Jon Reynolds, Founder, SwiftKey

Jon Reynolds founded SwiftKey, the predictive typing app, in 2008 with university friend Ben Medlock. From launch in 2010 to now, SwiftKey has grown to over 300 million daily users. Jon was CEO of the company from its genesis and guided it from humble beginnings, through to selling the business to Microsoft in 2016.

In this fireside chat, Jon tells the story of SwiftKey – its early days in Cambridge, moving to a USA office, and acquisition. A fascinating story of a vastly successful tech company.

Video & Transcript below

Video

https://businessofsoftware.wistia.com/medias/pni54udtkl?embedType=async&videoFoam=true&videoWidth=640

 

Transcript

Mark Littlewood: Hi, John.

Jon Reynolds: Hi.

Mark Littlewood: So tell me about Swype, SwiftKey and all your other competitors.

Jon Reynolds: I think you can see why I agreed to come and speak. Mark is singlehandedly built our user base with his passion for SwiftKey.

Mark Littlewood: It’s true.

Jon Reynolds: We really appreciate that.

Mark Littlewood: You won your very first award on making it mobile conference in 2010?

Jon Reynolds: Probably 2010 so a long time ago. I think the real thing for us was when we launched our product was back around 2010, we were really the first people to introduce a new type of technology at the time. Natural processing and we were looking at the context of the words that people are writing and to predict what your next word might be. The thing that’s scary for us humans is we’re quite predictable and you can guess a third of the users next words without typing anything at all. So it was a mixture of that key modelling technology mixed in with a learning algorithm which adapted to the words you personally write. A lot of the keyboards today do a really bad job at personalisation.

Mark Littlewood: Yeah. Ok so they give you a little bit of background on this SwiftKey story and there are a few points I’d like to focus on here and ask John about. The other thing I want to say is you guys should be asking some questions here. So before we start, can you just jump up to give yourself a bit of energy and circulation? You don’t have to put your hands in the air. I know sitting down for more than 2 minutes is a trial for some people. Ok, so sit down. Now you’ve got the energy and the permission to jump in with some questions. But we will talk a little about the early foundations of SwiftKey and what John learned there. Then talk about how your business model changed iterated as things went on and then there’s an acquisition that I don’t want to break the story but as Twitter and everything out there. You were sold to Microsoft a year or so ago.

Jon Reynolds: Yeah.

Mark Littlewood: I will talk a bit about that and the future. But I think some of the key things here that I’d like to come out and I think would be useful is you’ve got how many users?

Jon Reynolds: Well in our technology probably 300 million or so.

Mark Littlewood: 300 million and you were founded in 2008?

Jon Reynolds: 2008.

Mark Littlewood: And really launched in 2010. That 300 million from originally it was just a scrappy startup in Cambridge. So not that all startups in Cambridge have to be scrappy. You’ve come an incredibly long way very quickly.

Jon Reynolds: Almost all of our press coverage we seemed to get criticised our office and I don’t know if that’s a bad sign or a good sign.

Mark Littlewood: So, tell me what you were doing when you set SwiftKey up? What was your entrepreneurial journey? What was the story? Why did you start it?

Jon Reynolds: I don’t know. Maybe similar or maybe different from people here but I was studying physics at Cambridge, graduating in 2007. Everyone went in banking and management consultancy so obviously I wanted to be as different as I could. I end up going into civil service and looking back, it was a passion to solve the big problems and in the government I could do that.

Mark Littlewood: That’s a big problem.

Jon Reynolds: When I got there, I found myself in the management program, probably more of a job which wasn’t as stretching and in a new environment never having worked in an office environment before anyway and just had tons of ideas. And actually I was working on the restructuring of Eurostar and the HiSpeed one line which goes from London to The Channel Tunnel. It was a fascinating project working with some great advisors – City Group, UBS and different lawyers. And I was the guy taking a minute so in one of the meetings, probably 25 people round the board table, looking across and seeing the partner typing on a blackberry like this. This is 2008.

Mark Littlewood: And you’re literally paying them to do that 500 GBP an hour.

Jon Reynolds: 500 a button probably. Something about that moment, we said we got this QWERTY keyboard which originally was in a typewriter because of the mechanical device, the layout was to stop the mechanical parts from colliding with each other. We’re still using the same technology 150 years later or whatever, strung down on this area. This is crazy! That was the original insight. My father-in-law claims it was him skiing in Switzerland trying to type with gloves on which was the inspiration but somewhere in there there was an idea. And I guess from that moment I was just kind of thought about it for a few moments and then amazingly, Ben who ended up being my cofounder, was visiting my flat mate. I knew him from university as well. And I knew him as a genius scientist. Even though I did physics unfortunately I can’t code. So I pitched this idea to him and that’s when we got started.

Mark Littlewood: Ok. So you left your civil service job middle of 2008, founding this business. It didn’t launch till 2010. What on earth were you doing?

Jon Reynolds: Looking back now, I think anyone that runs an accelerator probably sees this as a massive failure. I mean, what we did in 18 months you’re now expected to do in 6 weeks – the bar has raised a lot. I think the reality for us was that I was still doing my job a long time so for the first 6 months it was evenings and weekends and it was one of the biggest recessions we’ve ever seen, leaving one of the safest jobs to go and do startup. Probably wasn’t popular with my in-laws and parents. And when civil servants tell you you’re doing a brave thing, you kind of know they mean stupid. That’s what I was doing 2008/2009. We were fortunate to get a grant funded by Innovate UK and they gave us 3 grants over a period of time. The first one was £20,000 at the end of 2008, we got a second one in March 2009. At that point I left to do it fulltime and really the rest of 2009 was iterating and prototyping. I think we had a very clear sense that the modelling techniques that Ben knew using a PhD and machine learning, so he was at the cutting edge and applying that research in a mobile phone, nobody had done that before. We could see from our models, and they were incredibly accurate, at the time there was no next word prediction, the correction technology was poor so we could see the quality of it. But originally because we were trying to kill QWERTY, the UI was novel different type of user interface so even though we could do tests for users on different devices and the show it was faster, the learning curve was such that we saw people won’t be willing to adopt it. So over a period of 2-3 prototypes we came up with a theory which was it has to be QWERTY and what’s the simplest UI we can think of? Our research showed us that users can’t actually, it’s very hard to scan when you have more than about 3 predictions showing so we thought 3 predictions was about the right number of predictions, stick them on top of the keyboard and put the most likely one in the middle felt like the right user design. And now it’s not only our technology that influences the market and I don’t want to overstate this, but every single keyboard Apple used to have an inline prediction when you type them, they now have 3 predictions, google as well. Pretty much every UI has that. So whether we happened to be the first people to come across that, I’m sure if we hadn’t someone else would have done it anyway but that UI turned out to be very powerful and so it’s a combination in our design not just about the technology but also how you package it up in a way that’s empowering users.

Mark Littlewood: Ok. So were you thinking about making money with this business in this early stage or just on getting something that was a functional working prototype?

Jon Reynolds: Yeah so I think we did everything wrong. Looking out there, the only comparative we had was T9 which came up here, I mean they run a billion handsets. They had 100 million of revenue in 2007 and got bought for 260 million dollars. We figure that sounds like some big numbers. It would be pretty cool to get our software on a billion user devices. We didn’t realise the licensing market, going out there and licensing our software to manufacturers like Nokia and Samsung was going downwards and the market was growing smaller. Really it was like this looks interesting as a size of a problem! Really it wasn’t a problem, we weren’t trying to set up a company we were literally just trying to make typing better. We thought it was terrible and we can do a better job. But to get a grant funding side of a business further down the line we needed some employees to go that way. I think probably 2010 is what I see as the birth of the company cause at that point we knew what our market and product was, we had a prototype and we talked about the mission and focus, we really knew what we were trying to do.

Mark Littlewood: Did you have any idea about how you were gonna make money at that point? Cause the original thing was a paid app wasn’t it?

Jon Reynolds: Yeah, this is interesting. I heard, maybe too much weight on serendipity and nothing was, and people can tell you in hindsight the genius steps they did. I rarely believe it. But like most of us I look back and think so many points where knife edge decisions and somehow they all add up in the right way.

Mark Littlewood: Cause obviously if you were gonna do a consumer facing app that saves time for people, you just knock out an Apple app and everybody buys it and that was the answer surely.

Jon Reynolds: Yeah, so there’s a lot of questions in here. I think the thing for us was let’s take a bit of a setback. The iPhone was launched in 2007, the industry was disrupted quickly but it’s not obvious to what was going on. Symbian had a 65% market share in 2008, Windows mobile which was windows on a mobile phone, it could do everything, but it was pretty complex for a mobile device and then you have the iPhone. Android didn’t really exist and I wasn’t aware of it until 2009. IPhone didn’t let you put a keyboard on the iPhone. You could do it as a demo but not on the device. I think Symbian was an option but very complicated, we could see it was going down the wrong direction. Android came along and it had 2% market share in 2009 and we heard 50 manufacturers were launching Android phones at Mobile Congress in 2010 which is the big industry event. So kind of the data was showing that Android had momentum behind it, but it was a very small part of the market. At the same time apps, it’s hard to remember now but back then were kind of nichy – it wasn’t entirely obvious this will be as mainstream as it is today. When we were looking at the strategy in 2009, we weren’t thinking let’s launch an app. We were thinking how do we license to Nokia who was shipping millions a year and get 0.50 cent a device to get a 25 million dollar contract with Nokia. That was what we were trying to do and so we went trying to talk to as many OEMs as possible. The message we got back was your slide deck looks impressive. Your demo on your iPod touch – that was all we could afford so an Ipod touch was our demo – that looks pretty cool. But will users actually want to use this stuff? Is this gonna have an appeal to users? So in actual fact it was the OEMs that gave us the feedback which was go and prove it. And so the app came out of a need and a necessary need to prove out to those OEMs value and we saw our model as going out on licensing. What then happened was we went to this industry show in 2010 – probably when we first connected, around that time.

Mark Littlewood: Mobile World Congress

Jon Reynolds: Yeah and we ran around everyone and they just kind of don’t take you very seriously but amazingly there’s a mobile company called Ink Mobile that were working with 3 Network to produce handsets for them based in Battersea in the UK. They were on a stand next to us. The last day of the conference we went and pitched them and said we came looking for a keyboard, this is pretty good, let’s talk next week in London. I mean how many times in history there’s been a phone manufacturer in London that we could talked to? And they gave us our first contract and really helped us get from 2 people to 10 people. And that kind of worked to basically build out a keyboard for them, it helped us to build an app which we then launched and it became I guess the same business.

Mark Littlewood: You just became very talked about at that point. There’s a difference between being talked about and making lots of money and having lots of customers. But was that – did you kind of think about how you will influence people? I remember just smart people talking about SwiftKey and how much time it was saving.

Jon Reynolds: It’s an interesting one looking back again, I feel like – now I still believe SwiftKey is the best keyboard, but Delta was not as big as it was then. When you look back to 2010, to be honest, kind of you would be crazy not to use it. So we were charging $4 when we launched it. And a bit of an aside but this showed you how apps were on Google or Android Market as it was then. We launched in GBP cause we were a British company and needed the money in GBP but we didn’t realise that Americans couldn’t buy because their credit cards wouldn’t let them purchase the GBP. And so we ended up with a few hundred thousand sitting in the account cause the app was so successful. We are running out of money as a company and we can’t get the money out of google play because it sitting there in USD even though our accounts was in GBP. We realised we had to setup an American bank account and hopefully no one is here from HSBC…

Mark Littlewood: Yeah, they wouldn’t dare. We bank with HSBC.

Jon Reynolds: The local bank which was gonna take us 2-3 months to open up a bank account in America. It turned out to be quicker to set up the subsidiary in Delaware and get silicon valley bank to setup an account for us and in a week we had an account. Bit of an aside about the state of the market then. Lost my chain of thought now.

Mark Littlewood: Ok, we’ll get it back. You launched and had a very successful paid for app and it was going and people kept talking about why can’t you do it for Apple and you weren’t allowed to do it for Apple basically. You were going along very nicely and all of a sudden you changed your model slightly, your business model, because you weren’t doing a paid for app. What was the thinking there? That was a point where you had quite a substantial funding for the first time, wasn’t it?

Jon Reynolds: Yeah, I missed out the journey up. Essentially what happened was that we – Joe ended up doing our marketing – a friend from University. I don’t know anything about marketing at all and essentially he was a person I knew who was unbelievable at getting into any party that you weren’t invited to. He had the most friends than anyone I knew on Facebook. He had all the skills we didn’t have. And so his job for the first year was go out there and get to know every single tech and Android blogger out there because I thought marketing was about getting to know people and so he did that. And I think the credibility we had was because we knew people – all the Android blogs were being set up for the first time as we were launching. We were very early on Android and had a great product at exactly the right time by accident as much as by design and we talked to the right people about it. I think that momentum led to the success. I think that product market fit just happened. When we launched on Android market, because we had a community we built over time, we just wrote a short blog that said please can you help us test out SwiftKey. Within a few hours we had 400 people, in a few weeks we had 5k people and in a few months 50k people. So if we told all those people to download SwiftKey at the same time then maybe we’ll get the chance. That’s really how it started. So we went up on the top 10 in the charts and the paid apps and we stayed there and it grew and that word of mouth effect just happened. So in 2012-2013 we ended up being the top app on Android which was amazing but unfortunately it’s not enough to retire on. The business model was going away from paid apps and towards fermium models. Why did we then shift if we were the top paid app, why would you want to go free? I think we realised that by that stage, we’d gone out there and worked with all these different manufacturers. We’d worked with Samsung, Sony, Blackberry and Motorola. We got a lot of momentum in terms of licensing. We could see that the market wasn’t hundreds of millions of dollars licensing market as we thought it might be at the beginning. Also being at the top of the app store for 2 years, that would be single digit millions of revenue. At the same time we could see the market was fundamentally changing and so apps like Instagram and WhatsApp were coming along and it was less about the revenue and more about the strategic value of users interacting with your product. And so really what we hit upon was the keyboard was an amazing part of the phone and an amazing strategic part of the phone because whatever you’re doing on the phone we’re the interface between yourself and what you’re doing and trying to communicate with other people and make notes, email, Facebook, whatever it might be. We realised rather than having 300 technology users and people using the Samsung Keyboard which was powered by a white label engine, if they were all SwiftKey users, we would have been an incredibly important company in a strategic place. We realised we made some quite big strategic mistakes and it would’ve been far more valuable and impactful for us to have branded SwiftKey loyal users across all our partners rather than trying to make a few millions out of them and the prize was a much bigger one. And that’s really why we raised the money to fund us on the vision. Index and Excel came on at that point and got behind that. And the pivot was going away from licensing revenue towards a free app. We figured it would grow our user base from millions to tens of millions and to use our OEM partners to preload SwiftKey as the default keyboard rather than trying to charge for it. And that was the pivot we went through in 2014.

Mark Littlewood: Who were the white labelled customers?

Jon Reynolds: At the time I guess it was probably – we had a very good contract with Blackberry, also Samsung, also Sony – those are probably our main ones. We had much others that people probably aren’t so familiar with. Now we probably partner with everyone – not everyone but the vast majority. We’ve got about 30-40 partners.

Mark Littlewood: Swype’s one of yours isn’t it?

Jon Reynolds: So Swype is one of our competitors.

Mark Littlewood: Sorry! It was the, sorry. You were white labelling and what’s the Samsung one?

Jon Reynolds: Samsung keyboard before us was using Swype and then we were competing with them to get the contract. We’ve been on every Samsung phone up until the Note 7, which was an unfortunate one. Nothing to do with us not being on it. But again, Samsung is probably the main one right now were we haven’t moved across to SwiftKey branded relationship but we’re with Huawei, Sony, and really hopefully getting more visibility on handsets people are buying.

Mark Littlewood: Ok. So Apple store.

Jon Reynolds: Yeah.

Mark Littlewood: Finally got there, 2014?

Jon Reynolds: Yeah.

Mark Littlewood: So 6 years after you started. What changed there? Did that kind of change the way people perceived you?

Jon Reynolds: Well it was amazing cause I think lots of people start on Apple and go to Android. I think there’s definite challenges and pros and cons to both, but I think there’s a lot of complexity on Android. I think we’re on 10,000 different device keys so even one model will have a skew for every single operator and region. And strange things like suddenly in Gmail, they haven’t implemented something properly in Android so the keyboard doesn’t work properly. So you get these strange bugs. We had to raise our game a lot because when you work with the people like Samsung, the quality bar is so high. When working in 100+ languages. I think moving across to iPhone in some ways was a relatively natural step for us. The challenge was we only found out that Apple were opening up the keyboard framework in their keynote speech, 3 months before they went live. That’s how secretive they are. We had built a demo app called SwiftKey note on the iPhone platform before to advocate that it would be good to get SwiftKey onto the iPhone. But because of the way our software worked, we were quite well set up to bring a lot of the SwiftKey experience onto the iPhone. It’s one of my proudest moments for me in the whole company. We put a small team – at that stage we had come to the conclusion that very good people but very small amounts of them was the best way of doing things. So having a team of 4-5 people and their job was get this shipped and we released it. We knew the deadline we had to meet it, we released it full spec of what we wanted to release on time and I think the marketing campaign again was incredible around it. We had 5 million in the first week or so, so the launch was very successful. Unfortunately, and I don’t want to go into too much detail, the platform wasn’t quite as mature as Android had become over the years so there was a battle around stability which we’re limited by the platform. As devices got better and better, the experience on iPhones became a lot stronger so we made a recent release on the iPhone a few weeks ago and we’re starting to really invest in it again, but I think we probably haven’t had as much momentum as we could. But our hands were tied a bit there as well.

Mark Littlewood: Got it! So, May 2014, I have a quote here from you. And this is…

Jon Reynolds: This is from my cofounder, Ben.

Mark Littlewood: We’ve had a number of approaches but we’re mostly excited on building a UK based tech company to rival Google, Facebook and Microsoft, the giants of the US. The west coast has a culture of building these companies up so they support a whole ecosystem of start-ups around technology entrepreneurship. We want to do that. And then you joined Microsoft a month later. A year later, two years. What changed?

Jon Reynolds: It’s a good question. I think that was an aspiration for us and the more I look back on it now, I think we had a very special team and opportunity. I think we also could see that the major players in the UK, and I don’t want to discredit any of the major UK tech companies, but it felt that people like Google had a more positive impact on the tech scene than home-grown businesses. We’re all passionate about wanting to build the ecosystem here. I think at the same time you have to do what’s right for your business so I think we’d always had this approach, we had this long time vision and it’s probably a slip that that was ever made public, but our long term vision was always about taking the company in one direction. But if someone approached us on the journey and obviously you talk to them and you’re polite, and so by the time we’ve been around for a long time, you can imagine everyone – we tried to partner with everyone in the industry, we’ve had a lot of these conversations. I think the process we came down to is everyone focuses on money and on acquisition but it’s a lot more than that. The three criteria we had were vision and mission. How aligned are we on that? What does it mean for staff and what does it mean for valuation shareholders? And all our staff had options so that’s the same thing basically. And I think what’s really interesting we spoke to Microsoft and we spoke to them for years, we knew them in 2010, they were doing windows mobile keyboard, but their vision has changed a lot in the last few years and they realised that. The mission of Microsoft is to empower every person and organisation to achieve more. It’s a pretty ambitious kind of big vision and so they can’t do that without being on Android and IOS. So the last few years they’ve changed their approach and really built up some incredible apps. At the time they started speaking with us, they’d bought a company which has become the Outlook app, Summarise which is the calender app, Wonderless which is a note taking app . You could see SwiftKey alongside these applications, being a clear part of that productivity offering. So I think over 2015, these conversations developed and we gradually pitched our vision of where we were taking the keyboard and they said it’s the same thing we were thinking about internally. It’s a huge alignment on –

Mark Littlewood: Sorry, I thought there was someone waving a hand for a question but it wasn’t.

Jon Reynolds: So there was a huge alignment on vision. And the second thing was because they basically said we want you to do what you’re doing, so we want the vast majority of your team to come with us as well. So there’s a very clear alignment and then it’s a negotiation about price value, etc. But I definitely feel if I look at the journey that we’ve been on since, I think our user base has doubled since we’ve been acquired in terms of our branded Swithkey users. We’ve carried on releasing and updating SwiftKey every two weeks on the same cycle. I think we kept that rhythm pretty well within Microsoft as much as we did beforehand.

Mark Littlewood: So one of the things that Jason Eckenroth was talking about this morning when he was talking about selling his business is that everybody around you will advise you to take the money. It’s a good idea, your investors and advisors typically. Was there any bit of you that thought should we stay independent? Did you feel in control of that process and comfortable that that was the right outcome for the thing that you started?

Jon Reynolds: I think what I’ve learned is that essentially it’s very hard for boards to do much without the founders blessing in either direction. I mean you can obviously be forced to sell. But I think for me and Ben, I think we – as I said, it wasn’t as if we didn’t know the situation or we hadn’t potential conversations previously. We knew – I think we’d earned the right to make that call and so I think in this situation, I think a lot of things aligned. I think we also felt because our vision now was about distribution, there was less about revenue generation. Actually taking off the pressure to generate revenue in the short term to keep the business running and having a true long vision was very attractive at that point. Knowing that Microsoft would come alongside us, give us better resource, some great technology we’ve been able to leverage as well and accelerate our vision, I think truly did fit with where we were going. It wasn’t as if someone was going to come along and say you’ve got some great IP but I actually want to fire all of you and kill the app as well so everything you’ve built will stop. This is a sense of securing the legacy for the product, for the team and for us as well and bring it to another level.

Mark Littlewood: Ok so as cofounders that – so you have board meetings and in your board meetings you have these let’s look at these strategic opportunities etc etc. Did you spend time consciously together away thinking about strategy, thinking about vision and those kind of important things that you sometimes sort of miss as you kind of go through – you obviously can look back at this and can articulate some of the key points. But in the moment, were you aware of those things? And how did you manage that with Ben as the cofounder? How did you sort of manage that tension between dealing with the day to day and staying true to a vision?

Jon Reynolds: Yes. Great question! I think there’s a lot I take from working with Ben, he’s an incredibly individual – if only you’d had the chance to meet him. I think one of the reasons SwiftKey worked was because of that relationship and that actually we have very clear strengths and differences in what we could do. Like, I couldn’t code so at the beginning my basic mantra was anything that wasn’t code I would do to make sure Ben could code as fast as possible. So that meant I took on fundraising, marketing, everything just because it needed to get done. Doesn’t mean I loved all these things, but I had to make it happen. I think that worked very well for a long period of time. As you grow larger, we ended up being 140, you need to get greater clarity. So actually I think after a period of time it gets to the point where both of us have the experience and ability to run the business and 80% of the time we’d have exactly the same view on something and 10% I’d have a different view and 10% he’d have a different view. I think when it comes to the strategic questions, not about selling but the direction of the company, that’s where those differences become clearest. I think along the journey there were only certain times where we really big calls to make. I think it was very clear what we had to do in the beginning, it was OEMs and then we had to get a app out there. At the point when we chose to go to the free model, we both agreed it was the right thing to do and we started scaling the business. Then the question became the balance between trying to generate revenue to keep the business going versus building the pure technology vision for the future. Ad that around 15-16 is probably where the bigger differences between us, because the balance of keeping the business functioning from a business perspective and actually what we want to do from a product perspective. Those are tough calls for leaders to make and as cofounders you have to have an element of both of you need to make those decisions together.

Mark Littlewood: I know we got a room full of introverts, but if anyone has questions I will open it up. Ok we’ll start up there! Just before we ask Bridget what her question is, what was the thing that you hated most about that journey that you’d been on?

Jon Reynolds: It’s a hard question. Two things, most difficult thing to me was always coming back to people because if you’re running a business, you care deeply about your staff and the people. And it’s always some crisis going on everywhere so your whole job is always mitigating different things and it’s hard because that’s the thing you take home at night. I care about the app store and our metrics but I also deeply care about – the thing I probably find hardest is I quite like switching off so I’m not the type of person…we talk earlier about holidays. And for me you’re on holiday, go on holiday, don’t email. I’d never worked on Sundays but increasingly both me and Ben we’d try and take a whole weekend off cause we needed time to recharge. It’s a marathon when you’re businesses. But whenever I was on holiday, we were always raising money. It didn’t matter if I put it 6 months away or next week but somehow we were always raising money. So I was spending an hour a day talking to lawyers, it’s not what you want to do with friends going around Sicily. So when that happens every year for 5/6 years, it’s the ability to truly switch off and truly recharge your batteries because I know it’s best for me and the business but sometimes when you’re leading the business, particularly investments, you have to make it happen.

Mark Littlewood: Did you push each other to do that? Did you recognise it at the time?

Jon Reynolds: In terms of what?

Mark Littlewood: That you needed to switch off.

Jon Reynolds: I think sometimes in the business it’s unconscious things and cultures and values that you put into business. I heard someone tell me a story about, they always happened to have lunch at their desks so when they started hiring people they found they had 10 people that had lunch at their desk. And someone put their hand up and said can I go out for lunch? Of course you can. It was the fact that everyone just assumed that’s what you had to do, that’s how the company worked. I have this thing about are you deliberate and intentional about the culture you’re building or are you accidentally building culture? I think you can email all weekend and it helps you out and I clear out my emails but suddenly I got all my stuff replying to emails. Is that what I want or do I want them to have a break? You have to think deliberately about it and me and Ben were on the same page. I think we’re both happy taking a break, if one of us was a 24/7 and the other one wasn’t that might be different but with those kind of values a lot of the stuff was subconscious and we did it because that’s how we both were.

Q&A

Mark Littlewood: Thank you! Bridget!

Audience Question: My question is a good extension of what you were saying. When you were acquired by Microsoft, we heard a lot today about organisational theories and culture. What was the biggest impact on your company and the culture you’d already built – post-acquisition did they try to impose on you their management theory or the way they liked to organise stuff or did they all eat at their desks and couldn’t believe you let people go out for lunch?

Jon Reynolds: It’s interesting. What I learned at Microsoft is that there’s a lot of autonomy for different group leaders and managers and stuff. A lot of my experience is related to the part of Microsoft I’ve been in. We’re in AI and research area, so maybe a bit different than other parts of it. But I feel they’ve done a good job of actually maintain a lot of our culture identity. I think we’re now a year on so we’ve moved from our offices in Southwark across to Paddington so it was probably the right time to start feeling a bit more assimilated and part of the wider Microsoft team. The location may not be as great as some of the staff, we started looking at different integrations across Microsoft so it’s been a gradual phasing. But in terms of day to day management, day to day working, a lot of it has been very similar. I think it may be the culture of Microsoft changed a lot in the last year. Their staff appraisal system is called Kinect. It’s one page A4, 4 questions and bullet points that you do twice a year. It’s not 25 pages of stack ranking every employee. There are many things that are positive and I learned in a big organisation. The most negative thing I’ve seen is the process around things like purchase orders and onboarding vendors. That whole process I’m used to saying ok, we need to do this and that’s happening this week and it happened immediately. Now we have to plan for at least a 2+ month process to onboard. And that just it kills morale on the team cause the team are used to making decisions and making things happen and suddenly their job is running a process to allow something to happen. I know they’re trying very hard to change that. But I think it’s that, there are a lot of errors – that isn’t the case where I thought would be. And I was positively surprised by the work culture as well. I think I felt like it’s a big company, everyone just takes it easy but actually there are many people there, very smart people working very hard. That’s been a positive thing that we’ve been able to work with and kind of learning in both directions.

Mark Littlewood: Yeah. Are you the CEO of SwiftKey or the something of something.

Jon Reynolds: My boss leads a team called intelligent input so that’s looking at not just text input but also an app called Pix which is looking at cameras and how can we take better image input as well and computer vision that whole area. So some very interesting research in all these different directions so he’s leading that area. And then essentially me and Ben, Ben’s leading the product area, I’m leading on business development and marketing and then Steve who’s head of engineering he’s leading on the engineering side. We’re very structured and we report to him.

Mark Littlewood: Gotcha! Andrew, you have a question!

Audience Question: Two ones. One quick one and apologies if I missed it. How did you make money after going free with the app? The second question is you mentioned a lot of your employees had options. How did you start that off? I’m intrigued about how one decides how much to give, particularly in the early stages when the company evaluation isn’t that high. When is the right time to start giving out shares in the company? What’s the right strategy to do that?

Jon Reynolds: So with the business model, originally we felt there might be some easy freemium options so you might make money from selling themes and things in the keyboard. And that was kind of –

Mark Littlewood: I was remembering being offended when I got an email offering me emojis for 0.99. I was like jeez!

Jon Reynolds: This is the heart of the question. How did you make money out of the keyboard and keeping the product purity there? We went away from that direction, all the themes are free, we don’t charge anything. When you get to a large user base, because the interface you have between the user and what you’re doing, there’s a lot of things you can potentially offer the user. So I don’t know, can we enable you to – we know you were writing about meeting up. Do you want to have an Uber? Can you imagine a service that would come in? You can also imagine greater integrations with other apps. And you might be able to share or users might opt to share data to enhance the experience. There’s lots of things like that but I think all of these happen at scale and I think this is why the acquisition made sense for us. We knew it would take us time and more investment to get to that scale and with Microsoft there’s the time and investment they’re putting in to ensure we get there.

Audience Question: Did you revenue go down?

Jon Reynolds: Our contracts were 5 years with big manufacturers, there’s a long time period before all our revenue went down.

Mark Littlewood: Just to be clear, you swapped a decent but not huge immediate supply of cash for some big ass enterprise sales that were gonna happen at some point.

Jon Reynolds: Yeah, but also you have to make sure that your investor and your staff are behind you. It’s a big pivot to do that. There’s also things I’ve learned in hindsight from doing that, around that, modelling where the revenue comes. I think also the thing about size of the team and what’s the right time to invest during those pivots, there’s many things to discuss on that journey but ultimately we’re fortunate it did work out well. So the second question, I think options – this comes down to, it’s hard when someone comes and says we did that. Every single founder and management team has to make the right decisions for their business. There are a million different ways to run a business and they’re all good under the right circumstances. I think for us we had a principle which was we knew that unless we become like a Facebook type business – and that was our aspiration – most people an option will be a nice bonus. But it won’t be something on which everyone retires on. We felt everyone just shared in the success of the business and everyone to win when that point comes. But I think the reality for certain roles you do need to end up offering more substantial option packages. I think particularly as we developed the company people became more aware of options. In the beginning in the UK, options weren’t a thing people were aware of. As soon as we set up in America and started hiring people there the first question was what are the options. Whereas here it was more interested in the salary so it was an education piece where people are now much more aware of that. We tended to offer what was fair and I think largely everyone has done reasonably well out of it. This is one of the hardest things, our methodology changed a lot over time and if someone leaves, should they take the options with them, lose all their options to prevent them from leaving? In the beginning we were quite penalising and then we realised people want to leave, allow them to leave, let them keep their options. You kind of do some things when you don’t know what the company is about and later you think it’s not right. Most of the things you can put right but not all of them.

Mark Littlewood: You had an interesting example, a 3 founder situation but one of them never really kind of engaged. What was the –

Jon Reynolds: Yes, so very early on, I think I pitched the idea to a bunch of different people. Ben was the guy who said yes he’s definitely on board. Had another friend from school who was a photographer and UI designer and I pitched it to him as well. So we started the company with 3 founders, Chris was doing UI design, Ben doing the back end tech and I was doing the business side of things. That was the idea. And I think fair play to Chris, 4 to 6 weeks in he said look this isn’t for me. I’m not the type of guy who wants to do this and he opted himself out and we thought it was literally nothing at that point – just a few guys talking. We could go and set up another company but it’s easier to offer some money for his shares and we bought him out. The idea was that it’s worth nothing but if we’re generous now and everyone left on good terms, that was it. The journey that happened later is 7 years of hard slough and I think I’d be different if he was around for a year or two. And I think a lot of credit to him as well to say that, if he hadn’t it would be harder to have the conversation 6 months in.

Mark Littlewood: He tweeted and said that it was a bit of a stupid mistake. But yeah, interesting. These things happen. There was a question here and there. Ian.

Audience Question: Can you foresee end of QWERTY?

Jon Reynolds: I guess that’s what we originally founded. I find fascinating right now where we’re getting very close to the point where I think speech recognition is getting in certain scenarios pretty close to human quality recognition and so I think my co-founder like to talk about it and if you had perfect speech recognition and perfect gesture based typing, what would you do? The reality is there are some scenarios where it’s really good to type and others where it’s really good to speak, depending on content, what you’re writing depending on the thought process. I mean humans have been producing written text for thousands of years. So it’s something about the process and reinforcing it in the memory which is important. I think we will see probably more voice input as time goes on but I also think that the quality and the importance of typing will not diminish and we will end up in a scenario where both will be used, depending on the circumstances.

Mark Littlewood: Yes.

Audience Question: I think you mentioned earlier that the vast majority of people would be part of the acquisition. It sounds there were difficult decisions there. Is there anything you push for on the negotiating table? In terms of the team that certain people wouldn’t be included after the acquisition.

Jon Reynolds: That’s a really hard area to talk about so I’ll be careful but I think what often happens in acquisitions is that a lot of the support functions the existing company tends to have that in place. So I think all our staff in that area, I have been incredible proud of how professional they were during the process, and helped the integration. Most of them knew it was the part of the deal and I think Microsoft handled that very well and treated everyone fairly. I think most of the rest of the teams in terms of engineers, you want as many engineers as possible, we want to hire engineers and I think other roles you want to maintain. I think it was mainly in that area that that was the only difference.

Mark Littlewood: At the back, yes. There’s some good questions coming out today! Well done!

Audience Question: You mentioned that in the beginning you were handling pretty much every aspect of the business that wasn’t coding. I’m really interested to hear what were the things that you struggled the most to hand down once you started really growing the team. And is there anything you with hindsight you wished you’d handed over sooner or did it in a different way?

Jon Reynolds: Good question! I mean I think like I don’t know how many VAT returns I did, but at the beginning you do whatever it is. I think one thing that is quite hard, some things are harder to delegate than others and one area which is a big is strategic relationships. And it may not be precisely true, but some relationships like with Samsung it took us 3 years to build the relationship up and you get turned down a 50 times in the first two years and eventually you get the door to visit and you get a chance. Even if you’ve got a really great sales guy. For certain key relationships and opportunities I think the founder will always be pulled in to that, same with investment rounds. I think I don’t know if I ever had that, I don’t mind delegating and working with other people but there’s certain areas for the key meetings you need to be there and maybe someone else can help with kind of building up to that point. But I think I originally thought it would be easier to say look I’ve hired a sales guy, I’m not doing sales anymore but that never happens. It’s the same with product, you can hire product managers. And Ben, my cofounder, has spent a lot of time on the product vision. In the early days it’s where we spent a lot of our time together on.

Mark Littlewood: Yeah. Ok, so what’s next? You’re in Microsoft, your SwiftKey tentacles are spreading across the organisation. There’s a ton of stuff going on with AI and machine learning there. How do you sort of fit into that broader vision of Microsoft that they have as much as any other giant companies.

Jon Reynolds: First of all, we need to be at a very large scale to make an impact from Microsoft. It’s crazy cause if you’re a business worth hundreds of millions, then what’s the point? Equally if you had a user base more than a hundred million users, what’s the point? First we need to scale and that’s what our core focus is. That means investing in product, making the product better. Building up partnerships, trying to get distribution and working with Microsoft to achieve that. It’s a core parity. Then it’s about adding value for our users and other parts of Microsoft. So over the next year or 2 you will see these features come in. One example Windows team talked about having a cross-device clipboard so you can copy something on your windows PC and in Android you can paste it through the keyboard. So those kind of features where actually you can start seeing intelligence coming across between devices is at the heart of where Microsoft is going and getting intelligence across every touch point. My focus is to make that successful for Microsoft, our responsibility is to make that happen.

Mark Littlewood: Gregory!

Audience Question: There are more and more companies that are working toward the home assistant, Siri and Amazon. Do you ever see a SwiftKey assistant more geared towards voice and gestures?

Jon Reynolds: Microsoft focuses on Cortana as there competitor in this field. There’s a lot of progress in the research. It’s probably more of a question on how we would work with Cortana rather than would we do something on our own.

Mark Littlewood: Good question.

Audience Question: Now that you’re at Microsoft, will that impact your Apple strategy in terms of how do you set prioritisation now that you have a Microsoft boss to report to?

Jon Reynolds: I think Microsoft wants to be the best productivity experience across Apple, across iPhone, across Android and PC. It may have changed the last few years, but the leadership is it’s mobile first for everyone. I don’t think this has changed at all, it’s the same like before.

Mark Littlewood: Was that – sorry down here as well.

Audience Question: It’s somewhat impertinent but I suspect I’m not the only one thinking this. I don’t know the value of the deal but looking it up on an iPad you could see what they press reported.

Mark Littlewood: What did the press report?

Audience Question: It said for 250 million dollar cash buyout which I wouldn’t be impertinent to ask you what portion of that you get cause you’ve done investments. But it means you don’t need to work again when you work out the clauses in the agreement. So beyond that, what motivates you? What are you going to do?

Jon Reynolds: That’s a good question. And I think, it’s weird, if you go back and…I speak to a lot of founders – I don’t mean – I’ve been to various conferences and seen amazing founders. The passion is mostly about the problem, the solution and how it’s impacted on people’s lives. Some people get motivated by trying to make a lot of cash. That wasn’t the case, it was about trying to solve a big problem which had a big impact. You realise it’s creating value and you want to maximise that. But yeah, it’s a very hard question and I think my sense is that once you’ve done a start-up you have the bug so it’s hard to not do it again. There’s so many things we did wrong the first time around. Presumably the second time around you make fewer mistakes or maybe you’re more ambitious and make bigger mistakes. In some ways you’ve got something to lose doing it again because you could fail. But the first time round I knew I could go back and stay on my parents floor. In that way, I think where I am now a year on from the deal is probably less together and clear on my own future than I would have been a year ago. For now I’m focusing on getting the deal done and I’ve realised that it’s a very long process, I’ve been out of it for 10 years now and the fact that a year on I’m still processing and unpacking it, it has a deep personal impact for me and my family and friends. If you’re not careful you could end up just chasing adrenaline, cause that’s what you’ve been used to. Right now I want think about the values, with my wife, I became a father 6 months ago. For us, what’s our priorities going forward? There’s amazing ways to build enterprises and solving big social problems. The next 20 years will have some crazy social challenges which are coming along. Is the right vehicle to tackle those a company, a charity? I think ultimately we should look at a company as a way to align people and organism. So the company is the vehicle to achieve that mission. I think I’m passionate about solving problems and now I want to carry around solving big problems but the right method to do that, I don’t know.

Mark Littlewood: Ok. I think that’s probably a really good point to wind up or wrap up. I’m sure there will be plenty more big problems and opportunities to solve them. So you will be around for drinks and so – what’s that? Ok now could everybody just get ready to clap, please? Ladies and gentlemen Jon Reynolds!