Standing tall: TOWER goes from strength to strength
28 Apr 2020
TOWER Cold Chain Solutions as a business possesses a compelling and enduring spirit. A survivalist personality which underpins its upcoming growth journey. The time has come for TOWER to rise above the competition.
Too ahead of its time
The cost of throwing away cardboard, polystyrene and the chemical gel packs used to maintain temperatures was high, and the temperature control was inadequate. Things had to change. “We wanted to provide a solution that came with the right temperature protection for the products with a built-in logger to cover the audit trail and for it to be a reusable solution that answered the pressing environmental question,” Pollard says. TOWER’s patented KryoTrans containers answered all of the above.
The product was ahead of its time, and while this felt like a positive thing for TOWER, the market was not ready. “We thought the market would be instantly receptive, but there was no wish to buy our containers. Pharmaceutical companies didn’t want the capital expenditure or the asset management” Pollard mentions. TOWER adapted its approach to a rental model, something that would fit the customer base, but even this shift didn’t create the growth that was needed.
The company and its technology was in a sweet spot for future growth both due to the proof of concept, but also various trends/megatrends supporting the concept.By now a new incarnation of the company had evolved to develop the rental concept, this was backed by Chris Pollard and Chris Krzak, a fellow early shareholder who had been responsible for the successful productionisation of the KT400 container, together with Just Arne Storvik and Les Komaromy.
Customers encouraged TOWER to develop larger-format packaging that could accommodate palletised loads, and TOWER responded to the challenge with the remarkable KTM. These containers are modular and can be built into 12 different sizes from the same basic components, able to fit across a variety of transports, including aircraft and lorry holds, without changing the structure of the container. The multi-use nature of the product makes it an appealing prospect as a true end-to-end solution, reducing multiple operational risk factors. The headline of the product though is that as a result of the modular design, damaged parts can be easily replaced and repaired, which in theory renders its life infinite.
Even though the KTM opened up a vast, global market to TOWER, access to that market was still determined by finding sufficient cash to build containers to address the demand. But it was at this time that Just Arne Storvik introduced his fellow Norwegian and long-standing friend Tor Erland Fyksen, and the two of them started to look at ways in which the company could properly realise its obvious potential.
Strength of Nordic financial backing
Fyksen then invited Storvik into Advanzia as a seed investor and participant in subsequent financing rounds. It was during this period that the pair developed a shared entrepreneurial vision through lateral thinking and sharing of ideas. Fyksen was engaged in developing Advanzia into the formidable success story it now is: in the meantime Storvik was driving consolidation in the global marine and energy insurance markets while holding executive roles in Scandinavia, UK and Bermuda.
The capability of commonality
He continues that whether it’s with your business partner or your finance provider, mutuality is important, however on occasions it is friction which spins solutions. And for success, whether from a business or financing perspective, you need to possess a willingness to learn, the ability to confront and be confronted and, most importantly, the capability to listen to the market and the various stakeholders.
"If you want to be a serial entrepreneur, you need to listen and learn. It can be quite a humbling experience." - Tor Fyksen, Majority ShareholderSuch is the nature of entrepreneurialism, there doesn’t seem to be a guide or rule book when it comes to setting up a business. “If you want to be a serial entrepreneur, you need to listen and learn. It can be quite a humbling experience. When you finish your education you feel you know everything, but when you start a business you realise you know very little!” says Fyksen. This was apparent during the early stages of TOWER’s forays into the market. TOWER lost both EIS and EMI tax relief when switching to a rental business model, as they were no longer compliant.
TOWER then had to look outside the UK for funding, to friends and family, as well as angel investors helping support the capital-intensive business. Storvik backs the relationship approach in his business mentality: “A key recommendation is that you need to build strong relationships and nourish them over time. You also need to be transparent and fair, as trust is something that is very hard to build, but very easy to destroy.”
There has always been an ability to survive for TOWER and perform despite the headwinds: “it’s striking how TOWER have managed to get such a good standing with big actors in the pharmaceutical industry, but the fundamental characteristics of the TOWER containers of robustness and utter reliability are so important to them. Most competitors are much bigger than TOWER, with significantly more resources. One of the most pronounced characteristics is how TOWER meets clients with an open and eager attitude to serve.”
One of the most pronounced characteristics is how TOWER meets clients with an open and eager attitude to serve. If you bring a great customer service model, you can win business even if you’re not the most obvious answer. People simply want to do business with you.
Chris Pollard, TOWER CEO
Combination of cultures
“If you bring a great customer service model, you can win business even if you’re not the most obvious answer. People simply want to do business with you, that’s the philosophy we’ve developed, we live close to our customers. It’s fundamental and crucial to us that we provide customers with developing solutions to meet their needs.”
Working for the client is entrenched in what TOWER does, and this puts the business in a great position for the future. They can cater for the ultra-high value, clinical trials as well as the bulk market for finished goods, including vaccines. Fyksen summarises how TOWER’s approach contributed to why he and Storvik become majority shareholders: “We are strong believers in TOWER and the concept, it really has great potential. The product is one thing, but you have to build the "machine", i.e. the organisation and everything around it. Now that TOWER has that in place, it has great potential to develop into a leading international player.”
Pollard underlines the importance of the company’s culture; “TOWER hasn’t been able to afford health plans and nice offices for its staff, surviving in that cash-limited environment is only possible if you have a team that really believes in the potential and the future of the project and the end goal of what it is trying to achieve.”
“We have been building that team steadily under Managing Director Niall Balfour and with the new backing there is now the opportunity to show what it is capable of, I think it’s going to be an exciting journey. Niall joining the team in 2016 was a vital step in our development, and he has brought rich experience from the pharmaceutical supply chain and is now central to the leadership of the business in this exciting next phase.”
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Creating an impactful business community
"This is the beginning of an exciting partnership, and we are proud to be standing alongside TOWER, particularly at this unprecedented time where it can play a critical role in assisting the global fight against the coronavirus." - Jonathan Wynn, InvestecA key example is the funding struggles TOWER suffered in the early days, and even now Pollard mentions that “time had been wasted chasing down what were inappropriate sources of funding, from dozens of conversations.”
However, with Investec’s Private Capital team working directly alongside Storvik and Fyksen to inject new capital to fund a 400% expansion of TOWER’s stock of cold storage containers, Pollard can look to the future with promise, not just in the domestic market, but globally as well.
“The new growth capital from Investec’s backing is going to make a colossal difference. The build program of new containers, funded from this investment round, is so instrumental because it gets us to that critical mass where major operating efficiencies can now be unlocked. The increased size and scale allows us to better service our client’s international needs, by enabling us to follow them into new markets where our solutions are needed most. Has the involvement of Investec helped? You’re absolutely right it has. Clients ask - What is TOWER? What is the kit? Is it sustainable? Is TOWER the right partner? We know that we already have the answer to the first questions, but with Investec alongside us it will give our market the confidence to develop global partnerships with TOWER.”
Storvik concurs; “We found, with Investec, an impressive willingness to think outside the box in order to come up with a financing solution that is tailored to our specific circumstances. Even in the very early stages, we sensed a genuine interest in understanding and engaging with the business, and in thinking how Investec could help to make it a success both in the near term and as a long-term partner on our side of the table to help the business realise its maximum potential.”
The alignment between Storvik, Fyksen, Pollard and Investec’s approach to entrepreneurialism has created a harmonisation to build towards success, the shared values and culture running throughout all three parties.
We are strong believers in TOWER and the concept, it really has great potential. The product is one thing, but you have to build the machine, and everything around it. Now that TOWER has that in place, it has great potential to develop into a leading international player.
Just Arne Storvik, Majority shareholder
Covid-19 - a new challenge, and a new normal
“The outbreak did affect TOWER directly from the start as we have significant business in and out of the Asia Pacific region, in particular China, but our agility and dedication saw TOWER drive through these issues and already we see signs of the market overcoming the difficulties posed by the various national lockdowns and the scarcity of airfreight capacity. In the near term we are dealing with a rise in the number of new business enquiries, as customers seek reliable and robust temperature-controlled packaging solutions that can cope with the delays in the supply chain that are being caused by the coronavirus situation.
“We are building new containers and introducing new stock as fast as we can with the intention not only of winning this new business and maintaining it, but critically looking after our loyal customer base. Diagnostic testing kits for Covid-19 are now being introduced to the supply chain and once we are through the first phase of the virus we will see test vaccines being assessed in clinical trials before entering production for mass market distribution, TOWER intends to play a full part in helping ensure that vaccines and test kits reach their recipients in perfect condition.”
Chris Pollard added “at a time when so much misery is being inflicted on our global community by the Covid-19 pandemic, it does seem to me quite remarkable that all the parties to this transaction retained their focus and determination to conclude the deal despite the massive disruptions to normal life. This seems especially notable on the basis that TOWER’s products will have an important part to play in the safe and effective distribution of vaccines when they become available.”
Investec was advised by Kirsty Barnes at Simmons & Simmons LLP. TOWER was advised by Phillip Slater at Dorsey & Whitney Europe (LLP)
The view from Investec
This capital injection by the Private Capital team is not just a one-off transaction, but a first step in bringing Investec’s full toolkit to support TOWER on its growth journey. This is the beginning of an exciting partnership, and we are proud to be standing alongside TOWER, particularly at this unprecedented time where it can play a critical role in assisting the global fight against the coronavirus."
The sudden deterioration in the economic backdrop, and the logistical challenges brought about by the coronavirus lockdowns presented a host of unique completion challenges, which we overcame together. We are delighted to be partnering with Just Arne, Tor Erland and TOWER, and are very much looking forward to working together to realise the equity vision".