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Using Bayesian probability theory, Lynch developed software that enables a computer to analyze any type of prose -- whether in e-mail, Web pages, or word processing documents -- and understand its context. More important to its major corporate customers, Autonomy's software enables a computer to take that information, categorize, sort, and store it -- all tasks normally requiring manual labor. Thanks to the Internet, the demand for this kind of information processing is growing exponentially, as is four-year-old Autonomy. Since last October, the company's shares have soared from $15 to about $120 on Europe's Easdaq exchange. That gives it a market cap of more than $5 billion -- making its 34-year-old founder, who owns 16% of the company, Britain's first Internet billionaire. Autonomy, which runs its operation out of both Cambridge, England, and San Francisco, plans to list on Nasdaq in the next few months. COMPETITIVE ADVANTAGE. Having outstanding technology wasn't enough to make Autonomy a success, though. Lynch saw that if Autonomy was to break into the global big leagues, succeeding in the U.S. would be essential. He established his U.S. headquarters in Silicon Valley two years ago to be closer to major customers and the Internet scene. Now, more than half of Autonomy's $40 million in annual revenues come from the U.S., outpacing the company's sales in the rest of the world. Analysts expect those sales to increase in the coming years, since Lynch has licensed his technology to several major U.S. software companies, including Oracle and Sybase, in the last year. "Two years from now, companies won't be able to sell software that doesn't have this kind of information automation and management capability built in," predicts Lynch. So far, Lynch's technology is used by more than 160 major corporations. These include Reuters, Merrill Lynch, and British Aerospace. As a result, the company's sales have grown at a compounded quarterly rate of more than 50%. Autonomy benefits from the fact that it is one of only two companies that have this kind of sophisticated proprietary technology, according to analysts. The other is eHNC, a spin-off from U.S.-based HNC software. eHNC's technology, however, doesn't automatically offer users links to sites where related information can be found. "Autonomy is the leading global provider of technology and software products that enable the automation of tasks that would otherwise require costly manual labor," says Dresdner Kleinwort Benson technology analyst Nick Bidmead. Autonomy is likely to maintain its early competitive advantage. Its software has practical applications across a broad range of market sectors, from business-to-business and business-to-consumer e-commerce to document management and security to knowledge management. So the potential growth opportunities are massive. In new-media publishing, for instance, the software enables companies to categorize and organize online text by content, offer links to related material, identify the user's preferences, and then deliver relevant personalized content. In e-commerce, the software allows companies to organize their online product catalogs automatically. More interestingly, it also profiles users' buying and browsing habits and then suggests referrals to related products and services. "We're in a position to make money in almost every area of software," Lynch says. ROCK MONEY. One of the more promising areas for Autonomy's technology is mobile Internet access. On Feb. 23, the company introduced technology that automatically personalizes information delivered to wireless phones and handheld-computing devices. The technology will be sold to content and service providers to enable them to deliver individualized information, such as sports scores and news features, to phone users. Ericsson, for instance, provides personalized business data from the Net and internal sources to their employees' mobile phones via a Web portal. The potential of Lynch's technology seems obvious now. But that wasn't always true. For Lynch, trying to find the original funding to commercialize his research proved difficult. Back then, he recalls, "entrepreneur" was a dirty word in Britain. He managed to get a little over $3,000 in startup capital in 1991 from an eccentric promoter of rock bands that he happened upon in a London pub. Lynch used that capital to start Neurodynamics, Autonomy's parent company, that same year. When Lynch decided to spin off Autonomy from Neurodynamics in 1996, he had enough customers to attract $15 million in venture-capital funding. "At the time, that kind of money for a British technology startup was almost unheard of," says a banker involved in Autonomy's initial public offering. These days, capital for technology and startups is much easier to come by in Britain. A bit too easy, says Lynch, who thinks Britain's nascent Net scene is currently being fueled by an excess of hype and hot air. Still, he's confident that over the next two years, Britain and Europe will have their own New Economy and won't be so dominated by the U.S. Until then, Lynch is likely to remain something of an icon for Britain's upcoming Generation E. But it's certainly not an image he actively cultivates. Lynch admits to being more of a homebody, spending what little free time he has at his estate in the rural countryside of Suffolk, England. "My idea of heaven is relaxing at home with my rather large and smelly dog, Gromit," he says. Lynch named his otter hound after the dog in British animator Nick Park's celebrated Wallace and Gromit series -- where the clay hound's intelligence far outstrips that of his owner. But in the case of Lynch, who has been dubbed Britain's "billion-dollar brain" by the London press, there's no doubt who's the master. Capell is a Business Week correspondent in London |
