Newcastle’s hedgehog lab reveals success secrets

Newcastle digital consultancy hedgehog lab has experienced major growth since it was founded in 2007 by Sarat Pediredla and Mark Forster.

The company aimed to double its turnover every year, and has succeeded in opening offices in London, Copenhagen, Boston, Austin, and Hyderabad.

It seemed like the app developer would experience another surge of growth after it received £1m in investment from Maven Capital Partners last year. The cash was designed to allow the firm to invest in its sales and marketing function, boost its delivery capabilities and broaden its presence overseas.

But almost immediately after striking the deal hedgehog lab hit a major stumbling block when a client went under scuppering a six-figure contract and dealing a massive blow to the firm’s growth strategy.

The company, which had previously been riding high off the back of its huge growth figures, was forced to restructure its business and make redundancies.

“I think when we finished we had to make 16 people redundant. They were mostly developers. There was some departments we didn’t need and it allowed us to take stock of what we needed. It was cost cutting and we had to balance the books.”

Sarat describes the breach of contract as “bad timing” as it happened almost immediately after the firm received its investment from Maven.

With hindsight, the senior team believe that much of the problem was created due to the company’s huge growth rate, which “comes with its own risks”. Sarat admits that he and his team made mistakes that led to the business being unprepared once pressure was placed on the firm’s finances.

“When you are growing at a breakneck speed, you are going to make mistakes. I have posted on LinkedIn about some of the mistakes we made. Ultimately the buck stops at the top.

“The key is, how do you learn from those mistakes and fix those problems? With the experience of 2017 we have grown every year and remained profitable.”

hedgehog lab’s problems last year stemmed from its success over the last few years and its rapid almost uncontrollable growth. The company now employs more than 140 members of staff around the world, including 65 in Newcastle.

Sarat is clear that the company is now focusing on growing the business in a “sustainable” way, which means having the right safety measures in place to weather external issues such as clients defaulting on payments,

Despite the difficulties that affected the business last year, Sarat points out that the firm still increased its turnover, although profit levels failed to grow. According to Inc. 5000 List of Europe’s Fastest-Growing Companies it was reported that the firm’s 2016 turnover was £2.4m.

While growth is understood to have slowed last year the company is now “back on track” and is expecting to report turnover growth of 70% for 2018, at the same time as quadrupling its profits.

“We are at the half year mark but we had already booked more revenue by May than we had done in the whole of 2017,” says Sarat.

“It could have been 100% if we ramped up at the pace we wanted. We can’t just keep hiring people all the time. We have to balance that out with the risk, the fact that work might dry up.”

He adds: “We definitely didn’t foresee some of the problems in that we were optimistic in how fast we would grow. Our stretch target internationally is still 100%, so we are disappointed that we are 30% under target.

“We still want to keep growing at 100% as our stretch target but our expected growth in our business plan is 40% over the next three years. We want to keep delivering that. Our ambition is to build a world leading digital consultancy in Newcastle.”

One of the ways the company is attempting to grow sustainably is through the way it works with its clients. The firm is positioning itself as an investment partner with some of the North East’s biggest companies, such as Northumbria Water, AkzoNobel, and the Home Group.

The company is also restructuring its senior management team, part of which involves bringing in new members of staff, including Aiden Dunphy, who is chief product officer.  He is responsible for the product delivery and he has revamped that process.

After the problems faced by the firm in 2017, Sarat says that hedgehog lab is back on track. Turnover and profits are set to soar, and the company is currently looking to hire another 10 people to work in its Newcastle office.