A profile of Gus Tugendhat, Tussell Founder for City A.M.
“Government procurement is big business – even the most conservative estimates suggest that 10 per cent of UK GDP is spent on goods, services, or constructions on behalf of the state.
In the wake of the Carillion scandal, questions about which firms the government awards contracts to – and why it seems to be same old faces – have been correctly asked.
Carillion was over-exposed, taking on an unmanageable amount of contracts on too-tight margins. This hammered the nail in the outsourcer’s coffin. Calls for the government procurement process to be more transparent, to level the playing field, and give SMEs equal opportunity, have been made by think tanks and business groups alike.
Perhaps unbeknown to said groups, three years ago the government passed a law – the excitingly-named Public Contracts Regulation 2015 – forcing all local and central authorities to publish all procurement data on the Contracts Finder portal.
But making sense of this deluge of data is easier when you have a whole team dedicated to business development – something few SMEs do.
It’s big business, and one that Gus Tugendhat has tapped into. Having spent a career working at the intersection of data and finance, after a brief stint at a startup, he founded Tussell, which takes the open government data and turns it into something useful.
“We take everything the government openly publishes and we collect it, aggregate it, standardise it, we cleanse it, validate it, and curate it,” he says.
“It’s for those asking themselves quite commercial, strategic questions, like: how much does the government spend on media buy? How fast has it grown over the last five years? Who are the biggest buyers? Who are the biggest suppliers? Who has the biggest market share? Show me a footprint of all the contracts, alert me when a competitor’s contract is running out.”
The use cases are staggering. From an SME providing workwear, to a hedge fund checking its exposure to certain industries or companies, the granularity of the data is second-to-none.
“To use a cliched phrase, people want to follow the money,” says Tugendhat.
“Essentially, our database allows people to follow the money in a sector that accounts for 10 per cent of UK GDP. The Bank of England, whose people I met recently, framed it in an interesting way. They said that, especially post-financial crisis, they look at the UK economy as a network, and the UK government is the single biggest node in the network. It touches 28,000 companies directly, and many many more indirectly through the supply chain.”
Having only launched in 2015, Tussell already counts Morgan Stanley, Credit Suisse and Lloyds Bank among its clients. In a fairly meta appreciation of his platform, the government itself even uses Tussell to read its own data.
“They actually pay us to mine a clean version of their own data. And then we also provide them with more partnership related services, like the fact that, through our database, we have a really good idea of data coverage and quality. So for example, we share information with them about the number of contracting authorities that have never published into Contracts Finder – essentially those that are not complying with their legal requirement. Or those which have published in the EU database but not in the UK.”
Tugendhat praises the government’s transparency and accountability as a “tide that raises all boats”.
If the government is better at publishing data, Tussell benefits, and in turn, so does the market at large. If everyone can see which tenders are open, or approaching, in theory it should level the playing field, offering equal opportunity to both SMEs and behemoths alike.
“It’s not just the big beasts asking themselves these questions,” he says. “One of our customers is a Bristol based workwear company, and they win big government contracts for workwear, and they’ve got really sophisticated business development processes. They really want to deeply understand their target market, their addressable market.”
Another use case, with a City spin, is nothing to do with actually procuring work itself. Having a granular view of the minutiae of government procurement is priceless to those operating in capital markets.
“Our database contains more than £3 trillion of public procurement going back five years, and if you’re in capital markets, that’s quite a trail of money. We’ve got a hedge fund that is mining for the predictive value of that. If you’re a fund manager who wasn’t yet shorting Carillion – or if you are a shareholder of Interserve, Capita, Serco or Mitie – you want to understand whether what happened to Carillion can happen to other stock you hold.”
The data is such that Tugendhat has even discovered further use cases beyond those he anticipated. He bootstrapped the firm – self-funded for the first two years, resisting fundraising for as long as possible, “because the earlier you raise money, the more equity you give away, the more leverage other people have.” When he had built the platform and proved the concept, he decided to go through a private £1m fundraise, with investors well known to him personally. But every fundraising garners media attention.
“When our fundraising was announced, as these things do, it obviously went onto various websites. And in the month or so after our fundraising was announced, I got a barrage of emails from people who rightly, cleverly, took that piece of news and said: ‘well if Tussell is flush with cash, then it must be investing and spending and growing, and therefore it probably needs insurance and recruitment, IT, search engine optimisation – all of these things.
“They used our fundraising as a trigger to market services to us. And the opportunity we see with Tussell is to use government contract wins in exactly the same way.
“So to say that if You Ltd has just won a £1m government contract, and we can validate that it is equivalent to 20 per cent of your prior year turnover, then winning that is quite a big event in your corporate trajectory. It’s probably a signal that you’re vetted, you’re creditworthy, and you’re growing. It’s another way of identifying creditworthy companies in growth mode.”
Read the full article on the City A.M. website.