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Multi-room music system proves sound investment

When accountant Peter Murphy joined West of Scotland hi-fi specialist Linn he loved music, and he loved the sound of one day running his own business.

global PLAYER: Peter Murphy started Simple Audio at his home in 2008. It has just been snapped up by American computer gaming specialist Corsair. Picture: James Galloway
global PLAYER: Peter Murphy started Simple Audio at his home in 2008. It has just been snapped up by American computer gaming specialist Corsair. Picture: James Galloway

Nine years later in 2008 he started Simple Audio, on his own at home, then battled four years of hand-to-mouth funding in Govan and Cathcart to get his networked home audio system into the market.

Last October his Glasgow engineers' creation, retailing at under £500, was tested by Stuff – the world's biggest-selling gadget magazine . The verdict was "better than Sonos" – the giant corporation that dominates the global market.

No surprise, then, that last week Simple Audio was snapped up by Silicon Valley, as computer gaming specialist Corsair delivered undisclosed windfalls to Mr Murphy and a handful of fellow directors – a smart return for Scottish Enterprise and angel investors, and a US-backed growth platform in a mass market for Scottish technology.

"I was quite ambitious and wanted to build a company from scratch," says the unassuming father-of-two, who had quietly plied his accountancy trade until he hit 50. "I was keen to bring HD audio to as many people as possible, but it wasn't a good time to be raising funds.

"We got knocked back by all the banks, who weren't interested in funding product development, and we went for a Smart award from Scottish Enterprise (SE) but got rejected as 'not technically challenging'."

It took Mr Murphy two years to recruit his cadre of high-quality engineers, several from Linn – which operates higher up the market – and to raise £35,000 from the West of Scotland Loan Fund, £35,000 in a SE product development grant and £20,000 of his own cash. "That allowed us to get our first prototype developed, from there we showed it to a few people. Par Equity got involved and SE reinvested through their co-investment fund.

"It took three to four years to get us from very early concept to a system that will deliver digital music to 32 rooms in a house in 24-bit audio – the challenge was keeping it funded."

Nine years in the operations and executive management teams at Linn had convinced Mr Murphy that multi-room digital music could be made affordable. "I saw a gap in the market for a product that could deliver superior sound performance at an attractive price. The only competition was systems that sounded OK but had limited functionality... we believed we could create something better, and the market itself was huge. We had seen it grow in a couple of years from £100m to £1bn".

The networked audio market is forecast to mushroom to £10bn within another two years.

The Glasgow team spent two years going round Europe, talking to customers about what they wanted a digital audio system to deliver for them.

Mr Murphy goes on: "We needed very high quality engineers, that is what makes one product sound different from anything else, and I was confident I could put a team of guys together who could do that."

The founder believed the start-up had another advantage. "A lot of competitors have legacy products like CD players, amplifiers, turntables. We believed that to be successful we needed absolute focus on the digital music customer. Once we heard the early-stage prototypes we thought they already sounded better than the competition."

But money was tight. "Three or four times we were backs to the wall," Mr Murphy recalls. "We were lucky things seemed to appear at the right time – Par Equity appeared, investors came in at critical points but you are never more than a few weeks away from running out of cash."

The Par Equity syndicate of 40 investors brought not only cash, but business help. "Each time we needed additional funding they dug into their pockets, and we got a lot of good advice," he says.

Mr Murphy admits: "The only time I started to feel more at ease was when the products started to sell. By that time we had gone from one person to 15."

Now Simple Audio hopes to double that strength over the coming year, bringing valuable skilled jobs to Govan. "It's a good place to source engineers from," the founder says.

The players are manufactured in Scotland using audio chips from Edinburgh's Wolfson Microelectronics.

Does losing independence matter? "We see it as just another step forward for the company," the entrepreneur says. But why a computer component maker with a niche in PC gaming?

He reveals that Corsair had been tracking Simple Audio since 2010 and was attracted to the digital music market. Its approach was no surprise.

"Corsair has moved us to another level of capability. They're very strong in logistics, distribution, capital resource, and will help us do what we set out to do in the first place."

It was harder, and took longer, than expected. "When we started we weren't sure why so many people had come into the space and failed," Mr Murphy says.

A major challenge was to enable the networked home audio to deliver internet radio stations and music streaming services, with the same HD quality, and keep up with constant change in the market.

"People's music libraries come in different guises and different formats. We found out about the difficulties as we got more into it. One of the values for Corsair is that we have actually done it – other companies have got part of the way and had to stop," he adds.

The company projected a £2 million turnover in its first year, and £4m in 2013. Mr Murphy says that should be achieved with sales across the UK and Europe. By the end of this year, the systems will be in the US and Asia.

The San Francisco corporation has a $500m turnover and employs 800 worldwide. In the UK, he says, there doesn't seem to be the financial backing or the ambition to go and do it.

He reveals: "It was never an ambition to be a £10m to £20m audio company – it was always to be a global player. We weren't hung up about how we did it."

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