For Mark Klarzynski, building and selling technology businesses has become something of an accidental habit. And he’s done it all from Manchester, something he couldn’t have envisioned 20 years ago.
The Manchester tech entrepreneur is now approaching what he describes as technically his fourth exit, after Nasdaq-listed US tech giant NetApp signed an agreement to acquire PEAK: AIO, the AI storage specialist he founded in the city in 2021.
Just five years from launching a Manchester start-up to attracting a global tech giant is quite the trajectory. But for Klarzynski and investor Pembroke VCT, the significance of the deal stretches far beyond PEAK:AIO itself. It is also a marker of just how much Manchester’s tech ecosystem has changed.
“I grew up in Manchester and I’ve done a few companies. In the 90s and early 2000s, it was never really possible for a Manchester tech company to get so far. There wasn’t funding. There wasn’t exposure. There wasn’t marketing. It wasn’t recognised as a technological hub,” Mark Klarzynski, founder of PEAK:AIO, tells me on a video call.
“This time, when we were introduced to Pembroke, it was very refreshing that the country as a whole was less geographically based and understood that there were hubs in Manchester, Liverpool, as well as London.
“Manchester isn’t what I would say the tech capital of the UK, but I’d like to think of it that way. And for international companies to recognise that, that only happens when you get investors like Pembroke and PXN.”
For Fred Ursell, Head of Investments at Pembroke VCT, deals like this are precisely what “put places like Manchester on the map”.
“Mark and some of his employees will do well. They’ll have great experience. They will have the financial resources to maybe start other companies in the area and it has that knock-on effect.
“Maybe they become angel investors in the local area and support other budding Manchester and Northern-based entrepreneurs. So it really is fantastic for an area to have an exit of this nature.”
The duo were unable to disclose the value of the proposed deal but once completed, it will also mark a significant milestone for Pembroke VCT as its first major technology exit.
It was also one of the businesses we revealed earlier this year that should be on everyone’s radar, thanks to Ben Davies, marketing director at PXN Group. So it’s fair to say that story has unfolded rather dramatically since.
For Klarzynski, it’s admittedly been a “roller coaster” few weeks. Fresh from a trip to Las Vegas where he spent some time with the NetApp team, he may have been feeling a tad jet-lagged when we spoke, but he’s more invigorated than ever about what comes next.
But how did a Manchester business founded just five years ago get here?
‘I thought I was done with tech’
The slightly ironic thing about PEAK:AIO’s story is that Klarzynski wasn’t particularly looking to start another business at all.
Before setting it up, he thought he was just about done with tech “for life”, then AI came along.
“In 2017, I realised how fundamentally different the world of AI was from the traditional world of IT and everything we knew. It was just so very different. Part of that challenge was not just accepting that and working out how we use it. We know how now. The wider challenge was: how does this technology deal with this different use case?”
Although he wasn’t originally looking to launch another start-up, that problem pulled him back in.
He launched PEAK AIO to “purely solve challenges” posed by this new world of AI, developing a software platform designed to deliver faster, more efficient AI systems and tackle one of the data storage industry’s biggest issues: how information is stored and accessed.
READ MORE: Manchester AI software company secures £5million for global drive – Prolific North
Last year, the business received £5m in a round led by Pembroke VCT, with participation from PXN Group through NPIF II alongside a Silicon Valley investor.
Four exits in, Klarzynski has also learnt what he’s good at. And what he’s not so good at.
“I’m very good at innovation and I’m very good at making that realistic and usable, and finding where that works. I’m not so good at scaling; it’s just not in my skill set,” he admits on our call.
And that gets to the heart of why NetApp came into the picture.
Why sell now?
So why sell now, just five years after starting the business? While Klarzynski would love to tell you it was all part of an “amazing strategy”, it wasn’t quite that simple.
The team had built the technology but the next challenge was getting it into the hands of much larger customers and scaling it to take the technology “mainstream”.
“It doesn’t matter how good your technology is. We developed this technology, which is awesome, but we were still PEAK. And it needed somebody that could deliver more than technology, somebody that could deliver support worldwide with the credit and the ability to take the product worldwide,” says Klarzynski.
Six months ago, it became “harder” to do that alone.
“Even though we had the technology and everybody loved it, for them to buy that or to use it was a big jump of faith. They were going to bank their whole AI future on PEAK:AIO on its own from Manchester, whereas it’s less of a jump of faith to do it with NetApp.”
Fred Ursell over at Pembroke VCT says the proposed deal also says something about UK technology talent more broadly, which he describes as “probably overlooked and underappreciated”.
“The UK might not be the fastest-growing or by market cap the biggest, but I think we build great businesses. We really think about things very carefully before we go off and raise a load of money,” he explains.
“Mark’s evidence of that. He understands the market and world of storage arguably like nobody else in the UK,” he says.
Ursell remembers visiting Klarzynski at the Storage Awards last year while Pembroke was carrying out due diligence on its investment. Klarzynski became something of a celebrity for the evening, with people approaching him for photos.
“I think we have pockets of talent like that in the UK that we don’t celebrate enough. And arguably, this is just one story. There will be lots. I think there’s a tonne going on with Manchester,” he says.
It’s a view shared by Andy Barrow, Managing Director and GP at PXN Ventures, who has known Klarzynski personally for the past decade and describes him as a “key person” on the world stage behind some of the significant technology to have emerged from Manchester.
READ MORE: Where Greater Manchester’s tech growth is happening — and what’s driving it
On a separate call, Barrow explains what makes this particular deal stand out is not simply that a Manchester tech business has attracted a global buyer, but the technology it has built.
“This is such a significant outcome, especially in this space. AI infrastructure technology comes out of the Valley and the Bay Area, so for this to come out of Manchester, it’s really significant for it to be acquired by possibly one of the top three biggest storage vendors in the world.”
That significance isn’t lost on Klarzynski either, who is keen to credit investors including PXN and Pembroke with helping PEAK AIO get to this point.
He says those introductions and investment helped the business to “snowball”, and it’s a far cry from the tech sector he encountered decades ago.
“It has been a great privilege for me, a guy that grew up in Manchester as a kid, to get to the tail end of my career and see that its actually progressed and that London investment companies recognise Manchester. That wasn’t how it was 10 or 20 years ago.
“I think the UK has really embraced AI, and the UK always has been very good at technology. We maybe not necessarily in the past been so great at sales and marketing and business, but we’ve caught on, and we’re making good businesses. And all of that investment, the universities, the tech, they’ve all sort of come together. But I’m very proud that this is Manchester.”
What happens after a Manchester tech exit like this?
Once completed, PEAK:AIO would become Pembroke’s first major technology exit.
“For that to be to such a big company in such a great deal is fantastic,” says Fred Ursell.
And PEAK:AIO isn’t the London-listed venture capital trust’s only bet outside London. Pembroke recently invested £4.5m into Manchester fintech Ryft’s £20m Series B round and has also backed a business in Leeds.
READ MORE: Manchester fintech Ryft lands £20m for European and US expansion – Prolific North
“VCTs are designed to support the UK economy and UK business and I think they do on the whole a very good job of investing regionally.
“We think there is a real opportunity now. London is the capital, and there will always be a huge amount of activity down in London. So that will keep us busy. But it’s deals like this that do put places like Manchester on the map, and there are lots of other good deals coming out of Manchester and other areas.”
And that’s where this deal potentially becomes more interesting than just the acquisition of one Manchester tech company. For Ursell, its significance lies in “what it could do for the area”.
It’s the founder-exit cycle tech ecosystems talk about a lot, particularly through our long-running GRAFT Regional Tech Champions series focused on Greater Manchester.
My final question to Klarzynski was the obvious one: what’s next? For now, at least, he isn’t going anywhere and will be working alongside the NetApp team for the next year or two.
“I was in Vegas with NetApp last week, and I’ve been a new start for so long in my life, I’ve forgotten how much potential there is in a large company. So I’m really hopeful that what we’re going to be able to do is help NetApp transition into this world of AI in a new way that’s going to make an impact.”
