Interview: Moshi Monsters FD Divinia Knowles

YOU KNOW that you are visiting a company that is very different from the norm when you notice that the receptionist’s desk and is shaped like a big tree stump.

And while it is not quite Willy Wonka’s chocolate factory, Mind Candy and its larger- than-life founder Michael Acton Smith are not a million miles away from Roald Dahl’s memorable vision.

Mind Candy’s key intellectual property is Moshi Monsters, which at its core has a website that boasts 50 million children registered as users across the globe for the kiddy-focused social network.

Finance director Divinia Knowles is tasked with managing Mind Candy’s finances and back office, during what has been a period of rapid growth, change and creativity for the Shoreditch-based business.

Staff numbers are at 130, from 40 in 2011. The limited company’s accounts for the year ending December 2010 show that turnover leapt to £7.6m – up from £1.9m a year earlier. Meanwhile, the number currently bandied around in the press is a staggering £250m valuation for Mind Candy.

During her six years at Mind Candy, Knowles has lived through the inevitable highs and lows experienced by most creative businesses. She had to build a finance function to suit what was an informal business.

“I was the finance department,” says Knowles with a glint in her eye.

“So over the last six years, having built the finance function from scratch, I have also educated [Acton Smith] about the way we plan things, the way we do business models – why that is important and you cannot go gung-ho.”

Classic start-up
But risks are there to be taken. Knowles speaks of “massive cash-related ups and downs”, particularly where Mind Candy’s previous project is concerned.

PerplexCity was a popular and well publicised so-called alternate reality game, in which the real world was used as a setting for a sprawling adventure.

But the numbers didn’t add up. “We just did the classic start-up: a really good idea and then the more that idea was actually tested in the market, the more we realised that it wasn’t commercially viable although it was creatively brilliant,” she says.

Many start-ups “completely remodel” themselves into being something else, explains Knowles, “when they realise what consumers actually want”.

But even armed with Moshi as a potentially viable product, 2008 was not a great time to go for a round of capital raising off the back of a previous failure.

“That was the worst time in the world to raise money and that’s a big lesson about how bad it can be,” says Knowles.

Mind Candy had two investment term sheets on the table, both of which were pulled at the last minute – a situation described by Knowles as “unheard-of”.

Knowles admits that the period was “really, really tricky”.

“For me, it was deferring our creditors, ringing people up and just telling them the situation. I was quite honest because at that stage, I thought that we didn’t really have anything else to lose,” she says.

Heaven-sent investment
However, Acton Smith and Knowles found a “very lovely angel” who believed in Mind Candy and saved the business.

From having an uncertain future, the company has flourished. Alongside a period of financial growth, Knowles has led the expansion of business support services and engaged other department heads.

Six staff work in the finance function, with another two on the way. As Knowles herself does, the team is expected to work closely with the key decision-makers within Mind Candy. “We are very advisory, and I have put people in who work across the whole business with all of the major product owners in the company teaching them about financials, making sure that they become a P&L owner,” she explains.

The process of embedding the team within the business was, like the formation of the function itself, one of building up as the business asked more of it.

“I used to do all the accounts and be that business advisory function. I have also built a finance team, structured it, put in our financial systems, and budgeted across the company – but in different steering committees to finance. All those things I have done from scratch,” says Knowles.

“It’s been an iterative learning process, and it has been a great deal about listening to people and what they need us to do.”

Bringing in the big guns
Other changes include bringing in the big guns as auditors: PwC replaced GSM & Co in 2011. Subsequently, Mind Candy moved its reporting from UK GAAP to IFRS, and saw its audit fees increase threefold.

Despite being classed as an SME, Mind Candy’s corporate structure is relatively complex. With US employees and an increasing number of product lines, Mind Candy now operates with three US companies and two in the UK. “Our tax overhead is quite complicated, because we have all these products that attract different taxes in terms of digital products and then withholding taxes of consumer products. It got to a point where we needed PwC – they have offices everywhere,” says Knowles.

The move to IFRS was Knowles’ idea. As accounting and reporting was still manageable, she believed the move was feasible, and would open up the business to more investors.

Knowles is now moving into a more operational role, with Acton Smith spending more time in the US. An IPO in the future seems likely. At that point, she expects a CFO with flotation experience will come in to handle it.

But while she says that Mind Candy is “nowhere near close” to that point yet, Knowles still seems reluctant to move into a more traditional corporate board role: “It might be good to go and build something again, maybe with Michael, maybe with somebody else – who knows?”

21st CENTURY CFO
The image of CFOs as people acting in silos – left all on their lonesome to make very big decisions – may be accurate for some senior finance chiefs, but not for Divinia Knowles.

She attends many FD networking events, including those produced by accounting firms.

Knowles is also a member of the FD Academy, an organisation set up by the team behind interim finance staff providers FD Solutions.

“This is probably going to sound awful, but lots of the FDs I’ve met are not very dynamic, which means that they silo themselves,” says Knowles.

“Don’t get me wrong – I have met some FDs that are amazing, but they do tend to be more strategically involved in the business.”

Knowles believes that her CIMA qualification has been crucial in helping her find a greater appreciation of business a whole.

“It gives you awareness that you cannot just be an island; that you cannot be somebody who sits there behind a spreadsheet and tinkers away with numbers. Because in today’s environment, you have to be somebody who looks across the wider business and is then strategically planning things,” explains Knowles.

“I am always saying to [my finance team]: ‘What is the point if you are putting together all that information and you do not share it with anyone?’

“[The information] is supposed to be there to help everyone make really good decisions about what they do in the business and that is what we should be trying to achieve.”

DIVINIA KNOWLES CV

2006 – present CFO/COO, Mind Candy Group

2001 – 2006 Retail management and accounts, Christopher Howe

2000 – 2001 Retail management and accounts, I.Franks