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Jack and the beancounters: growing an idea into a business
by Mark Smith

Once upon a time in a land far, far away their lived a man, a man with an idea. Sadly, Jack (for that was his name) didn’t have many beans to help grow his idea, though he did have a cave full of pitchforks, a village full of peasants and a castle full of beans…..

I fear carrying on the irregular theme of fairy tales might get in the way of this particular story. So I shall desist. Rather I hoped it might be useful to describe how a business grows from an idea to a decently profitable business in less than 5 years and the highs and lows of that journey and the lessons learned.

London is the thriving capital of Europe with regards to tech investment right now. However, that masks a structural problem when your company is at the pre-revenue stage. This was where we found ourselves 4 years or so ago. ContactEngine began life as ipadio– a company whose name reflected the initial concept (Internet Protocol rADIO) our first iteration came about because we saw a missing link between the telephone and the internet. Despite the web essentially only existing because of the telephony networks, there was a gap we thought we’d like to fill. That gap was the live streaming of a telephone call via any website and via any telephone. To take a simple example if you’re standing on top of Everest or you’re rowing across the Pacific Ocean there tends to be a shortage of signal. A satphone transmits its data to space and back again so gives the ability to make a call – all ipadio wanted to do was capture that audio and live stream it through a website. Not the simplest thing in the world to do – but we did it and bingo we had a business idea.

Or more poetically, we had a hammer looking for a nail.

Trouble was there were lots of nails of varying size and shape and we needed some resource to forge the hammer.

This is where you get your first challenge. The UK is a relatively small place with a relatively small market, worse it’s full of quite smart people, so making your way to ‘base camp 1’ is something of a challenge. We got to the foothills by the simple expedient of sacrificing some profit in our existing web development company (Nemisys, which I used to run) and dedicating a couple of developers to forge the hammer. We also launched a free website (which still exists on to throw some of our ideas at the online community to see how they got on with it. It went really quite well, has millions of users from all over the World, and we had some quite press worthy moments (first broadcast out of Haiti after that awful earthquake, the amazing 13yr old Jordan Romero who climbed all the highest peaks on all continents, Mayor Boris phone-casting straight after he fell in a river etc etc ). Trouble was we couldn’t work out how to make any money.

Lesson 1: build your tech yourself at your own expense and test it out with folks on t’interweb.

So if you’re British, older (I’m some way away from my teens), don’t have skinny jeans, or a silly hat, the chances of you getting someone in the UK to bung you millions to have a play are about as likely as England winning the World Cup. That’s not the case if you are American, sub 30, worked for one of the big tech monsters and have a mildly whinny voice. Then you just might get the cash…..

So the next trick is trying to work out how you make some revenues. This is where Lesson 1 paid off – in amongst the millions of users of (space) were people with actual jobs. Using as a travelog for interesting journeys was commonplace and one of those people was a comms professional from Virgin Media. Now I am no great believer in luck in business – I’m rather fond of misquoting Gary Player, the South African golfer, who once said ‘it’s funny but the more I practise the luckier I become…..’ however it was undeniably fortuitous that Abi used to record her walk along Hadrian’s Wall (the one that separates the Tories from the SNP) – because when she returned she asked us if we could use the same technology to help improve the way she communicated with her mobile workforce. Which we could, rather easily as it goes.

So Lesson 2 listen to your community and let them help you see how your shiny-shiny might help them in their work lives.

Now it gets a wee bit harder. You’ve got the tech, you’ve got some clients (after Virgin Media the likes of Wickes, Sky, Asda and others followed suit) and you have some early revenues. Trouble is your model is SaaS (an ugly phrase for something quite simple – your clients pay you modest monthly amounts to use your clever stuff, and SaaS needs looking after, and that needs people and sadly people need to eat and so you have to pay them salaries. But you don’t yet have the money to pay them. So you need to find some cash.

Lesson 3 – friends and family. One of the advantages of being older is that you develop a decent network of friends and associates, you might even have saved a little cash along the way yourself. This is the time to speak with the ones that have the beans that you need to grow the business (sorry, couldn’t resist….). We had a very good relationship with a very capable city gent, a chap who had made and grown fortunes in his business life but who also looked favourably on us because we had some track record. So we landed ourselves a modest amount of capital (just over £100k) to employ a couple of people full time and to explore patents.

Lesson 4 – don’t waste your time pursuing patents in the UK – you can’t protect a business process (and much online innovation is just that), you can’t show anyone what you’ve built because that becomes ‘prior art’ (look it up), so you can’t test anything and it’s a horrendous waste of time and money. Do this in the States instead – where this sort of silliness is avoided and you can protect a business process.

Now to the next lesson – you think you’re doing alright, you’ve got a few £100k of business per annum, you’ve got some decent brands working with you, but you discover that you can’t actually prove the business benefit of better internal communication for a company. Everyone feels implicitly that it’s good to talk – but try and prove the bottom line contribution. You can’t.

So the next Lesson is listen to your customers. What we discovered was that the ‘internal comms’ work we were doing was great but the budgets of the departments concerned were low (we worked with one company of 15,000 people who only had 3 working in their internal comms department). However, the very thing we were doing for their people – timely, cross platform comms (via voice, SMS, e-mail, apps, mobile web etc etc) was a perfect solution to a major pain they had in their business – which was better communication with their customers. Beautiful. Virgin Media as an example employ sub 15,000 people but they have millions of customers. And if you help them improve the way they manage their customer appointments/care/journey/experience then it saves them money (lots of money) and makes their customers pleased to boot. Happiness.

Now things get more interesting. You’ve accepted that the UK investment community doesn’t do ‘pre-revenue’ finance. It just doesn’t. Trust me. I am a Doctor. No really.  But it does start to take notice when your revenues start to climb. This is where you start to hear the words ‘angels’ – these are some of those British business sorts who have made some money but who want to help companies grow by acquiring a bit of equity. They aren’t really angels (no wings), and they do get some really quite decent tax benefits from making these investments but they are a godsend to companies looking to grow fast.

So Lesson 5 – network with Angels. I did this in a variety of ways – just make a few calls, send some e-mails, get a ‘deck’ (when did a slides become decks??) together, make sure you know your numbers, but the final breakthrough came when I got a freebie trip, via whatever the DTi are now called, to Spain to a mobile congress.

Oh Lesson 5a – don’t go on Dragon’s Den. I was shortlisted to be on the show. I went to do a screen test and despite the fact that I am a confident fellow, with a decent patter, when the camera was pushed in my face I became a totally inarticulate arse. I could not actually say what my company did in 1 minute, despite 5 tries. In the end I apologised and left. The next day they called and said ‘you’re on’ – I imagine because I was a drivelling idiot and they wanted to make the Doctor look like a twerp. Best piece of advice I ever had was to turn it down. Two reasons really, one – they didn’t invest enough for the round we were looking to settle, and the second was that I do have a wee bit of a temper and my advisors reckoned I would speak my mind and them lamp the big, tall rude one. 15 minutes of fame and a lifetime of infamy would have been a wee bit unhelpful…….

So back to Spain. Turned out representatives of the London Business Angels (LBA) were in town, and one of them drunk vodka in half pint measures. Suffice it to say we got on really rather well and they suggested we put a business plan to the LBA network.

Lesson 6 – do a good business plan. They are a challenge, it has to be said, and one thing you can be certain about is that the way the plan works out will not be like the plan, but it is a good discipline to step away from the tactical everyday battling and rise above your passion and be objective about the future. If anyone wants the structure for a winning business plan drop me a line – I’ve a few!

So Lesson 7 – do a great pitch in front of people with money.

So to the real business of pitching. Once the biz plan was provided – including the ubiquitous hockey stick growth curve, the LBA invited us to pitch their network. This in itself is a success – I recall at the time the LBA were receiving some 1000 plans per annum had 4 events with around 6 pitching of which a couple would ‘win’. Crap odds huh? So to the pitch itself. Quick sub lesson here – don’t eat Sushi 1 hour before you go on (you know that tip former El Presidente Tony Blair gives about always give speeches with a full bladder, well doing that with a fast track intestine is not to be recommended….). Back to the pitch – important to be confident, forthright, borderline cocky, but also have some clear evidence to back up what you say, investors want big sector opportunities, a nice bit of disruptive tech, a team with some cohunes (whatever they are) and you’re in with a chance. Prepare for some really silly questions, my absolute favourite one is ‘why are you not putting your own money into this?’ There is the slick answer (well I already have because this business has been boot strapped by me for the last year or so) or the one that gets more laughs which is ‘look you silly man, if I had my own money to do this why in god’s name would I be offering bits of it to people like you to buy?’.

Suffice it to say we got the funding we needed to transition across colleagues from Nemisys (myself included) and new people to get the business cracking. It was more complex than that of course and more twists and turns – but if it was easy we’d all do it ;-)

I think this story needs to be in two parts – this is already beyond a blog and more of an essay!  So I shall save the next bit to another blog.

What’s happening now in the world of ContactEngine is getting more exciting. It’s reckoned that out of 10 investments that Angels make 1 is great, 2 are good and 7 are terrible. I’ll perhaps write about why those odds are so poor another time, but we are in the great/good bracket just now. Business is booming, we have loads of great clients, we’re saving them tonnes of money and growing inside companies, growing with new companies and most recently have acquired our first European Headquartered client (our technology works in any language as well).

So to conclude: I think the lessons worth sharing can be summarised as follows:

Lesson 1: Try and test out your ideas before you settle on the way you’ll make money, and try and do this at your own expense – so don’t sell out too early (if indeed you can!).

Lesson 2: Listen to feedback – some will be wrong, some will be crack pot but much will be helpful, having a 1000 brains thinking about your apps is a powerful tool, and it’s often free.

Lesson 3: When your idea needs some support see what you can raise from people close to you that you trust, they are likely to invest amounts that are small but less likely to take a disproportionate amount of equity.

Lesson 4: Beware the lure of UK Patents – often it’s a fool’s errand and an expensive one, consider doing so in the US but also the defence I like best is ‘our protection is what we are going to do tomorrow not what we’re doing today’ meaning it’s speedboat style innovation that protects your position best.

Lesson 5: Fly with Angels – network like crazy, make friends, buy drinks, listen, learn and understand.

Lesson 6: Write a brilliant business plan with graphs and everything.

Lesson 7: Pitch brilliantly. I’ve seen terrible presentations of exceptional businesses that have worked – but more often than not at early stage it’s the mug on the stage that the investors are buying – so be the very best you can be. And don’t eat Sushi.

And the final bit is once you’ve got through the half dozen or so stages above – you really need to deliver on the business promises you made, stop being strategic and get back to the tactical. I used to play a lot of Rugby and my particular specialism was what used to be called the Maori Sidestep – where a big fella just runs as fast as he can towards the line and bashes as many people out the way to achieve that singular goal as possible. It’s not a bad analogy to business in a start-up – keep your eye on the line and run as fast as you possibly can. That way you just might win.

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