What have you learnt from the funding of 6 tech startups and have your experiences impacted upon your investment strategy? / As per the ‘hare and tortoise’ fable is being first to market critical as a startup?
My first three start-ups were self-funded and revenue generating very quickly, the fourth was self-funded but nearly broke me as we were too early to market with an e-commerce proposition that retailers weren’t interested in because they thought nobody would buy goods online, my last two ventures have been backed by Angels, VCs and debt. If I do another start up I will fund it personally for as long as I can, if I need external funding I would choose Angels before VCs because there are no pref terms or board seats for Angels and they’re hands-off. I don’t want to carry the burden of debt again as it’s a very expensive overhead for a business to service. At Cushon we had VCs and a debt provider, without them we wouldn’t have achieved what we did, so my above comments are idealistic, sometimes you don’t have the luxury of choice. Timing and cash are two of the most critical factors for a start-up. Get either wrong and it can be a very expensive mistake.
Still awaiting a UK banking licence, the first having been lodged in January 2021,is there a risk that the Revolut narrative and perceived over zealous bureaucratic regulation could lead to fintech businesses looking increasingly away from London?
Yes, most definitely there’s a risk that UK fintech’s may find it more appealing to go overseas if regulation is easier and quicker to obtain. I’m supportive of the need for very strong regulation which is in the best interest of UK consumers as well as for UK taxpayers who ultimately pay when things go wrong. At Cushon we jumped through lots of hoops with the FCA and The Pension Regulator, but quite rightly as we are managing pensions and other savings products for over half a million people. But it is taking too long for many UK Fintech’s including Revolut to get their licences so we need to find a way to speed up the process without reducing the governance.
Following their new savings account receiving almost $1bn in deposits in little over 4 days, are Apple a major threat to existing financial institutions?
Yep, as well as Amazon, Google and other big brands that consumers love and trust. One of the biggest challenges for a new Fintech is acquiring customers and getting brand recognition. Cushon achieved this through the workplace with the benefit of employers promoting and endorsing the proposition. Going direct to consumer is very hard and very expensive. It can take years to build customer loyalty but it can be lost in minutes. Apple and others like them have the customer reach and can turn on the tap in no time. One of my biggest fears for Cushon was if Apple, Amazon or Google decided to compete in our space and our biggest challenge has been brand recognition, which is one of the big attractions for Cushon becoming part of NatWest.
What is the biggest myth about being an angel investor and what advice are you glad you have ignored?
It’s often assumed angel investors only invest in high growth start-ups, usually in tech, but that’s not necessarily true. Some of my best investments have been in mature steady growth businesses and my worst was in a fast high growth business. I’ve not had any advice which I’ve ignored, but the best advice I had from a VC was that if you invest in ten businesses expect half of them to go bust, you might get your money back or make a small profit on three or four and you’ll make your big bucks on one of two. I’ve invested in twelve businesses in the last five to six years, all in tech but at various stages of growth. I’ve had four go bust and one very good exit so far from a mature tech business which IPO’d. What I’ve learned is it’s very much about the people starting or running the business that matters most.
What did your time at Staffcare, Assureweb and Screen Pages teach you about hiring for growth and scaling Cushon to a team of about 150 people managing £1.8bn of assets?
In my early businesses I was very hands on and often the biggest or only producer of revenue through my sales activity. There’s also a different mindset to running a self-funded lifestyle business compared to a VC backed business. If I had my time again with Screen Pages I would have re-invested more of our earnings into hiring more people and paying for more experience rather than worrying about salaries and recruitment fees. At Staffcare our funding allowed us to hire at pace across all functions in the business and when I left we had about 100 people, including offshore developers, and were managing employee benefits or pension auto enrolment for about 10% of the UK workforce. At Cushon we grew organically and through three acquisitions. I’ve learned to become hands-off, hire better people and empower them to do their job and motivate everyone in the business with share options. I built a very good management team and I know when I’m no longer needed because the team in place is performing well, which is why I leave Cushon today in the safe hands of a good team. My personal view is that too many founders aren’t strong enough to know when their time has come to let go and hand-off to better people.