How do you scale a business to £100M with only £1.5M?

everyone welcome back to Today's Show today we have Penelope hope with us founder of Rebel energy she raised only a million and a half and got to over a hundred million in Revenue in a very short period of time pel welcome to the show thanks Jason so a pleasure to be here I'm excited to have you on um I don't get to talk to UK Founders as often as I would like and you're quite the success story with your company Rebel energy so I want you to tell the audience a little bit about the early days and why you decided to raise one and a half million pounds to get it off the ground yeah when I look back at it now I I can't understand how we managed to do it with 1.5 million pounds but we uh my co-founder had a coner for a new energy supplier and and left his job and wrote A A business plan and I came alongside him to um finesse that into a um a purchasable and distinctive opportunity for an investor um and opportunity for a consumer the money that we raised um initially paid for us as a team to start to build the backend processes our head of Ops did that um to build those highlevel um Partnerships my co-founder did that and to put together the investor case which was my responsibility and we took that out to investors uh and with that money we were able to start building building those um backend operational processes building the team um defining the brand carving out our Market Niche and of course taking it to Market so what was the fundraising prices like so it sounded like you you pretty much just had a business plan and when you came to thinking all right you need only a million and a half pounds to get to where you think you need to go uh who did you approach and what was your your fundraising strategy yeah we had a Cornerstone investment from an investor in the states for about2 200,000 pound that paid for uh Dan myself and our head of ox to get started on the business um we then went out to an angel group in the UK and raised a further 800,000 roughly but that was from about 30 business angels most of whom had been entrepreneurs or business owners in their own R and those were tickets ranging from 25 to 50K and then I wasn't so excited about this part but it turned out to be super um successful and positive for the business we did a crowdkeep raise of about £500,000 um we had more than 700 investors uh it was hugely oversubscribed and um what was great about that was that we had everyone people investing from as little as10 pound up to 25,000 um so it it um made it accessible to to all sorts of people and many of those people came on board as our beta testers our initial customers when we started stress testing our system so I think I think that was um you know it was a really nice blend of of raising from slightly different sources and all of those people have been tremendously supported so this this is fascinating to me so you no institutional capital and just for the audience to you know know you grew this company to over 100 million in revenue and you raised about a million from business angels and Mark invest in the US how did you get the US investor is that just a personal relationship you had or did you to go and get an investor from the US specifically it was a personal relationship to my co-founder Dan and he I think very intelligently had kept this this person in the loop from the earliest phases of him ideating and conceptualizing what the business would be um so this person felt that they well they were part of the journey from the earliest Inception point and I think um I think there's a nice story in there uh as to how to to treat an investor um to incorporate them thinking um and to involve them from the earliest possible point and then how long did it take to shop this around to angels and to her 30 angels together to to participate uh with that K yeah we had a bit of help from our Angel Network who were absolutely phenomenal in terms of hurting the cats so to speak um so we we did an hours pitch online Don and I um and we took them in detail through our investor deck and the invest a case for wanting to get exposure to this Market specifically um the structural trend of the energy transition um and also our place within it as an energy supplier and um the the leaders of the Angel group The Investment Group rather they CED around the angels and those that were expressed interest we would have a onetoone call with them and then uh it was up to us to go through the the AML the shareholders agreements the term sheets and to sign them up uh to the business I guess how how long did that take from like the getting approved to be pitching in front of the Angel group and then to having them all close and sign yeah I'd say it was about six months um and we we didn't wait to close the round to start using the money and and building the company um which is bold but I think was was necessary speed is is of the essence in getting a company like this to Market so yeah about six months no it's I and it was it a safe is that how you guys raised or did you guys rais on a convertible note or priced round no convertible note we I'm not quite sure what you mean by safe okay it's just another it was a priced round I take it in terms of like they bought common shares you got you and when it came to that the crowdfunding round so for the American audience it's like a we funder or start engine I think you mention you use crowd strike or crowd Cube we Crow Cube crowd Cube okay uh and with crowd Cube um raising 500k through that how long like when did you decide so you got the 800k from Angels how long did it take for you to decide to do the crowdfunding round and how long did it take to get that money in the door I think we did the angel pitch in September of 2020 and January of 2021 we were kicking off with the crowdfunding pitch um and that was very much Dan really wanted to do that and I was very reluctant because I had always raised money in very very private discreet settings um and I I was I was shy about um going on the internet and recording a video but it was it was a wonderful idea it was a lot of work because of course quite rightly they have questions and those questions um have to be answered um and and correctly so yeah it was a lot of work but it proved to be really successful and it was just so wonderful to have the support of so many so many different sorts of people um the kinds of people that we wouldn't have been able to have on our cap table otherwise no and it's you know at least from what I understand about the business it's a very direct consumer you know I I useal energy in my house in London um and for the audience that doesn't understand like energy is very fragmented here and competitive whereas the US is very monopolistic or duopolistic um you don't really get a choice of who you choose for energy and the model that you have in UK is very rare uh in the US it's in some parts but not most um so to get money from what could be your customers and have you know create uh engagement and potential you as you said beta testers people that signed up early and having that commitment is actually a great strategy um for for Founders that are considering that type of Avenue for that for this type of business um so how long did it take from deciding to go live to closing I think you said 700 investors to that participate in your CRA Cube campaign um from well when the campaign goes live it's really I think it's only a number of weeks I think it might only be about four weeks from memory and of course the the weight of the crowd uh proliferates and compounds as the as the raise uh nears its close so in the last 24 hours of the raise uh that's when everyone starts sort of um jumping in and that's that's quite exhilarating and where were you guys at in terms of traction when you went live on Crow Cube we were pre-market launch um so we had we didn't have any customers um I think we the crowd Cube closed in about let's say the spring of um 2021 one and maybe two or three months or so after that we started putting ourselves and our team on our supply so really really early early beta testers um to check that we could get out a bill that the systems were working and then we we had over the summer going into the summer of that year we had about 300 beta testers at that point on Supply um and then it wasn't until the following year that we entered the market um proper and started scaling and so walk me through that that grow strategy cuz you know to to launch at that time and to get to where you guys are in terms of Revenue in such a short period of time like what was the secret sauce what was your team doing the secret Source the first thing you have to understand about the an energy supplier is that it is a utilities business so a utilities business means that a consumer must have your product whether they like it or not they need electricity they need heat they need light they need telefony they need wireless internet they need water so you have a you have a captive audience you don't have to convince them oh I'd like this pair of shoes or oh I'd like to buy that sa for it's a must have so that means you have a volume of capacity in the market and it's not about convincing them that they need what you have it's about convincing them that you are better than a competitor so to to answer your question when you whereas with most businesses it might take years or months to make this transition from being a startup to a scale up where you're you're growth hacking perhaps that's organic growth or perhaps you're taking an investment to Market and acquire customers with an energy supplier you turn the system you you open the sales channels that you have with with Partners so the the quickest way to understand that and this wasn't the case for us in the early days but many suppliers will turn on a sales Channel such as you switch or go compare a comparison website and there's a volume of customers on those sites every day waiting to be to allocate to be allocated to choose a supplier and really it's it's less about um acquiring customers and for an energy supplier it's actually about retaining customers um people are price sensitive um many people have signed up to uh platforms that automatically switch the utilities provider if there's a better deal elsewhere so scaling is not about um is not so much about trying to find customers it's about um onboarding them securely making sure the systems work and the oper operational systems work correctly and making sure that we serve them properly um so that they're they're not calling up with uh complaints so that's interesting when to look at it you have that captive audience that they have to have the product or at least someone's uh you know competitors or yours and and when it comes to pricing and just this is just my genuine curiosity like when it comes to pricing energy Commodities in in the UK to be competitive and still have a profitable business you know how is it not a race to the bottom uh you know among s competitors it can be a race to the bottom and that's where I think many of our competitors fell foul during the the winter discontent as I would call it which is the winter of um 2021 the going into 2022 where we had the wholesale prices and more so than they have ever done so in in this country so to answer your question which was about race to the bottom um the way to compete then is at operational margin um the everyone is going by and large unless they have what is called what is known as purchase power agreements and those are direct and specific agreements with energy generation power plants to supply energy to that Supply specifically most people most suppliers and certainly we were in the early days will be buying energy wholesale from the market um so we're exposed to the same prices so the way to compete is at that operational level and we did that through um and this might be called AI now but um it robotic process automation so there's about 500 backend processes that run that allow an energy supplyer to run the most obvious of those would be the onboarding process where a customer types in their name and their add address and their their metering needs and their fuel use and um there are many processes that run like that we automated all of those from the get-go and bear in mind that many of the the large incumbent players will have people doing these sorts of things manually so that's what really allowed us to compete at the level of to to protect margin and I'm I'm really delighted to say that we've been profitable in every month of trading since we started our year one ebit Dar margin was about 11% um which is unheard of for us sector uh where where people um a lot of companies are struggling to to cover costs yeah so I think it's super impressive is you know the next question I usually ask guests on the show is like so you raised one and a half what's the next round and it looks like you got to profitability and no longer need a around um is there a future where there ever needs to be an additional raise or you guys have been growing profitably year over year it's been we've been profitable in every month of trading um and everything I I've always had a a deep deep commitment to organic growth that's what I was taught when I was a a young Equity analyst um and I think you know if you can do it why not um you I think Equity is in very safe hands when it's in the hands of the the founders um because they have or certainly in our case we have the the social and environmental Mission very much at heart um and we have the best strategic interests of the company at heart as well so yeah I think you know the the modern the modern way of doing things is to raise big um but I while I respect people who who may um wish to do that I think if you don't if you don't need to then then why would you right I think you got to a very respectable scale that most Founders dream they could get access to um and you did it so with relatively L capital and and rapidly pass that it's 2024 and the end of 2024 and you launch this and we're still not generating Revenue the start of 2021 uh it was pretty impressive on that growth so when you um and um you've also decided that uh you recently that you've stepped down and have pursued other roles or other opportunities uh with that kind of rocket ship why did you decide to take a step back yeah so I think as I said um with it being a util is business we hit that inflection point very very quickly of well we're no longer a startup we're absolutely a scaleup and the the Strategic and creative challenge changes overnight so in startup mode the question at the beginning of the week is how on Earth do we build this company and in scale up mode the question is how do we add another th customers and both uh both aspects of the journey require great skill um and and it's definitely an art as opposed to science um I felt my skills are more suited to the startup phase I think that's where my real photo lies and I think I think being a Founder is about laying the foundations and if you can do that well uh you pave the way for um high quality growth in the years to come you're likely having trouble raising money or selling your company personally I've had four exits and I've raised over $145 million if you want a free coaching session with me just like subscribe and leave a comment down below let me know what you think of today's video for a chance to win a free coaching session with me I'll select three winners every single month you just have to like subscribe and leave a comment down below for a chance to win now onto the video looking back at your your success with Rebel what would be some things that maybe you would have changed or you know uh that you look back on that you would have come cut that up when you look back at your um track record at Rebel would there be anything that you would change about uh what you did um uh no I don't think there is um I think that uh it was a sort of a holy chaos and um it was uh it was very challenging and um required enormous amount of hard work and sacrifice as I as I think uh I think any big initiative does um um but I wouldn't you know I often think oh had we raised more money and it had been a slightly easier ride or slightly more comfortable ride um but I I don't think that's the point of um starting a company I had a wonderful definition Jason of what it is to be an entrepreneur and by a very successful gentleman in the real estate business at an event just this week and he said being an entrepreneur is spending a few years of your life living as most people won't so you can spend the rest of your life living as most people can't and I thought gosh yeah that that's exactly it and um I think those that are prepared to to be very uncomfortable um are to to that same degree will those people reap the reward no it's very well said I believe I've heard a quote similar to that and I completely agree it's a it's an absolute grind for the the days that you're in the mix but uh the days you get well the problem is you settle down that's the problem with entrepreneurs they never really you know take a step back and and do actually enjoy as much they go and start the next thing at least that's something I see often with a lot of Founders um and what would be your advice now having done kind of having the angel Round And The crowdfunding Experience um when you advise Founders today or speak to Founders today like what's your advice when it comes to to fundraising for them um the the thing that I find myself telling Founders again and again and again when I see their decks is you're not here to articulate what a good business it is that you have you're here to articulate what a good investment it is that you have so the these these decks and these razes are set up to to shout about how brilliant we are and this new product feature we have and all these you know fantastic elements of the business and as an investor you know I'm interested in okay great but how does that trans at into a return sometimes exciting businesses are not good Investments and sometimes what looks like a boring business could be a fantastic investment if it produces um steady sustainable long-term results so I always say to Founders you know Think Through The Eyes of the person that is investing why would they even want exposure to your industry let alone to your specific business within that industry how have you positioned uh your business to take advantage of um data Trends um that could be in in an Investor's favor have you applied five 10 year forward multiples to your conservative moderate and aggressive growth forecasts to show an investor what they could potentially be taking off the table so they can contextualize that in terms of their portfolio so I think about it as an investment analysis exercise I don't think about it in terms of getting excited about the business and I think um I think that's something that um was success for us at least I I think that's a very Equity analyst background of your have that approach I would like it's such an important exercise I do it with Founders often in terms of you know you're not selling your business you're you're selling the investment opportunity to you know into your business and you're selling shares like that's your product that you're selling to to investors in most cases and you're right there's at least in the US there's a lot of investment made on hype and the excitement of potential and a lot of those things don't work out but the the risk tolerance in the US is much higher but in the UK this kind of more pragmatic analyst approach um I think resonates a lot better from my experience being here and you know talking to Founders and investors there's there's a different call investment grade product that Founders are going to have to package up to attract the right type of capital which creates I would say more sustainable business opportunities but maybe you know less of like the wild and crazy unicorns that you know might uh might come out so I'm curious with with that kind of mindset and you know sharing what you shared there like what do you think is the opportunity for startups in the UK you know specifically when it comes to to raising money where where do you see gaps or opportunities for Founders to to come in and fill I think that's a difficult question I go to a lot of uh pictures so I'm seeing startups pitch all the time I see a lot in fintech um I see a lot in technology and AI I see retail businesses almost written off before they're considered because that um direct consumer products like I I saw moisturizer pitch the other day considered very difficult to to take share out without an awful lot of backing opportunities you know I think the opportunity is in in the UK is in the the access that we have as entrepreneurs to um cheap product testing via no code um and to be a and prototyping so it's really inexpensive actually to to build something an an app or a a product and to to test it with with very little investment and I think I think it's the arrival and onset of those sorts of Technologies which present the best opportunity because you know ultimately we're looking to my first recourse would always be to sell fund or to take as little Capital as possible in order to generate as much as of a return as possible which is which is that um Capital efficiency um factor which I think is the most important one because we want to own our businesses so I think it's actually the tools and the resources that are available I also think the opportunity is in um is in the tax efficient environment that we have um in terms of the seis and the Eis which is is really a godsend um you you don't have that in other countries it's the and and this is a very lateral way of looking at it but it's also the administrative the bureaucratic the legal environment that we have in the UK which is so strong um having lived and work worked in another country you know you just can't get things processed in the same amount of time as you do here and then I think also there's there's Network so um London very much but also Regional cities um there's good founder networks there's ways of connecting with other people um I think the opportunity is in the environment that we have no it's great to hear because I I kind of get mixed feelings uh from different entrepreneurs and investors on the UK Market I think UK stands on its own and has lots of opportunity but often a lot of UK Founders compare themselves to the US and you know try to make an apples apples comparison and it's just not they're just completely dramatically different markets and um you so some Founders that think globally day one maybe us is appropriate but there's enough you have a market and a big enough opportunity here for most businesses in the UK and uh I think taking away the americanism you know in terms of influence and the capital markets uh gives Founders here a better shot at success in terms of you realizing the benefits that do have especially if you compare to the EU like Germany for you know from a legal perspective Germany is like an absolute Nightmare bying and getting a business set up I I would encourage Founders in the UK Jason I really would you know it's 50 pounds I think nowadays to incorporate a business on company's house and it takes all of 10 minutes um you have to pay I think it's a few grand to incorporate a business when you've gone through the legal processes in the states um as I say the the sis Provisions are so extraordinarily tax sufficient that it it's almost silly not to um so we have a uh we have a legal environment which is encouraging investment into small businesses I think the the the piece I think comparison is the thief of all joy um so let's not go down that route um the only thing that I would love to see more of in the UK that I think the states does really well is that um if we go we take the valley for instance um at least more than 50% I'd say of VCS in the valley are run by exited Founders so people who have been entrepreneurs in their own right um and have been through that Journey sometimes multiple times and have been very successful so when they come to the table to assess an investment opportunity their lens is entirely different to someone who has never had that experience of course it is um I think that's the ingredient that really um is stimulating that that high growth environment because of course someone that's done at themselves is going to be very quick at identifying someone else who's capable of of doing that same thing so I would love to see more um founder created VCS in the UK I think that's the piece we're missing you think it's too too much of traditional Finance uh in in BC here in the UK it is traditional and I'll one um possible explanation for that Jason is that we have a very non diverse thought environment in our VCS um so there was a great report published by um I think it was diversity VC um and it's it's easily accessible uh and a Google search in the UK I think it's about 7 to % of adults have been privately educated so they've gone through the scoring system that is fee paying um but more than 70% of Partners inventure Capital companies have been through the private schooling system so we have a a a high concentration of a very particular portion of the demographic running the VC investment decisions now obviously that needs to change but if we if I had to encapsulate in one phrase the value system of the private schooling education system I would probably call it um protecting tradition that's what what the fee paying schools are are really instilling that you know some of them have centuries and centuries of builtup um reputational capital and and they're about protecting those traditions and that's that's very nice that's that's lovely um if if I look at if I had to encapsulate in a phrase what I think entrepreneurship is about I would call it um innovating through disruption or disruptive innovation so here we have in the UK um a scenario where the destructive innovators are going to the protected traditionalists to us for money and uh I I don't think that's um that how the conversation ought to be I think we need far more Diversified um VCS um and the the gender stats are are pretty horrible there as well um and we we just need a more egalitarian environment um whereby the the the disruptive innovators and often times if we look at the big UK entrepreneurs um Richard Branson for instance often times the most brilliant disruptors have come from the most deprived backgrounds um so we need a way of um creating a VC environment that facilitates the the being able to pick out and recognize um the talent when it arrives rather than it being strained through the Civ of a deeply conservative and analytical framework as I think you alluded to so one I completely agree with you and I think you've articulated my feelings about the uh UK ABC ecosystem incredibly well I do want to push back a little bit as you you end that point there in terms of having Theses that are less analytical and um but going back to what you kind of said earlier in terms of Founders coming with more of an analytical approach to their investment opportunity you know I guess that's how the market is today and you're you advising Founders to adapt to the market today but I guess how would you how would you advise Founders to kind of navigate that kind of paradox of opportunity yeah I think that's a great question and I I realize there's perhaps a bit of an internal conflict in what in what I've said there I so the way I I Navigate it is I number one we should all have our investor hat on because if we as Founders own the the equity in our business we are investors in our own businesses um so we have to have a demonstrable path to um Revenue generation and profitability ASAP and we need to be able to articulate that story um with Clarity and cogently um we have to accept that this is how the um investor the VC investor Community is currently and uh I don't think there's anything wrong with um with taking upon ourselves to demonstrate clearly what the what what those good returns are going going to be um can we also bring um dynamism and creativity and some of that sort of um really high level exciting founder thinking yes um perhaps it's about knowing when to turn that on how to channel it and who it might resonate with um so perhaps um an angel group um being business owners themselves um the kinds of questions I get from Angel groups are always entirely different to the questions that I get from VCS they're so phenomenally pragmatic and practical it's just amazing how they think um and then again perhaps a crowdfunding campaign now that really is um sort of Blue Sky Thinking um for me feels a bit more poptastic you know it's commercial it's consumer investing I think it's about um dialing up and dialing down um the our our qualities and to speak to what might um resonate with the type of investor that we are are talking to and I think that's that's ultimately just about sharing respect well said well said and the last question I want to dive into on this is in regards to access you know as we talk about kind of preserving tradition and VCS you kind of coming you predominantly from that background conservative background how do founders get access how does they you're gave that opportunity to potentially you know present and have access to those investors yeah um I think it we all of course people who are within those circles already are going to have contacts connections from which can come warm introductions however we also have all of us have equal access to networking and um this is another key piece of advice I give to Founders I say you need to be networking like it's your job um so uh we all have access to event bright and we all have access to Google to look up the the found groups and the net the VC networking events even the private Equity networking events and I certainly in my experience it's impossible for me to go to a networking event and not being and not be invited to another one oh have you heard of this event or have you heard of this evening or this conference um that there's a lot that happens digitally online there's a lot going on on LinkedIn there's there is an incredible conference circuit um in London and we're on the the tip of Europe here so I think it's about um working really really really hard to to make those connections and not underestimating the um the time and the effort that that takes and also the time and the effort that must uh consequentially go into um maintaining those relationships uh because of course the best time to raise money is when you don't need money so when you write that email to a VC and you say Hey you know I don't need money I'm just letting you know um that we've achieved this in the last six months which is what we said we would do and same thing the following six months and you know it just creates a slightly different Dynamics so I think you've got a network like it's your job pel it's been amazing having you share your insights on this uh on the podcast today especially just the UK perspective uh as a Founder here um if Founders or listeners want to get in touch with you uh or learn more about you what would be the best way for them to get in touch with you that would be LinkedIn Jason thank you perfect we'll make sure to throw that in the the description down below El thank you so much for being on the show and sharing your thoughts uh you know look forward for our audience to to hear what you have to say great thanks so much Jason thank you for watching today's episode as a reminder I'm your host Jason Kirby I built and sold multiple companies with over 135 million in transactions as either a Founder operator investor across multiple Industries I'm currently the managing director and founder of thunder. BC where we help companies and Founders at all stages navigate what capital to raise and who to raise it from and help improve company's odds of raising the capital if you need help reach out to us at help. under. BC if you like Today's Show please share with your friends give us a like or comment down below and as a reminder this show is published weekly and to get notified new episodes and our news newsl be sure to go to our website at join. thunder. BC and if you sign up today I'll send you a few freebies on how to negotiate a term sheet how to get a free list of relevant VCS and much more that's it no more Shameless plugs thank you and see you next week