Never miss an episode
Subscribe to the Sound Advice podcast
Subscribe by email and get the Sound Advice podcast delivered to your inbox every month with a ton of related articles, templates and problem solving guides for small businesses so you can put our Sound Advice podcast into practice.
Looking for small business ideas? Setting up a business is like playing poker – you have to deal with ambiguity, anxiety and risk. Trained architect Arthur Kay shows his hand to reveal how he built his businesses – coffee recycling company Bio-bean, and tech and urban housing company Skyroom – from big ideas.
Kay is proof that the best business advice can be applied across any industry or discipline. He has tackled everything from turning used coffee grounds into fuel to taking unused space above existing buildings and creating affordable housing for local workers.
With Bio-bean and Skyroom you couldn’t get two more disparate companies, yet he’s made an enormous success of both. We find out how and learn which entrepreneurial hacks and innovative strategies work every time.
Here’s what he covers:
Turning an idea into a business
Let’s talk about the first company you founded when I first heard about you—Bio-bean. I was wowed, amazed and confused to how your product hadn’t existed before.
You had the idea of taking used coffee grounds from all the big coffee companies, such as colossal cafe chains, and turning them into briquettes to burn in wood-burning stoves. Tell us how that came about.
Well, credit goes to you, Bex, because you were the first person ever to interview me when I was just out of university setting up that company.
The company’s called Bio-bean.
We collect used coffee grounds, mainly from instant coffee manufacturers and big coffee chains and coffee shops all over the UK.
Thousands and thousands of different shops every day.
We collect the stuff that’s left behind after you make a coffee—the grounds that are left behind afterwards. We turn those into a range of advanced biofuels, pellets and things called coffee logs, and also liquid biofuel— biodiesel, which was used for some time to power London’s buses.
And then perhaps most exciting is that we also make a range of biochemicals.
I can’t take any credit for this— just the clever scientists on our team. We extract the stuff that makes coffee taste and smell like coffee out of the used grounds, then reapply and use it in flavouring everything from cakes to liquid.
It’s a genuine kind of circular economy business.
Ideas can be incremental, rather than come from a eureka moment
It’s exciting to have come up with every one of those applications. But we will focus on the beginning of Bio-bean because this is all about getting the first year right.
Did you come up with the concept at university? How did the seed and germ of an idea sprout in that brain?
It’s an idea I came up with whilst at university. Entrepreneurs put a considerable amount of storage on the idea and this eureka moment. For me, it wasn’t like that. It was very incremental.
A big takeaway that I’ve always had in terms of retelling entrepreneurial early stories is not putting too much emphasis on that first spark, an idea, but how you then turn that or go about the incremental process of turning that idea into a reality.
Often your initial idea is quite different to what you produce.
Get working, and don’t spend too much time thinking
There’s a hilarious quote from, of all people, Mike Tyson, which is that everyone has a plan until they get punched in the face. It means that everyone has an excellent, gorgeous business plan, which you spend hours polishing and making look beautiful.
But then that comes into reality with customers and potential partners.
In our case, a big challenge was the technical and the engineering side of things, and that’s when you start learning rapidly.
So, my big lesson was not from just year one, but that first few years of setting up Bio-bean. It is not to spend too long behind a computer in the laboratory or to think about it.
Try and get out there and talk to customers.
Learn fast because rapid prototyping is the process you want to start getting into quickly.
It’s the classic 1% inspiration, 99% perspiration to make anything work. Are you hinting at the fact that maybe the original idea you had is not how Bio-bean ended up looking?
Even if your headline vision remains consistent, everything may change
I would say the headline figure is and was coffee equals fuel. In both my businesses and many other successful companies, the headline vision remains consistent throughout.
However, the nuances of what coffee equals fuel are, the products that we’ve ended up creating, and the processes through which we’ve gone about creating those products, have changed dramatically.
I think that’s the big thing.
People are talking about pivoting in businesses and not being too attached to things. A real challenge that all entrepreneurs have, particularly in those early stages, is understanding what needs to change in your business versus making sure we can keep that overarching ambition goal mission consistent.
It’s about being very willing to change how one gets to that endpoint.
In the writing of a fiction book, it’s known as killing your darlings. You might have an excellent idea for a book and a plotline that you’re excited about, as well as a character who you fall in love with. But if that character ends up getting in the way, then you have to be willing to step away from them.
In the case of Bio-bean, the specific product that we ended up stepping back from was liquid biodiesel.
The original involved the fact that used coffee grounds have a very high percentage of natural oils within them. The plan was to take the solids and turn them into pellets and the liquids into liquid biodiesel and oil.
We understood more about the complexity and regulation of running a large biochemicals plant in the UK. As a small business with a small amount of biofuel, we’re competing against oil super majors like BP and Shell in the liquid fuel supply chain.
This was a very dull, technical and niche challenge, but it meant that we had to change how we were going to develop our product. That drew us more down the biochemicals route rather than the liquid biodiesel route.
I think that’s just having a laser focus on what’s working for the business at all times. I love that point about killing your darlings. I’ve never seen that applied in a business sense before. I am not very good at killing my darlings.
That’s why my editors are always grabbing the red pen.
Understand how networks are formed
When you were building that Bio-bean network, finding all those independent coffee shops to give you their grounds sounds like a huge undertaking.
How did you build out that network?
Was there any way to automate that sort of customer? With shop acquisition, how did you build this vast network?
The short answer is very incrementally, but it was also about understanding how you form networks. It’s an exciting and, again, niche area called network science.
Within network science, there’s this idea called power laws.
We always think that things distributed relatively evenly across networks. But if you delve into them, you have something called the Pareto principle, where different power laws exist within networks.
I think Pareto was an Italian monk. He worked out that 80% of his crop yield came from 20% of his land and that 80% of the nobility owned 20% of the land in Italy.
It’s the idea that we don’t have even distributions throughout networks. We have huge concentrations of power.
And surprise, surprise, it’s the same in the concentration of used coffee grounds, which is what we were trying to find out.
And so, if you look at the power law, the Pareto distribution of coffee grounds waste, the power sits with a relatively small group of organisations. It sits with big chain coffee shops such as Starbucks, Caffe Nero, and Costa Coffee, and then with a tiny group of two instant coffee manufacturers—Jacobs Douwe Egberts and Nestle.
And so, you’re right. There’s a long tail with the thousands of small, independent coffee shops, all of which might have one, two or three branches.
But there’s a massive distribution of chains like Coffee Republic, which I know you had in the podcast, or Caffe Nero with a thousand-plus stores. It’s about focusing on those as the key ones we’re keen to work with.
Now we’re proud to call many of those our customers today.
Did you know all this when you were building the network, or is this the beauty of hindsight where you think, “Ah, all that time we wasted knocking on doors, and I could have just made four phone calls and got most of my business in?”
I did not know this beforehand.
But the benefit of some hindsight is that I could apply some of that knowledge, or some of that thinking and approach when setting up my second business, Skyroom, when thinking about it from this power law and distribution perspective.
Don’t jump too far ahead of yourself
But some things you need to find out. A big mistake in the early stages was trying to jump too far ahead of oneself.
So, if we’d gone out straight away and tried to engage with Starbucks on day one, they’d have rightly said, “No,” and, “You’re not ready for our business,” and, “It’s far too big a scale,” and all those sorts of things.
There is an incremental build-up to be able to take that off.
You can develop that within organisations with the classic, “Let’s pilot it. Let’s then scale up to a hundred stores, and let’s scale-up throughout our network.” It’s trying to predefine experiments that scale-up can work through.
It’s very tempting to try and do the Hail Mary and go all or nothing. But it would help if you defined what those different milestones are and clearly articulate them.
You need to communicate both to yourself and your potential customers, partners, colleagues, or investors what success looks like and what failure looks like. You need to give an obvious thing to aim for in those early stages.
Clearly articulate one, three and five-year plans
When you’re doing a business plan, does that mean that you follow a slightly different process than the classic SWOT analysis—strengths, weaknesses, opportunities and threats?
Do you stick to that, or do you have a more analytical approach to planning now?
I try and aspire to do a lot of these things, or what I believe is best practice, rather than what I necessarily do every day.
But what I try to do is set out a five or ten-year plan, clearly articulate what that would look like, and then incrementally work back from that. So, to say, our mission in X many years is to achieve Y results. And then to break that down specifically in terms of what that looks like and reverse engineer that back to the present day.
That backwards planning system means that you can give yourself a one, three or five-year plan. Going for longer than five years is perhaps a bit unrealistic.
You can scale up and down your one, three or five-year plan accordingly after saying, “Was I a bit unrealistic?” I’m one for being a bit over-optimistic.
I guess the temperament of an entrepreneur means that you do have a slightly more half glass is full approach.
That’s helpful because it means you’re going to be ambitious. But it’s essential to be realistic to investors and partners and make sure they understand that’s a stretch goal.
Then you can play with those one, three, five-year plans, basically.
Metrics can help with emotive future visualisation
Which metrics do you focus on? Do you look purely at things like revenue and profit? Or are you also looking at things like how many staff you might have, how many offices you might have, and the growth rate month by month?
How many different metrics do you like to include?
I think it depends on the business, and what your metrics are.
With Skyroom, we’re looking at the number of homes delivered and then an environmental and social metric. We have different metrics within that. And then specifically on the granular day-to-day in terms of things like headcount and turnover.
To be honest, the more granular you’re able to get, the more helpful that process will be because it means you can visualise the future.
Visualising the future doesn’t necessarily have to be things like saying what your growth rate will be in June 2026, which is arbitrary. It can be more emotive.
I could say, “I’d like to run a business where I can spend half an hour a day talking to each of my direct reports, or a business where I know the name and family of everyone I work with or a business where I have three offices—I want to set up in New York, and I’ve got family in Brazil, so I want an office in Sao Paolo.”
You can be pretty specific and emotive about it, especially when you’re in that year one. A lot of people believe that they have to build a business a certain way.
There’s a model of entrepreneurship in the UK, particularly heavily influenced by the West Coast United States. But in different countries, there are other influences from where their model of entrepreneurship comes from.
It’s stating the blindingly obvious, but it’s worth noting that you can build a business in whichever way you feel is best for you.
And whether that’s a lifestyle business, high-growth tech startup, or a company that means that you want to spend as much time as possible working remotely, you want to define and articulate that future.
It doesn’t all have to be, “Go and get angel investors, then VC [venture capital], and an IPO [initial public offering] listing in 2028.” There are other ways.
That’s excellent advice.
It’s old hat to say, “I want to be a hundred million pound business in 10 years.” It feels like a lot more companies are thinking, “I want to be a B Corp. I want to be carbon net-zero. I want to have a five star Trustpilot rating.”
It feels like the conversation has changed a bit.
I think so. I think it’s an excellent thing that those slightly more holistic metrics are coming in, which people are thinking about more, rather than a market capital or revenue metric.
Look at more than the obvious fundraising options
Tell us about Skyroom. Can you give me your elevator pitch?
If you’ve raised money for this business, I want to hear the elevator pitch you gave the VC who ended up stumping up the cash.
Well, no, we have not raised money for the business. I was trying to work it out because I was thinking about fundraising before this podcast and the different approaches we’ve done in my short career.
We’ve done debt finance, crowd finance, angel, VC, and then with Skyroom; it’s bootstrapped.
But then separately, we’ve raised money to fund ourselves and invest in some of the projects.
We raised just over a hundred million pounds last year as part of something called The Key Worker Homes Fund, so we can begin to use that hundred million to invest in projects that we will be developing ourselves and try and accelerate that transition.
But my elevator pitch.
Let me think of you as a head of housing at a local authority in London, because we work with a lot of them. You’re one of the biggest landlords in the UK because local authorities typically own between 20% and 30% of the land they operate.
We help local authorities unlock the airspace above their existing buildings to then deliver homes for key workers. In the airspace above existing buildings, we developed a proprietary podium system to provide built offsite homes. They’re precision manufactured homes built in factories in the north of the UK and then installed on to the top of existing buildings.
Typically, we look to deliver between two and six stories of new homes above existing buildings and rent those to London’s key workers.
We set up in 2018. Sadly, because of the pandemic, the plight of critical workers is becoming increasingly centre stage. But the good news is that policy is beginning to change, providing homes for key workers.
Slowly, the central government is beginning to look at policies to support key worker housing.
The winds of change are helping out to make sure that homes to key workers become more of a priority.
I imagine, like many businesses, that pandemic slowed you down, but how is it going otherwise? How many projects do you have in the pipeline?
And when can we start seeing you using the airspace above our existing UK buildings?
Our particular focus is London, and in terms of setting up big long-term goals, our ambition is to deliver homes to 10,000 key workers by 2030. That’s our stretch goal and what we’re going to be working towards.
In our pipeline, we’ve got just over 1,000 homes we are working on delivering at the moment. So still not enormous, but 1,000 homes are enough for a few thousand key workers, so it’s a good start.
We’re starting very small in terms of our first planning permission within the company. We secured, in November last year, our first planning permission. I believe this development model is one of the first-ever planning permissions secured in the world.
That will then hopefully be on sites at some point later this year. And so we’ll be delivering 15 homes for about 30 to 35 key workers.
The exciting thing about it is that they’re gorgeous homes because they’re in the air space above existing buildings. We’re right in the centre of London in Zone 1 with views towards The Shard and the river, so it’s a beautiful part of the city.
But on top of that, these homes are affordable for them at a London Living Wage, with the rest sold to first-time key worker buyers.
We’re trying to achieve this idea of sustainability and affordability with beauty within that architecture. I think people often assume that if it’s affordable, it’s therefore cheap and rubbish.
If it’s sustainable, it’s got to be expensive. And if it’s cheap, it’s got to be unattractive.
We’re trying through architecture, design and thinking about it slightly more holistically that you can deliver a home that is affordable, sustainable, and beautiful all in one go. We’ll let the people who live in them be the judge, but hopefully, we can come back and tell you more about them in a year.
Recruit well. Having a solid team behind you will help
You can give us all the testimonials from your happy customers.
I love what you said about starting small because I remember when I was reading about Skyroom, I just thought of all the moving parts that were involved from, as you mentioned, planning permission, but then the building materials, the design, and finding the key workers to move in, as well as dealing with neighbours.
All these different elements have to come together to make a single project successful.
I just wondered how you tackle that as an entrepreneur. Do you have to break everything down into hundreds and hundreds of achievable steps?
How do you avoid it seeming somehow overwhelming?
I’ve worked very hard to build a solid team with both businesses who have previously had experience in these things. I hadn’t had any experience in both of these industries beforehand.
I went straight from university to then set up Bio-bean before setting up Skyroom.
They’re very complex businesses to work through if I was a sole operator and trying to do everything myself. I was very willing and happy to delegate, working with people with years of experience in the industry.
In particular, with Skyroom, I work closely with Lewis Kinneir, a very experienced architect, and then James Gerrard, a very experienced financier and developer.
Collectively they have decades of experience in this industry. It was leaning heavily on, frankly, fantastic and incredibly smart, hardworking, driven people who brought a lot of the required skill set to the table.
Entrepreneurs need to both zoom into the detail and have a wider perspective
In terms of thinking through that level of complexity once you find intelligent people, it’s about the ability to see both the wood and the trees when stepping back and having perspective when zooming in.
I trained as an architect. I constantly reflect on the benefits of an architectural education because you are encouraged to look at a cityscape strategically and how you could design a city.
But then also be able to zoom in, look at the door handle, and ask if this is a well-designed and thought-through door handle?
I’d never really kind of thought of that as a big deal. I assumed that was just how one did things—but understanding that you can zoom into detail and zoom out to give you that perspective and the strategic view is essential for any entrepreneur.
I think in jobs like consulting, finance, or journalism, whatever it happens to be, you have a specific role.
You’re not necessarily, unless you’re on a speedy track career path, given the perspective of what your boss’s boss is thinking about or what your junior’s junior is thinking about.
You have your tier, and you need to make sure you nail your tier. As an entrepreneur, you need to go in and out between tiers and give that perspective.
I listened to people who I’ve heard in your podcast before, Bex, such as Coffee Republic.
They are looking at everything from the details of where you source the beans, the flavour of the coffee and how a barista greets a new customer, all the way out to what is their real estate strategy throughout the North East, making sure that they have my rent level set at the right place so they can expand through a real estate portfolio and compete against Costa and Starbucks, et cetera.
These are seemingly contradictory skill sets, but a good entrepreneur can give that larger perspective and zoom into the detail simultaneously.
Entrepreneurs should know when to stop
Do you think that that mindset enabled you to look at an idea like Skyroom and feel, “Construction? Sure. Why not?”
Does that mindset break down all the barriers, even if you haven’t necessarily worked in an industry before because you know that you have that broad spectrum, you can attack anything, any problem?
Not every problem, but I think it makes things more achievable and manageable if you can try and articulate what success looks like and your three, five, and ten-year vision. You can say, “This is what it could be.” And then break that down into manageable steps to be able to get there.
In time, it could become very, very complex and overwhelming.
The to-do list of any entrepreneur could be infinite. Knowing when to stop again is a challenging skill. With high-achiever people who had academic excellence beforehand or people who close down the computer and realise they’ve done a good full day’s work and got what they need to get done, that’s a tough mindset to switch over to.
It’s a challenge to get a first from a top university as a high performer to going and setting up a business.
I think that although your CV looks beautiful, it’s a more difficult path in terms of mindset because there’s no one at the end of the day saying you’re done, with a pat on the back.
You don’t always need funding—look at the business you want to build
I want to talk to you about funding because we touched on it earlier, and then you also talked about hiring great people.
To my mind, hiring top talent can often be expensive, so there needs to be money in place.
Can you talk to me about which modes of funding worked best and which business we’re talking about because I know that it’s been chiefly with Bio-bean that you’ve done the fundraising, Maybe you’re thinking a bit more about other sources of finance with Skyroom?
Compare the different kinds of funding experience and what you learned.
So with different funding, the main thing I always stress is that it depends on the kind of business you aspire to build, back to what we were discussing earlier.
Firstly you decide what company you want, and then once you’ve decided what kind of business you want, what funding is needed and available to get there.
Again, because we have very strong role models for entrepreneurship, particularly of this West Coast US model, one often assumes that the only way to do it is to go and raise money with angel investors and find venture capital.
Where if you’re not growing at, what is it, 30% a month, you’re going nowhere. It’s about understanding the kind of business you want and having a funding plan that corresponds.
I think the gold standard is to try and build a standalone business that does not need external financing. That is a very, very difficult place to get to. But if one can make that, that is the dream. Many people assume that one needs financing to get going in business. If you can break things down into tiny parts, there is almost any business you can start working and earning money.
Let’s take Skyroom as an example. You might think that building 100 homes, or even one home, costs hundreds of thousands of pounds, with hundreds of homes costing millions and millions of pounds.
Therefore, how on earth can one get to revenue before one’s delivered homes?
What we did is to break it down into incremental steps.
We started off working with existing major landlords and providing support on a consultancy basis, helping them out with their existing developments.
And so we broke it down so granularly that we could offer a small product and service that could generate small amounts of revenue in that short term.
Skyroom is a business that you’d never naturally think of approaching in that mode, and we tried to think about how could one bootstrap that kind of business, as I believe it’s the best way to do it.
In terms of other models, angel investing and venture capital is an excellent route to go down.
Some of the funders that we’ve worked with in the past have provided a lot more than capital and can be incredibly beneficial as funding partners. But it’s also about understanding.
People often think of it as being given money rather than selling a part of one’s business. It’s a very different mindset again there and needs an understanding of their business model regarding how they make money.
Venture capitalists operate on a power law distribution again, where their portfolio will mostly be either lost money or break even.
A few companies investing within a portfolio, which could be anywhere between 10% and 2%, will be successful. Still, they rely on that 2% or 10% to be so successful that not only does it pay back the 98% to 90% that are failures or break even, they’ll make more money than that from that tiny percentage.
I think many people, certainly those I know and speak to, go into those conversations not fully understanding that’s their business model.
If you’re not the golden child, you’re kind of nothing to them and that the water closes over very fast.
In terms of Skyroom, we’ve gone down this different route. We’ve almost become a venture capitalist ourselves in that we’ve raised this fund, the key worker homes fund, which has given us a hundred million pounds to find new projects and work in particular with local authorities and housing associations.
We’re able to not only provide our technology, expertise and technical approach to building these homes for key workers, but we’re also able to put in quite a lot of the money to unlock and accelerate those developments too.
It’s another tool in the arsenal, but very different and exciting regarding how one raises money for a fund versus how one raises money for an angel investor, bank financing or crowdfunding.
I imagine that once you’ve done some consultancy for all those landlords, you then are in with all those landlords when you want to start building on top of their existing portfolio. That just strikes me as very, very clever.
Before crowdfunding, you need to build an audience and user base
I wanted to ask a bit about crowdfunding because we haven’t touched on that.
I remember when we spoke in 2016, you were just embarking on a campaign. I never found out how that went. How did it go?
That was crowdfunding for a product called Coffee Logs, which at the time was quite a weird idea.
So they are logs you use instead of wood or coal in your home on a burning stove. And yeah, it went well. They became the best-selling eco briquettes in the UK and are exported to Germany and the Netherlands.
I think at the time we spoke, it hadn’t been invented. I think they were just an idea we had cobbled together from a little briquette—literally a homemade coffee log.
So now it’s at the level it’s at.
I was devastated because you told me you’d stripped the scent of the coffee out of the logs. And I was like, “What? Why? Why can’t it smell like coffee in my house?” And you said, “No, no, no, not everyone wants their whole house to reek like Starbucks.”
Exactly. Well, that’s because we were developing alongside a very technical product in the flavours and fragrances—the biochemicals referred to as extracting things called volatile aroma compounds.
This is the stuff that makes coffee taste and smell like coffee, and it was about us capturing all of those compounds.
Coffee has a complex figure profile.
It’s got about a thousand different volatile aroma compounds, making it one of the most difficult to generate synthetically. Therefore the stuff that we call coffee is essentially flavoured water.
You use hot water as a solvent, pour it over these roasted seeds, and then find that you then get flavoured water that we call coffee.
But if you were to then pour again another cup of hot water over it, it’d make a less intense coffee, which we don’t drink. Because we have all these used coffee grounds, we thought about what to do with them.
To take out and capture those volatile compounds, bottle them up and work with some fantastic niche businesses—companies that make flavour or bottle, refine and synthesise flavours and fragrances.
They are some of the most interesting businesses I’ve ever come across.
Working with some incredible scientists and flavourists to generate these super-sustainable kosher coffee flavour and fragrances, all derived from the use of food-grade coffee grounds.
It’s a niche I’d never thought I’d be working, but it’s fascinating.
You use every single component of those coffee grounds. And as an aside, if you like hearing about flavour houses, there’s a great book that you have to read called The Dorito Effect by Mark Schatzger.
I have not. I will check it out. Thank you.
It goes into these big American flavour houses and how they are making vanilla, for example.
But anyway, that’s a digression.
When you say that the crowdfunding project was a success, can you tell me how you made it a success? Because I’m wondering if some listeners think they’d like to crowdfund their product.
What did you do right at that early stage to get so many people interested in funding?
What we did right and what we did wrong?
I think I’m going to get maybe some numbers slightly wrong here, but I believe we aimed to raise £20,000 for a competition called Voom, which was at the time run by Virgin Media.
We won it, which was great.
And it was through a platform which I think was run by a previous guest of yours called Jessica Ratty.
It was a platform based in Cornwall called Crowdfunder. It’s a fantastic team, intelligent people, and very generous with their time.
There are two kinds of crowdfunding that I’m aware of.
There is equity crowdfunding when you’re selling a small percentage of your business to a large group of retail investors, or there’s product or service crowdfunding where you’re essentially more like Kickstarter.
You’re saying this is something you would create, and whether you be interested if we were to make it. Money comes in through pre-orders or similar kind of things.
I think what we got wrong was that we assumed that the platform would be what provided the investment.
The interest would come if we told a cool and enticing story and showed a fantastic product. People on the platform would automatically say, “Fantastic, let’s go and support this.”
The reality and from talking to lots of people who’ve had much more success than we’ve had on it and understanding more about those systems is that you almost have to bring your audience to that platform and have been doing that legwork a long time in advance.
It was one of those unhelpful pieces of advice, which means you’ve got to do the hard yards—there’s no short hack.
You need to be talking to potential customers, understanding their challenges and problems, engaging with them at an often one-to-one level or in-person level, building up that what Kevin Kelly calls a thousand true fans, who are the thousand people who are going to not just like what you do, but love what you do.
Not just the idea of it, but willing to buy coffee logs every single week, loving them, and telling all their friends about them.
They’ll be your means of profit, spreading the word of coffee logs.
We didn’t get those thousand true fans and spend time with those customers, understanding someone obsessed with the product. You’d be surprised some people are obsessed with the burn quality of different woods and fascinated by air-dried versus kiln-dried versus hardwoods versus softwoods.
We didn’t spend time with those real wood nerds and understood how a coffee log could compete or be better and get into the skin of that.
It’s the hard yards of understanding your customer, to the point where you name their cats and know their favourite chocolate bar. You know them so well and then bring those fans to the platform.
That’s where the engagement happens, rather than what we did, which was tell what we thought was an inspiring story, plunk it on the platform, and hope for the best.
That’s excellent advice. I think a lot of people do that. They think to build it, and they will come rather than, we’ve got to bring it to you and then hopefully you’ll follow us to our crowdfunding.
If you are a technical business, look at grants for research and development
We touched on with Skyroom that you’ve got this model to try and make revenue even before you fully launched.
With Bio-Bean and crowdfunding, that was one way of sort of doing that.
What other ways did you get cash in? Because I think you were pretty clever at getting grants. I think there were lots of European grants, for example.
How did you track down money to support your R&D (research and development_?
R&D, especially with a heavy technical business, is a huge expense and can be very risky. We raised money through many different grants and awards, particularly Innovate UK, which I’m sure many listeners are familiar with, which is particularly heavy on technical grants.
For a complete list, there’s a resource that is essentially like a funding finder. Somewhere where you can go and find any funding, whether in venture capital angel investment or grant funding, understanding the entire funding landscape is in a few diagrams of how the whole thing works.
Innovate UK was beneficial in terms of funding some of those early-stage projects. And we’ve benefited from that with Skyroom as well. We developed two proprietary technologies there.
For non-technical businesses, there are also pools of grant funding for social, environmental projects. From my experience with them, they are much more competitive, with relatively smaller amounts, but there is still funding available.
With for-profit businesses, neither social nor environmental or technical, I don’t have much experience in that space. I’m not aware of lots of grants like that, but others may point them in the right direction.
When you were talking about creating your fund in the key worker homes fund, which will pay for some of the projects Skyroom’s going to do. How does one do that? Can anybody create a fund that supports a business, and how easy is it to start a fund?
There’s a lot of legal and technical legislation you have to go through actually to be able to set a fund up. Still, essentially if you have an investor who’s willing to support and put their money behind it, it gets the return on capital through that.
But the model works in that we’re not going to be the owners of the land. We’re going to partner with local authorities and housing associations who are owners.
We’ve raised the money, and then that money is invested into those projects. And so we act as then development manager through those projects and then deliver the homes.
It essentially acts as an accelerant to make projects happen faster because things can take a long time in affordable housing.
Our thesis is that key workers have suffered long enough with deplorable living conditions and long commutes, so we want to get on and do it because we are waiting for the government to develop a solution.
A hundred million pounds is not enough to solve this challenge.
It sounds like an awful lot of money, but it’s not a vast amount when you’re talking about delivering homes. What you need in this space are billions, if not tens of billions of pounds, to give it a drive and accelerate the delivery.
But with a hundred million as an early stage private company, we can start to get it going.
The good news is that the mayor of London and central governments are now beginning to follow behind and start to put a policy in place saying, “Okay, if this is happening. We can look to support key worker housing.”
Sustainable products will only work if they are better than what’s available
Can you tell me a bit about the construction of these fantastic new homes?
You mentioned wanting to create spaces that are sustainable and beautiful but not overwhelmingly expensive.
Just take me on a journey.
Describe how you will construct this and what kind of materials you’re looking at. I don’t know if that’s revealing the secret sauce a little bit, but I’d love to hear more.
Well, firstly, people can go and look at architectural visualisations if they go to our website. So I’d invite anyone to do that,
We’re working with amazing architects from an early stage regarding precisely how we go about them. As I mentioned, one of my colleagues is Lewis Kinneir, who’s a talented architect with an incredible network of some of the best architects in London.
We work with outstanding architects from the outset on each different project.
You build all the homes offsite. It’s an important point because you make these above existing buildings. You imagine the level of disruption and noise and anxiety if someone’s going to be hammering away on your roof for two years or however long it takes?
A considerable part here is to try and minimise the downside to existing residents.
By building the homes offsite in factories, it means you remove a whole bunch of disruption. You can install these homes and lift them into position in days—literally crane them in place in days, rather than through two years of construction on your rooftop.
It’s a very rapid process actually to deliver an installed home. These houses built offsite in factories are called precision manufactured homes.
A massive issue in sustainability, often not spoken about, is that a vast portion of CO2 emissions and waste comes from the construction industry. It’s one of the most wasteful industries, both in terms of end of life, how demolition works but also in terms of when you’re onsite.
Let’s say I was cutting a piece of wood to put up a wall.
If your building is in a factory, you know exactly how long a piece of wood is to get, You’re standardising it, and you can get that ordered without wasting any wood. If you’re building it onsite, you usually have someone sawing it through and then throwing away the end and putting it up.
There’s a tremendous amount of waste.
And then, in terms of sustainability standards of the homes themselves, they’re all passive house standard, which means that they’re of the highest UK environmental standards. In theory, and one of my colleagues will probably tell me off for this, they should be the most sustainable homes ever built.
We need to get that lifecycle assessment to verify where they’re built, how they’re built, and what materials they’re built to fit that standard.
I can see how excited you are about promising a sustainable home that positively impacts the world.
How vital has purpose been in driving you forward as an entrepreneur?
It’s been essential. I’m very passionate about making a positive difference environmentally, but I’m also not someone who’s a shirt-wearing vegan that is very, very intense about it.
I’m interested in solutions, which I believe maintain a quality of life that people in the West rightly or wrongly have become accustomed to because I think the only way sustainability can become mainstream is to make it better.
And by better, I mean, either genuinely a better or less expensive product than exists now.
The canonical example of this is Fair Trade in the 1990s, where you’d have a teabag, and it tasted like sawdust and dirt. Eventually, they caught on to the fact that they needed to be at least as good as existing teabags if they’re going to work.
My view is that a product can’t be compromised because it happens to be ethical or sustainable.
It makes it much more difficult.
It means that you have to be a fantastic product and sustainable, and I think the only way to make it mainstream is through that.
The most famous example of this today is how Tesla has approached it.
First and foremost, they’re making fantastic cars, which if you compare them to conventional cars, are better. They also happen to be considered a less environmentally impactful car generally.
But first and foremost, they’re a fantastic product.
And that’s the approach that we need to consider when we talk about either social impact or environmental impact. First and foremost, a great product.
I would give the same advice if you were asking me about as a business, “How do I raise money as a socially impactful business versus a conventional business?” The answer is to be a great business and have a positive social environment or environmental impact.
This is similar to the advice given by Rachel Clark, who was on a previous episode with Nut and Noggin. She developed this plastic sulfate-free shampoo but was saying, “No one is going to buy this thing unless it’s just as good as a regular shampoo that comes in a plastic bottle.”
You can’t skimp anymore. People aren’t willing to do good just to virtue signal on social media that they’ve done so.
The products need it to work.
Sadly, I think people are willing to do that but are not sustainably willing to do it. It would help if you saw it through the lens of social, environmental, and economic sustainability
You can get people to drink through paper straws for a few years. But people aren’t going to be doing that forever.
There needs to be the most sustainable choice, like how you can get people drinking straight from a cup with no straw. And then after that, if you need a straw, come up with a better straw. But I don’t think a paper straw is going to solve any challenges long-term.
Networking is crucial—make it a pleasure, rather than a chore
And you mentioned, Arthur, this excellent architect that you brought on to your team. How did you meet him? Was he a power beforehand?
Did you scratch out the idea for Skyroom on the back of an envelope?
I trained as an architect and was always interested in design and architecture. So I was often in and around that space, spending a lot of time networking, and I met him through a friend of mine who Louis teaches in an architecture school.
And then I had another friend who ran that architecture school.
So through those two, I was introduced to Louis as a very inspiring, hardworking guy. I started talking to him about the idea, and we took it from there.
So in terms of advice you’d give to anyone listening who is trying to build a founding team, try to meet like-minded people and brilliant people who achieved a lot of stuff already.
What would you advise them to do?
The word networking, I think, has got bad connotations, and it’s cringeworthy, but I would say embrace it, go out and do an awful lot of it.
You don’t know the circumstances through which you get to meet interesting people.
I psychologically tried to put it very early in my career in the camp of a two-hour drinks party after work, instead of it being, “Oh, this is annoying, and it’s eating into my social life,” or, “This is a third rate social engagement.”
I try to think of it as a first-rate professional engagement like, “Oh, I could be in the office, but I’m talking to interesting people and having a drink.”
It’s a slight mindset shift, but my workday went from I don’t know, say, 8:30 to 8:30, and the last hour of that was networking, versus 8:30 to 7:30, and an hour of my social time was with people. It flips it a little bit in terms of being a good end of the workday.
The important thing is not rushing it and thinking long-term about it. I’m talking to a few friends who are thinking of starting their respective businesses at the moment and are very keen to find a co-founder who has complementary skills or mirroring skills or equally high quality.
They’re on this equivalent of a kind of dating app, where it’s, “Let’s rush and find a business partner.”
And my constant advice to them is, “This is going to last longer than most marriages, for better or worse.”
If your business is a success, which you hope it will be, this will last longer than many, many marriages. Think of it with similar levels of caution, also similar levels of getting to know the person.
Understand their motivations and what makes them tick.
Can I constructively have a debate with this person? Can I deliver a project over two weekends to this person and define what success looks like up front?
You need to be ruthless with yourself because it’s much easier to think, “Oh my God, I found the perfect person because their CV looks good, and we had an interesting couple of coffees together.”
You wouldn’t marry that person.
And everyone seems very keen to get married.
But the right person will wait. They will also want to make sure it’s the right fit.
They will also want to go in with their eyes wide open.
There are different models of entrepreneurship depending on your needs
Can you talk to me a bit about how you managed to start Skyroom yet still be involved with Bio-bean? You didn’t do a classic sell-out, exit all, and ride off into the sunset.
You’ve approached it a different way. Tell us about that.
It’s getting down to this idea of recognising that you can adopt different models of entrepreneurship, and it doesn’t always have to be a binary start and finish.
I set up Bio-bean in 2013 and 2014 and then set up Skyroom in 2018 and 2019.
I tried to have a transition period between them for significant learning.
In short, it all relied heavily on having a fantastic team who could run it and deliver, who are far more competent than me. It would help if you could delegate and slowly step back from different responsibilities and make yourself redundant within that organisation.
And that is weirdly an ego thing because a lot of people want to feel very important.
I think busy people who work for other people think, “How on earth would my boss cope if I was gone?” Sadly, the water does close over very fast, and so if you were not to do that role, often other people could step into that role, whether that’s one or two more people.
It would help if you recognised that a lot of things could be done by others.
It’s trying to trust and delegate effectively and work closely with people. Here I’m talking aspirationally rather than reality. I think my colleagues at Bio-bean would probably say, “Haha. He thinks he delegates so well.”
Like you meddle every day.
But being open to that approach, I think, is the crucial thing, and it’s something that I am working hard at trying to improve on still today.
You don’t need to be highly intelligent to run a business
So you have this fantastic team in place, which means you presumably spend time on each business. Is it like one day a week on Bio-bean and then four on Skyroom?
What’s the split looking like now?
No, less than that, I think. I do some teaching at UCL and Imperial College London, and then I do some Fast Forward 2030 stuff, and then I do some Bio-bean stuff.
And between all of those, it’s probably maybe a day a week, or a bit less. So almost all my attention is on Skyroom and the Key Worker Homes Fund.
Can we talk about some of the challenges that you faced in any of those three businesses? Something that might have seemed impossible at the time, but you figured a way forward and learned something valuable from it?
I think I’ll talk about decision making as a challenge and in a slightly more generic sense.
Unusually, very, very clever people often don’t make the best founders or CEOs of companies. Intelligent people often rely on complete information and not taking a lot of risk in a situation.
Running a business is more like poker than chess
Let’s look at a game like chess and a game like poker.
In a game like chess, you can see every piece of information needed to win or lose that game on the board in front of you.
It’s a game that’s got complete information versus a game like poker, where you have a certain amount of information on the cards in your hand and the cards on the table, but you don’t know about the other cards around the table.
Setting up an early-stage business is much more like playing poker than playing chess because you have minimal information.
You have a lot of risk, anxiety, stress, and ambiguity about what will happen, But you still need to decide at that moment, and decisions need to be moving forward.
Business owners must be comfortable with anxiety and ambiguity
And so a piece of advice I’d give would be around knowing that there will be anxiety and ambiguity, but not trying to resolve it, pretend it’s not happening or make everything look nice and tidy.
Sit with it and be comfortable.
I’ve heard this analogy used before that if you’re going off and running a marathon, no one says, “I’m not going to get tired.” You just say, “I’m going to be running a marathon.”
Tiredness comes as a part of a marathon, and the hard thing is knowing how to handle that tiredness to complete the marathon.
As you can probably see, I don’t run marathons, but with entrepreneurship, it’s similar that there’s going to be ambiguity.
There’s going to be anxiety.
There’s going to be stress.
It’s learning how to sit with that stress, embrace that ambiguity and say, “I don’t know this. I don’t know this. I don’t know this. How, with the information that I know at this point, can I make the best decision with the information possible?”
It’s not the right decision. It’s not the perfect decision. It’s about you recognising the difference.
What kind of decision is it?
If this a decision which is a big decision or an irreversible decision, which do I put in which category?
Is it a decision that is small and reversible?
Frankly, the small reversible choices you should make fast, then move on to the next decision.
The big ones that are irreversible are the ones you need to focus on and spend more time on. But those should come once every few months. Those are irregular decisions.
But the small ones are where you need to be moving fast, prototyping and not thinking about too much.
Like what you have read?
Subscribe to Sound Advice on Apple iTunes here.
We are also on Spotify, and anywhere else you get your podcasts.
We would love for you to join our community and share your insights and stories. Season two is coming up, and we would love to take your recommendations for guests or even some questions you would like me to ask in future.
Never miss an episode
Subscribe by email and get Sound Advice delivered to your inbox every month with the Sage Advice newsletter with a ton of related articles, templates and problem-solving guides for small businesses so you can put our sound advice into practice.