From Revolut employee #3 to building a £5B energy giant - Alan Chang [Fuse Energy]

0:00I mean, just to give you an idea, right? The top engineer makes 10 times more than the bottom engineer. Running a company is not a democracy. You can't run a company based on committees. It doesn't work. You're going to say you're going to hire 100 people, but you can only find 20 great people. Does that mean you're hiring 80 mediocre people? That's also dumb. So the way I described the team of what we're building is this is an art piece in your home that saves you money, not the other way around. Today on Billions, I'm sitting down with Alan Chang, co-founder and CEO of Fuse Energy, A UK-based energy startup that just hit 5 billion pounds valuation in only 3 years.

0:33Under Alan's watch, Fuse exploded from 2 million pounds in revenue to 400 million today. That's a 200x growth while traditional energy giants are struggling to innovate. He took the exact playbook he built as employee number 3 at Revolut and weaponized it in an industry that hadn't seen real disruption in decades. While Brichet Gas and Octopus are playing by the old rules, Fuse Technology's first model is making energy cheaper, cleaner and more abundant. And Alan is the man making it happen. Alan, thanks a lot for being here. Thanks for having me. I'm quite curious to understand, you joined as employee number three at Revolut.

1:18You became, very quickly, chief revenue officer. how did you decide to make the switch from being chief revenue officer at a company that was scaling like crazy to start building your own company? Yeah, so Charles and I were, you know, my co-founder Charles and I worked together at Revlet and yeah, both of us felt like, you know, fintech is a, you know, problem, right? It's largely solved and it's really about, you know, acquiring more customers, so it's about distribution. And we felt like our talent was better suited by solving another problem. So when we're selecting a new problem to solve, the criteria was the problem needs to be important.

2:09So it needs to be a top problem for humanity as well as a problem that if it weren't for us, it wouldn't get solved. so energy was really the only problem that fitted this criteria at least to us at the time and yes that's why and we think the whole energy industry is heading to the wrong direction energy prices have gone up effectively year over year since I can remember US and Europe is going through this huge de-industrialization which is partially caused by higher and higher energy prices and people's quality of life is also going down also partially because of higher and higher energy prices so I think for various reasons we couldn't find a single energy company that we felt is solving this properly so I thought we'd give it a shot and how does that happen like concretely like you are both working at Revolut maybe during weekends you know you brainstorm about ideas but do you like make a proof of concept before you decide to start your company or you just say okay like this is the new topic I'm passionate about and I want to go all in yeah so we spent about one year researching right at our own time and then yeah a year later we you know gave us enough conviction that we didn't know everything at the time but gave us enough conviction that something much better can be created here so yeah so after that point we went all in okay and how do you launch an energy company because I mean for a software it's pretty easy you know you would just code something ship it online to production and that's it but I'm assuming that there's a lot more regulation and things like that.

4:16So how do you go from zero to one? Yeah, so we spent about a million to build the MVP of a full-stack energy company. So we spent, if I recall, around 50K to acquire a license. We spent 750K to acquire a single wind turbine. How did you find it? We just actually transformed it just from good old business development. Okay. Knock on doors.

4:59And Charles also learned to become a trader. So he's a qualified energy trader. So there you go. That's your full stack energy. Very, very small full stack energy company. And how exactly did you get the the 1 million did you raise the money first and uh or did you use like some revolut stock and uh and invest it directly yeah i i yeah both of us put some of our capital in it um yeah before before we raised around before we raised around okay so you you raised the round when you had like the the energy company or was it uh before it was like it was like half there. And how exactly do you go for raising for an energy company?

5:44How did you pitch? How did it look like at first? I mean, I'd say more or less it's how I... It's just like describing the problem and at least have a high-level plan of how we tackle it.

6:07so obviously like you know we had some financials but you know they were totally wrong unsurprisingly like most seed companies but yeah like I think I think investors like agree agree this is a big you know important problem solve and at least they think we're the right team to tackle it um yeah and and and and this is like i'll say this is one of the few industries where the addressable market is like absolutely huge right um i actually think you know this company can grow keep growing even beyond a lifetime okay nice do you feel like uh your focus right now is the uk markets but you want to expand globally is it like uh your goal at some point yeah like uh the goal has become a number one energy company in the world um so it's hard to do that without expanding internationally all right and uh and what's like the because right now you're really like competing on on price uh like is there what would you say like what would make you the best company to keep like uh an energy cost that is extremely low.

7:30And what are the risks? Would the incumbent decide to decrease your price if they see that you're starting a price war? How exactly do you think, do you see it as a threat or not at all? Yeah, so I get this question a lot. So I think the first assumption should be most companies want to make more profit. right and I'll argue if they wanted to make more profit they would have already so the energy is very simple it's really the cost to deliver a single kilo hour and you know it's important for energy companies to be structurally profitable right so you can reduce your margins but it's very hard to go beyond zero whereas in the last two and a half years since we launched we've spent a lot of energy in reducing the cost per kilo hour in fact so far we've achieved roughly 15 % reduction in the cost per kilo hour since we launched which is much higher than our competitors so yeah sure they can you know lower the prices and make those ones more competitive but you know I doubt they will go below zero so really how much you can go in price reduction is really from your margins from your efficiency and even if they do lower prices I would say you know we've partially achieved our goal of lowering energy costs.

9:26And is your vision to continue lower the cost for the end consumer? Yeah, for sure. I think that. If you look at Europe, the average blended cost per kilo hour is roughly$20 to$30 per kilo hour. If you look at China, it's$8. dollar cents. Right. So, what that tells me is the prices in Europe can be at least three times cheaper. Why do you think there's such a difference in pricing? I mean, there's sort of, like, I can give you many, many reasons, right? I think it's a combination of inefficiencies and bad policy. Now, but I would say majority is probably bad inefficiencies, which we can take out.

10:27Bad policies, you know, not under control, but we would try to influence energy regulators to implement the right policies. And how do you influence? I mean, we just, you know, present them the facts, right? It's like, if you do this, price will go down. And I think it's very...

11:00I don't think... I think most people would want lower energy prices. I think it's hard to argue with, no matter your political positioning, I think it's hard to argue against lower energy prices. so we just present an alternative policy that will help us get there and are you looking at kind of the future energy sources that could become available to reduce the cost also like fusion so right now our focus is existing technologies so it's about improving what we have existing and just making it more efficient but yeah the idea is like in the future once you know the company is making a lot more money uh yeah we will invest those you know free cash flow into you know big bets that can take a long time to pay out or you know may not even pay out right uh but the idea is like we focus reinvest all energy and money into you know make making you know low cost energy a reality and where are like the the main sources of energies that you're taking right now because obviously like you bought like uh something i think it was in in in scotland at first or something like this and uh how exactly do you expand like the amount of energy you can get as you scale yeah so right now we do a combination of generating on power as well as buying power of the market.

12:43But yeah, the idea is we will increase both the amount of generation in our portfolio as well as the different energy technologies in the portfolio as well. And can you explain how that works when you connect to maybe someone's energy and you have to redistribute it? How exactly does that work? Yeah, so right now we don't own the cables, right? So when we generate power, it basically feeds it back to the grid. And we basically also sell energy to consumers, and we just basically have to buy the difference. Okay. And on your side, do you want to become also a real infrastructure? Because as you said, you don't own the cable, so is this something that you want to do long-term?

13:30We're actually in the middle of buying a grid operator. so yes we do want to own the grid so basically like when you look at the problem I'm trying to understand how you think like do you look at every single cost and see whether or not it's better to own or to yeah I mean yeah we do yeah we do ask ourselves like should we own this or not and I mean I think so far every single cost we looked at we want to own because we'd make it better right okay yeah so yeah we haven't found an exception so maybe we'll find one in the future but for now yeah uh and that and the great thing about owning it is you can do something about it right if you don't own it is it's hard to do something about it and that requires like is it something that uh from your perspective and whenever you discuss with a potential investor is each round meant to only accelerate the growth or also to fund a specific stage of development, typically like owning the cable or the grid or whatever?

14:37Yeah, so the company is profitable already. So we're already, you know, reinvesting cash flow back into expanding the business. I'll say the capital, if we ever raise again, yeah, it may be to accelerate, right? or existing business or, yeah, could well be, you know, taking a new bet. Yeah, or both. Because now you can take, like, debt, essentially. Because if you're profitable, you can leverage your EBDA and get some debt, correct? Yeah, and that's also the plan, yeah. Okay, okay. And is it easy to raise debt, like, when you're an energy company? Like, or how exactly do they value the EBDA? Because the company is also quite young.

15:30so how do you navigate this? Yeah, so in energy the debt works a bit differently so it's more closer to asset financing so you can finance your existing assets at base plus margin and this is pretty well understood so it's less about convincing, more about you know, showing financials. Okay. And right now in the team, how many are you? We're just over 300. Wow, okay. So that's super cash efficient overall, no? Yeah, I mean, like majority of people we have are, you know, electricians, customer service, right? But yeah, like overall, we try to keep the company as lean as possible. and what are the things that you took from your time at Revolut that you kind of applied at Fuse yeah so at Revolut there was like six cultural values we took one cross, it's like you never settle so never settle in quality, never settle unless we're number one yeah that's the cultural value I resonate the most and in the day-to-day like can you give example of things where you never actually settled and and the result it got i mean it's a way of operating right like for example you know if i see you know a designer presenting me a design that you know is not

17:18a simplest solution to solve the problem then i you know i tell the designer to do it again right i just don't accept it um yeah that's one example that happened like this morning okay and uh when it comes to hiring like uh how do you make sure like to hire people who have like the the same values as you do like how do you test that people are never gonna settle during like the interview process well first of all like i think it's now pretty public of our cultural values right um we don't really shy away from you know stating this publicly and how we operate publicly right i think it's pretty well known so i think that's like one filter uh a second thing we do is like during interview process we do communicate to like like people who are you know considering joining is like look this is this is the deal right we were super transparent about this is how we operate.

18:20If you don't like it, that's totally cool. You don't need to work here. And that's totally fine. I think you still have my respect. This mode of operation is not for everyone. But if you do decide to join, then this is the expectation. And people should not be surprised if this is the expectation. do you believe in work-life balance

18:52I mean I think for if you want to maintain a company and maybe grow 10 % 20 % a year then yeah sure I think that works if you're trying to build a category leader if you're trying to really change something you know like truly change something in society I think that will work so I think it depends if you want to build a coffee shop business or a B2B SaaS company I think that's okay that's probably okay but if you want to build a generational company I don't think that works and how is it going in the UK with this kind of mindset? Because typically like in California or in San Francisco, you've heard probably about like the 996 where you work from 9 a.m.

19:55to 9 p.m., like six days a week, et cetera. Typically like in France, people would, there are definitely like startups working like super long hours, et cetera. But if these things get public, like it gets really bad press. Is it similar in the UK or like how do you see this? Yeah, I mean, look, it's... I don't really care, right? Okay. It's a good filter. Yeah, like, look, if you don't like it, don't work here, right? You know, no one's forcing you to do anything, right? As I said, like, we're very public about work ethic. I personally work seven days a week. So does Charles. so there's you know many others in the company but you know if you don't like it you don't you don't need to work here right and i think the type of people we attract is people who really really care about the problem they're solving right like ultimately i think like there are not many problems right like there are a lot of problems like a lot of companies are building and solving problems that are good for themselves good for shareholders or good for maybe their customers right but maybe not good for society or maybe neutral at the very least like i i would say like the problem we're solving is like not only good for us good for our customers but also good for society right it's like a problem i i don't think i don't i don't think anyone can hate on hate on the problem we're solving

21:39so yeah I think and it's also like a pretty hard problem to solve so if you're like super smart, super ambitious

21:51I think this could be like your life's work

21:59so yeah that's the type of people attract right and if that's not you that's that's all they're cool and how exactly do you reward like the people you you attract like of course there is a good salary but uh how exactly do you structure like equity package now that you are like 300 people yeah so everything is performance based uh so top performers disproportionately make a lot more than than average performance can you give like a range size, even if it's like a number you made up, but just so we get an idea like of how much performance can impact on one salary. I mean, just to give you an idea, right?

22:38The top engineer makes 10 times more than the bottom engineer. And how do you know from an engineer, like how can you validate that he's a 10x engineer in the day-to-day? Like what kind of KPIs do you measure? Yeah, so we measure, well, we both observe quality and quantity, right? So I think quality is non-negotiable. Things like, is your software actually solving the problem, for example? Because you won't believe it, but a lot of software engineers write software that don't solve the problem, right? And then also, finally, quantity, right? How productive are you? and how exactly do you like measure it specifically because for like i mean if you work as a cro it's quite easy i'd say because you can look at the top line you're generating the churn or whatever but for a developer like how would you measure like specifically it's more qualitative right like it's based on like prs um you know the code quality there you You can also look at results.

23:48Once you ship your software production, does it actually solve the problem, right? And for that, do you think it's only tied to the engineer or also to the product team that's working with them? Well, we don't have product teams. We have designers and engineers. So engineers have a lot of ownership into an execution. So the engineer would be the one talking directly to the design team, so they execute. Design is basically execution of what's... No, so basically I work directly with the design team. And the design team shares and iterates with the engineering team on designs. And then the designs are handed over to the engineering team to execute.

24:36and do you feel like measuring the output is always the best way to determine yes ok it's not just output law we look at code quality too and the code quality is defined by other peers looking at the code yeah ok and for other departments like what are the typical KPIs that you look at? Well, if it's like things are as a general if it's possible to measure well, then we measure and reward against it. So for customer service it's pretty simple. It's how many tickets you handle and how well they're resolved. For electricians, is also pretty simple, right? It's, you know, about how many jobs you do and how well they're done.

25:38So these are some of the examples where it's very easy to measure and we put, you know, quantitative KPIs. If it's, you know, less linear, right? And it's more like nonlinear work, then we, you know, try, we apply like a qualitative approach. Okay. Okay. Makes sense. And how exactly, like, how exactly are these KPIs, like, measured or like not measured but define prior to to each year because i know that i think you 10x every year maybe this year it's going to be less i'm assuming because at some point it gets hard like to to 10x so do you start from like revenue objectives and then distribute like each kpis for each department or how exactly is that engineered?

26:28Yeah, so for now, we centralize planning for other companies.

26:40So everything we do is decided by the leadership team. Although that being said, anyone can challenge. um but yeah we give like qualitative goals uh to each leader of the company okay and how do you make sure like to always attract the the best talents when whenever you started the company like how did you find like the first 10 people and you knew that they were going to be like uh rock stars of uh of the company like what was your process in selecting and hiring top people want to work on hard problems right and they also want to work other great people and they want to be rewarded for it so the way i think about it is very simple right like you when we started the company you know charles and i were the only believers right in the company and then you convince a third believer a fourth believer fifth believer right and that could be you know people which run a team or it could be investors right now number of believers to today it's like it's harder too right but you know that's how you grow right and and yeah it's like we convince people by you know demonstrating a track record you know you can see and when we're nothing we have no track record right we can just you know say okay this is our previous track record you know perhaps we can extend our previous track record to this new company.

28:16But now we have a few years of financial track record that we can show to people who are considered joining. But as we grow the company, it gets easier and easier to convince top people to join. I think in the early days when you first raised, you said yes to a term sheet, and very quickly afterwards you received one at a much higher valuation. did you like regret taking like the lower valuation first?

28:51Yeah so we received several term sheets and and we basically took a term sheet where we were happy with the terms but yeah there was like we knew there was another investor that went a bit higher do we regret it? yes, obviously but I think because we said yes we had to honor it

29:25and is the valuation the only thing you look at whenever you raise? I think valuation and governance we don't want to give control a way of control of the company. I think that's very important. But otherwise, yeah, valuation is like the key thing. Can you expand a little bit more on governance? Like what is okay, what is not okay to give? Like how do you see this basically? I think ideally you give away nothing. Okay. So like no board seats or just observers and no voting seats? Yeah, I did it, yes. We are probably closer to that spectrum than, yeah. I've also seen companies where effectively investors have majority control.

30:19And I don't think they are, it's very, very, like, running a company is not democracy. You can't run a company based on committees. It doesn't work. so what you got to do is that you have to ensure the most competent leader is leading the company and you have to give them all the power to do it the problem is now that's obviously this is not true for investors but you have a lot of investors that think have very for some reason have very high confidence in their of their opinions even though they know nothing and that's the most dangerous investor basically you know this like mid this midwif meme right this iq meme so you have like very smart people on the right you have you know low iq people on the left and they probably they probably both of them would say something like okay get found this majority control right let them let them alone then you have the middle investors that will be like oh we need governance we need blah blah right we need control all that all that stuff right so you want to avoid So basically either avoid working with those investors or don't give them the ability to, you know, change the cost of the company.

31:39And how do you find like such investors? Do you like straight from the first meeting say that governance is kind of like a non-negotiable or like how do you approach it when raising funds? We discuss it during term sheet stage. we just make it very clear this is a red line for us okay and did you learn that from Nick or was it something that yeah like Nick I think Nick shares I believe he shares some views yeah but also I speak to other you know entrepreneurs both ones that they have control and ones that they don't and so far I haven't met a single entrepreneur that doesn't agree with me And do you feel that the one who give away control are the one who chose it?

32:32Or do you feel it's because they kind of like had no leverage and hence no choice? I think they were young and naive. Okay. Okay. Okay. Okay. And whenever you raised from investors, like how exactly do you do like your own due diligence with the investor you're going to build in? I mean, like, I think a key thing is, like, do you like the guy, right? You know, is there someone you can work with? Like, and do they listen, can you reason with them? Like, because ultimately as an investor, like, they are not building the company, right? However, like, you know, as much as you like, there's always a little bit of investor confidence in a company, right?

33:28The question is just how much. So you want them to be reasonable and logical both in good times and bad times.

33:43And how do you test that? I think it's pretty clear, right? When you speak to someone, you can sense whether they're reasonable or not. Just by having conversation. But how do you know that during bad times they're going to react in a similar way? I don't, right? But if, however, in good times, which is, you know, like during timesheet stages, definitely in good times, if they can't be reasonable, then they definitely won't be reasonable at bad times. Okay, makes sense. And what would you say is like the biggest problem that you are trying to solve right now for your company? Confidence will tell people to join.

34:30And that's why I'm here. So for everyone listening, if they want to apply. Okay. And what kind of... So hiring is basically like the biggest bottleneck. So you're trying to get basically like word out and be on more podcasts. But what are the other things that you are doing for hiring? Like, do you believe in hiring agencies, all these kind of things? No. No, okay. No, I guess we're still on it. Okay, I agree. And what I've... Actually, it's quite funny. I have a funny story with a hiring agency when I was trying to hire a C-level. And essentially, that agency, at the final stage, basically like told the person to ask for maybe like three times more than what he initially communicated with me because they were essentially like paid on the amount you know like that they would get like a percentage of the of the final uh final yearly salary so yeah i think it's a it's a funny market um and um on on your end like um have you like how exactly do you push people within the company to recommend others?

35:50Have you found ways that are working? I mean, if this is a truly good place to work, then I recommend, right? And you give incentives or not at all? We do, but we haven't really found a chain with a needle. Okay. I think ultimately, like, ultimately the workplace environment is like, you know, it's also a product you're building, right? If your product is good, than people refer, you know, naturally, right? Even with our financial incentives. Yeah, I agree. But I think typically for us, for developers, it kind of helps like to give them an incentive, which is originally something you would think of more like salespeople.

36:34But the caveat is, you know, you need to have a good product. Yeah. Yeah, of course. Of course. And what would you say is like the number two, like, problem that you're trying to solve. I mean, I think the key is hiring, right? Like right now, we spend a jar of time recruiting the best people. But ultimately, I really do two things, right? It's recruitment and making sure we're on the right track.