How to Scale a Business to £1 Billion in the UK | with Octopus Energy & HomeServe Founders

0:00So we've got no HR department. We don't have a department that creates process. We don't have a department that you kind of tell people what they have to do. This is outrageous. There's a company in India that have called themselves HomeServe. Can I have your permission to sue them? Absolutely not. Let's wait until they're successful. And if they are, we'll then buy them. My company's raised$3 billion of investment into our cap table. About 2.9 is from outside the UK. School was wrong for me. I mean, I did well enough. I really hated the constraint, the discipline. And maybe there's a bit of an entrepreneur that says, look, I don't like being told what to do.

0:34A great believer in keep it simple. That was the magic model that kept me going. We're building the Amazon of energy. And British MP sniggered at that. You start again at zero. And so I wanted to make sure that starting Octopus in my 40s, it was going to be the big one.

0:54I'm Richard Harpin, a Yorkshireman who sold my company, HomeServe, for£4 billion. And this is the Business Leader Podcast, where we look at the stories and strategies behind modern businesses. Today, we're looking at how you build a billion pound business in the UK. To answer that, we're going to do something a little different. I'm handing over the hosting this week to James Whittaker, who heads Deutsche Bank's wealth management business in the UK, and in the Nordics so that he can give me a grilling. Thank you, Richard. And it's not just you I'll be grilling today because we've got two founders in the room who've created multi-billion pound businesses.

1:32So I'm delighted to also welcome Greg Jackson, founder and CEO of Octopus Energy. Hello. And both of you are featured on the UK Billion Pound Business List, which rounds up founder-led companies that have achieved the valuation of one billion pounds or more, including one or two founders who've sold or exited for over a billion, including you, Richard. I'd love to start by getting your perspectives on what it takes to achieve this. I'm very up to you, yeah. Look, I think first of all, you've got to have a big, you've got to be ambitious. From the very beginning with Octopus, you know, I remember one of the investors in the early days said, how are you going to beat British gas?

2:09And with great respect to British gas, I said, look, no one in America has even heard of them. You know, our job is to be bigger than that. and I think having that ambition from the beginning meant that we got the right foundations, we raised enough money to be able to get through the sort of volatility of the energy markets, we could hire incredible talent at every stage of the journey and organise and structure ourselves for growth rather than just to make the most of being a small or medium business. So ambition, really critical right from the start. Yeah, and in my case, I'll be very candid.

2:45I sold a business when I was about 30, and I realized after we'd sold it that you don't carry on from where you left it. You start again at zero. And so I wanted to make sure that starting Octopus in my 40s, it was going to be the big one. And so for me personally, there was a personal drive that said, this is my one last chance to make a big green dent. And did you start with the size of the problem you were dealing with? Or did you just think whatever I build here is going to be the big one? My co-founders and I were basically from a technology background. Every business we'd looked at or built, we started with how can you transform this with tech?

3:31when we looked at the energy sector you know globally energy is a three trillion dollar revenue sector mainly running on systems that are five decades old so we saw the opportunity to transform this with modern tech but on a scale that meant that you know we could genuinely make a difference and build something uh that we kind of felt we would maximize our own potential so i think it was the combination of the stuff that we know, which is technology, and the scale of the market and the opportunity we had. Of course, energy as well. You know, when we started 2015, 2016, you could see energy was going to undergo this huge change as we deploy enormous amounts of solar power, wind power, which behaves totally different than traditional energy.

4:21And at the same time, things like, you know, cars are going electric. All of the energy that's currently delivered for transport through oil and gas sooner or later is going to go through the energy you get at home now that struck us as being a tremendously exciting colossal opportunity with so many different ways that we could hopefully build something big thank you richard and for me in home serve i never never started with the ambition of uh can we build a billion pound business. But I think having sold the business three years ago and looking back and saying, what did it take? Now, I think firstly, it was about coming up with a scalable business model.

5:06And I didn't have that from the beginning. It was an emergency plumbing business, pay on use that didn't work. Only when I copied and found the magic home assistance annual membership model was that the breakthrough and finding a way to scale that through affinity branding with utility companies. And I think it was about the people and making sure that I brought in MDs for each of those countries as we rolled out internationally that were much better at running a day-to-day business than I ever could have been. And then thirdly was having the discipline of staying really focused and I wasn't. I was a typical entrepreneur with far too many ideas, getting into doing repairs for home insurers, furniture warranties for retailers but I did eventually learn that just sticking with that core business model and evolving it rather than doing stuff that was two steps removed from the core, that was the key.

6:13Sticking with the core business model. Absolutely. Greg, because obviously you built a business and then you've built another business within there. So you've got two very distinct businesses as we look at it from outside, both of which have hit the billion pound valuation. How have you managed that conflict of two different businesses? Yeah, the two businesses you describe are Octopus Energy, which I'm really proud is today Britain's biggest energy supplier, but also by far the most loved by customers, delivering great value and innovation and operating in France, Italy, Germany, Spain, Japan as well, plus a little bit in New Zealand and the US.

6:49Plus, we've got energy generation in 20 countries. By the way, Greg, let's just celebrate again that you beat British Gas. Who would have thought that when you and I were working together in HomeServe and they were the big competitor to think that you would set up something from scratch and in 10 years you would beat them i remember that i sent you a message or called you on the day that that was announced saying wow that is absolutely amazing what an achievement no you did thank you that was hugely appreciated and i think obviously you beat uh british gas uh i took them on in things like uh boiler insurance uh home repairs and a bunch of other sectors so you know it's not that we hate them or anything It's just that between us, we have kind of spotted there was the opportunity to bring sort of fresh value to consumers in different parts of these sectors.

7:43But, yeah, so we built energy. But the whole insight at the beginning had been we could do it on technology. And actually what happened was years previously, we had pitched traditional utilities on how they could use technology, how we could build them technology, would transform their businesses. and largely those traditional utilities they either didn't see the opportunity or they said, look, it sounds good but someone's got to do it first and in many ways what we built was the technology Kraken and the utility Octopus and we built them like yin and yang Kraken gave us an ability to be more efficient, more agile give better service and to innovate and meanwhile Octopus gave us a route to market to test all our ideas.

8:32Normally when you're building tech, you're reliant upon your clients kind of wanting the innovation you can build. Here we were able to do both. But, you know, I don't think this is the end. Currently we're building some phenomenal businesses, again, within the group. So, you know, we've got Octopus Electric Vehicles, which is Britain's largest electric vehicle specialties in business, where we've got nearly 60 ,000 cars that we lease to customers. We'll probably do another 40 ,000 over the next year or so. So pretty soon we'll have 100 ,000 cars that we're leasing, all electric. And of course, we're able to bring people the bundle, the car, the charging, the home charging and the out-of-home charging, and enable them to, just like the early days of mobile phones, we can give them the advice on what battery they need, what car is going to suit their lifestyle best, and how to make sure they get phenomenal value by going electric.

9:26so you know i think one of the interesting things for me listening to richard about focus is i totally buy it but one of the things in business is people always want um hard and fast rules and part of the job of the entrepreneur is you work out which rules you're going to challenge you're going to work out which conventions you'll overturn because if you don't do at least some of that you'll only be as good as other people have been if you're lucky and richard listening to to greg you know there do you do you look back at home so actually i could have developed those other businesses i look back and think uh had i been more disciplined and focused that uh maybe as a team we could have got there in half the time or that would have been in 20 or 30 countries today not 10 or 11.

10:17You both mentioned on a slightly different topic you both mentioned the importance of hiring the right people. Yeah. The talent you recruited whether it's because of the capital or your approach Richard of bringing people in as soon as you could to run the divisions. What was quite often it's a different mindset those people coming in than the mindset of the founder. What did you look for? First thing for me is as a founder you recognize that everything you have is built by your people. You know, I sometimes see when CEOs take on the job of running an existing company, they look at the people as an overhead.

10:57But as an entrepreneur, you look at the people and say, look, given the talents of this group of people, what can we create? And I think fundamentally it makes you value people in a really important way. uh and and so for me i i first of all want to have a team that are all very different than each other um uh sometimes you know when people meet me they'll go oh but greg you know you can't build a company with everyone like you and i say you should meet my cfo right my co-founder uh who you know i have the best idea in the world i come in the office really excited and he goes but greg what about the risk all right and immediately uh you know look at the moment In that moment, it feels like a real damper, but actually we've got deep fundamental trust in each other.

11:46And that kind of balance is so powerful in making sure that the things that we do do are both as creative and hopefully visionary as possible, but they're also very, very grounded. Similarly, our co-founding CTO, someone you know very well, Richard, in fact, probably wouldn't be with me if it were not for you. uh james edison who uh these two co-founders i've known them for 30 years we don't socialize we're not friends i mean we're friendly we got on well total trust but entirely different personality types and really that you know for example we've got a whatsapp group in the company we call it it's the 10 and that's roughly 10 of the earliest leaders that are all still with the business.

12:31So as the business has grown, each of their roles has grown, but they bring a different perspective and skill set that kind of balances, complements each other with total trust. And then below that, we've now got these kind of series of leadership teams that have grown in the business, but leadership and a diversity of thinking, but with the same values has been absolutely core to everything we do and you know what one thing one reason i couldn't have work in a corporate was i couldn't do politics i hated it i hate the idea that you wake up every morning thinking how do i beat my colleague i wake up every morning i hope i hope my team do thinking how do we beat the rivals how do we work together to beat the rivals and i think that's been one of our greatest strengths i think you obviously talked about the trust there and obviously that comes with a long term relationship but also i think with where you have a team where everyone's clearly focused on what's the best thing for this company so when people are challenging you and giving you advice it's because they think you know you're you're receiving it and accepting it because you know that it's coming from a place where it's not politics it's what's best for the company um Richard what's your beyond what worked really well in home serve was um going back to that original recruitment saying at Procter & Gamble my first company and where Greg also started and it was has done, can do, will do.

13:56And therefore, I was looking for people who had done the role before, were proven, and could come in and do it again at HomeServe. And that was really about recruiting country chief execs that could be given a model, but a level of autonomy to run their country, having them as locals. And to give you one example, the guy that joined HomeServe in 2010, when HomeServe America was only making$10 million of annual profit, Tom Roosin. He was an entrepreneur. He'd run his own travel business before he went to work for an affinity branded company in the US, nothing like HomeServe, but with some common disciplines.

14:42And he came in and 16 years later, he's still with HomeServe and HomeServe America made$300 million last year. So it was finding people like him that were proven. In terms of the skills that I look for, Jim Collins in his book, Good to Great, would call those level five leaders. And they would be low ego, focused not on their own career, but on the good of the company. They would be resilient, persistent, courageous and curious and avid readers or avid listeners and learning from others. The people you're talking about that fit those criteria, obviously very highly in demand. They can achieve great things.

15:33How do you keep them within the organisations? Number one, I think, is about the purpose. What are we trying to do here? and let's get behind that. And that's got to be driven by the customer service that's being offered. And in HomeServe, that was about taking away the worry and the cost of home emergencies and repairs and doing that through an annual subscription. And everybody could get behind that. So that is a number one. Secondly, would then be about putting together employee ownership schemes. In HomeServe, we were a public company for 18 years, so able to do that with a tax-efficient share-safe scheme, so everybody had shares in the business, as well as long-term incentive plans for senior leaders.

16:26Oh, interesting. We also, I'm really proud, every single employee is a shareholder. And we don't have, you know, sort of traditional bonus schemes. and very few people earn any form of direct performance pay.

16:45But everybody, I think it's kind of ethical as well as rational that everybody will do well if the business does well. And they'll do so together. So you don't end up with one function having to fight against another, one division kind of battling against another. But instead, the effort is all on how can we do better product and service of our customers? How do we use the opportunity to transition to build more value for society and each other? In terms of people staying, I think there are two dimensions. So Richard talked about purpose. And what we do is critically important, both providing better service and value in a sector that's not traditionally done that for customers, even though it's their third or fourth biggest outgoing.

17:36But also, you know, we are resolutely focused on reducing humans impact on climate. So our purpose is clear and solid. And it's not retrofitted. It's literally what we built the business to do. But the other dimension is how much they enjoy their job. Like What is the daily experience of work? And I talk about this quite a lot because, you know, there's a lot of charities where people got great purpose, but they may not actually enjoy their jobs that much. Whereas you look at a gambling company, I was talking to people who worked in an online gaming company, right? You know, you could argue with the purpose, but they really enjoyed their jobs.

18:20And I think so for us, we're going to say like, what environment is going to make people want to be here rather than anywhere else. And so it's extremely flat. We have a culture we call freedom and responsibility. So very little process. We give people freedom to make good decisions, but they take responsibility for them. It makes for a much more dynamic organization and with a lot less cynicism because you're not told one thing by the company and given a bunch of processes that make it impossible. How many layers do you have, Greg? And you also talk about not having a HR director. to yeah so we've got no hr department um and uh we've got some people professionals scattered around the business brilliant people that our managers can turn to but we don't have a department that creates process we don't have a department that people kind of tell people what they have to do um and we teach managers to manage when you have a small business you have 20 employees you don't have an hr department you just have to work out how do i simultaneously get the most on my team and look after them and that's what our managers have to do uh i don't actually know how many layers we've got because we don't have an organogram uh so you know there's business people listening uh look uh i reject the idea of the organogram because i want to have this kind of much more dynamic organization it's tremendous fun when new senior people join and they hey you know they kind of immediately want to know where do i sit in the hierarchy and how do i get this stuff done it's like look if this stuff's important you will find people coalesce around you to get it done.

19:52If it's not important, it doesn't matter how senior you are, it ain't going to happen. But once you get used to it, it's an amazing machine. It sounds crazy, but I've now twice read Henry Ford's autobiography, I guess about 100 years old. He describes with great disdain organograms. He calls them like, you know, diagrams of a tree with little cherries representing each man in the organization. Obviously, it was many focused on. So, yeah, These kind of sound like modern ideas, but the reality is they go back centuries. Richard, is there anything you'd add to that in terms of organizational structure?

20:30I agree that it's about flat organizations and giving people responsibility. But also, I think as businesses that I'm invested in with Growth Partner, Rollout Beyond the UK, It is about having a common model so it can be replicated. I'm a great believer in, keep it simple, the 10 % rule of only changing 10 % for the local environment. Because if people are doing their own thing and you're in 20 or 30 countries and it's 20 % different, recipe for disaster and complexity. Couldn't agree more. I mean, in our case, we've grown most of our international operations through acquisition. And one of the first things when we buy a company, we look for entrepreneurs running a company.

21:25So to Richard's point, they're literally doing it. And what we want to do is move them onto our technology, Kraken, rebrand them Octopus, and then fund them for growth. But only when they run the Octopus culture. And so the first thing we do is bring them over to our HQ in London, have them spend time in all our offices around the place, and we absolutely school them in the octopus way. If they're not going to be able to do that, it will be a failure. And by the way, we do the same things like marketing. In the early days, we didn't have enough confidence to really enforce the way that we do marketing and branding here.

22:06And we let countries have a lot of independence. Actually, what we found is, look, just like everyone in the world likes McDonald's, KFC, Apple, Harley-Davidson, Coke, those brands almost naively took themselves global because they just thought everyone's going to love us. And we need to be the same. Did you have to part company with any of those chief execs of the businesses you acquired because they wouldn't come along with the brand and the octopus culture? Yeah, we worked really hard to keep them because of the trust point. and I think we really work hard to make sure that people feel safe, that they're not feeling, you know, they're kind of on a thin thread all the time.

22:42But, you know, we've had a couple who, as the business grew, really couldn't embrace the culture at scale. It's hard, by the way. It's really hard to have a business where you can't just tell people what to do. When you get used to it, it's far more powerful. But where that hasn't worked out, uh you know we've had to part company with people always by the way in a hugely kind of straightforward open and as positive as possible way um but you know i'm really proud if i look at our businesses now you know the leadership in the countries some of them are more octopus than octopus including for example japan you go to our office in tokyo it feels and like our London HQ, just maybe even more us.

23:27And what drove that international expansion for you both? For me, it was we're not going to build a big enough business unless we expand outside the UK. And I always dreamed as a kid of one day going to America, copying an idea from over there and bringing it back to the UK. and so the big dream was when I went to the US for the first time I think that was not until 2001 found that there wasn't utility branded home assistance cover over there and thought wow what an opportunity but I was really pleased that we had tested and proven the model closer to home first I think too many businesses think oh well it's a common language it's a massive country we'll go over there and it'd be really, really easy.

24:20I picked France first. It was closer. But people say, why did you pick France? And I joke that it's really difficult to employ people in France, really difficult to do business there. So if we can prove the model there, then we can do it anywhere. The truth was South Staffs Water, who were the joint venture partner with me were themselves 30 owned by general diso so it made sense to then go across the channel try and persuade them that they would do a a joint venture and even then it took about a year to persuade them greg in your case yeah look from the beginning we wanted to create you know the energy major of the 21st century uh you know bp and shell could go around the world over 100 years ago, by the way, before they had email, and when it was very, very hard to fly anywhere, we should be able to do it today.

25:15So from the beginning, we created a brand that would be replicable globally, technology that was not built to meet the needs of a particular market, but was abstract and genericised to the point it could, in effect, work anywhere. And then, you know, the observation is we're in energy. The laws of physics are pretty much the same in every country. I believe people are pretty much the same everywhere they all want to look after their families they all want to know they're getting good value they all want to be warm and comfortable and if they can do it without them to pay extra they all want to make sure that the planet's inhabitable for the next generation so I thought the fundamentals were there from the beginning we wanted to build a huge business and then there's a point of principle for me which is we often hear this bit about British entrepreneurs are not ambitious enough.

26:07You know, people starting a business on the west coast of the USA don't consider themselves confined to California or to the US. They naturally imagine it will be global and we should be the same from day one. And again, I had this fascinating experience in Parliament in the early days. It was a few years into the business and finally we were like getting to the point it was significant enough to be invited to a select committee. And during it, I said something like, look, we're building the Amazon of energy. And British MP sniggered at that. Now, you know, the energy reporter at the time carried that story.

26:45And at the time, I felt a little bit kind of embarrassed, put out, but actually at the same time, it didn't change the ambition. And then a few years later, actually when we became the biggest energy company in Britain, the same reporter referred to that story and said, doesn't seem so outlandish now. And of course, since then, we've gone on to exactly what Amazon, which is not only built their retail platform, but also the technology. They had AWS, we had Kraken. And why do you think there is that view from some quarters that, you know, that ambition was so outlandish? Why is it that we perhaps don't celebrate and, you know, encourage that ambition as much as a society as we could do?

27:25I mean, first of all, I don't mind that. I've got to be really clear that what a privilege for people like me and Richard to be in the position we are. And we're here because we challenge norms and just want to relentlessly push. But I do think that Britain would be wealthier, that the people of Britain would enjoy better services because we had a stronger economy. If we encourage more of our businesses, if we create the conditions for them as well to go global. Britain's a mid-sized country. The US is what, four times bigger as a market? Europe is four or five times bigger. Countries like Japan have got two or three times as many households.

28:09If you want to build real value, you need to be building and then exporting your model around the world. And Britain does well off that. Thousands of people we employ are based in the UK, servicing and building our business around the world. It generates tax receipts here, generates employment, and it creates skilled, great jobs. And we should be proud of that. I completely agree. I think that there's so much around the UK that creates almost a perfect pilot to your point about France. If you can be successful here in a sophisticated, competitive environment, that model should work around the world.

28:46Just on your point around how you did expand, you said predominantly through acquisition. Why did you make that decision? Was that just a pace of growth point? Yes, totally about pace. So energy is a regulated sector. And so when you want to enter a new market, you've got to build an entity, then get it regulated. You've got to be able to build all the supply contracts. In Germany, you need 700 contracts with the individual organizations that own the wires in every town and village. So by acquiring a company, you kind of leapfrogged to that point. so you've de-risked some of that early operational stuff um hopefully they've got a few thousand customers they've learned how to make the processes work and then we can take over and really turbo charge it through technology brand and investment and i'm very jealous of that because i'd have loved to have gone into every one of home serves new countries and bought a home serve lookalike and then grown faster.

29:48And the issue with us, they didn't exist in most countries. And I do remember my group legal director one day came into my office brandishing a bit of direct mail and saying, this is outrageous. There's a company in India that have called themselves home serve. They've copied our marketing and our business model. can I have your permission to sue them? I said, absolutely not. Ring them up, say, how else can we help you? Is there any other part of the model that you need to know about? Because let's wait until they're successful and if they are, we'll then buy them. By the way, what you just heard there, right?

30:30Some of the best lessons I've learned from Richard and also one or two other entrepreneurs have been this, do the exact opposite. Like the stuff that other people get wound up and angry about, it's like embrace it. So a couple of examples. First of all, Richard, the first time I ever went to a meeting with you, when I worked for you at home, after the meeting you said, how did that go? And I said, well, it was great, but you told them all our secrets. And you said, look, ideas are ten a penny. But if we share the ideas, there's a chance we can build something magic together. And, you know, everybody else in corporate world goes around kind of squirreling this stuff away.

31:05And Richard's like open source about it and creates tremendous opportunities and values as a result. and I think the confidence was great. There was another business I had where we'd made an acquisition and I mean this business was, you know, had a half a million pound overdraft and a half a million pound overdraft limit. You know, it was, we had to turn it around. And in the early days, the finance director came in my office and she said, there's a calamity and she told about this thing and we were clearly going to go bust. And one of the guys we'd acquired just chuckled and he said judy don't worry about it'll be fine and you saw her physically relax and she left the office because it was all going to be all right and i closed the door i said how's it going to be all right he said i don't know but getting stressed ain't going to help and by the way it was all right right we sorted it out and i think you know when people bring you bad news embrace it because you're much better off knowing than having them scared to tell you So we had this great thing on, like your thing, we discovered some of our customers were using our referral scheme to build businesses.

32:11What they were doing was they would buy Google ads and they were buying better than we did. So their ads were going above ours. You click their ad, it would then take them through to our website and you'd sign up with our referral code. So essentially, instead of a friend get friend, they were running a business off the back of it. And our team were like, don't worry, we're shutting it down. I was like, don't shut it down. First of all, learn from them. If they're better at this than us, we should learn from it. Secondly, they're bringing us customers. We should create a scheme that makes these people VIPs.

32:42And saving you on your Google ad spend as well. Exactly. And it breaks the people. And, you know, today we've got this kind of group of people that are super fan customers, some of whom came through that route. And I just think it's like, I mean, I love HomeServe India. It was such a great story. In the end, they didn't make it work. so we didn't go there and um it's difficult to do business there but um well i'm glad they de-risked it for you right you could have wasted your own money money in management time couldn't we moving to uh look at the list itself and a couple of the themes that we sort of spotted as we look through um a couple of things stood out well stood out to me and i wanted to get your view so roughly 75 percent of the list is still held privately uh 25 was listed uh richard obviously you listed home server and ran it when it was a public company and greg otter's remains private um i'm interested you know how that decision afforded for you about listing the business and also greg why you think actually the best thing for the company is to remain in private hands and from a capital source as well so richard we got to um the early 2000s and we'd outgrown the profitability of the small parent water company.

33:55And I was focused on hiring more really good people into the business and felt that as a corporate business, we needed our own identity and brand as HomeServe to be able to bring in better people rather than saying, oh, why do I want to come and work for a sleepy utility group? So I thought we should find a way of separating HomeServe from the parent company and looked at all the different routes. And in the end, a demerger in species is what it was called. And that meant that we reversed into the water company listing on the stock market and they were demerged. So we ended up with two listed entities and that worked really well.

34:40I was then the public company chief exec for 18 years. I never dreamt of, oh, I must float my business on the stock market, but I think it is a good thing to do. I think it's really bad today that we have stamp duty on the main market and getting rid of that could help rejuvenate the stock exchange. I'm really sad that the AIM market, the junior market, there are now less than 700 companies. and we've got to do something about encouraging private investors to put their money into backing some of the high growth companies on the AIM market, market it better and bring down the costs of medium-sized businesses floating in the first place.

35:29I think it costs about half a million pounds. Advisors need to be persuaded to take a longer term view and bring down some of the regulation and red tape but i think we dearly need to see half of our billion pound companies as listed companies not 25 or less and greg i guess the counterpoint to that is uh interesting to know yeah well first of all i i'm not religious about either private or public uh so far being private has suited us very well uh we're 10 or 11 years into our journey but we're relentlessly a growth business. We plough every penny we make all of our profit back into growth. And that requires very patient investors.

36:19Now that's not impossible in the public markets, but having a small group of deep pocketed long-term investors who share our vision and who are exceptionally knowledgeable, and therefore they understand what we're doing and a very comfortable, in fact, love it, has been powerful. At the same time, we've de-emerged Kraken. The valuation at the time was just under$9 billion. And Kraken is an incredible, globally unique software as a service business. It's the enterprise software 2.0. It's a great foundation for AI. is the only big data native cloud-based operating system for utilities and could do a whole bunch of other sectors and has displaced you know some of those decades old giants in very large clients with long-term contracts providing real value for them it may well at some point choose to float i i no longer run crack and i'm not even on the board so i don't have control over that but i do look at it and think you know that's clearly an IPO candidate if it chooses at some point and for octopus um you know if we continue to have the right private investors then we'll probably stay private but if the conditions are right for floating uh you know apart from the personal life impact of being a public company ceo i'd love to hear from richard on that um you know it's always an option what i would say is that you know richard mentioned the stamp duty on the UK stock exchange.

37:57I think my big concern in the UK for investment in growth businesses, but also in the public market is 20 years ago, more than half of the money invested by pension funds and insurers went into British companies. And today it's three or 4%. Now they managed 4.6 trillion pounds so broadly speaking you've got a two trillion pound deficit of investment going into british companies public and private now that creates lower valuations which is one of the reasons some companies choose to list in the us um but it creates less headroom for capital investment and acquisitions here in britain damages employment and ultimately it provides poorer returns to our pensioners and we to me like you know the the government this government and indeed predecessors are you know people like jeremy hunt started bringing in reforms to start to change this but the plans are going to take five years plus and i think to me this is the thing we should be looking for 100 day plans how do we reverse it fast and for that for our national economy we always get stuck in this spend and tax kind of zero-sum game the way to escape that is growth and the way to grow is to unleash huge amounts of capital to invest in british growth businesses and public businesses it's interesting you say that that was exactly the summary of the deutsche bank report raised in london this year um we can see that confidence is returning to capital markets but there's just not enough domestic capital you know investment in the UK I think there's a study done that said British businesses 380 ,000 of them want more investment and that adds up to 190 billion of additional investment required if you said well maybe half of those businesses are not investable then there probably is about 100 billion pounds gap and we need to get that money in and agreed it's not just about public markets it's about getting more private investors corporate investors pension money uh all of that would help well i've got to say i see people shocked when i tell them this policy makers that my company's raised three billion dollars of investment into our cap table about 2.9 is from outside the uk right that and And we're the lucky ones.

40:31We were able to take our story global and raise money in Japan and Australia and the US and Canada. So many companies, you know, don't have a global story or shareholder base and just get stuck for capital. But the tragedy is when we do well, not tragedy, I'm delighted for them. Australian shareholders are going to do, Australian pensions will do well, Canadian pensions will do well. And I'm delighted for them. But I wouldn't mind British ones doing well as well. And actually, we'd be solving two problems at the same time, right? Because I do worry that there's not the pension returns and saving culture that we need investment culture from the man on the street to actually meet their retirement goals.

41:10So the more UK investment, whether it's in pension funds themselves doing it privately or people doing it publicly, the better. What was good to see in the budget was that£20 billion more of investment capital within the National Wealth Fund and within the British Business Bank. So that was definitely welcome. Not enough, but still welcome. You raised the budget and I was going to save this till later to talk around what the UK is like as a successful founder, as an environment for successful founders. You know, we're sitting here the day after the budget was announced. The big headline for entrepreneurs was the return of or the introduction of founders relief.

41:51Does that go far enough to support and encourage entrepreneurialism in the UK? I think it's a real help that 10 % tax rate for the first 10 million of capital wealth generated in a lifetime. I think that's really good. and it does incentivise that risk-taking. And as entrepreneurs, we know that we're sacrificing time with our families and kids, working all hours, putting our homes and capital at risk. So I think it is really important to have those financial tax incentives as well as running a business for a purpose. Greg, have you still got a role of advice in the government on entrepreneurialism?

42:40Not entrepreneurialism, but on civil service reform, how we can use the same technologies and techniques that have made Octopus so efficient and able to crack and to transform other organizations. How can you take that into government? Very exciting. We had a group in our office yesterday from DVLA that are beginning to work in the same way. And honestly, it's all about how do government services better serve the needs of customers? and you know i can't wait till we can see government services transform like that it's really exciting but in terms of this question on entrepreneurialism uh you know richard touched on the risks that founders take and uh you know i sometimes do say becoming an entrepreneur isn't good for you right um it's not a rational decision in the behavioral economics uh going way back you know way back in the evolution of humans uh within any tribe you finally find a place you're going to settle and everyone gets comfortable there's always one or two tribe members decide to go climbing over that mountain or wading through that thicket to see if there's anything the other side quite a lot of them don't come back but when they do they can bring the tribe to an even better place and i sometimes think entrepreneurs are a bit like that and i don't come wrong we can do well out of it when it works but you take a lot of risk on the way but society needs it right it is how we quest for and create growth nearly all growth in mature economies comes from new companies nearly all productivity growth sorry uh now what they recognize in the budget was this role of founders and you know i think it's really hard i'm glad they recognize this because i think it's very hard for a lot of policy makers to recognize what they did which is you might spend 30 years at risk longer 40 years totally at risk um and every year of that choosing instead of having a steady income or even instead of taking money out of the business you keep putting it back in to grow that business to build jobs to build value and wealth of course you hope to get a share yourself but it is so important for society um and a lot of the changes that have been made over the years in, for example, tax treatment for capital gains or entrepreneurs relief, things like that, have changed the goalposts.

45:02Now, if you spent decades working against a particular rule set and you chose not to look after yourself in that period, and then they take away the one thing that would have rewarded you for it, it destroys entrepreneurialism. So I think recognising founders relief, and I hope we have long-term consistent policies on this, so entrepreneurs can dedicate themselves knowing that you know if it works out they're not going to have the rules changed at the last minute you mentioned the the we talked about the mindset of the people leaving the tribe and going to the next you know see what it was over the hill and it made me think about the amount of entrepreneurs i meet and i'm lucky enough to meet in my career so few of them actually continue to build their business to the point where it goes past the unicorn level, into the billion, into the multi-billion.

45:59Why do you think that is? And is it because your ambition was different, your skill set's different, that you've both been able to achieve it? I think I quite often get asked, like, where do you get your energy from or where do you get your drive from? And I think that's the wrong question. It's the other way around. I was born with driving with energy. And for all of us that are there, this is what I do. um but it is brutally hard and richard mentioned like you know the sacrifices we found me look i almost had tears in my eyes when i said goodbye to my son yesterday because i'm not going to see him again for the best part of a week now right and that's the norm of course sometimes everyone doesn't see their kids for a week but i haven't i haven't had the yeah the ability to focus the way i want to for decades now it's my choice because i have that drive but the um eventually like you know time and again you get the opportunity to step up like if you've done okay you get the time to step off this conveyor belt uh you get the opportunity to do that and i think you're always weighing up like i've only got one body all right uh at some point if i burn it completely out there's nothing left for anyone at the end including for me um i've only got one life you know if by the end of this i've sacrificed too much uh you can't go and get it back and so i think it's really interesting like you know people shouldn't have little violins for people saying what i'm saying but from the perspective of you you're your only you and i think for a lot of people it's got to be is it really worth it to carry on sacrificing what little you have left and i don't mean worth it financially is are you able to be to deliver the meaningful uh kind of impact you want or the fulfillment that you get from doing this and eventually if it becomes too hard you'll step off so my only thing is the more that governments can recognize this and enable um us to build the value for everybody that i hope entrepreneurs do the more people will choose to stay on and do it at scale makes a lot of sense for me it was about recognizing what i was good at and not good at and my strengths were around challenging a team, the vision for the business, the business development, the strategy, not running the day-to-day.

48:26So when I figured that out and focused on just the bits I was good at and then hired great chief execs in each of the countries, that was the magic model that kept me going. And then it was fun working with really high caliber people, seeing what they were delivering and just keeping going and i do think that uh maybe a lot of entrepreneurs take too much onto their own shoulders need to be able to bring in better people and delegate and that would then help them to go on for longer i think you've always been quite good at drawing a line as well which i'm not like i was i was at a dinner party once and got my laptop out afterwards and someone said surely someone else could do that for you and i said well probably but then i'd just do the next thing and so there is that's why i mentioned that they kind of challenge your drive but i should say as long as it's enjoyable that makes so much difference i got i can't tell you if i wake up and there's a bunch of external factors made it less enjoyable it actually does have an impact on your desire to keep going so i think like making sure you're surrounded by great people you're enjoying it we spend a lot of time working don't we so So it's got to be fun.

49:34And our role as leaders is to create an environment where all of our teams have fun. Yeah, totally. And I think your point around energy made a lot of sense. But Richard, we spent a bit of time together and I can attest it since leaving HomeServe, it's got nothing to do with your energy levels. You're still as passionate about business and investing as you were, I'm sure, when you were running HomeServe. Mainly because I look back and think the things I know now that I wish I'd known at the start of my journey and all the mistakes that I made and passionate about seeing more billion pound businesses created here in the UK that can become global leaders in the way that Kraken and Octopus Energy are.

50:17And we really need to have 100 of those businesses on the list, not the 47 that we've got. And it makes me think about, I think we're better as a country on startups. We have about 330 ,000 of those every year and lots of venture capital money going into those businesses. But we do have incubators and accelerators. There's some combination of British culture. The fact is fairly frictionless. In a lot of countries, you have to get legal advice and register stuff before you can start here. You can literally, while you've got a job, start trading off the side of your desk, building something new.

51:00and so we allow it we make it very easy we've got we've got to keep that it is magical but the other thing britain's really good at is it recycles uh not only capital from people who've sold businesses but also the expertise so schemes like the uh eis and seis schemes especially encourage people who've been successful in business to back the next generation and then provide them with the advice and help that gets them to the next stage but what's strikes me is the opportunity is colossal but even i think um even if you um shoot for the stars and only get to the moon so um even if businesses don't get to that billion and they just go from being a medium-sized company to a large one and uh the big fact that struck me was that we only have seven and a half thousand large companies in the uk that employ more than 250 people if we could double that then that would create about a hundred billion of additional value for the economy and that's what we need right now it's pretty pretty tough out there for um householders high energy bills and um uh expensive cost of living and um uh we've got to do that stuff but we do know someone who's doing his best to bring energy you know energy bills down I'm optimistic, by the way.

52:24Look, sooner or later, that will happen. Britain needs to reform its energy system. But the reality is the cheapest power in the world now is solar power that's generating, followed by onshore wind. Over time, we're building this stuff. We need to change the system to be able to get the benefit. But how many people today know the cheapest car you can buy, brand new, is an electric car? And it's not even a Chinese one. It's a Daisha made in Europe. And are those the ones that you're selling? I love the outdoor advertising. You've seen it. Octopus now selling cars, I think. Fantastic. Yeah, you know what's really made it?

52:58People have noticed it. And they're all electric. Amazingly electric cars now. Cheaper to buy often than a petrol car. Certainly coming down all the price. But currently nine times cheaper per mile than diesel if you use a smart tower from an innovative energy retailer. Now that, so I'm optimistic on these things because, you know, for years, people are worried about the cost of driving. And of course, during this horrible crisis in Hormuz, so many people worried about filling their cars. I'm not saying they can all go out and buy a petrol car now. But if you know that we're heading towards a period when the solution to the driving cost is homemade British green energy in an electric car, it will save your money while saving the planet.

53:39And you've got to be optimistic. And actually, to the spirit of your points, I think there's a lot to like about the UK, the entrepreneurial spirit. and the entrepreneurism we get to see is in our day-to-day job is just incredible here you know what one of these makes me so excited i see great businesses all the time and they surprise me and they're not always going to be huge but it is people who've spotted an opportunity and done it so i just feel like my pa is a member of a pa network um and you know she pays a sum of money every year to be a member of this network and then the network works with all the restaurants and hotels and places like that that people like me have to hold business meetings in.

54:22So she gets taken for, you know, dinners and lunches, charmed into taking me to a place. Someone kind of came up with that idea. I was so impressed by it. I wish I'd invested. Talking of businesses that you're impressed with, are there other names on the list, on the billion pound business list that you look at and go, I really respect what that person's done there? There were two that I picked out and one was a retailer. And what surprised me is that the third biggest category in the list was retailers. And yet private equity are not investing in British retail right now. Very few. And I think that's a mistake.

55:05and so the standout retailer there is Home Bargains. Read in the news recently about Poundland sort of struggling and Home Bargains isn't and I was fortunate enough to meet Tom Morris a few months ago and what a down-to-earth guy he is, what a fantastic machine of sourcing products, innovating on products and having them made in China, owning more of the supply chain. I was just blown away by that business. The other one is a business called Glass, run by Mia Drennan. And she's one of, unfortunately, only the few female entrepreneurs on our list. And she's done a tremendous job. This was spotting an opportunity to run the back office admin for lenders.

56:05And she professionalised that and turned it into a business worth a billion plus. And I think we dearly need more female entrepreneurs on our list and find ways of helping and supporting them. Absolutely. Well, first of all, one of the great privileges of my job is I'm looking to know some of the people that run those businesses. And I want to name them all. because I think there's such talent there. But I'm going to mildly controversially, I think number two on the list is Ineos. What I love about Ineos is time and again, as I've been building businesses, people make this assumption that, you know, it's always got to be digital.

56:47It's always got to be online. It's got to be super low capital and that you can't make stuff in Britain. And I think that what I really admired with what Jim Ratcliffe did with Ineos is taking unloved sectors and showing actually you do them in Britain brilliantly and create tremendous value. And the other one, I don't think I spot it on the list, but surely Wetherspoons is a billion pound business. Or Greg's. I didn't see either one there. That's a good challenge. And the only reason I mentioned those, I mean, particularly, and now Greg's is older, but Wetherspoons is, you know, it's still found to run.

57:24And, you know, Wetherspoons knows its customers better than anybody else. I was in Cardiff the other night for a business event. Basically, I run these events, Town Hall for customers. And afterwards, I just wanted a curry. It was about half 10, 10.45 at night. All of the curry houses were shut. Arrive at the Wetherspoons. It's serving food till midnight. You sit at the table. You can order online. It was one of the very first ones we could order on your phone. The prices were outstanding. And the curry wasn't bad at all. So, you know, I like the businesses that truly understand the customers bring tremendous value, but they do it in ways that are perhaps unexpected.

58:03Did you say that was in Cardiff? That was in Cardiff, a great weatherspoons. It was called the Prince of Wales. I think probably not quite at the billion, but let's keep hoping that Tim Martin gets there next year. Everyone get down there and buy a Jolf Frazee. And who knows, you might bump into a founder of a billion pound plus business there. Yeah, there was BrewDog, a business that I admired, and some of their pubs were great. And unfortunately, they fell off the list and went through hard times. And so that was a real shame. Yeah, it is. And I think that, you know, they fell into a private equity trap.

58:36But the reality was they built a business that had outstanding products. I've still got stuff, you know, fridges full of their beer. And some of the pubs were great, you know, with pinball and things like that. I think you know James one of the founders we both know him and you know the downfall always brings a lot of bad publicity but the reality is that is a guy who did some seriously impressive stuff and you know I hope he bounces back actually talking about the list and looking at some of the characteristics and perhaps this is because I've got a son who's doing his A-levels at the moment but I noticed that 25 % of the list actually didn't go to university richard you did and greg i think you took a an unusual route but went to university in the end um what do you think it is about the uk you know if you look to the uk education system are there things that you think actually this is preparing people for a life you know successful entrepreneurialism are there things that we could do differently um and did university benefit you i think it's a great stat and uh should be higher um let's get uh more successful entrepreneurs that don't go to university and end up doing a degree that is not of value in business.

59:52I think there is still a value in some degrees. And I've got one of my kids that is just finishing his master's in engineering. Hopefully, we'll go into business. But yeah, I'm a big believer in apprenticeships. And we should be doing many more of those, more technical qualifications that can really help. we're going to move from a white collar environment to blue collars hopefully won't be replaced by AI we need more trades people out there doing the improvements in homes installing more solar panels and generating cheaper electricity with Octopus Energy and so yeah I think that was a great stat on the list and um let's not send all of our kids to university and have them on that list of the unfortunate million needs that um some of whom have been through university and are now unemployed so i did take an unusual route i'd left school at 16 to write video games and um you know in my case school was wrong for me uh i mean i did well enough i did well but I really hated the constraint, the discipline and maybe there's a bit of an entrepreneur that says look, I don't like being told what to do.

1:01:14It's one of the reasons I can't have a job. I actually found university, I actually did go to university and it's where my co-founders, I found that the Freedom University game, it was perfect for me. I've got to say I don't think I attended a single lecture after almost in second year and definitely not in third year which would make exams challenging but the freedom to be able to use your time and build out relationships and experiment with new ideas you know i found incredible uh but i don't necessarily say it's for everyone and actually you know you can remember mark zuckerberg didn't finish his degree he went to university didn't didn't graduate um and and very often you know certainly for for an entrepreneur what matters far more is what you can you learn yourself you teach yourself you learn from others and how you work with others and whether you do that university or not is kind of secondary rich as you mentioned in your answer around you mentioned ai how do you think this list is going to adapt over the next couple of years as more and more impact is seen from AI?

1:02:23Yeah, most of the big successful players on AI today have come out of California, certainly American businesses. We definitely need to see more homegrown British AI companies. And I think it will take another few years, but I'd dearly like to see some of those that make the list. What was interesting is that financial services topped our list by sector, but as we probably expected, tech was second and retail third. So I think tech might well overtake the first place financial services when we publish the list again next year. I mean, you talk about AI in Britain. DeepMind, which is the core of everything Google have done in AI, was a British company founded by, you know demis eventually got the nobel prize um but exited for 400 million pounds now on the one hand you could say look today that business would have been worth tens maybe hundreds of billions uh but would the uk have had the capital to get it there uh i.e back to the conversation we had earlier yeah uh for the uk to be astonishingly successful in some of these areas we really do You have to fix the capital issue so that we can go head to head with and build the globally significant businesses, particularly things like AI that are so capital intensive.

1:03:54But interesting, I mean, because of DeepMind, the UK has this fantastic powerhouse in AI employing a lot of people with tremendous talent and a ton of companies kind of in the ecosystem. And it will build things we can't even think of for either next year's list or the one the year after. What I would say is tech is going to change, right? We saw Saspocalypse when suddenly the idea was that because AI can write code very well, the kind of companies that were valuable in tech before may be less so. But at the same time, the fundamental technology, I'd say platforms like Kraken, that essentially enable you to use AI throughout your organization can become more valuable.

1:04:38is never going to be more turbulent. It's never been more turbulent. It's going to be over the next year or two. I think it'd be interesting to see, to your point, Richard, about tech becoming a higher proportion. I think the other thing here is that hopefully it will help us expand the list much quicker. If you can get a billion valuation with only 10 employees now, you can have a full chapter on AI about how quickly you can scale up should change that paradigm. I think the other thing as a country is we need to stop talking about exports and export guarantees, export help, because would you recognise your business as an exporter?

1:05:15It's more about how can we create more businesses that internationalise, because only 5 % of our companies in the UK are manufacturers, and yet we still use that language in government support. So I think changing that and saying we can help more businesses and they don't need to be manufacturing or even if they're manufacturing in the Far East, but they're repatriating their earnings back to the UK. So culturally and language-wise, that also needs to change. We are unusual. We open a factory, we manufacture heat pumps in Northern Ireland. I'm not sure how much the value is in the hardware and how much in the software and how much in the firmware.

1:06:01And you can't hypothecate that. We're just creating value. just one quick thing on tech businesses I was in a meeting with some policy makers and other businesses and someone said look you know a hairdresser can't use AI I was like first of all put aside the fact I've seen demos of hair being cut by robots we'll put that aside you know I mean AI could answer the phone run the calendar manage the accounts my goodness you can transform you know everything yeah and And, you know, do you define that hairdresser's a tech business when that happens? I think the reality is AI is definitely, there's a ton of challenges with AI.

1:06:41Let's be really clear. We don't know where this goes and we don't know about the dangers. But within so many businesses, the opportunity to create them from scratch in a totally different way than we've ever seen before, or to transform the most traditional sectors, is unending. We are out of time. We are very quickly running out of time. So, Richard, I don't know if you'd like to finish with a closing remark about the list. Great to see we've got 47 companies that have achieved that unicorn status. We definitely need more. I do think that they can all be role models for businesses that are scaling today to say, I want to be the next Octopus Energy.

1:07:22and also to be able to have a framework, which we have within Business Leader, to be able to help businesses to scale, to follow the right steps. And I think a lot of those are very similar. And I do believe that we will see more. And if they only become the next large companies and not billion pound companies, then that would be good as well. From Deutsche Bank's side, it's a privilege to help support the list and to help celebrate some fantastic examples of entrepreneurialism. And a big thank you, James, Phil, for doing that and being our sponsor. And it's also been a great privilege to sit down with you both today.

1:08:00So thank you very much for your time. Likewise. Thank you. I really enjoyed that. Thank you. What an amazing job Greg Jackson has done in building Octopus Energy and Kraken from a startup to a multi-billion pound business in the space of only 10 years. an inspiration to many other entrepreneurs in the UK. We need to see more billion pound businesses, but equally in shooting for the stars and only getting to the moon and just seeing more large companies in the UK, lots of really valuable learning. Thank you to James Whittaker from Deutsche Bank and to Greg Jackson from Octopus. And thank you all for joining us.

1:08:42Please do rate and subscribe. You can check out the UK billion pound businesses list on our website. That's businessleader.co.uk. And whilst you're there, sign up to our weekly newsletter. With more people on board Business Leader, we can have better conversations and inspire the UK's next wave of business leaders.