He Built an £80M Business After Walking Away From His First Idea | Ed Klinger

0:00The story of Flock is just coming up against seemingly kind of insurmountable shitshows and problems. We had about 51 % market share in the drone industry. We already have half the market and our revenues are absolutely tiny. So we said, screw it, we're closing the drone business. This is one of my big takeaways from the last 10 years is rejecting rejection. We were running out of cash in a dying industry or with a dying product.

0:26Alex Chisnall:It'd take me inside that moment, if you can, like when you knew that they wanted to acquire business. The journey of the acquisition was the kind of the most thrilling and stressful and intense journey I've ever done.

0:45Alex Chisnall:What stops founders from building something meaningful isn't a lack of ideas. It's the fear of getting started. I'm Alex Chisnell, and this is Screw It, Just Do It. The podcast for people who are ready to stop waiting, take action and make things happen. So you've just built Flock to an 80 million acquisition by Admiral. Take me right back to the beginning. What did you see that made you think the insurance industry needed reinventing? And along that journey, did you pivot the business in any way at all? Multiple times. And actually, to answer the question, I think we need to go even further back before we were in the world of insurance and realized it needed fixing.

1:27So we started the business, or I joined Anton, my co-founder, who had already started it, and we had no interest in insurance and we weren't in the commercial motor space at all, which is what we do now. We were in the drone data and analytics space and we had a really specific problem that we wanted to solve, which was there was a massive rise in the use of drones, personal and commercial. Everyone was talking about, you know, how are these drones going to navigate cities and deliver packages to your door safely? And so we decided, can we pull data from the drone and data from the environment, like building data, population density data, driving data?

2:04And can we basically build a pathfinding algorithm that directs a drone from point A to point B and allows it to navigate around dangerous spaces? And it was a really sexy, interesting space to be in. and that's how we got started. And we went through pivots, multiple pivots to get where we are today. And I'll just whiz you through them really fast. So the first one was that these drone pilots who were using our software came to us and we had many using it, came to us and said, well, the biggest problem that we think this actually solves for us is that a big chunk of our expenditure is on an insurance policy, right?

2:39We're, let's say, a commercial drone operator taking photos for weddings. They're spending a significant amount of their income on insurance. And they said, if we're flying more safely because we're using your software, surely we should be able to save money on insurance because we're going to crash less. So we went to see all the insurers who were insuring drones and we showed them the software. And we very quickly realized that none of them were going to be able to take in this data, process it, and come up with a new price for a drone pilot. That's not how the insurance industry really operates.

3:07They don't use real-time granular data or algorithmic pricing. They were using much more old-school models.

3:14Alex Chisnall:But you managed to have a conversation with them. We got in the door with them in London. It's a great place to do it because it's surrounded by the biggest insurance companies in the world. But we realized that they weren't going to do it themselves. And so we, you know, in the spirit of the podcast title, we said, screw it. We will start our own insurance company and we will price insurance more intelligently using all this data asymmetry and advantage that we have. And we went on the journey of trying to figure it out. And we ended up partnering with an insurer who said to us, you know, you can use the data, you figure out how to sell this, you figure out how to price it, and we will pay the claims.

3:48Right. So that's what this insurer, Allianz, said to us. And that was our foot in the door. That's how we realized that the insurance industry wasn't capable of doing this by themselves. You know, they're built on legacy systems that come from the 1990s. They don't necessarily have that culture of kind of rapid innovation and technology that would allow them to do this. And that's how we became not just an analytics company, but an insurance provider to the drone industry.

4:12Alex Chisnall:That's such a cool story. And at what point, or did either of you literally say to each other, like nudging each other, going like, wow, this could literally be no ceiling on this? So let's talk about the next pivot. Once we'd figured out how to get, the story of Flock is just a story, and many entrepreneurs will say this about their businesses, It's a story of just coming up against seemingly kind of insurmountable shit shows and problems and then realizing that there's no way we can possibly solve them and then trying really, really hard, eventually solving it and then getting hit with the next unsolvable problem.

4:46It is the last 10 years. Just as we'd figured out that we could partner with this insurance company and use our data and price per flight the insurance that these pilots were going to buy. So, you know,£4.95 for one flight worth of insurance, we got blocked by the regulator. and the civil aviation authority said you know you can't launch this product because it's uh it doesn't meet all of these specific criteria that come from the eu and we went we then had our next battle which was trying to figure out how we could get to work with the regulator and collaborate on this product and just as we'd overcome that problem we launched the product and this was 2018 and then we we were expecting as all founders do this immense influx of of cash and luck and customers and I remember sitting with Anton and Mike Ovan and thinking why is no one buying this and it's the classic dilemma which is that you you get excited and hyped up about your own product and then you realize that it's exciting to an incredibly small number of people especially in an industry as small as the drone industry we did eventually see customers coming through I remember we sold our first five pound insurance policy and it was the most exciting thing we'd ever seen and then you iterate the product you speak with more customers more start buying they recommend their friends and we we managed to over the course of kind of two three years we we actually became the leading provider in the uk we had about 51 market share in the drone industry obviously it's a claim to fame but it's a tiny tiny industry and we realized rather than realizing wow there's no ceiling to this it was actually the opposite we realized there is a very obvious ceiling to this we already have half the market and our revenues are absolutely tiny they're eclipsed by the costs of running the business.

6:28And we'd raised money from venture backers at this point. So we really needed to achieve a new level of scale. And that's when we kind of took a long, hard look at ourselves and said, we need to pivot the business and we need to expand into an industry where we can use this technology and the same approach of kind of real-time pricing and risk management coming together. But we need to do it in an industry that's 100 or 1 ,000 times larger than the drone industry. and that's how we eventually landed on on commercial motor and the story of how we got there is is convoluted and winding right okay um how many no's do you think you you've like collected on the on the journey to to get to the to the yes i mean the the majority of our time at flock has been spent um dealing with no's from from customers or from partners or from investors or actually probably most of all for myself.

7:23Anton and I, we hold ourselves to really, really high standards and we hold the business to really, really high standards. And many ideas don't make it through the net. And actually, maybe this is an opportunity to tell you how we pivoted from drones to motor. We didn't just choose an industry because it was big. We put ourselves under quite a lot of pressure to choose the right industry. Really, there were four things we were looking for. an industry that was large we didn't want to launch into another small industry and make the same mistake again an industry that was growing because we didn't want to launch into an industry that was becoming obsolete and dying again you're fighting the tide an industry where the vehicles are connected to the internet so that we can extract data from them in real time because that's what gives us the edge and an industry where that level of connectivity is growing i.e.

8:14where more and more vehicles are coming online every single month or every single year. And we ran a project on this. We looked at 10 different industries, e-scooters. They're definitely connected to the internet, but it's a tiny market. So that was out. Cargo shipping, really big market, but much harder to get the data and so on. We looked at 10 and commercial motor just hit every single green light on those four criteria. massive market all of these vehicles are being connected with these devices so you can telematics devices so you can see where they are and how they're being driven and the rate of that connectivity was going up so it was just a bit of a slam dunk moment and actually one of our drone customers came to us whilst we were doing this project and said i'd love for you to ensure all my vans i've got 12 vans can i give you the telematics data and you can ensure the vans and we said to him no we can't do that because we're so busy working on this project to figure out what our next industry is going to be so we're just we're too you know we can't possibly insure you and then there was this kind of pinch me moment where we were like well hold on a minute obviously you know we've we've got the data that proves that this is the right moment to do this and now we've got customers coming and asking for it and it was the matter it was actually the marrying of those two things it was the top-down understanding of the industry that we were thinking of going into and the key trends and the bottom-up understanding of customers telling us this is what we want and it wasn't just that customer one of the things that we did was we actually went to a depot a trucking depot and and we spoke to probably a hundred truck drivers and fleet managers and we showed them what the product might look like and we asked them you know how much would you pay for this how much more would you pay for this than you're paying currently and we got enough yeses for us to say you know holy crap this is this is we're on to something and that i think is the moment that's you know after four or five years working on flock that was the first moment that we said this could be a really really big business one of the best

10:15Alex Chisnall:parts of hosting screw it just do it is getting to sit down with incredible founders and once a year instead of interviewing them one at a time i bring hundreds of them together this november i'm going to be hosting the Festival of Entrepreneurs at the NEC in Birmingham. You're going to be able to hear from founders including Richard Harpin, Ray Kelvin, Juliet Barrett, Piers Lenny and over 200 speakers across two days. So if you're looking for ideas, inspiration and genuine business connections, I'd love to see you there. Just go to festivalofentrepreneurs.co.uk to register for your free yes free ticket and how interesting was um the data that you got from those 100 people with regards to the pricing was that ridiculously varied was that you know 75 percent said within this band how close to it was it what you and anton were thinking the reason it was so interesting is because there was a really clear signal in the data so rather than just receiving a hundred disparate answers which pulled us in a hundred directions we heard really clearly from these hundred people or so, yes, there is a need in the industry for this product because, you know, this is what they told us, we're spending money on these devices, but we don't get value from them.

11:30And if only our insurance company could give us a discount when we use the data and drive more safely. So if you could help us do that, we would work with you tomorrow. In fact, some of them got in touch immediately after and said, can we go ahead and buy this? So that was the really, it was the signal from the noise that was the powerful thing and that's what gave us the conviction to go ahead and build something um and you know that was that was really tricky because at that point

11:55Alex Chisnall:we were we're really small we had 20 staff what year was this this was 2020 so we were going into lockdown we took the the entire team went remote um which was a blessing and a curse it was a curse because it's really hard to build new creative things when you're all in different homes but i I don't know if you remember back in the early days of COVID, the blessing was that it also kind of gave you permission to be so bold as a founder. Like a lot of founders made big company changing decisions in kind of 2020, 2021, because everything was reset and the whole global economy was kind of being shaken up.

12:32And it just gave you permission to take a step back and say, hold on, does this business make sense?

12:37Alex Chisnall:It's funny, isn't it? I like spoken to, you know, that many people who started businesses in that time or reiterated their businesses during that time and it I remember myself you know literally I think maybe it's the only time since in the last six years but having time to like take a breath take a step back and actually go okay if I actually started this again knowing what I now know what will I do differently and let's take that as a starting point um interested to know how when you were looking at those different industries and which which one where the opportunity lay. How long did you guys take to do that out of interest whilst running a business, right?

13:13Whilst running a business, it took about three months end to end, which in hindsight was too long. It was too long because within a month, we knew. I had the gut feel that we were onto the right industry with commercial motor. Looking back, I think it's quite important to look back and kind of continuously critique yourself as a CEO. and I think looking back I was too intricate and analytical um you know paralysis analysis is the phrase that I I use now in reference to myself then um I should have been slightly more gut feel led that said I think it was still valuable that we did the exercise um but we could have done it

13:51Alex Chisnall:three times faster and maybe there's a question there isn't there about you know given the industry you're in how much do you go on gut and how much do you go on the data right we we uh you know we there are some decisions where no matter how much data you have I really believe you just have to go with your gut one of them controversially is for me is hiring you can you know there have been many many hires that we've made where all of the data showed a very clear story that this was a brilliant hire but my gut told me otherwise and sometimes it's really difficult to pinpoint exactly what it is it could be you know an expression that's made during an interview process it could be the fact that they were X number of minutes late or whatever submission they gave you wasn't quite right.

14:36You know, there are hundreds of tiny signals which lead to you making a gut feel and sometimes you can't define them. I will say though that there's not been a single time in the last decade of running Flock where I've hired someone against my gut feel and it's ended up being a good hire. Every single time I've gone against my gut, I've regretted it. And I speak to a lot of founders and CEOs who say the same thing. and I'd again also probably controversial I'd say the same about firing um you know I of all the CEOs I speak to I always ask you know if you could go back and do it all again what kind of things would you change the most common answer I get is I would make difficult performance management decisions faster because once you have a really strong gut feel that someone's not right

15:21Alex Chisnall:it tends to not go away agreed and you know have this conversation a lot and and everybody from say like a Julian Hern at Huell to an Al Barra at the Grenade and chap I interviewed yesterday Brad all said hardest thing is hiring second hardest thing is is keeping those people that you want to keep in the business right and I was talking about this recently so and I said and I remember I knew I should have gotten rid of this particular person way earlier and I just you know kept them in the business now massively massively underperforming and then when I decided to pull the trigger and have the conversation he literally burst into tears on me and completely disarmed me right and then unloaded a load of personal stuff as well it just makes you feel like shit right but at the end of the day you do have a business to run but equally you've got to take people's feelings into account at the same time I think that I think that's right um one thing that I heard an entrepreneur say which just stuck with me is that often you can make a decision to keep someone on too long even though you know that they're underperforming and often they know that they're underperforming and you're keeping them on because you think that it's the right thing to do by them but actually you know slightly less intuitively it might not be the right thing to do by them because they they might dread coming to work knowing that they're underperforming and disappointing others um and you're to some extent allowing them to thrive elsewhere in different business and hopefully put their career on a completely different trajectory because it's not on the right trajectory in your company if they're failing and then maybe even more important than that it's you know letting go of a really serious underperformer is also doing the right thing by the 10 20 100 other people in the business who want to be able to come to work and work with other great high performance people um and yeah it's it's really stuck stuck with me because and you see it really clearly right like you can see you can see it in your day-to-day you will be working with people who you think, wow, I'm blown away by you.

17:24You're fast, you're incisive, you've got great insight into the industry, but you're being slowed down and pulled back by someone you're working with who's not delivering. It's not doing right by the high performer to essentially force them to continue working with an underperformer. And, you know, to what you were saying earlier, it's really hard to retain great talent. One thing you can do to ensure that you drive away all the best talent is to force them to work with people who aren't on their level and to have that person then maybe even build teams underneath them, also not at the right level, the classic kind of B players, hire C players mentality.

17:58So yeah, I mean, hiring a great team, retaining the best people and being quite fast and intentional about removing underperformers is, you know, for me a really, really, really top priority and I think should be a top priority for any founder. And how much involvement do you have like in the hiring process? because I remember, you know,

18:20Alex Chisnall:specifically remember this conversation, like interviewing Julian Hearn at Huell's HQ. And at the time, you know, they just exited and they saw his post today. I think it was the last bit of government compliance that means that the sale can actually go through for like a billion euros, right? And when I interviewed them, I think it was year five and it was 50 million company and they've, you know, 100x that or whatever they've gone and done, right? And him saying back then, I think they were a team of 30 odd and he still had the final say on, on every hire. It's the same at flock. Is it? Yeah.

18:53We've hired hundreds of people over the years and I have the final say on, on every single one of them. Um, there've been a very, very small number for, for example, when I was on paternity leave, I didn't want to become a blocker to hiring. Um, but generally I will interview every single person in the business and run the same rigorous process or attempt to run the exact same rigorous process with, with everyone we've ever hired. And I, and I would, want to keep it that way for quite some time. I think it was Palantir who over a thousand of their first employees, I think it was, that the CEO was interviewing personally.

19:25And many of the best founders I know have stuck to this, despite a lot of pressure and criticism pushing you to do quite the opposite and to unleash and allow your team to hire as quickly as possible because it is inevitably the case that it's a trade-off between speed and quality.

19:41Alex Chisnall:To flip back to something we were talking about earlier, when you're talking about like vehicles coming online um for those who have no idea like me what kind of percentage or number of vehicles are coming are online there so in the so we deal with commercial vehicles not not your kind of every your your vehicle might not be transmitting data and on the internet but but now the majority of commercial vehicles are um and it makes sense when you think about it right so imagine an amazon delivery van the manager of that fleet of let's say 100 vans, needs to know where all of those vans are at any given time.

20:17They need to be able to direct those vans to the right locations to pick up and drop off packages and so on. Imagine a taxi fleet, an Uber fleet, a Bolt fleet. These vehicles all need to be tracked in real time. So in the UK, probably 60 to 75 % now of commercial vehicles are fitted with aftermarket devices. So little hardware devices that go in the vehicle, track their location, often track lots of information about the vehicle as well, how fast it's going, how harshly it's braking. And what Flock does is we ingest all of that information and we use it to basically risk score every single vehicle and every single trip.

20:54And then we provide that data back to our customers with an AI that has a conversation with the customer and actually can tell them in natural language, you know, this driver has been speeding, this driver has gotten better over the last three weeks and we pay our customers back when they become safer so this year we'll pay several million pounds in cash back to our customers because they've become safer over time by by following the insights that we give them because again being a novice when it comes to

21:22Alex Chisnall:this industry like the only thing i'd heard like vaguely similar to that would be like with learner drivers right and having like a box fitted to the car and as a as a as a father of two teenage girls who are both taking lessons at the moment. Crikey, they've gone up since my day. Two of them at the moment as well, like every week. Crikey, it's like a second mortgage. So imagine that logic applied to B2B enterprise customers. And rather than just learners, it's all of the drivers that are working with these very, very large fleets. And some of the fleets we work with have, in some cases, thousands of drivers and vehicles.

21:58Alex Chisnall:yeah and where again i guess you must have spent some time on this but when it comes to like autonomous vehicles must be a conversation that's that's um top of the agenda last couple of years and i remember interviewing somebody at a live event i was doing when i was working with virgin startup and it was like must have been 2018 and this guy and i'd love to go back and find out if he's still in that industry or whether he's at the forefront or whether he got taken over but that's what he was doing and we're talking like eight years ago now which seems like a lifetime away for this industry right so you know radically new challenging technologies to take slightly longer than people think but then the change is dramatic yeah the famous phrase i can't remember who said this you'll you'll find it and put it in the notes maybe is that um you know less happens in two years than you think will but much more happens in 10 years than you think will and you know i was writing about autonomous vehicles in 2016 when i was at cambridge um and i wrote this paper about the next 10 years of autonomous vehicles.

23:00And a lot of the dramatic change is coming to pass, right? You've got, I don't know if you've spent much time in the likes of Austin or San Francisco in the US, but you've got tens of thousands of rides happening on a daily basis, safely transporting people around the city. It's quite an amazing experience.

23:19Alex Chisnall:Switch to it slightly. Correct me if I'm wrong on my numbers as well, but you've raised more than 40 million from investors along the way um what do you think the biggest misconception founders have about raising money because i hosted like a round table dinner recently with 20 founders ranging from businesses from uh literally a couple of million all the way up to like north of 500 million and it's you know no surprises it's the same conversations that come up and the biggest one seems to always be around funding right my it's kind of a misconception but also just advice that i give to a lot of founders that I advise is to be very well and thoroughly prepared for a fundraise.

24:03You hear stories of founders going out with a half-baked deck and raising X million in 48 hours. It does happen, but I don't think that's the fundraise that you should be preparing for as a founder. I think it's a misconception that you can do that and guarantee that it will work. The advice I give to founders is, you know, treat a fundraise in the same way that you would treat a very, very complicated enterprise sale. You're going to be meeting a huge number, most likely, of potential customers, which are the investors. You're going to want a really well prepared sales deck or materials that you can provide them with.

24:42You're going to get feedback from them along the way. You should be willing to iterate your materials along the way and hear the questions that they're asking. and instead of just answering, let's say investor A asks you a question, the fastest and easiest thing to do would be to provide them with an answer. The thing to do that takes slightly more time in the moment, but will prepare you much better for the fundraise is to go back with your team, write an excellent answer to that, document it and then have it shareable in a format that you can share with the other 20 or 30 or 50 investors that you might speak with.

25:14And if you're being, if you really want to go the extra mile, produce a high quality document that has all of these answers in already right answers that your team or that you or the existing investors are asking produce an investment memorandum and share it with investors who you really like along the journey once they've proven to you that they're interested in the business we we've done this in our previous three fundraisers our series b we raised just over 30 million quid in our series b we had an 88 page investor memo that we provided to investors as they got into the data room and it does a few things one it establishes a huge amount of credibility because now the investor is looking at this and saying okay these guys have really done their homework um b it allows it allows you to help the investor tell your story in your words and what i mean by that is these investors these whether they're associates or partners if they like your business they're going to go back to their their investment committee and they're going to pitch your business.

26:15And the best way for them to pitch your business is for them to pitch your business in the same way that you as a founder would pitch your business. And the best way to get them to do that is to provide them with the pitch, provide them with the materials, help them answer all the questions that are going to come back from their investment committee. So there's a huge amount and there are many more benefits of doing this. It also clarifies in your mind as a founder what your business is all about. So it's a very insightful, introspective exercise putting together one of those documents. And you can do it in, especially now with Claude and GPT you can do it in a few days when you know when I was doing it these these tools didn't exist but you know you learn a lot about yourself and your own business

26:50Alex Chisnall:just by writing it down that's a great how many rounds we we ended up our most recent round was our series b so we did you know pre-seed seed and then some extension rounds a and b yeah and did you raise before like Anton started the business or at some stage in the early day the when Anton got money from Innovate UK, which is kind of the research grant facility that the government provide. And that got us, you know, I will forever be grateful for that, because that's what allowed Anton and I to pay ourselves£1 ,000 a month, which was our 12 ,000 pounds a year was what we paid ourselves when we started the business, which was really exciting back then, because we were like, it was my first ever job was starting block.