My Favourite Failure: Unpaid payments nearly destroyed my business despite UK legal system & rock solid contracts - Neil Ambikar

0:00This might sound like the plot of a spy novel, but UK startups are increasingly at risk of state actors trying to steal their assets. Take one Scottish renewable manufacturer that was harnessing wave power. They were visited by a 60 strong delegation led by a senior Chinese official. A couple of months after that, some of their laptops were stolen. Guess what happened next? Yep, pictures emerged showing a Chinese firm making a product that was virtually identical. This is why we're working with a National Protective Security Authority and the National Cyber Security Centre, the UK's security experts.

0:36They got in touch with us because they seized such a growing threat facing UK startups. How are they responding? With the launch of a new campaign, Secure Innovation. It's not just your cybersecurity that matters, but your physical security too. If you want to get a better handle on your security, check out npsa.gov.uk forward slash innovation and download their free quick Start Guide. There's a link in the show notes. Not only was it emotionally so frustrating, anyone who saw me during this period saw the toll it took on me, going from this euphoria of onboarding a lot of customers to boom, not getting paid.

1:17This could have pretty much destroyed the complete business. Neil Ambarcar is the founder of B2B Pay and Navi Payments, and B2B Pay is lucky to still be here. The company was taken to the brink by a sequence of events that led to Neil questioning the legal system in the UK. He says he did everything right, but ended up losing. This is how the game is really played.

1:50In 2015, Neil set up B2B Pay to help business owners find the right business bank account. Remember companies like Monzo were only just beginning to appear at this time. Banking, particularly business banking, was still pretty old school. We sort of ended up having a really good funnel. We started building a reputation on the market. We had really strong search engine optimization and marketing. So we were getting about 50 ,000 website visits a month and over 1 ,000 signups. So we had 1 ,000 people signing up on a website asking us for accounts, which we would filter out and send to our partner bank.

2:32So this was really good for us because we had this model, which was a funnel that was working. From that, we were able to onboard maybe 50 to 100 customers a month. And the way the business worked was that, hey, we got a commission from our customers based on, you know, whatever revenue they generated with a partner and maybe other services that we provided them. So it was pretty good. I mean, it was hard work. Like, you know, it's like you had to work like six, seven days a week, 12 hours a day. There's a lot of complexity, a lot of documentation. but for a change after the first two, three years when we really struggled to make any revenue.

3:13Like I can say in the first two, three years of being, say, a fintech entrepreneur, we were making very little revenue, not enough to even pay basic salaries. And then finally to find a business model which worked was great. The plan was to build this model, to build their cash position and profitability so they could execute on loftier ambitions, like getting a license so they could offer financial products themselves. This was step one, trying to give themselves a platform. We became really friendly with one sort of a financial institution because they were able to take on a lot of our clients, open accounts fast.

3:50So we started sending over 70-80 % of our customers there because it just felt like, hey, these guys are moving really fast. We have a great relationship with their team. They're opening accounts fast as compared to some other partners, which took months on, you know, with slow replies. So we sort of focused all our energy like, hey, this partner, they're the best performing partner. Let's, you know, just channel 70, 80 % of our customers there, 70, 80 % of our energy. So, you know, like on a daily basis, I was spending most of my time trying to increase the flow to this channel. So we had become very reliant on them.

4:36And we were responsible for driving a lot of their growth because we were sending them a huge amount of customers. We had a huge client base. A lot of people know us in the market. So the thing is that initially they were like super happy with us because they were like, wow, you're sending us so many customers. It's so great. You know, you guys are amazing. You know, like, you know, they had very few customers, but because of our sales funnel, we were able to channel a huge amount of customers. And and, you know, the thing is, as our business grew and because I said in these sort of businesses, we have like a revenue share agreement.

5:20after a few months of, you know, you know, we did all the hard work by bringing them a huge portion. You know, like the the the the affiliate payment started turning slow that, you know, rather than receiving them on a monthly basis, it was suddenly like, you know, an open question when we will get them. Then they were suddenly like, you know, like I think they realize how much business we were bringing them so that they're going to have to pay us a lot of fees. So suddenly there was also discussions that, you know, hey, you know, maybe we need to renegotiate the terms and things like that. You can see where this was headed.

5:58The situation deteriorated and it was the first time Neil had faced this kind of problem. He was getting frustrated but knew that they had a good contract. So he hired someone to write an official looking letter to remind the bank of their responsibilities. They took this as if it was like a court action. So it became very defensive. Basically, they just stopped all communication. And yeah, and so basically, and I was left in a limbo because on one hand, I was not getting paid. And it was like, okay, should we send clients or not? And then the second thing was like, should we tell the clients we have there to stop using their service?

6:42But at the same time, if I stop, then in a way I'm in breach of our contract that I will not harm the client relationship. So it was like a damned if you will, damned if you won't situation. So we just kept operating as normal. Obviously, we did not send as many clients, but we were in like a limbo situation where we couldn't do anything and they just stopped communicating. This was a high value problem. The unpaid payments were worth 200, 300 ,000 euros, critical to the bootstrap business. Yeah, I mean, this was like a big wake up call on how the legal system works. So for me, it was really simple, you know, like I'm completely in the right.

7:26There's a solid contract. So we sent two, three letters like that saying, hey, please pay us. Please follow the contract. They hired a big law firm. I won't name the name, but it was one of the bigger law firms from London. The company was UK registered. And basically, we just got like saying, hi, blah, blah, blah. We need more time sort of letter like, ah, we are taking over the case. We are considering it. What is the issue? So it was quite long letters asking us for more information. So then I also hired a lawyer and the lawyer was really good. We wrote them a letter, a very, maybe a five page long letter explaining everything.

8:10Hey, this is what B2B pay does. These are the client lists. Here is the contract. This is the commission's owed. For my side, it was a foolproof, solid case. The lawyers, basically, as I said, it was a huge law firm, one of the top, let's say, two or three in London. So you sort of respect their professionalism. And they just kept writing like, yeah, yeah, we're busy. Oh, yeah, we just need more time. And this turned into six, seven months. And at that time, we realized that this law firm was not at all interested. They were just brought in to waste time, that they were not serious about actually replying to any of these things.

8:56So we spent six, eight months, you know, sending them letters, reminders. Hey, do you have an update? And they're like, yeah, yeah, we're going to send it to you. Oh, no, there's a court case come up. I've been very busy. And and the thing is, because these are just like, let's say, you know, like legal letters, they are not like court. There is no enforceability. Then we finally decided that, OK, let's let's send a real letter. So we hired a solicitor in the UK to send like an official letter, which would be like the first step towards the legal process. And then they took the same approach saying that, look, if you again, like, you know, they're like, yeah, I will respond.

9:42We will respond. And then it got to the point where, yeah, you know, they were not going to respond. And this is a year after the initial, let's say, conversations that you haven't paid us. And then it was a big reality check that we finally, so the way it works in the UK is you have a solicitor who does legal work and you have a barrister who apparently goes to the court. So the only option open to us at the time, according to them, was that, hey, we have to go to a court case. And the thing is, because, yeah, I mean, we couldn't go through the small claims court or something like that. I don't know.

10:20But anyway, and then it was like, hey, you know, this court case will cost you about£100 ,000, you know, just to do it. Neil had a big decision to make. Basically, I was left in a position after one year that and just the, you know, this was still like hurting, you know, like the whole year you're just remembering these conversations. and you're like, okay, I could spend£100 ,000 to fight a case to maybe get£200 ,000. Maybe by then this company has gone bankrupt. Maybe I don't win the case, even though on legal. And at that time, it was like the trauma has been so much from this case case that you know you have to you have to just learn to accept defeat and be like you know what this is it's time to quit like you know I think that okay I had spent at that time only maybe well not a not not insignificant but maybe five to six thousand euros and it was like maybe it's time to for me to just cut my losses lessened learn even though it's a huge amount than going down a rabbit hole, which is like, I end up spending 60.

11:37And once you, you know, these bills can be, you know, unending, you know, you pay 5000 euros to the lawyer. Next thing, you pay another 5000 euros. And then once you spend 20 ,000, it's hard to stop spending that money. And I was like, okay, you know what, I don't want to go down this rabbit hole. The company had been nurturing other customers in the meantime, but they had 70 to 80 % of lost revenue to fill. Still, they managed to get by and B2B Pay is still going today, even though Neil's focus is another company, Navi Payments. He learned something fundamental though from this experience, which has stood him in good stead with his latest venture.

12:13You know, it's all about trust, you know, no legal contract is going to, you know, like help you in these sort of matters. You know, you can have the most ironclad if they don't pay you. the pain is too high. It's never worth the legal route. I mean, I'm not going to say never, but at least in my experience, it's just not worth it. You know, I had a bad feeling about these partners when I first had a call. I mean, there were two partners, one of the guys I knew for a long time and the other guy when I had a call, I already had a bad feeling. And I should have gone with my gut that, hey, I don't trust these guys.

12:49It's not worth going. So now when I approach partnership is the first thing is, hey, it's trust. Let's sign the contract. Let's start working. If for some reason they break the contract, I have the mental attitude now that, hey, you know what? That's it. The relationship has ended, but I'm not going to mentally spend my time thinking about it. So I think the main thing for not just me, for any entrepreneur is, hey, first is trust. If it turn sour, just cut your losses and move to the next because I wasted a year on this thing. I could have spent my time on something else. Don't get emotionally attached to these partners and make sure you don't have all your eggs in one basket.

13:39Neil Ambachar, who says pick your partners carefully and trust your gut. We hear that a surprising amount in these stories. Often your instinct will be right, so dial into it. Put words to your feelings.

14:00Thanks for listening to this episode. I've been your host, Dan Murray-Surter, and if you liked this episode, please share it with a friend. See you next time.