How A Bank Collapse Nearly Wiped Us Out

0:00Adam Ward:Welcome everyone to the latest episode of The Naked Founder podcast, the business podcast where nothing is hidden. Thank you to our sponsors, Financial, the home of money for women. Our guest today is Adam Ward, CEO and co-founder of Airtime Rewards, which is on target to hit 40 million turnover this year. Adam dropped out of his law degree after making a small fortune from a mobile website that he built during his studies. However, life threw him two big curveballs. The first was when his son Max was diagnosed with a genetic condition called Angelman syndrome. and the second was when all of Airtime Rewards money was tied up in Silicon Valley Bank when the bank suddenly clapped which made for a sleepless weekend.

0:38Adam Ward:Welcome Adam. Thank you Chris, thanks very much for having me today. No delighted to have you and this is your first ever podcast so we're going to go easy on you Adam. Adam we always start every episode of the Naked Founder podcast with the same question. What didn't they tell you about founding a business that you wish you'd known at the start? That's a good question.

0:54The Naked Founder:I think everybody when you're talking about starting a new business people talk about strategy they talk about funding they talk about growth product market market fit no one really prepares you for what all of that means when you actually start doing it a psychological weight of it all and and i think i think people underestimate actually how hard it actually is to do all of that um there are moments in business where you go from feeling really unstoppable and moments where you question are you doing the right thing and and i think those swings can happen in the same week but it's um it's really really tough and it can be really, really lonely as well.

1:30Adam Ward:Those swings can happen in the same day. I don't know about the same week, but that's the life of a founder. Alan, there are a lot of places that I can start, but I want to take you back to 2023. Every founder's worst nightmare. You've worked on Airtime Rewards for over a decade. You've got all of Airtime Rewards. Money was tied up in Silicon Valley Bank. You're feeling okay about yourself. Suddenly, Silicon Valley Bank collapses, and you've got all your money tied up in there. And those of us who are old enough to remember Northern Rock can still visualise and still remember the queues outside with people trying to take their money out of the Northern Rock.

2:04Adam Ward:Just tell us what happened and how you dealt with it.

2:08The Naked Founder:Yeah, I mean, it was coming on three years to the day, actually, when it actually happened. And it's probably one of the events that you can never really plan for. Typically, when businesses run out of money, it's been happening for a while and you run out of runway. But this event happened very, very quickly. It's probably the hardest thing to put into the emotional context that we went through during that weekend. But one minute you're scaling your business and the next you're watching a bank collapse with all of your money in it. And it was pretty difficult, pretty emotional weekend.

2:39Adam Ward:I remember watching it actually, because I wrote a story about it, but obviously it kicked off in the US very quickly, went over into the UK as well, but it was changing by the hour and it was Friday night, wasn't it? That's right, yeah.

2:50The Naked Founder:It all happened on a Friday and we were still in COVID, so we were still working at home quite a lot and our finance director messaged me an article from the Daily Mail which was basically a story around the US the big parent company of SVB was having problems and there was a good chance it was going to go into liquidation they just put the results out and they weren't looking very very good and it very very quickly snowballed as to is it going to affect us in the UK? What does that mean for us? And we remember trying to get into the bank account, online banking on the Friday afternoon. And sometimes you could get in it, sometimes you couldn't.

3:33The Naked Founder:But what they'd done is they'd stop you withdrawing money. And what had happened is there'd been a run on the bank. So people had seen the article in the US, put two and two together and decided to act on it and try to pull the money out. and the UK arm of the bank had basically put a stop on that happening. Friday evening it came about and news had come out that the US arm had been put into administration and that they'd frozen all the deposits. And then pretty quickly the same happened to the UK business. We were basically told that the bank, there was no public interest in the bank in the UK.

4:13The Naked Founder:It wasn't critical to the UK sort of financial infrastructure. And pretty much the same thing was going to happen into the UK. So we went to bed on the Friday night. Did you go to bed on Friday night? We managed to get some sleep, but we knew we had to come up with a plan around how do we manage moving forward no longer being able to access the money in our bank. Saturday morning came around and the news had got even worse and the government weren't going to do anything about it. Again, back to the fact that this was a non-public facing bank it was only there really for startups but during the course of Saturday the tech industry pretty much rallied around about 30 to 40 % of the UK startups most of the investors most of private equity businesses all banked with SVB and we'd basically put a case together for the UK treasury UK Bank of England that actually if if what was about to play out played out there'd be a massive issue with all of the startups and the tech industry for the UK and what that meant so Saturday started off really really depressing and us coming up with plans and how do we how do we pay staff how do we tell our our staff actually what happened made it even worse than that Josh our co-founder was skiing in Mont Blanc so we were doing all of this over over team he's trying to come with all different models of of what our cash flow would look like.

5:34The Naked Founder:We knew we had money coming in at the month end. But ultimately, Saturday was about lobbying the government to try and step in to save what was, you know, one of the biggest assets in the UK with a tech scene.

5:48Adam Ward:This is what people don't realise with founders, though. Some of the stuff you've got to deal with. I mean, there was a happy ending in the end. And just tell us what a happy ending was, because you went back to work on Monday and your staff wouldn't have known what you'd been through.

5:59The Naked Founder:Yeah, that's right, yeah. So we were planning not only for the worst, but also how do we how do we deliver this message to our team um most most of which none of them really knew what was going on we we went into work on Monday uh or we knew we knew we had to go into work on Monday with a plan to tell the staff this this might have included not necessarily we need to pay the wages um would we need to close the business but fortunately um we went back in on into work on Monday and and the bank had been bought by HSBC they were guaranteeing all the deposits so our money was safe so it was almost like it didn't really happen and I think related to running a business finding a business you carry a lot of weight and your staff don't necessarily understand and know some of the things that go on and people just carry on and that's what happened on the Monday we didn't tell our staff what happened a few people asked later in the day but we'd finished the day with access to our money again and it taught us a huge lesson around treasury management, something, again, you don't necessarily plan for in a business, but we have a policy now for how we manage our money, split between banks, and hopefully it doesn't happen again.

7:07Adam Ward:No, and that's the thing that people don't see as well. You mentioned the fact you talk about weight. You've lost a lot of weight yourself, actually. You've lost about 25 kilos. You're on a bit of a health fitness regime, and you're doing fantastic and looking fantastic for it as well. I'm going to take you back again, actually, to your childhood. Now, I think your parents, like all parents, wanted the best for their children. They were hoping you were going to embark on a career as an accountant, but you actually embarked on a law degree at university but left after two years. Tell us what happened.

7:36The Naked Founder:I absolutely loved studying law when I was back in college and going back quite a while now, when I was in sixth form. Law was one of my most favourite subjects, and I did really well at it, and I could absolutely see me becoming a lawyer. My parents had a slightly different plan for me. They were hell-bent on me becoming an accountant for some reason and they'd force me to go and do work experience at an accountant. Were they accountants themselves? No, no. My parents both worked at the NHS. So my mum was head of midwifery for the north of England. My dad was a research scientist over at St Mary's.

8:11The Naked Founder:So both had worked for the NHS all of their lives, but for some reason they had a different plan for me, which was to become an accountant. And I went to university to study accountancy and lasted a couple of days before I plucked up the courage to tell my parents that this wasn't going to be for me. And I was coming home to have a year out and I was going to go and study law the year later.

8:32Adam Ward:You did that, but you left after two years because you're a bit of a computer geek, a bit of a programmer, a creator. How would you describe yourself?

8:43The Naked Founder:Yeah, so during that year out, I taught myself how to code. And looking back on everything we've achieved, I think it was one of the best things I ever did because running a tech business now, I understand how things work and I understand how to build software. And I'd done that while I was on a year out before I'd gone to university. But for me, university was a great experience. Which one did you go to? I went to Central Lancashire.

9:07Adam Ward:Yeah.

9:08The Naked Founder:Which had a really, really good law department. And I did everything that everybody else did at university. I lived there during the week. But where I was different is I always went home at weekend to work at Tesco. and nobody else I lived with at university had any worry about money or wanting to work and it was all about drinking but for me I wanted to earn money and that was something that really really got my attention at university was how do I start making money and that's what got me to think about business and how can I spend my time between lectures and studying and actually come up with something and build something and having spent the year previously writing software where this whole new world of the internet was starting.

9:50The Naked Founder:And I really wanted to focus a lot of my time on that. And it's that that took my attention away from studying law and making money.

9:58Adam Ward:You made some software that created mobile ringtones. The funny thing is that people talk about it now, but back then when you were at university, it was still quite new, wasn't it?

10:07The Naked Founder:It was massively new. I mean, we were all running around with Nokia phones. There was no iPhones. There was no Androids. the concept of being able to text somebody on a network was something really, really new and crazy. And that sort of shows you how early it was.

10:22Adam Ward:I still remember my first text message. No word of a lie. I'd covered a case, a pretty horrible case, actually, a paedophile gang in Bristol. And I wrote this background article, which went in the Bristol Evening Post, and I got a text message from the investigating police officer to say what a good article he thought it was. Thank you very much. but that was my first ever text message. So for the younger listeners and viewers out there, that's what it meant. So you created this software that created ringtones. Pretty quickly, you were making a shed load of money, weren't you?

10:53The Naked Founder:Yeah, yeah. So off the back of the text message systems, Nokia had released a piece of software that allowed you to ultimately create logos and ringtones and send them over the mobile network system. And that was the first website that I created at university. It was a website called knockylogos.co.uk. And it was basically a very, very simple website where you could come on and you could choose to replace the logo on your phone from saying BT Cellnet to maybe having a night tick or Adidas logo. And I'd built a way in which people could ring up and pay for that. So I'd go out to university during the day and then come back in the evening to a load of orders that people had rung up and left and paid for through the phone.

11:38The Naked Founder:and then I'd send the logos out and I'd carried on working on that software while I was at university and automated the whole process. So I was then going to university in the day, making money while I was there and then not having to do anything in the evening. So we reached a point in time where I had to make a decision. Do I focus on the third year of university and coming out with a law degree or actually doubling down on the time I spent on the business and going on a slightly different journey?

12:06Adam Ward:What did your parents say when you told them that you were knocking your law degree on the head?

12:10The Naked Founder:I think they were pretty shocked, to be honest. Obviously, neither of them were technical, so they couldn't really understand exactly what I was doing. I think they were happy that I was happy doing something that I liked to do. They could see, obviously, the benefits and the output of all of the time and effort. I remember a new car arriving and my dad asking me how I'd paid for that. So I think they knew deep down that I'd made the right decision. and obviously today is a bit of a different story.

12:37Adam Ward:Yeah, and we're going to talk about airtime rewards in a second. I think you sold your first business, WhatFly Technologies, to two ergo. Would it be fair to say that first business bit of a lifestyle business?

12:47The Naked Founder:It absolutely was. Nobody had taught me really how to run a business. I hadn't studied business at university. I dropped out of university to focus on building this business from what I'd set up from the university days and it was 22 when I left university to focus on it. And I was still young. I'd moved the business to Manchester, took our co-founder on, but we just made it work. We were in a very, very early market. We were building a really, really good team. We probably lacked a little bit of discipline. Everything you'd expect to be able to do now, everything that we do now in terms of governance, but we just made it work and we were always winning business.

13:26The Naked Founder:We're always making money. We never really had any management accounts, but it just worked. It was fun, though, wasn't it? It was absolutely fun, but it was in the era where you didn't go and raise money first. You got a business off the ground and you did it to generate profit and survive. That was the only real way of growing.

13:47Adam Ward:That's like I hear a lot of founder stories now. And they found a business and then within three months they go out to try and raise. They've not necessarily got a minimum viable product, not got tractions, a word you hear a lot, not got any traction. so in 2014 you founded a business that is now airtime rewards at the time it's called carrot with a k how does it work what problem were you trying to fix when you started what was then

14:09The Naked Founder:carrot now airtime rewards so we'd worked in in mobile for a long time and and and having having moved the business on from selling ringtones and logos the whole new world of mobile apps came about in 2007 and um we'd been acquired by two ergo um and we'd spent an awful lot of time working with retailers and mobile networks on loyalty and rewards. The business 2ergo was known for its product that Orange Wednesdays was one of the biggest loyalty programs that 2ergo had built and run. I spent a lot of time working on that and understanding some of the challenges around mobile network loyalty, but more importantly, retail loyalty.

14:49The Naked Founder:And we built an awful lot of retail products and advised a lot of retailers on their strategy to acquire customers and retain customers. And 2014 mobile apps were one of the main things people were spending money on and engaging with. So we left to Ergo to focus purely on resolving two major pain points in retail loyalty and rewards. And the first problem we wanted to solve was the lack of technology. Historically, a loyalty program for a retailer was built around carrying a plastic card that you swiped at the till. and you collected some points. And that typically was it. There was not a lot of emotion in it and consumers had been programmed to do this action at the till and not really get much value as a retailer that was winning.

15:41The Naked Founder:So we wanted to solve that challenge with airtime rewards. But then more importantly, what drove consumers to spend with retailers? And again, this concept of earning points and not really being able to do anything with those points caused the real problem and we wanted to change that and airtime rewards was was set up on the foundation that we wanted to be a technology business at heart but ultimately become the champion of the consumer in terms of what motivated them and incentivize them to spend with retailers and i think we've done a really really good job at that yeah i think you've done a really good

16:15Adam Ward:job as well and i mean airtime awards today works for more than 200 retailers you've got millions of users won countless awards as well just give us a few metrics to talk about the scale of airtime

16:25The Naked Founder:awards today so we celebrated our 10th birthday last year which i think i think is a huge milestone for anybody um taking a concept on a on a blank piece of paper to was it last year i thought you found the business 2014 um 2014 was when we left to ergo and we probably started the foundations for um what airtime was going to be um we didn't launch until 2016 right okay so you're 10 years old and just give a sense of the scale um we're a team of about 85 people now um i run the business with josh my co-founder who i met at two ergo um we have offices in manchester um in the city center we have our sales and marketing team in london just outside covent garden um like you said

17:09Adam Ward:why do you have your i know josh your co-founder is based in london you you live up in the northwest as well. Why have you got the office in Manchester and the sales function in London?

17:23The Naked Founder:Early on in our journey, we won a place on an accelerator programme called Wira. It's probably not widely known in Manchester, but it's run by Telefonica, who won 102 in the UK. We won that as part of a prize we won for Northern Stars, which was a Manchester awards initiative which is a massive part of our early sort of journey winning that but they gave us office space in Piccadilly in London and they sort of consumed us into Telefonica Digital as part of the accelerator program so Josh was already working and living in London when we found the business so it was a natural step to keep Josh in London and go to Wira for nine months and live within Telefonica's ecosystem and it's never really changed since then we built our business off us having two locations and josh being in london

18:15Adam Ward:um just talk about josh the co-founder because choosing the right co-founder can make a business choose a wrong co-founder it can break a business as well so just explain that dynamic between you