Earth Notes: Why Do Start-ups? (2025)

[00:00]

Okay, we're going to do this audience interaction bit, which I know it's Sunday morning and it should be illegal, [] I'm assuming, but I might be wrong, so I'm asking, that all of you here are here because you're actually interested in entrepreneurship, in your own startups, whatever.

[00:18]

Everyone stick up your hand who ISN'T interested in doing a startup.

[00:24]

[no one put up their hand] Okay.

[00:25]

Well, no, that's good, because I could be talking to the wrong audience here.

[00:29]

So look, I've only got two slides and because I've been started early, you've got about 600 hours of me, but look, here are four good reasons to do a startup. [First slide (1) Get rich? (2) Make the world better? (3) Do interesting things? (4) Retire early (FIRE)?]

[00:42]

You know, there's a chap called Zuckerberg who I think scored on number one, right?

[00:48]

Second one, making the world better.

[00:50]

Well, I probably wasn't Zuckerberg.

[00:52]

Interesting things. And I just put another one down.

[01:00]

I don't know if you've heard about FIRE: Financial Independence Retire Early.

[01:03]

It's very American.  I've done it, so it kinda works.

[01:08]

So if I was going to pick ... who if you got pick one of those who would sit their hand up for the first one and I'm not making value judgements on this.

[01:16]

So this is the get rich one.

[01:18]

All right. Super. The second one is make the world better.

[01:23]

You're all bastards. [laughter]

[01:26]

You're only allowed to do one.

[01:28]

Okay.

[01:29]

Was anyone voting twice there?

[01:31]

[Can you start again?]

[01:32]

Well, we'll go from the bottom.

[01:33]

What about the retire early thing?

[01:36]

Right.

[01:37]

So you can only do one.

[01:38]

Right.

[01:39]

What about the do interesting things?

[01:40]

Okay.

[01:41]

And what about the - and you can only do one - make the world better.

[01:45]

Yeah, I think you're all still ethically changed. [laughter]

[01:48]

What about the get rich one?

[01:50]

Okay.

[01:51]

All right.

[01:52]

Well, that's interesting.

[01:53]

So for me, I'm going to talk about three things that I did.

[01:57]

And the middle one of them was definitely trying to get rich, which ... as with a lot of covid-impacted things didn't quite happen in the end.

[02:07]

I had a lovely call.

[02:08]

Let me tell you, I had a call from the company lawyer,

[02:10]

he said, "Damon, if we had to [] transfer you a million pounds to your bank account, would it fit?"

[02:16]

And I said, okay, yeah, probably.

[02:18]

And then I had a call a month later...

[02:20]

"If we have to transfer you two million pounds to your bank account,

[02:22]

would it work?"

[02:23]

So I actually had to call the bank at this point

[02:25]

and they said, only if there's nothing else in it, a Nationwide current account can only have exactly two million pounds in it.

[02:30]

And then I had a call the next month...

[02:32]

Now you can see where this is going.

[02:33]

And they said, "Damon, if we had to pay you three million pounds...?" [and I said] "I'd have to open another current account if you do that."

[02:39]

And then they fluffed it all and the company collapsed!  So that was a bit of a shame...

[02:41]

Anyway ... so getting rich is a perfectly legitimate thing.

[02:46]

And there are lots of people who do that. Making the world better...

[02:50]

So two of mine were about making the world better.

[02:53]

Now, one of them was in the way that I'm now here for sustainability.

[02:56]

The other one was in the very early days before anyone knew what the Internet was or email was,

[03:03]

I was one of the very first Internet providers.

[03:05]

And that was really interesting, which also lines up with number three.

[03:09]

So everything I've done as a startup has made for a very interesting life.

[03:13]

I've only basically worked for anyone else on anyone else's payroll for about a year in total in my whole life.

[03:19]

Right.

[03:20]

All the things I've done have been interesting, less of those have happened when I've been on other people's payroll.

[03:25]

And this retire-early thing is real.

[03:27]

So for me, I didn't set out to do it.

[03:29]

But in my mid fifties, I was able to stop.

[03:32]

I don't have to work again.

[03:33]

I can come and do interesting things like this, right?

[03:35]

Except somehow I'm getting out of bed on a Sunday morning ...

[03:38]

I've got it all wrong. [laughter]

[03:39]

Right.

[03:42]

Which is me?

[03:43]

Yay. [Got the the slide to change]

[03:45]

OK.

[03:46]

So I'm going to talk about three things I did.  Now, clearly, because I'm not knocking around with Zuckerberg et al.

[03:54]

I didn't make it into the top rich category.

[03:56]

Although I'm going to say, while 20 years in finance, I spent a lot of time working with very well paid people, like people

[04:02]

whose basic salary before bonuses was several million pounds a year.

[04:07]

And Spike Milligan is right that having more money doesn't make you happier.

[04:11]

It just buys you a better class of enemy.

[04:13]

So I'm not actually bothered about the fact that I'm not knocking out, knocking around Zuckerberg and so on.

[04:19]

Anyway, here were three of these startups.

[04:24]

So going back to about the mid 90s.

[04:27]

How many of you in this room were born in the mid 90s?

[04:31]

Oh, thank God.

[04:32]

There's not no one.

[04:33]

Right.

[04:34]

The Internet didn't exist.

[04:36]

No one knew about it.

[04:37]

It was a thing called USENET.

[04:39]

You could just about do email.

[04:41]

So I spent a lot.

[04:42]

I broke BT's billing system, collecting email from the US and from Germany and from Spain and shuttling it around.

[04:50]

I was one of the world's biggest nodes for a thing called USENET, which no one probably knows about any more.

[04:55]

And it was really interesting.

[04:57]

And that was making the world better.

[04:59]

And having to explain to people how you could send something for free instantly around the world at no cost, you know, it's like boggled people's minds.

[05:07]

And that company still exists.

[05:10]

So if you were to go and look up ExNet in Wikipedia you'll see it sitting there as one of the earliest ISPs and I'm still registrar number 66 for the .uk domain space.

[05:22]

So although don't generally do it, if you wanted to register UK domain, you could come and ask me nicely and I can do it.

[05:29]

It's still very interesting.

[05:30]

One of the downsides is I still get 10,000 SPAM attempts per day from people trying to SPAM me and my customers, but whatever.

[05:38]

OK, so that's the first one, the Internet Service Provider.

[05:41]

The second one...

[05:44]

So I spent a lot of time working in finance.

[05:49]

One of my customers is a little company called Lehman Brothers, for example.

[05:52]

And I was there up until more or less when they died.

[05:56]

And there's a funny story about that.

[05:57]

But anyway, and so I work in regulated industries and see billions of dollars sloshing around for example.

[06:06]

But myself and a couple of friends had built a business to try and improve privacy online.

[06:14]

So we created a business called U-Centric.

[06:16]

It's meant to be about you.

[06:18]

And we were trying to protect people's information.

[06:21]

So exactly prevent the sort of things which Facebook [] and so on, do scraping up all your data.

[06:28]

So we were going to sit between you and the rest of the Internet and we'd act as a proxy for you so that they couldn't get your information unless a little thing would pop up or whatever in your display saying, "Do you want to let this information go out?"

[06:42]

Now, I don't know if any of you use tools like NoScript or Privacy Badger or UBlock or any of those things...

[06:49]

Similar sort of things to what they're doing.

[06:51]

But then we noticed, oh, there's an interesting app in the market.

[06:55]

We know about money and we can't spend anonymously.

[07:00]

So we created a virtual credit card, which is the first virtual VISA card in Europe, so that you could spend...

[07:11]

So the official story was you want to buy your wife a birthday present and you have a joint credit card.

[07:19]

So obviously you can't buy it on that so what do you do?

[07:22]

So you come to us, Entropay, you put just enough money in an account, a new card that we create for you online, you put just enough money in there and buy it from there, which is fine.

[07:34]

And the first thing that was ever bought on our system was a George, whatever-it-was, grill that I bought.

[07:41]

Actually, quite a lot of money was gambling and porn, but we won't talk about that.

[07:47]

And it causes some difficulty actually because VISA gets very twitchy occasionally, just like now the US goes to a very puritanical phase and puritans go and attack the money suppliers.

[07:59]

Because if you cut off the money for OnlyFans or whatever it is, it makes them hard to do.

[08:06]

And so VISA was getting quite twitchy about the amount of porn and whatever.

[08:12]

It's called Entropay because I don't know if any of you in this room are engineers or mathematicians.

[08:17]

You know about entropy?

[08:19]

So I was generating ... the way our system worked was you get allocated what's called a "BIN" a bank identification number ... the first six digits on your credit card or debit card

[08:28]

identify that BIN and then within it we would allocate create one at random.

[08:34]

The digits were random in here so that no one could guess it.

[08:37]

So no one there's a thing called a BIN attack where a criminal go and try and do it against every sequential thing in a BIN to try and see which ones have got money in and take money out.

[08:48]

So my friend and my CEO got very, very bored of me going on and on and on about having entropy in this thing and called it Entropay.

[08:57]

So it's quite a nice brand name.

[08:59]

And I think [] something like a billion quid was processed by us during the life of that.

[09:08]

Now that company got bought out.

[09:10]

We got very heavily into travel ... money, which is good.

[09:15]

Two bad mistakes.

[09:16]

One is to get into bed with Thomas Cook who went bust owing us a lot of money.

[09:20]

And the other one was to be just getting into our pomp right before 2020.

[09:25]

Because what happened to travel in 2020?

[09:28]

So the reason that three million didn't happen ...

[09:30]

and in the end I got three hundred thousand out of it which was a bit of a shame ... was the whole thing just folded.

[09:37]

We had to sell to another business.

[09:40]

But [] you know no one was harmed in the making of this.

[09:43]

[Everyone] got paid off properly.

[09:45]

All the investors got money.

[09:46]

All the staff got paid off.

[09:47]

It's a perfectly honourable exit for business.

[09:50]

And the last one was about making the world a better place in terms of sustainability.

[09:56]

So in 2012 a chap who I knew I can't even remember where from.

[10:05]

Oh yes because [] previously for ExNet

[10:09]

He had sold me a bunch of software and he bought a bunch of packaged software for me to sell.

[10:13]

And that element of the business didn't go anywhere.

[10:16]

And he called me up and said,

[10:17]

"Damon, we haven't spoken in years.

[10:19]

Have you read this book

[10:20]

by this interesting chap

[10:21]

called David Mackay

[10:23]

who's really interested in saving the planet?"

[10:26]

And it's a fantastic book by the way:

[10:29]

Sustainable Energy Without The Hot Air.

[10:31]

And I said "No that looks interesting!"

[10:33]

I contacted him and we had a chat.

[10:35]

And it turned out that he got to be Chief Scientific Adviser for the Department of Energy and Climate Change.

[10:42]

And by another coincidence the chap who got to be Secretary of State for DECC was my local MP.

[10:48]

So I was thinking quite a lot about stuff to do with sustainability.

[10:52]

[And I thought] "Oh!"

[10:53]

"Radiator valves!"

[10:55]

I'm sure you wake up in the middle of the night yourselves and go "Radiator valves!"

[10:58]

No?

[11:00]

So if you've noticed outside this building is heated with radiators at least in the corridor.

[11:05]

And there's a little device which sits at the end with 1-2-3-4-5 on it.

[11:09]

Lots of people have those at home.

[11:11]

And the nice thing about TRVs is they stop your room overheating.

[11:14]

So you set a sort of maximum temperature for the room on that.

[11:17]

Because it's uncomfortable and wasteful.

[11:20]

And if you're trying to sleep in the room that's too hot it's quite difficult to sleep.

[11:23]

So TRVs were invented in a chap at the company called Danfoss in 1948.

[11:29]

And in 1952 he suddenly thought "Oh, I could sell these for energy saving!"

[11:33]

But it turns out they're actually quite good at that.

[11:35]

They save 20% of energy.

[11:37]

But ... they're also a bit stupid.

[11:40]

So if you go and put your radiator up and then leave the room it goes on heating the room even though you're not there.

[11:46]

Lots of people sort of from my age upwards have empty nests.

[11:51]

We've had kids in the house.

[11:52]

They've moved out.

[11:53]

Their rooms are still there.

[11:54]

Why are we still heating our kids rooms when they haven't been there?

[11:57]

Right?

[11:58]

So we invented a smart one which without needing to be connected to the Internet or anything works out when you're not in the room and drops the temperature a little bit.

[12:07]

And every degree you drop the temperature saves about 10% of the heat that needs to go in.

[12:12]

So it's great for your heating bill and that's great for the planet.

[12:16]

And we started it as an open source thing.

[12:19]

There's a whole interesting ... who here knows about open source and free and open source stick your hands up?

[12:26]

Right.

[12:27]

OK.

[12:28]

And it's a great thing right that we have it.

[12:29]

But how do we finance it?

[12:31]

And I offered a talk to a conference at the start of the month about how do you finance that.

[12:36]

So we started off with an open source thing and subsequently had discussions with the government ... [I] led this thing in October 2012 with all the great and the good sitting there.

[12:51]

What should we do to save energy and so on?

[12:55]

But subsequently a few years in we managed to package it up well enough that the open source stuff is still there.

[13:02]

But we created a layer on top which investors ... which the government gave us money for from places like Innovate UK ... which private investors put money in.

[13:11]

You put money in.

[13:12]

So you had a mixture of government money, angel money, and so on...

[13:16]

I think in total we probably brought in about ... I'm never sure about these things but about five million in total into that last one.

[13:24]

In fact each of these ... the first one run almost no money at all.

[13:28]

The second one we had loads of venture capital money.

[13:32]

In fact the venture capitalists were so incompetent that most of them went bankrupt while we were still solvent.

[13:37]

Right. So we had weird things like the stress sales of stuff from venture capitalists who are meant to be the kings of the world financially.

[13:44]

And lastly, we had about five million in the mixture of things including ...

[13:49]

So from what Ben was saying yesterday none of this is really [] friends and family money but certainly personal money, eg from me ....

[13:57]

Grants from businesses, venture capital,

[14:02]

SEIS and EIS funding, and VCT funding ... we've had between the last two of those all of those I think we've basically had all flavours except that we never quite got into the bigger territory where you would get into really major funding on private equity.

[14:21]

You never got that far which is why I'm here, not with Zuckerberg on the yacht.

[14:27]

Yes. And the overdraft and stuff. Question: who understands who thinks they understand the difference for a startup between debt and equity?

[14:37]

One! Right. You know what you're lecturing on next!

[14:42]

So if you're creating a startup ... and I've done this a number of times, I've taken master classes in how to do a startup ...

[14:49]

And I for the last of these, OpenTRV, I split the shares 50:50 with my friend because I thought I want this to work.

[14:58]

I don't particularly care about money but I want some [].

[15:00]

And the first thing that Bloke and the masterclass said,

[15:02]

who knows about how to start and how to work worldwide,

[15:05]

what makes them success and what makes them fail,

[15:08]

is "Never give your equity away early."

[15:11]

Because the problem is, suppose I had had a billion quid

[15:13]

company and then he went rogue on me,

[15:15]

and it certainly happens to people,

[15:17]

that you have someone with such a large chunk of the equity,

[15:19]

you don't have it to sell to other investors.

[15:22]

So equity is where you sell shares,

[15:24]

and there are lots of models of doing it.

[15:27]

Debt is where you borrow, for example, from a bank,

[15:31]

or from your mom, or whatever.

[15:33]

But it doesn't dilute your equity.

[15:35]

And it's very important to understand, not at this stage

[15:38]

and you're just sketching something out

[15:39]

for the end of this week, right?

[15:41]

But it's very important to understand the differences

[15:44]

between debt and equity.

[15:45]

So grants, in fact, are neither of those.

[15:49]

Either grants are, if you get them right, they're free money.

[15:52]

So you don't have to pay them back,

[15:54]

and they don't dilute your equity.