Richard Lucas: British serial entrepreneur and angel investor in Poland
Podcast transcription - 7th december 2017
Peter Cowley: Welcome Richard. It's really great to see you again. I haven't seen you for a few weeks now. We've actually known each other six or seven years I think?
Richard Lucas: Something like that.
Peter Cowley: Describe why we're in contact with each other. Some of your background.
Richard Lucas: Okay, my name's Richard Lucas. I grew up in Britain, I was born in Oxford, studied in Cambridge. And I moved to Poland... To some extent I had a rather normal, middle class, public school Oxbridge-y upbringing, and as far as anyone can call that normal. I knew I wanted to go into business, although I didn't know what I wanted to do and had a number of little micro ventures when I was at school and as a student.
I moved to Poland in 1991, more for personal reasons. My now ex-wife, who's Polish, and I hated my job with PA Consulting, PA Cambridge Economic Consultants, and was looking for a change. Both to change my job and for personal reasons, I moved to Poland and got a job teaching a business school in Kraków. Kraków's a major city in the south of Poland, the former capital, in 1991, and I was 24. I had about 40 students, average age 40.
I was teaching through an interpreter, which made it quite a challenging thing to do. But after, I think, three or four lessons or classes, one of my students approached me and said they had a friend who wanted to meet me. And to begin with, as a well-intentioned teacher, I wanted to help, but it became very obvious, very quickly, to both of us, that it was way more than a teacher needed to do including things like could I come to meetings? Was this a good proposal of a corporation from an Austrian manufacturer on thermal transfer flat plastic card printers?
And, having had a British, economics, liberal arts, as the Americans say it, upbringing. I didn't know very much about science or technology. And I ended up going into business on the back of an envelope type deal, where I was going to get five percent for being helpful. I put a little bit of money in. I think my brother put a little bit of money in. By a little, I mean under 10,000 pounds. I think it was 2000 or 3000 pounds, which was a lot of money back then.
Peter Cowley: And you stopped teaching them as well?
Richard Lucas: Well, at the business school, Kraków. That means Kraków Industrial Society Business School, was getting ... There was a free market, think tank, a bit, I suppose, the Polish equivalent of the Institute of Economic Affairs or Heritage or something like that. But tiny in a grotty little office. Everyone had grotty little of offices in Poland, that was quite ... To the extent that you had one at all, but they got a grant from the Rockefeller Foundation, which was ... And they didn't have anyone responsible for fundraising.
So, they ran out of money very quickly and I think got paid about... I think it was $17,000. Which was good-
Peter Cowley: In the mid '90s, I think.
Richard Lucas: Yeah. Early 90s. And, I think that might've been a yearly salary prorated, but they ran out of money quite quickly, and ... The business was starting. But the upshot of this was that around ... And in the end, it wasn't obvious to me that this was the thing I was going to do, but I got a scholarship and went to South Korea in '92. And while I was there, I was still helping a bit with the business. It's much harder to do that than the now, because-
Peter Cowley: The internet wasn't really around?
Richard Lucas: No internet, but I'm rarely going to visit potential supplies in Taiwan, for example. And Japan. And I realized when I was there that actually it would make sense to come back to Poland and get fully engaged. That's what I did. One of the other founders pulled out. I bought out his share. Again, without company agreement, not doing it the way that I would recommend to anyone these days. But it's just what I did when I was a young man without anyone giving me advice. Note listeners, it's a great idea to listen to people who do already what you're planning to do.
Peter Cowley: Even if you stayed?
Richard Lucas: Even if you choose to ignore the advice, it's good to know what it is. But I ended up running a barcode systems company called Systemy Logistyczne, which turned into the largest barcode systems integrator in Poland.
Peter Cowley: You had an ownership part and a role in that?
Richard Lucas: Yes, it was 49 percent mine. It still is 49 percent mine, but it got it got adjusted by who was there at the time, and who was doing the work. We divvied up the shares. And during the '90s, I grew that up to the market leader in Poland. I can talk about the business model later if more people ... And we can come onto that. But I ... For various reasons, including not enticing, I didn’t see eye to eye with the co-founders of that business. I was keen to do other things, so I invested in a number of other enterprises with the profits I was making in the barcode systems business. We didn't have external funding, so it was purely bootstraps.
Peter Cowley: This was early 2000s?
Richard Lucas: No, this was during the 1990s.
Peter Cowley: Still 1990s?
Richard Lucas: And this was-
Peter Cowley: You were making a lot of profit even then?
Richard Lucas: It seemed a lot back then, but I think we were in today's terms, it might've been a couple of million dollars revenue with about 40 to 70. Something like $600,000 or $700,000, which is extremely high profitability due to the fact that there's very little competition, and again with hindsight, I would've done many things differently, but still making money. That's one of the ...
Peter Cowley: Well-known profits.
Richard Lucas: Yeah.
Peter Cowley: Sustainability.
Richard Lucas: And there's a big market. And there’s a big market for ... In that area, but there are lots of things about the business model, which the way we would make money have evolved and changed. But reinvested in a number of businesses, maybe of which didn't work out. But some of which are now significantly better businesses and-
Peter Cowley: Translation businesses.
Richard Lucas: For example, and start off with very ambitious and hardworking entrepreneurial salesman from SKK. We start off in other business, which also is doing better than the barcode systems company. But that was my roots. And then having invested around 1999, 2000, 2001 in a number of businesses, which are doing quite well. But I was also raising a family. I got divorced, so I was pretty busy at home.
Peter Cowley: When were you angel investing then, do you think? Or confounding?
Richard Lucas: That's a very good question. I wasn't aware of the phrase, angel investor back then. I wasn't aware of competitive intelligence until I had been doing that for 20 years as well. Was I angel investing? I suppose so. In many cases, I had the concept that I wasn't going to run the business. I was looking for entrepreneurs, and I had a challenge back then, which I still have very often. I've got an idea, which I think is a good business idea. I've got ... Not our own necessarily purely me, but through my network, people are like you Peter, I've got access to capital. And I'm looking for that person to run with the business idea.
Peter Cowley: Less co-founding really, isn't it?
Richard Lucas: Not-
Peter Cowley: Age of investing, you syndicate generally, isn't it?
Richard Lucas: Yes. But let's say, there may not be ... Because the point is it's not co-founding, because I don't want to work in the operating company. What I didn't say in my rather elongated introduction, is that now I'm shareholder in, I suppose, 12 or 13 companies, and seven or eight of them would count as classic angel investor.
Peter Cowley: Less than five percent?
Richard Lucas: Yeah. Where I got less than five percent.
Peter Cowley: Yeah.
Richard Lucas: But then another six or seven, and I'm missing ... I'm the largest single non-founder shareholder, so I'm somewhere between co-founder and-
Peter Cowley: And the ones where you got the largest shareholding, are there also other investors in those?
Richard Lucas: No. None of them have had what you would call professional investors. People who do investing. Slightly alarmingly, perhaps I'm the most professional. I'm regarded as a professional investor, and in fact, you and people that either Cambridge angels know ... Or not less, they know more about this. I have learned a lot from doing it together with you. And I think what happened was that the start-up community started to evolve and grow. One thing I left out, I was active in promotion of entrepreneurship for a long time. I helped take junior achievement or young enterprise. There was getting school kids interested in business to Poland.
Peter Cowley: When was that?
Richard Lucas: That was one of the first projects I did in Poland.
Peter Cowley: '05? '04?
Richard Lucas: No. 1991.
Peter Cowley: Wow.
Richard Lucas: It was one of the first things I did funded by the British NOHO Fund for Poland and Hungary. Or Far, I think it was called. They paid to translate some ... I wasn't translating, but try to organize some private projects in public schools. And I did that. And then as is often the case, when you've got a startup, you have no ... Whether it's a Silicon Valley style startup, or just ... you're in business, you're so busy with that, you have to rather give up the community things and then with the family as well. I had that sort of historic link with schools. And if people invited me to go into schools, give talks, I'd still do that because I think in this country, it's not as big of a lack as of a gap as if it's in Poland, but generally speaking, I think school children should benefit enormously from meeting real business people, even if they're not superstars. Even if they're not particularly present here. There are business people that recruit in schools, recruiting the same way that the civil service are.
But then the startup communities started developing, and I was very glad to see that some people were out there promoting entrepreneurship to students, even if the landscape which it was done was less like Silicon Valley. It was a lot better than anything that had been going on before.
Peter Cowley: You're still talking about early 2000s now?
Richard Lucas: No. That would be ... It was a thing called First Tuesday, and there's a lady in London. Maya Ariadne capital.
Peter Cowley: Yes. Through London.
Richard Lucas: In June Mayer. First Tuesday emerged during the first dot com boom. And I dunno whether it's worth getting into the details of that, but I was city leader for First Tuesday.
Peter Cowley: In Cracker?
Richard Lucas: In Cracker. And typically for me, just got in before the bubble burst, I was in Israeli. The AVC fund called it Yazam, which put some money in, and there was a brief period where they were paying expenses for all these people in very unclear shared object ... Or was it unclear divergent shared objectives getting ... It was a rather clumsy way of saying people didn't see eye to eye getting together where in the First Tuesday concept, you're either an investor or entrepreneur or a service provider, and the idea was that you could all network and start a company's milling around.
Peter Cowley: Investors? There were some investors?
Richard Lucas: Oh, yes.
Peter Cowley: They've been part of it?
Richard Lucas: In Poland, there were very few investors, but then the whole thing was a bit ... I wouldn't say misconceived. I wanted there to be a community of people like that, and we did several events, but-
Peter Cowley: And remember, this is only 13 or 14 years after the war came down, and the communist regime started to come underway.
Richard Lucas: Communism ended in 1989 in Poland, and the finance minister. It was called shock therapy, so liberalized prices, liberalized exchange rate, and those are like a big jump to a free market system, but an awful lot of legacies of communism both in terms of somewhat dodgy privatization, which remains to this day, a hot button in Polish politics to the extent that even in the last month or two, the conservative nationalist anticommunist government has removed some pension rights from former secret policeman, because, and generals, because Poland had a very soft transition from ... In terms, it wasn't ... There were no trials. It wasn't like East Germany where all the former communists consigned.
Yes, it was ten, 15 years after the end of communism. Poland had already by that stage, got a reasonably healthy functioning-
Peter Cowley: And the Polish were already tremendous super hard workers, and pretty onto enterprising anyway, haven't they?
Richard Lucas: Yeah.
Peter Cowley: Compared with other countries around Eastern block.
Richard Lucas: Poland had an ... Cambridge, one of the reasons I got the job in the consulting company of consulting about Central Eastern Europe was I had written my dissertation at Cambridge on why black markets were prevalent in communist-y communism, which meant that during the mid to late 1980s, I visited various ... What were then still communist countries to see how things worked in reality. And the black market is a very good way of seeing the way things really work. And as a result of that, and other experiences, I came to the conclusion that this idea that Westerners could go and teach people from the communist world about how to be entrepreneurship was rather misconceived that in many ways, the communist system forced people to be much more entrepreneurial.
Peter Cowley: The government wasn't aware of the catch flare again?
Richard Lucas: It wasn't so much that. It's just that in a society where everything works, that standard country that the UK, if you're a mid-ranking civil servant, or a school teacher, you can possibly go through life without even thinking about the way economics of the café works. You don't need to understand costs and revenue, whereas if you're in a communist system where nothing really works, you can't get the things you want from the people that are meant to supply them to you. And then you have to start thinking about what have I got that other people want? What they got that ... What have they got that I want?
Your hairdressers tend to be quite prosperous because they were information brokers? Someone said my law knows best, and they might say, "Well, I know someone who could get spare parts." Or whatever it was.
Peter Cowley: Wouldn't you always say that more enterprising ... Much more enterprising, I imagine. But also more enterprise than the UK out of need and necessity?
Richard Lucas: Yes. I say that if you look at people who get locked up from prison camps become very good at surviving on very little. And I think that one of the reasons I'm quite optimistic about the prospects for developing counties is that, compared to advanced countries like this one, or even more prosperous countries in Britain is that people used to give finding, bootstrapping the low cost way of doing it. And the Indian telecoms companies are ... There's a new huge development in India right now with an ultra low cost offering coming in. But even before then, Indian telecom mobile phone operators are much much lower cost per user than is common in Europe. And they know, or medical devices that are a wonderful examples. Very successful medical device innovations happening in developing countries because you have to figure out how to do it for $10 rather than-
Peter Cowley: Yeah, rather than $1,000.
Richard Lucas: Right. Rather than $1,000, so yes, I'd say that nothing's exclusively in Poland, but generally a developing world teaches a sort of a scarcity mentality which is very unhealthy thing to have in a business, and by contrast, in the startup community here in London, or in other cities. If you put a couple 100,000 pounds in the pockets of a young man or a woman or a team who haven't ever had that sort of money to spend is quite likely they'll overspend on things like office furniture and other things, which actually make very little difference.
Peter Cowley: I think entrepreneurs are actually learning not to do that more nowadays, but-
Richard Lucas: Yeah. I'm just saying that as a generalization.
Peter Cowley: Let's talk about some of the things you've learned. Not to do, what to do in terms of angel investing since you started, which is several years before me.
Richard Lucas: I'd say that ... And what I'm going to say now isn't particularly shocking, but businesses populated by people, and the people you go into business with have to be this sort of people who would be ready to spend time with if you wanted business with them. A company shouldn't hire people who don't fit the company culture. That doesn't mean that everyone has to be identity clones and everyone likes football, or everyone ...
Peter Cowley: We're all coders.
Richard Lucas: Yeah. I'm in favour of diversity, but diversity has to be around a set of common values, and I wouldn't go for a beer with a swastika wearing, Nigel Ferrer supporting Brexit, because I don't regard that as a person of-
Peter Cowley: That's quit extreme actually.
Richard Lucas: Yeah, no. People have got their different red lines, but in particularly, business test people's ethics a lot. And it is quite a hard question to ask someone straight up who's, would you rather have a bribe, or what do you think about sexual harassment in the workplace? But you need to be having those questions in the background. Are these people with whom you're not going to ashamed to be in business with later is a very, very important question. Or ashamed, or even ... The difference between shame and guilt is ... Shame is when other people know. Guilt is when you feel bad about being in business with them, even if no one knows how bad they are.
Peter Cowley: You've had the example where this has happened? Where you found this?
Richard Lucas: Yeah. I couldn't possibly talk about-
Peter Cowley: Not the specifics, but-
Richard Lucas: No. I've been very ... I can give you just one example of ... I didn't go to business with him, but he had the briefcase. There was $30,000 in cash and a gun. And I really did wonder what happened in my life that I got myself into an office where there-
Peter Cowley: A dodgy pub?
Richard Lucas: It wasn't a dodgy pub. It was in my office, and this was someone who I thought who wanted to lend his money. I think he thought that this would be a good way of making it clear that this would be banking services and more about them. We couldn't get bank credit, so this were as it were, there's a form of secret policeman who as far as I can see was loansharking. But the fact that I didn't realize that this was going to be part of this.
Peter Cowley: That's number one then?
Richard Lucas: Yeah. People. But then I would say ... What else have I learned? Make sure you understand the business model the way you're going to make money, and even if the first step is not yet to be making money because you got to invest, build a product, or you have to build a-
Peter Cowley: Good community, or-
Richard Lucas: You need to build a community. You have to have a clear idea of the business model, and verify that it's realistic, because quite often, people say we will use advertising. We will have a website, we will get lots of traffic, and we'll live with advertising. And if they don't verify that with somebody who knows about-
Peter Cowley: But you know that this means a very successful startups on the West coast and the states that haven't done that?
Richard Lucas: There are always-
Peter Cowley: I'm sure Facebook didn’t know on day five, or even 400. Hope it was going to monetise.
Richard Lucas: That's true. And I know you find his style grating, but I'm a big fan of Gary Vaynerchuk. We could probably put a link into him in the show list. Particular talks who ... He's an American dream immigrant success story, and fanatically hard worker. But the ... And he points out, and the reason I mention this, if you see explosive growth and traction. There are ways in monetizing that we may not know about now. And in the case of if you have a website, and if you're taking on a thousand ... I think it was some stage, Instagram was taking on 1,000 subscribers an hour. And that was ... And it got up to the stage where it was sold for what seemed a ridiculous ... I think it was $3 billion to Facebook?
Peter Cowley: That monetization, yeah.
Richard Lucas: But the ... What's the point? The point is that you need to understand ... You can't assume it's going to be Instagram or Snapchat. That's like assuming you're going to win the jackpot, or you're going to buy a horse and it's going to be a dobby winning horse. That's unrealistic to me to build-
Peter Cowley: And you said you would only invest if you could only understand the business model later.
Richard Lucas: I'm not trying to whether I would necessarily invest, although that's an additional filter. I'd say I want to understand how it's possible that this could be how a business model ... It's unit economics. It's going to cost one to do this, and they'll be able to invoice people for five or ten. Or I think Google AdWords. It basically costs almost nothing to present, and present inadvertent, and they're charging a couple of dollars, so it's 200 or 400 times their marginal cost. And then if they can get there, I can see how they're going to be able to generate bucket loads of money. It's very important for people to realize they often don't, the money that comes from investors isn't important. The bank credit is unimportant. The only money that really matters is the enormous money that comes in from clients.
There's very many different ways of looking at that question. Another is, "What is this business going to do that people will willingly pay for? There's another concept of the paying. You're asking less, and I'm moving onto more general questions-
Peter Cowley: Than man.
Richard Lucas: How you reveal a business idea that I very much like the concept of the painkiller. What is it that people won't typically buy from a new company that they haven't heard of before for something that is not particularly compelling? Why would you switch from your status? Quite of the status quo is nothing. It's nice because-
Peter Cowley: And you haven't paid for all of them?
Richard Lucas: It's nice. There's an app to help me book a restaurant. But when I go on holiday, quite frankly, I like walking the streets, and I'll just stroll with the number of people who ... If you're in a city where it's hard to get a restaurant where you're ... For months and months, [inaudible 00:22:06] been so full of people that at times you can't get a restaurant anytime you want. That becomes the paying point. Somebody can solve that problem, has a fighting chance of making a business. But I ... What is the paying point that the business is solving? Even a café is ... That's not too paying. Actually, you want someone to sit down on a summer's day or a winter's day, and the pain killer of a Starbucks isn't necessarily a raging desire for coffee. It's somewhere you can seat or local street station.
Peter Cowley: This will be a location to register.
Richard Lucas: Yeah, location. You understand what problem it's solving?
Peter Cowley: Yeah.
Richard Lucas: And that's ... In terms of other lessons ... And if you can't answer that question ... And many of my businesses don't meet this checklist that I think being too complex ... If you can't explain it in a simple way what the business does, that's a bit of a challenge. And I always try to simplify things perhaps in one sentence. Why exactly does this business exist? One area that's absolutely luxurious in my mind is the issue of mission and purpose. I find quite convincing the TED talks, when they say the why question's the most compelling question, why does the founder want to form, found this business? What is his mission? What is the purpose? You have to understand, are they engaged enough with their idea?
To me, they got to put in the hours and the ... Because it's extremely hard work to build a business. And anyone who thinks it isn't is delusional and they're unaware of that. Why do they care about their business idea? On the one hand, I do me. Sort of mess I knew. People who are very, very driven by the desire to help solve pollution. But sometimes, they care too much about the problem, not enough about the business.
On the other hand, you sometimes find people who are pretty financially focused, and it's pretty clear that they want to make bucket loads of money. And I know I'm not expecting to get the whole bucket. But if I can get a couple of bonus points as somebody who's making bucket loads of money, we've got a match on character and ethics. I find that quite attractive because as an investor, because I feel they're going to be representing the financial interests well. And if they're too driven by the mission, they might be jumping on yachts, and going to corporate events. Not corporate events. They're going to be more interested in either the lime lights, or I don’t know.
Peter Cowley: Than building the business.
Richard Lucas: Rather than doing really hard work, building the business. But people ... I think management process is under ... not under-prioritized, but I think very often, the ... When I talk about the people as not just character match, but do they ... Are the founders of the business open to feedback, and do they want to learn? You don't want someone who's too inexperienced. But, if sometimes when people are quite experienced, they've got a very dangerous, I don't need any help type of mentality. And I've increasingly over through my life, realizing the really smart people are more than willing to sit down and read an article, go to sign up on a training course, learn something, not reckon just because they know everything about sections or optimization now, doesn't mean they'll know in six months’ time if they don't keep up. But are they open to feedback? Are they open to advice?
That's extremely important. And also, do they represent me in the sense that if I'm not in the room, how are they going to behave? And you also ... No one's going to tell you they're disrespectful to their subordinates. But there's a great Australian musician, comedian called Tim Mentioned, who nearly, he's produced plays that are run on Broadway and in London. He did the Matilda play and the Roald Dahl. But wonderful guy. He said that he was giving advice to graduating students from University of West Australia when he was getting his honorary degree. And he said that he's taken important decisions on his assessment of how the person he's talking to treats the least half of the person in the room. For example, the he treats the reception-
Peter Cowley: The waiter, or?
Richard Lucas: The waiter or the receptionist. Is it ... Are they, whatever people say. That would be another way putting out, look at what people do. Not just what they say. That's-
Peter Cowley: Opening doors for people. Stack of little science about their character.
Richard Lucas: There's ... Or sometimes you be ... You always have to keep your pragmatism in mind that if someone's a genius, I really dislike when people take phone calls or start texting during meetings. And I-
Peter Cowley: I'd rather not do that now. I'm telling you.
Richard Lucas: Put your phone away, please. I find that ... But I come from a ... My sister has often made the comment that if I was visiting with my kids, no screens at table. We try to have that, and that's the kind of family values is disrespectful. But they don't really grow up in that culture. And to judge someone by your culture when you ... Being good at same thing, and being good at seeing things from the other person's perspective, which is part of what Daniel Goleman calls emotional intelligence. The ability to not be ... I think that's incredibly important for any entrepreneur in the sense that an entrepreneur has to be interested in what the value of what they're doing from the client's perspective is obvious, but the inability to put yourself in the other person's shoes is extremely dangerous.
Peter Cowley: Yeah. Let's just talk about the lessons you've learned, and how they're reflecting some of the failures you've had? Because you can't possibly tell me that all the entrepreneur generation should be non-wavering, being an investor, not your own. Being successful. What's led to those failures, do you think?
Richard Lucas: It's a long. I'm absolutely not someone who goes around wanting to give them the impression that I don't get things wrong. Okay, sometimes it's ... the scepter has seemed right, but the business hasn't though. There was a mobile for an infrastructure company, which was putting mass into the buildings, and I thought their edge was, and you had to get planning. It was this complicated bureaucratic process, and I thought, well, this is going to be attractive because it's quite hard to do this? It wasn't hard. It's quite hard. It's quite hard in the sense that it probably still is. You need to have permission from the gap buildings that's kind of ... Putting things on roofs. Planning permission is a different certifications. You have to actually make it work, which is presumably that tricky. You have to understand how to configure it all.
But then another sample was meant to be read part in the sense that it was around 2000, 2001 when there was the looming upgrade to 4G, or UMTS I think it was.
Peter Cowley: Yeah, not 4G at that point, but yeah.
Richard Lucas: No, it was 3G. There was the idea that there was the need for an upgrade in the network. And I just didn't look at the economic ... That was enough. And then rather than thinking about this acting because-
Peter Cowley: You foresee there, could you?
Richard Lucas: Yes, if I-
Peter Cowley: Was there a crystal ball better than the entrepreneur's, I suppose?
Richard Lucas: Yes, and the company was struggling when I got involved. Someone came to me to help bail them out, that I remember. Sometimes the things that I learned are so obvious, I find it stunning that I didn't realize it till later. Meaning, for example, when this business was losing money, and I was asymmetrically landing on it, I was the only shareholder with money. I was lending money to the business to keep the flow.
Peter Cowley: Rather than the bank chose, you were lending.
Richard Lucas: I bought shares to start with, but the ... Where I was somewhat from, who was in the sector of British businessman based in North Shore who was doing much larger scale projects. He had good relationships with the telecom operators. And I went to him and said, "You might be interested in investing." And he looked at his ... He just said, "Why would I be interested in investing when the business is losing money?" I couldn't give an answer, but this sort of a question your grandmother or nephew might ask. Do you think about if it's losing money year after year after year? Or month after month after month? Why is this? And basically, the problem was the margins were very low because there were a few big manufacturers like Nortel networks, Nokia, and Ericson manufacturing these.
Peter Cowley: They must be true. Most angel back to businesses. They lose money for months and months and months. Maybe even learn the reviews. When you take a life sciences business, it might be a decade before they break the bank.
Richard Lucas: That's a different ... This is-
Peter Cowley: This is an established business for you.
Richard Lucas: Yeah, and I recently heard of the three Ts for the reasons people invest or acquire startups, which was team, traction, and technology. But most of the business I was involved in, we were using other people's technology as we didn't have our own technology. And this is ... I often say the four Ps are important in business, which is product, process, people, and-
Peter Cowley: Profit, maybe. No, probably not.
Richard Lucas: Product, people, process, and there is a fourth P, which is isn't promotion. It's so embarrassing, I can't even remember my own acronyms.
Peter Cowley: Yeah, it got deleted from the podcast.
Richard Lucas: It's okay. You can leave it and then it'll come back to me. The point is that we didn't have our own technology, and that means you're potentially going to be squeezed by your vendors if you don't own your own product. You're dependent on things that are out of your control. And the three Ts, which are treasure, team, and technology. Sorry, were technology, team, and traction. I felt that that left eye treasure, or making money. The different business is making money to some extent no matter what anyone else thinks. You can always say, "Up yours." Just carry on making money. You're relieved from all kinds of constraints.
Peter Cowley: Can we come to another failure? Think of another failure?
Richard Lucas: Yes, certainly. I invested in a direct marketing business. And the insight there was that we were using in the mid '90s, telephone sales in a way that seemed to be much better than ... Our marketing processes seemed to be better than other people's. To some extent I’ve still got their service. I nearly invested in a marketing automation business, and I still might, although there are various why I might not do that now. And because we're using marking automation that I ... by which I mean using technology to generate sales leads automatically without human work. This can be everything from YouTube videos to white papers to webinars to slide shows. It's much more than just Google AdWords and Facebook ads and LinkedIn ads. And we were using term marketing back in the 1990s.
I go, "This is way better than what is normal practice in Poland. Therefore, it's a good idea to invest in this, because other companies would have loved to pay for what we're buying ourselves." And it just didn't work. And the reason was that ... And I often say to people, I've written a blog post which I can put a link in the show notes about, "Does it really matter what you think about your business here." Does it matter what the investors ... Please don't show me your product. Just show me evidence and the potential used if your clients are interested. If I had only said to myself, "Let's see whether other people want to buy this before I started putting money in. Then I would've-
Peter Cowley: Yeah, we went walking up, kind of going up the pyramids together with Robert Brady, if you remember him.
Richard Lucas: Yes.
Peter Cowley: Exactly that. He went investing the business. Less this being a leveled product market fix. Somebody somewhere paid there with some cash or something.
Richard Lucas: I think that quite often, that's ... For example, life science is that's even possible because you can't ... You can’t… Demonstrate the efficacy of a treatment before it's approved. But I would say that if ... And there's a famous case of the guy who invented the bank machine went to the ... I think it was the operation started in Barker's Bank and explain what a cash machine would look like of the guy who said in slightly ... Am I allowed to swear on this part?
Peter Cowley: No, you're not. It would say, "Bleep bleep bleep bleep."
Richard Lucas: If you can build this machine, I would buy as many of these bleeping things as you can make. The story goes, I hide from one source, the entrepreneur said, "Well, if could put that in writing on Barker's note paper, that might really help me raise the funds to do it." Simply getting the fact that he was in front of the potential customer is a huge plus. I turned down a proposal yesterday where I asked for evidence. And the guy said, "I am convinced that this is a great idea." And I didn't write out, or already given him some feedback, which I had always done that I nearly read him and said, "I told you, it's not about whether you think it's a great idea."
Peter Cowley: Come around, I'll show you the best mate.
Richard Lucas: And if you say it's going to be easy to find hundreds of thousands of people, then sure it is. Very, very easy to find it. And I really want their names and phone numbers in that process of going out to people and saying-
Peter Cowley: Simple due processes.
Richard Lucas: Simple ... And you can do that before the product exists.
Peter Cowley: Yes. Okay. From all your experience, what advice would you give to angels? We talked about things you've learned. Say you were starting out ... Roll back 20 years.
Richard Lucas: I was saying just a few minutes ago before we started the podcast, there's a book I read extremely recently called How to Turn $100,000 Into One Hundred Million by another famous celebrated American intern vesicle of Jason Calacanis. We'll put a link in the show notes. He suggests what I think is good advice, is to get involved in syndicated investment to start with which could be something we're well-involved in like Syndicate Room, or there are a number of other platform Seedrs or whatever could be crikey where you get the process of investing in ... You don't need as much money to do that because you can really put it up into quite small chunks. But he gives a lot of detailed advice there. He makes the point which hadn't occurred to me that if you're ... Once the entrepreneur leading a funded company, you don't really remember which of the angels put in more or less money.
You remember how helpful they are, so you should aim to be the best angel of the lot in terms of how helpful you are with giving access to your network. Giving help with recruitment. Whatever the problems are because whether it's 10,000 or 50,000, the people who helped the entrepreneur will build up reputation of being a good angel. The other thing that he says is to try to develop your network among the angels. You have to see who the other investors are. Know what you can invest. Get the word out that you are interested in current investing. Just be friendly and helpful. Obviously, there's a good pro quo that you'll share the deals, because I think there's a point you made about the platforms that were really good deals. They're necessary to get onto the platforms, because if something's really good, you'll share it with your close network and not put it up on-
Peter Cowley: In front or back of-
Richard Lucas: No. Put it out on the network. I'd say that don't invest too much capital in a few things, to start with. And I certainly would imagine that get advice from multiple sources via ... If someone listening to us could be in any city, or not just in the UK or any city in the world. There may be a local chamber or commerce, or club in your city. Say you're thinking of joining, when you're thinking of joining things, usually there's a membership fee and then they'll explain, "Well, either you have to know someone." Or like the Cambridge angels, you have to have an introduction, or whatever the rules are. Business people who are successful tend to be quite open to meeting new people. I wouldn't have met you if you hadn't been open to meeting me, because I-
Peter Cowley: Couldn't be part of Cambridge.
Richard Lucas: Yeah, it was after an event. But generally, the successful business people are surprisingly accessible because they make themselves accessible. Just start getting the word out that this is something you want to do, and be very very willing as all entrepreneurs should be to get critical feedback. And if you'll say, you're completely crazy because rather than getting offended, say "Thank you so much." If they're trying to be mean, that will annoy them, which is quite satisfying because you can't do this because ... Thanks so much, why not? You don't know anyone as well. I know you. But you get used to that sort of ... One thing I've said is, get to know the other investors.
But if you want to get ahead of the pack, you have to get out where the entrepreneurs are, because ... And that's ... They wouldn't necessarily come to you. It's a bit like dating. If you just sit there, hoping that your stunningly good ... In Peter's case, it's going to be very easy, but you're raggedly good looks are pretty secure.
Peter Cowley: Pretty secure.
Richard Lucas: A cue of potential partners.
Peter Cowley: Investors, maybe.
Richard Lucas: No, but you don't just sit there. You have to think about how you can source better deals. And my approach to that is to be helpful. Whether you're writing blog code posts, or putting out a pod cast, or giving talks in schools, or going to open coffee type events or networking events, and just ... When you meet people who are entrepreneurs, listen and see whether you can help them. Then you're building up your ... And I think it's called social capital these days, but you're building your network because you can get the word. And I've said this very quite often if you have an idea one day. I was taunted by Ukrainian business development person trying to sell software services. There's a very typical thing that someone might profile. LinkedIn invitations all the time for people in developing countries. If you got any IT, as sourcing needs, we'd be happy to talk, and I just read back to him, "Got none of these, but I invested in businesses. I'm very interested. Ukraine's a very attractive place to invest for a number of reasons."
I'd say if you come up, if you have a business idea, please get in touch with me. I could've just said, no. But just that extra sentence for all I know, he or she might have a network of people. "Oh, I've met this strange." You have to get the word out that you're looking. Be helpful. Be respectful. Get the crossing impression you're useful, because that could be your edge. This is Matt Clifford of entrepreneur first, has a very, very strong bias towards people with an edge. If you're an ex-water engineer, I was just reading in the financial times about the catastrophic state of the British water ... It's the water pipes. They're bursting with ... They're being renovated at a much slower pace than they're wearing out. This is obvious, long term, problem. And every problem is an opportunity. And I actually screen shot the thing on my phone on my way here from King.
If I can meet a water engineer, let's start a business. That is an opportunity, because clearly, someone somewhere is going to have to figure out better ways of fixing them, whether it's sort of automated guided vehicles that go through underground putting a line of plastic inside. For example, I expect that this exists already. Someone who knew how to do that could be a great person to go into business with, so you get when I'm looking for people. And what was in that Blinkton or suddenly diseased mutual friend or acquaintance who did a survey of the energy sector, and he got some professor from Oxford Unversity to review the key energy technologist who was looking for opportunities. I think developer approach, developer weighing, this sort of praying spray type approach that I wouldn't say I've got, but I put the word out in all sorts of environmentalists, and it kind of works for me. But-
Peter Cowley: But it's a level of profiling you would have to have up in there. Or whatever. Or have a good day out in the beginning. They aren't necessarily going to succeed, really.
Richard Lucas: No.
Peter Cowley: One has to build a profile.
Richard Lucas: But you have to start, and I think making a ... If you can tag along with some other people, because ... Also, it depends on the level that quite of line investing, extremely early before ... Almost before the professionals see investors get involved. You meet someone who's got an idea-
Peter Cowley: We're going to talk about advantage pair in a moment.
Richard Lucas: That would almost be an example-
Peter Cowley: Yes.
Richard Lucas: There, and the conversation there is someone has an idea that you think is impressive. You're seeing how much money would you need to get to this stage where you can verify that this is serious, and it might be someone that says, "Well, I've got this great idea to import Chinese server panels to Britain, because I've heard the price has crashed." Which is actually true. My dad's a building contractor, while my uncle, or whatever, is a building contractor, and he's agreed that he'll let me go around, or his existing clients and in-store server panels if they're interested, and he just wants to have a share of the business if it works. But now I need to go to Taiwan or wherever, and actually I need to find someone who's ready to supply me. Something like, if I were 10,000 pounds to get to the stage where they're ready to go, I might say-
Peter Cowley: You're going to make a cupid lunge in doing that. That's very interesting. You're more into pricing than I am. You're wanting to find the problem, finding a co-founder, and then funding them out there. I'd like to invest in businesses where there's syndicates.
Richard Lucas: Yeah, I know. I'd say that quite often, I'm at the stage of trying to get the person to the stage where they can talk to the angels-
Peter Cowley: And then build a bigger round, yes okay.
Richard Lucas: But also, I'm not doing just one thing. Some of the best options that I've got is probably putting more money into existing things rather than-
Peter Cowley: Your own.
Richard Lucas: Rather, the existing has already invested in, so I'd say my story and my position isn't ... Or where I have been in the angel investor in the classic sense. That's not ... I haven't really given up my entrepreneurial thing in a sense. I'd say, "What's the best way I can add value to this 5,000 pounds?" If I can get someone who ... I'm not going to say that to everyone. If I think, "That is a highly driven young man or woman who clearly has got the potential to-"
Peter Cowley: Cambridge mask in the example.
Richard Lucas: Yeah. Who's got the potential to do something is almost by doing that, I'm getting a share in then. Because it is about people that I ... You should feel, well ... And that would ... Again, the story I gave with the server panels, if it was just, I can make money selling panels, I probably wouldn't listen to Peter. I'm probably his age as he's got a base of customers with a very good chance of getting in there. That start to be interesting. And obviously, what I would the do of course, is say, my value, I would just say, "What good is it if I don't sell them?" Just use the hardware as a service. We're going to charge people by the month. We just say, "You don't have to pay 5,000 pounds. You're just meant to pay probably more than 50." I'd say 100 pounds a month. That's 1,200 pounds a year, six year contract. It turns out people have paid double. And everything's ... I love software and services at one full business model for the software companies. And hardware's a service.
You get these extraordinary conversations. You say, "We'll give you free training. Free service. Free guarantee. Free maintenance, provided you pay 2,000 pounds a month."
Peter Cowley: Let's just talk briefly about launch's pack because you introduced them to me.
Richard Lucas: Yes I did.
Peter Cowley: Huge fan. Alex Schey has been on one of our other podcasts. Great interviewee. Has lots of great stuff there as an entrepreneur. I think you've found them on ... Was it BBC? Was it ... That's when you first contacted them.
Richard Lucas: That's right. And what happened was I was skiing in Slovakia, which is the South of Poland with my kids, and I burn my wrist, and was sitting in the hotel. And listening to Peter Day's World of Business. And Alex Boucher was one of the people who being interviewed by Peter Day. And I thought sounds really interesting idea. And I was thinking, "How could I engineer introduction with him?" And I Googled around a bit. And then I'd invest money which I'd lost in ... And have now lost in a game. It's like football manager for motor sports. He was gracing life, and the idea was that you could manage your own racing team. And these very talented developers in crack of pretty good product, but they never got ... It was to the gamblers too.
Peter Cowley: Fantasy Football, sort of.
Richard Lucas: Yes, that's exactly. It's Fantasy Football. Instead, it's Fantasy Racing manager. And actually, it was acquired, although for less, what I had put in. It was quite another ... a site here. And then people will tell you they've done an exit. That doesn't necessarily mean it's successful X. There's an awful lot of ... And I think you're a big fan of transparency in the angel investing world, which would be very welcomed. I know people who often go around, behaving as if they've made a fortune, and I wonder if they really have.
Peter Cowley: Anything at all.
Richard Lucas: But anyway, the racing life was an online method of sports management thing, and another trick to find someone's phone number is, if you put their name in, plus press release quite often, their mobile phone will be in the press release either. It's not on the website.
Peter Cowley: You found Alyssa's number?
Richard Lucas: Yeah, I found her on PDF, which her phone number is on, so I just called him up and said, "Can I speak to her? I'm involved in a motor sports management game, and I was wondering whether you're fans of electric vehicles, and I was wondering whether we could potentially have some kind of partnership where we'd have an electric car or not, portfolio, and then where a startup, we don't have much money, so we're getting money, but at least you might get some audition of publicity. And like I said, I'll have to ... I'll just have to work with my colleagues, and put me on hold for ten seconds, and say, "Yeah, we'd really be interested." And in fact, he was in his bedroom." But which again is a sign of him being smart.
And I was ... My brother, Edward works for the Economist was having a book launch in London a couple of weeks after that. I arranged to see Alex, and we had a quite expensive lunch on this. And Jameson produced all this very sort of impressive well-organized looking business plan, which still needs a lot of work on it, but I was ... And I just agreed to put money in. And part of it was ... Let's say part. Let's say 89 percent of it was feeling that had proved his motivation and technical competence by building electric racing colour to come down to the Pan American Highway.
Peter Cowley: Racing Green is-
Richard Lucas: Racing Green in Europe.
Peter Cowley: You can find the shadows.
Richard Lucas: Yeah, Europe certainly is very impressive story, and that's all if you can do that, then he can do this, which probably I would do a bit more diligence now, but at that stage, I ...
Peter Cowley: You were family and friends almost at that point, because if before the first round that I then led with Matt Willington-
Richard Lucas: Yes, exactly. That was how I started. And in a sense, but that's ... I'd say this is ... But I would say that for angels in general, if you wanna source deals, if you're sourcing deals, you should probably get a better deal for being the one who sourced it. In principle.
Peter Cowley: Yeah. Which you did, because you had more shares of a cheaper price.
Richard Lucas: Exactly. And you're more likely to lose everything, because if you're the only one, then-
Peter Cowley: The cash will run out.
Richard Lucas: The cash will run out very soon, but I would say that in principle, if you're out there, also being a talent spotter, then you potentially can get yourself in a better position. And you're adding value as well, because if you're good at identifying ... This clear is a clear economic value to doing it.
Peter Cowley: Yeah. It's been absolutely wonderful. This is the first time I've interviewed you. Both times before, you interviewed me. We've learned a lot from it. Thank you very much indeed.
Richard Lucas: Well thank you. A pleasure to be on the show.