For the greater good of society
Podcast transcription - 20th November
Alan Cowley: Hi, I'm your host, Alan Cowley. On today's Invested Investor podcast, I have Simon Bond, who is the innovation director for SETsquared. Simon is an experienced director of business incubation, university enterprise and research commercialization, specialising in business development strategies for innovation-intensive companies.
Amongst his flurry of expertise is his current role for SETsquared, which is the award winning enterprise partnership of the universities of Bath, Bristol, Exeter, Southampton and Surrey. And we will hear a lot more about SETsquared in this podcast, but Simon, let's start with the question, were you always destined for the start-up world? What's your background?
Simon Bond: Oh, well thanks, Alan. Yes, I believe I was. I was always destined for business. My family has always run their own businesses, and so coming out into the workplace in the 1980s, I didn't know it then, but I identified the growth market opportunity, which is of course telecommunications and technology. And many of us who were in tech in the 80s and then going into the 1990s were working in very innovative businesses, many of them multinational, but not all of them.
We didn't realise that it was a start-up scene and venture capital was very, very young at that time. But I was blooded in that world, and I was delighted after working for some very big start-ups and running some start-ups of my own, to get a chance to work for the universities and work for SETsquared, which was leading the way, really since 2002 in developing a very exciting niche that's still a very exciting, huge potential niche of start-up s related to UK universities.
Alan Cowley: Okay. Before we go onto SETsquared, let's have a dive into your own start-up ventures. What businesses have you set up in the past then?
Simon Bond: Well, I had a couple of publishing businesses. The one I love remembering was an antique toys, dolls and Teddy bears magazine that I launched with my dad, in the twilight years of my student days, which was a moderate success. It was successful probably with my father more than a business venture, but that was a very firm grounding. But the one I found very interesting, particularly with what I did later was a start-up business called City Television, and this was pre-digital television, if you could just imagine such a time.
And the government was selling licences for analogue TV stations that could be launched city by city, and the play was to write a business plan, bid for these licences, aggregate them together and build a network of city television stations, analogue TV stations. And I founded that business. It was the idea of a friend of mine and I's, and we raised business angel investment. I remember receiving the fax with the confirmation of 100,000 pounds coming into the business. By the time that really got us going and we managed to get it operating.
So I as the proud owner of Taunton TV for a year or so and the highlight of which was the breakfast show where we had somebody putting ferrets down their trousers by way of entertainment. There was a great demand, local media at the time and we were able to sell the business onto a larger concern that was looking to aggregate these local licences across the UK. And we did pretty well out of the whole deal.
And I think that the risk of founding, the thrill of early investment, the business of managing partners, building up to a critical mass where the enterprise has some value beyond your own belief in it, and then making a sale at what we thought was the right time, that was a great experience for me and I don't think those lessons... There were some great times and there were some awful times during that, none of those lessons ever left me.
Alan Cowley: Sorry. What year was this in, then? That you were raising a hundred grand?
Simon Bond: Oh, it would have been 1999, 2000. That kind of period.
Alan Cowley: That's brilliant. And then you manage to sell [crosstalk 00:04:59].
Simon Bond: 100,000 pounds was a lot of money.
Alan Cowley: Yeah. Exactly. It was, it was. No, that's impressive. So let's just talk about the exit there, because we can talk about exits, how you look at it from a SETsquared point of view, but what about your own exit and how was that process for you and how do you think you learned from it?
Simon Bond: As history says, I had to carry on working afterwards. So it wasn't a completely life changing event, although I did really fine out of the exit, so I've got to say that. But people pay for MBAs and I was being paid to get an extreme entrepreneurial business administration experience. So I love talking about this. So I had two business partners. One guy I'm going to call M, the other one called D.
I founded the business with D, and M was the business angel investor. He was an older guy than me, Turkish actually, and he'd had family businesses in Turkey, experienced in everything from running carpet manufacturing businesses to intellectual property around the developing of date palms, so genetic engineering for date palms in Africa, so really experienced guy.
So D left the business, we were running low on cash at one point. M offered some additional loans to the company to keep us afloat, which we accepted. There was some dilution there that prompted D to leave the company. So ended up with M and I building the business, and let's say that was very tough. The low point there was having to do some pretty hardcore creditor renegotiations, but at a high point as the business of local analogue television stations started to pop up in the market, it was being talked about at the Edinburgh TV festival, discussed in the trade magazines and so forth.
We started to get interest from several bigger fish, really, larger organisations, often more mature media organisation, some in local papers as well as in TV, who were interested in understand how we're doing, but clearly with the intent of looking to acquire us along with several other businesses in order to aggregate the sector. Now Murat... Sorry. M was very astute in eking out our cash, because I think he'd spotted that there was a good negotiation to be had here, but we couldn't predict how long that would take. It took about the best part of a year and that time we had to run a television station with lots of bright young people, spending money on producing content and all of these sorts of things. But it was taking up money, we were burning cash.
But it came down to a couple of potential buyers who we engaged in discussions with. And long story short, one offered us a glistering opportunity of folding our business into a much bigger play, a national network of city television stations that then tended to float on the stock exchange, and I had previous experience in this. It looked really pretty fantastic. And the offer was still pretty good, but it was a privately owned business and they were offering us cash for shares and the terms of the deal as we got close to it, really their absolute concern was that we were out of the business without any recall to the business or involvement all.
And Murat guided me with this. I mean, I must say I did look at this and oh, wouldn't it be great to work for a national TV network and have a small piece of such a big pie? But he did counsel me and we settled for the cash. And I don't know what history would have been if the world was a different place, but the big play came to nothing. The company that bought our business for cash, which I did really well out of, was closed within a couple of years. It was eclipsed by the digital revolution.
And I always look back on on those days with Murat, the tough times where he helped me to renegotiate with creditors and the good times where he helped me to exit, selling my shares for cash because that was the right thing to do. And those immortal words that cash is king gives you choices are what I learned hard in that situation.
Alan Cowley: Taunton TV. So I'm presuming one of the factors which you got involved in the University of Bath and SETsquared was location. But what else attracted you to it?
Simon Bond: Yep. So I was attracted by the job because I happened to be living in Bath after selling City Television, and I was interested, those times were quite extraordinary. All times are extraordinary, but those were extraordinary times. So I started in September, 2003. If I go back the preceding years while we were building City Television, I was involved in the international telecoms business. And I remember going to the Geneva Telecoms show in 1999. I was working with some American lawyers who were involved in European telecoms deregulation. And it was a lavish affair, I think we went to see BB King play for entertainment, exhibition stands were routinely costing $5 million a pop. Extraordinary.
Within a dozen months or so, certainly 18 months, that business had absolutely been displaced. You could see the seeds of the future, the over-supply of capacity to networks caused the telecoms crash there. New incumbents were beginning to emerge. I mean, this was still pre iPhone at that time, but I did do a little bit of work for a small Chinese telecommunications manufacturer, which is over in those badlands of Shenzhen called Huawei at the time. And you could see new models for leapfrog technology being deployed globally to provide what people demanded, which was bandwidth, access to WiFi.
And in this environment, I could see lots of telecoms start-ups beginning to spring up all around. Just before I was involved with government and all of those sorts of things, so my happy hunting ground between London, up the M4 corridor, through Reading and the Vodafone campus, into Swindon with the microelectronics semiconductors there, and Bristol, which has always been a great heartland for electronics.
I just knew a lot of people who were working within corporates looking to get out to start businesses, recently out of corporates looking to sell new technology to corporates. And so this thing that I'd been through with City Television really seemed to becoming the experience of a lot of people and they were doing it better, bigger and in more exciting markets than I've had the opportunities to play in, and I wanted to be part of that.
Another thing that I must say is it was very exciting starting my own business. It's all consuming. I lived, breathed and slept City Television for a couple of years. Started work for SETsquared, running an incubator where I was sleeping a little bit better. I was working every day with 30 to 40 start-up businesses at the best time when the founders are most receptive to help, assistance, good counsel and filled with ambition. That was a real revelation to me and I found it very energising. I must say, what's energised me over the last part of 20 years is not only just working with myself on my idea but working with tens, hundreds of others, enabling their ideas.
Alan Cowley: Okay. So that's a great role of into what SETsquared actually does and how many people and companies have SETsquared helped.
Simon Bond: Yes. I mean, we've got some impressive stats, and the secret between you and I, Alan and all your listeners is our trick is to be standing for a long time. We'll be 18 years old next year, and so have worked with over 4,000 high-tech start-ups since we started, but of course we've been going nearly 18 years. A more tangible number, a stat is the team, which is about 30 people, distributed over five universities, Bath, Bristol, Exeter, Surrey and Southampton, we work with 500 member companies of SETsquared
At any time, that's between start-up and scale up businesses, early stage tech businesses. And we provide the founders of those businesses. We work for the entrepreneur rather than anyone else. The entrepreneur, we provide them with counsel, coaching, mentoring, to develop business plans for their tech businesses, their deep tech businesses to help them be presentable and succeed in securing investment to take their businesses to the next stage. That's our niche.
Alan Cowley: Okay. Okay. So sorry, one quick question. Why deep tech?
Simon Bond: It's a really, good question and it's our, I guess, defining characteristic. So excuse me, in this environment, if I go a little bit university on you, but tech square is staffed by people like me. All of my team all have had businesses, run businesses, either built, sold, crashed businesses, so very entrepreneurial, but we are working for universities, research intensive universities. And we have wholly committed ourselves to their goals. And the goals of these universities is that their knowledge, which is embedded in their people, their professors, and their students, and their research, which perhaps represented by the intellectual property, knowhow, and so forth, should be valued and valuable to the society that funds them. Universities benefit from public funding. So it's only right that the fruits of that investment are deployed for the greater good of the society that put them there.
And we think that in the technology era there are great opportunities to achieve that impact through business, particularly start-up businesses that can take this research or it's people and turn it into start-ups that we hope scale up and we hope turn into big businesses that create high value jobs, growth in the economy, tax revenue that keeps the whole show on the road. So this is the Setsquared model from a university point of view, why they invest in Setsquare is that we are a route that allows their know how, their knowledge, their intellectual property to find a valuable place in the society that supports them.
Alan Cowley: Okay. So, what's the benefit of the start-up coming out of a university? Obviously there's a help that you give in terms of the counsel, the coaching, the mentoring, but if you're an entrepreneur at university at the moment, or you've got an idea, or you're doing some research, what is the actual benefit of coming out of the university?
Simon Bond: Yeah. Well, it's a very good point and there are clear benefits, but I must say Setsquared, we will provide our service, we'll offer our support to entrepreneurs, whether they come out of the universities as students, or graduates, or from the universities as researchers, professors. But equally we provide it on exactly the same terms to private entrepreneurs who are developing technology businesses in our space and that that mixed economy between, let's call it the private and the public sector, is a very important characteristic of Setsquared.
The benefit of coming out of the university or the benefit of being an entrepreneur in our space is that technology provides the opportunity to create a unique space, a protected space in the market. Peter Field in his books describes this so beautifully in a market economy where all things are equal, frictionless and buyers and sellers can negotiate, everything will just deteriorate down to close to zero, because prices will be beaten down.
And so actually monopolies, monopolies of intellectual property, of distinctive technology, advantage based on breakthrough research are what you need to create valuable companies. And, of course, universities are brimming with such assets, our research, our know how, our intellectual property. The people that work in universities, those that cluster around them are rich sources of this dispensable intellectual property. And so the benefit of coming from a university or working closely with a university and the people that are involved in it is it gives you access to these really distinctive assets. And a good entrepreneur can fashion those to distinctive value that helps them to raise money and more importantly helps them to create good services, products that can make money.
Alan Cowley: Okay. I've got a bit of a debate question here.
Simon Bond: Go on.
Alan Cowley: I don't know how Setsquared get involved in this, but you talked about IP there and I often hear how IP is gobbled up by universities or a start-up might lose large chunks of equity to the university when it's spinning out. What's your verdict on this? Does it happen? Is it bad for the universities to spin out of... Sorry, start-ups that spin out of universities?
Simon Bond: I'm sure it has happened. I'm sure there'd are bad deals as there are good deals. I look at a, if there were such a thing as a classic university spin out, it's got some distinct characteristics. First of all probably the technology of a successful business that has spun out of the university when it was inside the university was perhaps a research paper or some records in a lab log book. Some software that was in its earliest stage, absolutely pre-commercial created, developed within the body corporate of a university. That university, that body corporate is a registered charity. Really important for UK universities to have the independence and the the financial status of a charity, but it comes with some regulations, some rules to stop that status being abused.
And the money that developed that initial research probably would have come from our taxes, from grants, from the government research grants, fantastic building the knowledge, the distinctive and world class research of UK university. So how do we get something that is the promise of a really good idea, some lab notes, some early rough potential intellectual property that's been funded by public sources embedded in a charity. How do we turn that into something that could trade shares on a public market and have value that would mean that the jobs growth of that company is guaranteed into the future. And that that journey, that's where a lot of people disagree. And the debate that you've heard of, is a good deal, is it a bad deal. It's on that journey. So universities will invest resources, money, people to develop those crude raw ideas into something that is recognisable, is valuable by very, very brave early stage investors.
And that's money that could be spent on libraries or elsewhere in the university, so that needs to be compensated somehow in the system. The business would be spun out and set into a private company that attracts investment. It's important for the university that there's enough attraction in the intellectual property and that business. The other investors would value it and invest in it. So there is a motive to do the right thing by the company, as far as the university's concerned. They get rewarded for creating spin out businesses, not just in commercial terms, the value of the shares, but also in the impact that business creates for society. The government rewards universities for that kind of behaviour. But the research, the researchers that developed the original ideas still work in the universities, they need to be able to use the ideas they originally had to develop further research.
So the background intellectual property may still need to be retained by the university, the application, the foreground IP could be put in business and allowed to have value to raise more money. So there's another area of tension there. It has just to be fairly negotiated. And so on and so on. So it's a very complex process with the requirements of the university being distinctive as a charity, as a research organisation, but also as an organisation that's got an obligation to get the ideas out there and utilised to great value by society. And for the business owner, for the entrepreneur, they needed to develop deep value in the business, so they can raise more money, but they are accessing state funded research at a price, which is often those early valuations is often a very, very good price.
Alan Cowley: Okay. And thanks very much for clearing that up a lot more. I've not heard it in such detail as that and it's often you do hear the horror stories over the positives.
Simon Bond: Oh yeah. I don't deny it. Whenever there's negotiation, you see people negotiating, there's always three versions of the truth.
Alan Cowley: Yeah, yeah, exactly. Exactly. So let's go back to Setsquared. A bit more focus. Just a quick question is the company only aimed at entrepreneurs or do you do any help and mentoring with investors as well or get investors involved?
Simon Bond: That's a really, good question to open that debate for us. Actually, and by the way, Setsquared is a partnership with universities, we're not incorporated just yet. And our model is that we're a membership model. So, our members are the entrepreneurs that start-up businesses, so we're there to service them. And so we don't provide the depth of mentoring to investors that we would provide as a service to our members, that's for sure. However, when you work with 500 businesses a year across Setsquared, 4000 over the last 17 or 18 years, the team does develop great insights into best investing. What is successful, what's less successful for investors in their approach, the different kinds of investment and so forth. And you know, Setsquared is a great big network. So, we get lots of opportunities to share and discuss these insights with investors, because it's in our interest to have ever more sophisticated, better educated, more insightful investors, because they provide the lifeblood of our customers, which are start-up s.
Alan Cowley: Okay. Yeah. No, no. Well, I'd like to think that maybe we could help you in some way of introducing you and helping with that education of the investors.
Simon Bond: That would be a great idea.
Alan Cowley: What are Setsquared future plans? So, currently you’re in partnership with the five universities and you've helped so many different entrepreneurs and companies raise finance. What are the futures? What does the future hold?
Simon Bond: Well, it's very exciting. It's the announcement that we've held on to our global number one status now since 2015 just really confirms our commitment to this mission for Setsquared. And with the power of an accolade like by the UBI global award, it gives us power of access to people and opportunities. We're going to build on our story. Now, that doesn't mean that we're going to create a membership model for ourselves and recruit more universities, but it does mean that we're going to spread Setsquared services across the South of England, which we see us out on natural economy, our natural market, if you like, to the West of London and the South of Oxford.
And we've got great concentration strengths in our five business incubation centres in Bath, Bristol, Exeter and in Guildford in Surrey. But we've been working with, with local authorities, local enterprise partnerships, agencies like the Catapult UK space agency, and so forth to provide a Setsquared as a service in the areas that are outside of our towns and cities to ensure that tech entrepreneurs in these areas have access to our services and importantly our investor networks.
So we've got big plans in that area and to ensure that no entrepreneur in the South of England, from what I call sea to shining sea, so from the English Channel to the Bristol Wash, is never more than half an hour drive from a Setsquared hub, or a Setsquared entrepreneur in residence, or a Setsquared centre, where he or she can get the help, the support, the encouragement to build their
Business, I think that's what we owe to our neighbourhood, our region. And I'm determined to do that. The other thing is, we are a membership organisation for our entrepreneurs, but we see a great opportunity in helping with investment, in creating a stronger investment sector for our core members. And so that's taking us into the early stages of managing funds. So we have a very interesting project with Innovate UK called the Regional Angel Investment Accelerator in partnership with UK Business Angel Association and seven central networks. This allows us to make Innovate UK grants to businesses as part of the co-investment package with Business Angels. It's not our money. We're managing Innovate UK's money, but we're doing what I've always dreamed of is bringing public sector funding for innovation alongside private sector investment in innovation businesses that we want to back.
And we're learning an awful lot there. And that's giving us an appetite. Still early days, but an appetite to develop direct access to funding for innovation companies under SETsquared's name. So that would be another part of the future. And then finally we've got, depending on your point of view, a national crisis or a international opportunity emerging with Brexit. And I want my organisation to be prepared to make very best for our members out of a that as it happens and how it falls out. And there's a number of implications for SETsquared out of the different Brexit scenarios. We aren't going to go through all the scenarios, but we need to be responsive, nimble, and quite visionary in our thinking to make the best out of whatever circumstances history put on our lap.
Alan Cowley: No, no, I completely agree. And that's obviously one of the biggest challenges that we will all face in the coming months and years. You talked about your members and your existing members. Let's just talk about someone potentially wanting to become a member. So what advice would you give to an entrepreneur or someone with an idea or someone in a lab that thinks that they could commercialise their idea or their research and what advice would you give them to set up a start-up and obviously they can, I presume, they can reach out and speak to you and we'll put that in the show notes.
Simon Bond: Reach out and speak to me, to colleagues and speak to people. There is a great British disease around secrecy when one thinks they've got a world beating idea. All ideas are world beating until you share them with somebody else and get some positively critical feedback on them. So those early stages where you're testing your thinking on other people critically, other people who are just like you. So we're getting that diversity or feedback around you, I think, is important and confidentiality really can be managed. We run a lot of pre membership workshops at SETsquared. Entrepreneurs programmes for entrepreneurs not connected with the universe at all. I run these up and down the South of England, all information's right on our website.
Also for students, we have a student entrepreneur programme for researchers. We have a researcher to innovative programme and all of these are opportunities for individuals to try and express their great idea and test it with other people in a relatively safe environment but not an unchallenging environment in order to improve the idea. And I think that essence of stepping up, testing your idea and testing yourself, being able to assimilate the feedback and then trying again is a feature of SETsquared's DNA. We do it very well and I think that the companies who go on to become members of SETsquared, they use that to great effect in the future. They tend to be, I think by nature, open, trusting. I mean they're students, they're cute managing their trade secrets and so forth, but they make most of their environment and I think that that early kind of preparation of SETsquared membership is very much part of all of that training that the insight we give them.
Alan Cowley: Do you have any examples of SETsquared's members or past members that you can talk about?
Simon Bond: The business that really comes to mind I guess illustrates this is Harry and he built a business called Zilo, which is a spun out of Bristol University. I think he was a PhD student, graduated with his PhD, and gosh, I have to check what the exit was, but it was a triple digit millions in the deal that he did to exit on Zilo. So a fantastic hit for a diabetes testing solution. But rewind, when we first met Harry, he was a member of our, one of our kind of pre membership programmes, a programme called ICURE where you're getting PhD students to test their ideas. The, the premise ICURE is that they would pitch their idea to a hundred customers, people, in an intensive three to six, month period and a similarly that feedback and use it to form their modelling of the business years.
A real classic league start-up approach to things. I remember seeing some of Harry's work and the premise at that time was that he had this technology and he, quite rightly identified, diabetes, the medical sector, the barriers to entry for literally a one, person pre start-up work were prohibitive. But he identified a smaller but more easy to enter market with in the brewing in strict view in that sector requirement for sugar levels. And the brewing process was very pressing demand and his solution would have given them, you know, a massive advantage in that process. And so he was developing his idea around that. So you know, not coming with an agenda, listening to what customers want, what multiple customers group to markets or market segments once was, I think he was using that programme to his best advantage.
He was always destined for great things. A talented entrepreneur, but subsequently [inaudible 00:37:50] the opportunity back to the biggest market, which is for diabetes testing. He built Zilo. He's done the most amazing deal with a multinational owner and has done extraordinarily well out of that and fantastically, he's even gone on to found his own incubator called Unit DX, which is based in Bristol, which he's sharing very, very generously and his insights in, you know, prospecting opportunities, listening carefully to customers, aggregate it together as market demands with a whole bunch of new starts up. So great business. Great entrepreneur.
Alan Cowley: Exactly. Exactly. Okay, so we've had quite a lot. That's a big success story of an entrepreneur and we've heard your own entrepreneurs. Let's just close up on what does the future hold for yourself. Have you been tempted back into the entrepreneurial life or what were you thinking?
Simon Bond: I must say I did think that would be what I would do at SETsquared. I joined on an 11 month contract in those really tumultuous times in telecommunications back in 2003. I thought, "Oh, you know, what a great way to meet meeting companies and maybe I can find my future opportunity doing this." But I must say that the sector, that edge, that edge between universities, start-up businesses, global markets for tech-based solutions is just so compelling. And I love doing it at scale. I mean the power that we have at SETsquared of representing the interests of 500 members at any one time, 4,000 businesses since we started, I find very energising.
And so, I don't think founding or working for a start-up is quite in my destiny yet. What is in my destiny is to build a SETsquared system that will, let's say outlive me, but will carry on after I'm too knackered and going to do a spend time in the garden or whatever one does. So I'm very committed to building a resilient system. That means that when people, you know, who were like me, when I was founding my businesses. When they come out, they're not learning just from by making mistakes, trial and error, we'll do that anyway. But they come into a positive nurturing environment with experienced people who can help them and boost their opportunity to sign. If I could do that, I'd be very, very happy. I'm probably happier than being in one company.
Alan Cowley: I think that just sounds absolutely spot on. And it shows with this, you know, you've been with SETsquared for around 16 years now and obviously you and your team have supported over three and a half thousand early stage tech companies within the UK. And that's just testament to SETsquared and yourselves and everyone that's worked there.
Well, Simon, it's been absolutely fantastic. And to hear everything that SETsquared is doing for, what has it been over three and a half thousand early stage tech entrepreneurs and how much incredible work and mentoring and coaching you've done, you and your team obviously, it's just fascinating. So it's, it's been extremely insightful and engaging. Thank you very much.
