Made to Fail 13 secrets of successful start-ups

Grapple: Getting customers before costs

Alistair Crane could be sufficient cause for me to quit and never try anything ever again. Alistair created Grapple at the same time as I created Trufflenet. In March 2010 we both pitched to Fujitsu. One of their account directors was sufficiently taken with our pitches that she introduced us to Whitbread. Six months later Grapple rejected an offer to buy the company for 15m. Trufflenet was celebrating our first 8,000 client. I cant quit because of Alistair. His achievements are exceptional. Its like a football club not entering the league because they will have to lose to Barcelona. But I cant be demotivated either. After our meeting, I was buzzing for days. His achievements are inspiring rather than demoralising. So what are those achievements? There are the heady valuations for one. The aforementioned offer of 15m within the first year of business. Sustained profitability for each of their first three years. Growth of more than 50% each year. A track record of delivering for some of the biggest consumer brands. A staff roster of 80 in the UK and Canada. Grapple builds mobile phone apps. In 2010, when it launched, every company wanted an iPhone app. A year earlier, too few people had smartphones for there to be a strong business case. A year later, the market was crowded. But Grapple wasnt just about building apps. In fact, it didnt intend to build the apps at all. The business had a piece of technology that translated apps and made them compatible with the wide variety of operating systems that ran smart phones. They acquired a Canadian company, Cascada, that had developed the technology. The plan was to license that technology to agencies so that they could translate their clients apps so that they would work on all devices. Without that technology, companies had to pay for new code to be written for each device or risk missing out on reaching consumers with other devices. So Grapple would be cheaper than using another agency which would write apps for multiple devices. It would also be quicker. The underlying technology helped Grapple users build apps in a few weeks rather than a few months. The USP was clear. Grapple would be partners with existing developers and digital agencies rather than competitors. That would make it quicker to get to market. Only agencies didnt want to write apps themselves. They just wanted the end product. They didnt want to buy a licence to Grapples software and then develop an app. They werent sure they understood what made a good app. They didnt want to invest in the expertise necessary to develop apps. They preferred to do what they do best and outsource the rest. So how long did Grapple spend hawking around this technology that no one wanted? About four weeks, says Alistair. The very first client McCann Erickson representing Xbox said they just wanted an app. So Grapple built the app. Despite the technology expertise at Fujitsu and internally within Whitbread they just wanted an app built too. Grapples problem was not just that agencies didnt want a technology licence. Lots of clients were iPhone-obsessed. The CEO used an iPhone. He used apps. The business needed an iPhone
Matthew Cain, 2013

Made to Fail 13 secrets of successful start-ups

app. Its not an environment particularly conducive to persuading the marketing director that theyll have to pay twice if they also want it to work on Symbian devices, used by 9% of the population. And that Grapple helps cut out that additional cost. Alistair didnt try to find customers who wanted his services. He didnt blame the marketing for failing to communicate his USP. He called up office and said they needed to find a way to get the app built. When he went to the next sales meeting the pitch hadnt changed. He didnt redesign the website, reprint a brochure or hire lots of new staff. He just explained that many of his clients were using Grapple for the build of the app. Grapple wasnt all about Alistair. Thats why Alistair doesnt describe himself as the founder. That honour goes to Jamie True, who identified the opportunity to buy Casadas technology and brought it to Alistair. He also put up a significant amount of the early investment in the business. Jamie was a start-up veteran before his 35th birthday. Grapple couldnt have succeeded without being in the right market at the right time. But it didnt succeed only because it was in the right market at the right time. Plenty of entrepreneurs would have insisted on selling their technology. They would have identified all of the reasons why they werent well-suited to building apps, and spent time fixing these. They would have written off the first few experiences as customers who didnt understand mobile development yet. They would have been patient with large agencies that didnt want to get in to mobile development and targeted boutique agencies without the capacity. Grapple didnt spend months proving itself. Perhaps it got lucky. Intending to license the technology meant that it didnt need a roster of successful apps behind the business. It did try, however, and there were a series of hotel booking apps. The early efforts were all too poor to take to market, says Alistair. The credentials for building the Xbox app were basically taken on trust. Alistair knew how to reach his customers. The first couple of deals were mates, he said. He knew what people were spending on apps and where theyd sit in the hierarchy of the organisation. And when he didnt know them directly, hed find someone who did. Grapple didnt spend months building a sales team, developing thought leadership positions or sponsoring events. He just found the most efficient way to get face to face with people who wanted apps. But they did need to prove publicly that this was a business to trust. And that the offer was being validated by organisations with a serious business need. Grapple built a simple app for the Green Party. It wasnt Grapples best piece of work that year, says Alistair. But it was a neat idea: a series of questions to identify how green you were. And the party went on to win its first seat in parliament. A perfect case study for the business. They decided to invest in PR at an early stage. Before the summer, they had a full time PR expert on board as their seventh member of staff. Their increased public profiles meant that they didnt have to create all of their new business leads themselves. Businesses were serious about building apps, which meant a formal procurement process during which firms would be invited to tender.

Matthew Cain, 2013

Made to Fail 13 secrets of successful start-ups

To get on the tender lists, they had to be known. Strong case studies and PR to promote them were essential. In such a fast-developing market, Grapples challenge was unique among start-ups: how to meet demand for its services. Alistair hired everyone at the company many of whom hed worked with before. He was determined to recruit the best people he could, despite the time demands of so many tests and interviews. Grapple didnt churn out apps quickly. A reputation for being the hottest new thing always ran the risk of appearing fly by night. Retaining quality was equally important. Thus far, the attributes that make Grapple successful are unique to technology start-ups. Its the only sector in which companies can adapt that quickly, the only sector where long-term credentials are not a pre-requisite and where CEOs are as keen to stay ahead of the curve as more junior staff. But Grapple is not a traditional Silicon Valley start-up. Grapple started by buying a piece of technology. That isnt the lean start-up model. It cost the best part of 1m before the company had been trading for a day. And the technology didnt come with a proven source of revenue. In fact, it had previously been acquired by a private equity firm that had been unable to generate sufficient returns. Grapple knew they were paying a reduced rate for it. But there was surely a chance it had no value? When I put the point to Alistair it appears as though it never crossed his mind. He paused, briefly, as though it was the first time hed considered the idea. He responded that even if he hadnt been able to get any customers for the technology he would have been able to find a buyer willing to take it on. If Alistair is looking for anything, it isnt confidence. Despite starting with a 1m equity investment, Grapple didnt have a balance sheet burdened with costs. The technology was proven. Time wasnt wasted operating in stealth mode with salary costs but no immediate prospect of customers. Alistair didnt leave his job to then start setting up the company. He stepped from one office to the next. The critical conversation was that with Ogilvy. They said they would commission a mobile app. But Alistair needed to be certain they would sign. He didnt tell the agency he was betting his future earnings prospects that they would be true to their word. But he got as close as he dared. Grapple didnt spend thousands on expensive marketing. They had a basic website, a PowerPoint presentation and a book full of phone numbers. They knew who they wanted to work for and how to reach them. Personal contact would be essential; the first 12 clients and agency deals were all signed by Alistair himself. In the first three months of trading, the business had more work than expected. It grew to fit the work, not vice versa. Theres a nice interview of Alistair from September 2010 conducted via Skype with a small US tech blog. Its conducted from the Grapple offices. You know that because theres a logo behind Alistairs shoulder. Its printed on A4 paper on a standard colour LaserJet. Costs were firmly under control. Alistair knew about life at a start-up. Hed previously worked for Blyk a mobile advertising company which was eventually purchased by Nokia. Alistair was the first member of staff; the only person left on the office floor when senior management huddled in private rooms. It taught

Matthew Cain, 2013

Made to Fail 13 secrets of successful start-ups

him about the culture of start-ups. How to build a dedicated team of experts who were willing to work long, hard hours for the enjoyment of building a business. Why pizza and beer beats small salary increases for building staff loyalty. Its a culture that still exists at Grapple: indeed, the business is based in the offices used by Blyk. I wonder aloud whether Ive uncovered some secret motivation for Alistair in beating his peers. But alas, its because he knew that the space was free and he could get a good deal on the rent. Alistair moved from Blyk to Nokia, where he became Head of Media Solutions. It makes perfect sense. In practical terms, the role gave him a senior position at a company which had established relationships with the largest brands in mobile. When he moved to Grapple, he wasnt picking up the phone to strangers. He didnt have to establish his personal credibility. They werent a number in a directory. His name wasnt a label for a cold-caller. Less tangibly, it placed Alistair at the heart of latest developments and opportunities in mobile marketing. He was well-placed to spot client demand for the next big thing. So what drove Alistair to Grapple? Timing, in common with everything else at the business. Jamie had a strong network and it kept him in touch with the latest developments on the technology scene. He knew that the owners were looking to offload Cascada and knew Alistair. Without Jamie and Cascada Alistair Crane would not be running Grapple. Despite that, I have a strong suspicion that Alistair would have ended up running a start-up anyway, if not now then at some point. Entrepreneurship wasnt an alien concept. Alistairs father started a business at a young age and business conversations were part of family life. Its not that entrepreneurial skills were transferred by genetics or osmosis, argues Alistair. To suggest otherwise would down-play his achievements. But Alistair was always entrepreneurial. He describes himself as weeding the family drive as a teenager to earn extra money whilst friends were drinking cheap cider in the local park. Alistair has a particular impatience and persistence which stands out amongst the entrepreneurs Ive met. If he hadnt delivered sales by the end of the second month, the investors would have wondered why he hadnt made more progress, he argued. Its the urgency of someone used to meeting sales targets and being rewarded for doing so. Early customers could expect to see Alistair waiting in their reception areas until they signed the contract. That didnt leave him space for pretending the company was larger than it was. But it was an effective way of ensuring that new customers were sealed. During the course of our meeting Alistair describes himself as the rock star CEO. It doesnt come across as arrogant just part of the Silicon Valley jargon thats seeped into the London technology scene. Theres surprisingly little thats arrogant about Alistair. Hes confident, but then again hes never really experienced a setback. He describes getting negative feedback in an appraisal without a hint of the paranoia or insecurity that drives so many successful people. But Alistair does believe in the personality, attitudes and skills that have made him successful. I suspect that he will disagree with the central premise of this book. Alistair believes that his drive and determination set him apart from equally capable, but less fearless peers who have stayed in

Matthew Cain, 2013

Made to Fail 13 secrets of successful start-ups

more secure employment. He probably isnt talking metaphorically when he says he doesnt need an alarm clock to wake him up at 04.30. He can show you the work he did on Christmas Day. He usually works on Sundays too, but as a sign of Grapples increasing maturity, he understands that he cant now expect to bother his team out of hours. Money motivates Alistair. He doesnt flinch at that admission. His passion is fast cars and he wants to drive them and buy them. I dont know what he earned in his first few months of Grapple. But he didnt consider it a particular risk. He was sure that he could just go out, start again and find a different way of making money. It makes him dispassionate about the work that Grapple does. He wasnt embarrassed to say that its early apps were unsophisticated and Im sure he wouldnt hesitate to tell a colleague when their work wasnt up to scratch. Indeed, it isnt clear that mobile apps are really his thing at all. He says that he was bored of apps at Nokia. This man uses a BlackBerry! Alistair isnt fussy. He greets me in person in reception, as he leaves another meeting. We are kicked out of an office by a junior colleague. The Grapple PR manager doesnt sit in on the meeting. In the early days of the business, he wasnt too clear on his status. It doesnt bother him. Jamie True is the founder of the company, as noted above. Alistair didnt fall in love with the name any more than he wanted to build apps. Changing the idea from licensing the software to building apps didnt require any emotional investment. He can sound as coolly analytical as a management consultant on a temporary assignment. As a customer youd have no doubt that hed be on your side. Grapple is a modern British success story. A company that could operate in any part of the world. A modern manufacturing company which makes 1s and 0s. Companies tend to be called overnight success stories when they are purchased for massive sums of money in a bubble with very little revenue. Grapple could have opted for a quick sale in its first year. But its made real money, providing jobs for almost 100 people. Grapple entered the market at the right time. But so could any number of others. The technology they purchased gave them a USP, but that hadnt been a success previously. Jamie and Alistair understood the mobile market; they had excellent contacts and had experience of start-ups. They launched quickly, didnt waste cash and didnt hesitate once they understood what customers really wanted. They werent experts in the product. They werent creating a market for something that didnt exist. They spent significant amounts of cash to launch the business. Its an uncomplicated way of starting a business. The results are exceptional.

Key points Alistair knew Grapple had a customer before quitting his job. He knew enough potential customers to be sure of reaching his target market. Grapple abandoned the licensing model soon after discovering agencies just wanted apps. They minimised the start-up costs and expected revenue in the first three months.

Matthew Cain, 2013

Made to Fail 13 secrets of successful start-ups

To buy the Kindle version: http://www.amazon.co.uk/Made-Fail-successful-start-upsebook/dp/B00F2OO3KC To buy the paperback version: http://www.amazon.co.uk/Made-Fail-secrets-successful-startups/dp/1475289537

Matthew Cain, 2013