Contrary to the popular idiom, ideas aren’t a dime a dozen. Innovation has been dubbed one of the most important objectives for businesses around the world for its direct impact on the bottom line. Innovative ideas for new products, services, or even business models can boost profits and give employees a sense of job satisfaction, encourages collaboration, and allows businesses to find competitive advantages in the marketplace–all of which are tangible returns. But how can you put a price on innovation? And more importantly, how can you efficiently capture the best ideas from the wider talent pool?
Childhood friends and serial entrepreneurs Owen Hunnam and Charlie de Rusett decided to answer that question through their start-up, Idea Drop, which uses smart and intuitive software to capture ideas within organisations, giving everyone within a company the opportunity to have their ideas heard, and rewarded if it generates profit for the company.
Their first ‘venture’ was in the schoolyard at age 11, when Hunnam and de Rusett started selling sweets to their classmates during break time. After the headmaster closed down their business 18 months later, the two founded a mobile disco business aged 12, which went on to generate £2000 per month. They were forced to close the business when all of their equipment was stolen when they were 16.
Now, close to 15 years later, Hunnam and de Rusett have built and sold two businesses and have recently secured £1 million investment to grow their idea sharing software business, Idea Drop. The duo speak to GrowthBusiness about their entrepreneurial journey, as they build a platform used by Fortune 500 engineering companies, UK police forces and SMEs across 61 countries and 318 cities.
Where did the idea for your business come from?
Charlie de Rusett (CdR): Owen and I were the kids that solved anything and everything on the school playground. We met when we were 11. I was quite naughty at school while Owen was quite academic. I left school without finishing my A Levels but I was good at maths and got into hedge funds. Owen went into Aston University. He had a theory if we took his student loan as seed capital, we could start a business. So using that £10,000, he launched Vine Publishing.
Meanwhile, the recession kicked in, and I realised that making investment decisions might not be where I got pleasure from anymore.
We had a beer together and thought about how to work together. That’s how I got involved. We grew the business, and sold it to World Media.
That’s when we made our first mistake. When we were growing our publishing company, our sales team said that marketing execs and directors are increasingly diverting their marketing spend from print to digital. We decided to train our team in digital skills and diversify from print. Back then, we were adopting a freemium model. 60 per cent of the content in our monthly magazines were strictly independent editorial, focussed on reader research. We had structure and a strategy, so when got an offer for the business, we got greedy and turned it down.
Ironically, a year later, the same company offered to buy us again but for much less. This was a lesson for us. When you know something is right for you, get it done. Don’t get bogged down by the numbers.
Fast forward from there, we rebranded and became a digital agency.
That’s where the early idea for Idea Drop came about. When we were a small team, it was easy to have ideas and work off them. When we grew to about 30 people, we realised that ideas that would just get told to us over our shoulder while we drafted a proposal, or it would pop up on a whiteboard during a meeting.
We had grown our business using cloud-based technology, so we had the foundations in place for content sharing. We went to Google to see how we could similarly capture these great ideas that were thrown about. There wasn’t anything out there, so we turned to our in-house team to build just that.
It had a low cost and very little strain on our resources, so the penny dropped. What we had here was a business requirement; a tool that generated ROI.
We got some seed investment and built out our product. It was from an the founder of ClickTech, which floated on NASDAQ for $7 million. He said “you guys can’t ride two horses here. You have to be focussed.” So we decided we’d be quick to execute, and sold some of shares and sat on the board as non execs.
We then took £1 million in funding in September to predominantly grow our sales team to sell Idea Drop, and continue to map out an ambitious growth plans.
How did you know there was a market for it?
Owen Hunnam (OH): The concept of innovation management is relatively new, but we looked a whole range of different surveys from the likes of Gartner and McKinsey & Co. We found a lot of data to support our view that data is increasingly important at a board level. It was becoming a critical driver for growth, but the tech solutions in the market to help facilitate innovation aren’t really there, even though it’s a growing industry.
We looked at one particular survey, which found that 84 per cent of execs cited innovation being a critical drivers of growth but only 6 per cent were happy with their performance. We believe there’s a tech gap, which we plan to serve. It was quite an organic process. We were developing this research to unearth the strategic issues that large banks and companies are facing, and how we can plug those gaps. We did this while we were still running the agency, so we had the luxury of doing a deep dive of the market.
How did you raise funding, and why?
OH: Our first two businesses grew organically and through our own investment. For Idea Drop, we raised a seed round first, then a second seed round in Oct 2014 from angel investors. We eventually raised £1 million from 38 investors, including former governor of the BBC, Lord Smith of Kelvin, as well as Charlie and I.
In the end, we managed the crowdfunding round ourselves, using our extended network instead of a platform. We received investment ranging from £5,000 to £200,000. variating in investment level.
Describe your business model in brief.
OH: Idea Drop has users in organisations with less than 250 staff, and larger corporations. We charge £7 to £9 monthly for SMEs, but most of our revenue comes from large organisations across sectors, including firms in oil exploration, law firms, et cetera.
Our licenses run between three and five years, so there’s that kind of license revenue. A second revenue stream is where we partner with our clients for the implementation and delivery. This includes workshops, webinars, gamification plans, and all of that stuff. We either do it ourselves or partner with leading innovation
What determined our model and pricing: Face to face feedback from the industry and clients, and the wider enterprise landscape and how companies procure technology and how it’s changing. Thirdly, our own business knowledge, on how we can best structure deals to get them over the line and on board.
We iterate our pricing to understand the value of the problems idea drop aims to solve. If a committee in a law firm meets once a month and lasts about an hour, the lawyers may earn £500 per hour, so the meeting would cost about £10k an hour.
We have close partnerships with our clients to understand what the revenue generating ideas and where they come from. This is one of the reasons why we have 3 to 5 year contracts. Our whole team are innovation experts and we go through a lot of training to help us refine and polish our methodology.
If our clients can see we’re very ROI focussed then they are more on board with our pricing.
What was your first big milestone and when did you cross it?
OH: Our £1 million fund raising round. It’s the validation from an extensive range of people we really respected was a massive milestone for me.
CdR: What helped us get there was that we built the software that can work with small and large organisations, from under 250 people to 150,000-person companies.
Without a really compelling, beautiful software offering, none of this would have been possible. But you can have the best tech in the market, but to drive the business forward, you need world class talent and the ability to assemble that team. We understood the power of cloud technology ourselves, that led to a fascination very early on and a dream that one day that would be an opportunity for us to pursue. We’re business people, and our previous businesses were effectively selling man power. What were now looking at is a product that can sell, sell, sell. Every one of our systems and every part of our business is based on the cloud, from Google docs, Xero for accounting, Slack for internal communications. We have this stack that communicates with each other to give really compelling data to help Owen and I make decisions. I think that’s what makes a difference to businesses now; what sits in that software stack and why and what do we want to learn from that software stack becomes crucial.
What advice would you give to other entrepreneurs?
OH: It’s an obvious one. I’d say work in an agile way. Not just in terms of software, but in every aspect of business. It’s better to have something live than not at all. Moving fast is a key to success in our experience.
CdR: Reputation. When you set an expectation with any stakeholder, make sure you not only meet the expectations but exceed it. Set realistic but challenging goals and meet them.
Where do you want to be in five years’ time?
CdR: We’d like to exit, hopefully. We’ve been working on this recently. Ideally we’d like an exit to a larger software vendor. It may even be to a customer. Another area we’ve identified, would be an acquisition into a management consultancy; perhaps one of the big four. They typically sell hours and brains. Technology like ours is disruptive and instead of bringing in consultants, large companies could use our technology, so consultancies are looking to acquire technology like ours in this space.
OH: We’re really keen to harness the power of ideas beyond internal workforce. The board has a vision, and they set a strategy to achieve that vision. That strategy can be broken down to bite-sized challenges, and if that’s communicated to a much larger segment of the workforce rather than small senior management groups, then they can harness the collective brain power of the organisation. That’s a common thread among all businesses.
We help them frame what those challenges are as a consultative piece, and our platform broadcasts those challenges for employees to engage with. We look at what solving these challenges means to the business. Is it cost saving? Is it profit generating? We try and make sure they keep the use of our system by rewarding and recognising the employees with the best ideas, by gamifying our platform. The most points you can earn is by having a challenge that can impact the business. We talk to the company about what those points mean and how they can redeem that.
CdR: For us, it’s a journey; it’s an organic process. One thing leads to another. It’s not something that stops and ends, its about that business leading to another opportunity. Entrepreneurship is a journey that never ends.