In November we hosted one of the most open and inspiring business breakfasts, at 12 Hay Hill Private Business Club, we’ve ever experienced. The irrepressible serial tech entrepreneur Dan Wagner, took time out of his very busy schedule to share his business journey, and what a journey it’s been.
A transcript of his talk is below. If you’re an entrepreneur or thinking about becoming an entrepreneur, his journey is certainly one to read and learn from. So over to Dan;
“Thank you for your interest and for coming along to hear me speak about what I’ve been doing during my career to date. Drew’s asked me to give you a bit of background on my career history and the up of the highs and downs of the lows over the last 40 odd years.
I think first of all, like you, we’re all experienced enough to know that life is full of ups and downs. There are no straight lines, nobody goes through life in a straight line, it’s never like that. The reality is there are good times and bad times and I think the same is true for the entrepreneurial journey. You know when you start a business it’s tough. It’s very, very tough and creating a business requires lots of commitment and effort but surpisingly, not necessarily expertise.
I was specifically interested in photography and the visual arts and at the time, in the early 80s, advertising was the hottest sector to get into. So I really wanted to get into advertising but I had no way in. However, I was able to get a part-time job as a runner in a photography studio and that gave me the opportunity to see how advertising works from the photographer’s side.
It was after doing that for about a year on Saturdays and in the evenings, that I decided to try and get into advertising, so I sent a huge poster advertising myself to the chairman of an ad agency in London – WCRS. It was on this big great big piece of board that advertised this 18-year-old me saying that I’m gonna be a great asset to the agency, and I sent it around in a taxi.
It was a very hotly contested job to get into these agencies and I thought that if I did something a little bit outside of the norm I might get noticed above all those people that were coming out of university with degrees. This is the kind of theme, by the way, that you’ll see throughout my career.
And it worked! The chairman responded very quickly, his secretary invited me in for an interview and I got a job as a runner again, for two and a half grand a year, running a lot of paper around, you know, doing odd jobs and so on. In this central London agency in Covent Garden.
And I worked there for two years until the age of 20 but while I was there, I started to get involved in supporting the team on new business pitches. So what happens in advertising agencies is that they pitch for new business, sometimes they get invited in sometimes they go out proactively and approach BT or Selfridges and say we’d like to do your advertising.
And one day we were invited to pitch for BT, it was a very big account of course, and I was appointed runner on the account. So I went to BT a couple of times with various other people from the agency to get the brief, and they said to us the world’s going to change because our telephone lines can now carry data.
You will have seen that the fax machine was just introduced that could send a picture from one place to another – and remember, when that was introduced around 1983 it was astounding to see an image come through a machine, the other end of the telephone line, which had been sent from Australia.
Of course, it does transform everything and they said: “it’s going to transform the way people use telephones and we’d like you to help us promote this to the British consumer”. It was hard to understand really, what data communications actually were or was, and I was tasked with trying to learn more about it.
And as I went through the process of investigating, I found it fascinating – a computer, somewhere in the world, can ask questions of another computer, somewhere else in the world, and get answers. So that was the germ of the idea of leaving my job at the age of 20 to set up my first company MAID, which was a terrible acronym, but it stood for “Market Analysis and Information Database”.
The idea was I’d go to the major newspapers and the major market research companies like Mintel and Euromonitor and take their information and put it on a computer system, and then build an interface to allow people to ask questions on it. Now we’re all very familiar with that today, I can pick up my phone and search Google and find anything but back in 1983/84, this was real science fiction.
Now, I had nothing to lose and a lot to gain. I was earning nothing, two and a half grand, which was below the minimum wage, I was living in a bedsit with some other blokes, so I had nothing to lose. So I left my job and announced to my family that I’m going to start my own company. My mother promptly burst into tears, she thought I’d saved myself by getting a job in advertising and now she was absolutely distraught that I had left the job to go and do something crazy.
So I went to see various newspapers and trade journals and periodicals, like The Times and the Telegraph and I said to them “I’m going to build an electronic archive of your newspapers and I’d like the rights exclusively for the next five years”, and because I was really the first person to do this, I got exclusive rights from everybody.
And it was amazing. I now have the exclusive rights to all the major UK newspapers, so then I went to America a year two so later and did the same thing over there. Then the same in Europe, and so I basically tied up the market for electronic distribution of news. What would actually happen is we’d get a newspaper delivered to us at about 1am in the morning and we’d have people keying in information overnight until all the major news and the business content was transcribed into an electronic format by about 7am the same day.
Then we said right, now you as the customer can interrogate the news that’s just come out and any previous news articles. But of course, nobody did it because nobody had any computers! So we’d created this thing and there was nobody there to access it! However, the IBM PC was introduced in 1984 and people were intrigued but still, nobody had computers in the UK and certainly not in business.
There was no way around that, so I had to go and live in America, where they did have personal computers. I went to New York in 1985, and immediately I showed this product at a trade show on the stand of one of our suppliers, as I couldn’t afford my own stand, I think it was Colgate Palmolive, and they said okay we’ll take it.
It was a $10,000 subscription membership, plus a fee for using it and then somebody else came along, I think it was the ad agency BBDO and the third one was American Express. So I’d sold $30,000 dollars worth of subscriptions at a trade show in New York in two days!
I came back to London, and I put these orders in my little briefcase (along with a half-eaten sandwich) and put these three orders down on the table and I said to my board “Look, three orders – $30,000”. They looked at me and said that’s just amazing, that’s fantastic, what are you doing back here? You need to go back to America!
So I went back to America and didn’t come back for three years. The business took off over there and we were signing deals very quickly because we had the right product, people had personal computers on their desk and they didn’t have the web services to meet them.
I came back to the UK and The Financial Times withdrew the licence from us. It was a very contentious argument over the contract we’d signed with them, which I think was very unfair and in fact, it became a big dispute that went on for a few years, as they’d basically breached the agreement and said no, we’re not going to give you the data anymore.
Then after a year and a half of arguing they told us they were going to do their own service, and they introduced it in the UK. But nobody bought it because we’d had our service up and running, which was £3,450 pounds and their version, FT Profile, they were offering for £2,900 pounds. We had a better set of content and I think our interface was better but they had the FT brand.
I wasn’t in the position to sue them as a small company. So we’re both in the market and all the ad agencies, all the big companies, and all the investment banks are sort of holding back from signing up for our service. But we needed to make sales and nobody was buying and of course, they needed to make sales and nobody was buying from them. Suddenly the FT announced – we’re going to drop our price from a £2,995 subscription to £100.
I thought this is not good because we know people are going to go with that, so we had an emergency board meeting, and I’d been reading this book, I was trying to self learn during this process because as I said I wasn’t very well educated, and I was reading this book by Trout and Reese, called “Guerrilla Marketing” it’s a really good book.
It talks about always doing things that the competition doesn’t expect. Always stepping out of the norm. It’s kind of like sending that ad to the chairman of WCRS it was explaining the same kind of thing. Always do things that nobody expects, always try and outflank your competitors by doing something that is the opposite of what they’re doing. So we said, “what are we going to do?” Our price is £3,450, and they’re doing it now for a hundred quid, we can’t compete with them on price or we’re out of business”. So I said, well, I’ve been reading this book and why don’t we put our price up to £4,250?
So we announced our prices were going up at the end of next month to £4,250. And we signed 28 accounts in one or two weeks. Everybody signed up with that, so why? Psychologically they thought, MAID is the winner, FT, the loser. I think we had a better product so I think that they were always coming towards us but I think that when we showed confidence by putting our price up, it made a big difference.
So that was a very big lesson, and it became a very successful thing and we really kicked off in the UK in 1986. Now in 1987 Dow Jones entered the market, Reuters entered into the market, but those guys didn’t have the content they had to wholesale from us as I’d tied up Europe in 5-year contracts but it was only a limited partnership because at some point, our contracts would not be exclusive anymore and they would become competitors.
Nevertheless, over the next 16 years to 2000 we became the world leader in online information, we became number one in intellectual property, number one in aerospace, engineering, chemicals a whole host of content. The business listed on the London Stock Market in 1994 and I remember walking into the press announcement meeting and there were a couple of journalists sitting in my little boardroom, and my PR guy who was a guy called Nick Hewer, now better known from being Sir Alan Sugar’s sidekick in The Apprentice, said to me, “You can’t walk in like that!” because I was wearing this Donald Duck waistcoat (from Moschino, not something that you got from the Disney Store, it was a little bit more elegant than that.
But the implication was it was a horrible, tacky waistcoat) He said, “You can’t go in like that, it’s not the right kind of attire, the city won’t like it.” And I said, “Well, we’re never going to get on the front page with this little company, raising 10 million quid on the London Stock Market, nobody’s interested in our tiny company doing data. However, if we get a front-page picture, it’s worth the risk.
He said, “I’m not sure if that’s a wise move,” I said “well I agree, it’s risky but the worst comes to the worst, nobody picks it up and on the positive side, I could get a picture on the front page.” Of course, it was on the front page of every newspaper the next day because, aside from anything else, I was at 30 years old the youngest CEO of a public company.
There was a lot of hubris around the idea that I was too young to run a public company, too young to be a custodian of public funds. So there was a lot of criticism of course, and my waistcoat didn’t help. Nevertheless, it was a very high profile and although the float was a bit rocky we got it away. Then after a while, the price came off and went down but 18 months later we did a deal with Microsoft and it went through the roof and things took off from there.
Then about two or three years later I listed the company on NASDAQ in the United States and eventually we sold to Thompson when they became Thomson Reuters in 2000, so that was a very good exit at half a billion dollars. Obviously I’d been diluted down to nothing! Other people made a lot of money but I didn’t do too badly.
You’ve got to remember that when I started MAID in 1984 we had to build an e-commerce store, there wasn’t the word e-commerce we had to build tools to take payment for information because people were interrogating a database that we have to be able to take payment for, so we had to build tools to manage the processes of taking payment for this stuff. And we also had to build technologies to search this data because as there was no search technology then to licence or buy or get off the shelf, none of this stuff was available.
So we were inventing all of this stuff or trying to. Nevertheless, by the time we got to the late 90s we were pretty sophisticated, we were operating in 192 countries, I didn’t even know more than 100 countries existed!
We were operating in all these countries, we had people buying in different currencies and paying using credit cards and those sorts of things. So, when I watched the .com thing kick-off and e-commerce became a very big focus for retailers I thought we were really well placed for e-commerce.
I thought we should be getting into this, but my board wasn’t so enthusiastic because they thought it was a diversion, but I felt very strongly about it. Anyway, I started to build a platform as I believed people eventually would not be buying the tools to build their e-commerce and using their own resources – that they would instead rent the infrastructure from the internet itself.
Now today we call that ‘cloud computing’, ‘software as a service’ or ‘on-demand’ but back in 1998, there was no concept of this and it was a bit “out there”. I kind of understood it, even though I’m not a techie, but I understood that we were running everything from the Internet and people were accessing our service through the Internet and I thought that it was a natural progression to provide a service where a retailer could upload their products and manage their interface and then they could create their own e-commerce website.
Then they wouldn’t need to buy machines, they wouldn’t need to build the tools, we could provide those tools, and we’re all familiar with that today. The concept was difficult to develop so I pulled in a load of e-commerce analysts and I brought them into my office, which was in Leicester Square by now, and I said I’ve got something I’m going to take you through, it’s pretty revolutionary, it’s a new way of thinking, it’s the idea of running infrastructure for enterprise retail from the internet itself.
The next day my stock was marked down like I’m a nutter, you know, going off on a tangent, they really didn’t get it. Anyway, we ignored them and built this thing and then when I sold the MAID business to Thomson Reuters I kept the e-commerce piece and then I acquired the assets of boo.com. Boo had gone bust because it was a mad concept of building a platform to sell fashionable items and streetwear, that was going to be global from day one.
Fundamentally, the principal was right, however, they were very early, they needed a lot of money to see it through. But, unfortunately, they made some very big errors and in the end, the main mistake they made was they created an interface that was very, very avant-garde with an avatar guide.
But the bandwidth for people to receive that data just wasn’t there, back in 1999 / 2000, and so nobody could access this service because it was completely impossible to download the Avatar. Even I had very high bandwidth at home and at the office and the Avatar took forever to load. If they’d had a very simple interface that could have served the needs of the broadband available, they probably would have been okay.
Anyway, they didn’t survive, but they had built some really cool tech to able to distribute a product from a warehouse in Germany to somebody who placed an order in London, instantly. So I went in to see the administrator and I said, I just want to do one thing, I want to fly somebody to Hamburg. I’m going to place an order here in Carnaby Street, and if they see the order there with the warehouse pick note in Hamburg I am buying this tech.
This was on the day that Boo went bust, we did the test and it worked! This was great because I had everything else, I just didn’t have that physical bit of being able to pick from a warehouse and I wanted to see that work. There’s no way you can evaluate all the code it’s impossible to go through all of that. So we bought it for £250,000 and Venda then became the market leader for the next 10-15 years in Europe.
We ran the infrastructure for many major high street brands, we ran Boo Hoo, who built their entire business on Venda’s platform. Then Laura Ashley, The British Museum, The Tate, Tesco, and The Royal Mail went on to use it. In the US, we had customers like Neiman Marcus, Land’s End, TK Max, and J. Crew. That business was sold to Oracle in 2014 which was another good exit.
Then we come to the not so good bit. You’ve got to remember I suddenly found myself very comfortable financially. Very happy, my lovely wife, family, the nice house you know, everything’s going well, my life’s going well and I’m now in my late 40s.
I’d sold two businesses successfully. I had good credibility so I had the ability to raise money easily. If I wanted to raise money for any business after MAID, there was no issue, I had all the credit, and then when Venda was doing really well I was in a good spot and all the trappings that come with that kind of success. You know being invited to Number 10 dinners, the American Ambassador’s residence all this sort of stuff that’s all very ego-boosting but doesn’t actually mean very much. Anyway, so I was thinking, Well, what I will do now?
I actually thought there was a big problem with retail. The big problem for retail has been exacerbated, demonstrated by all of the high street woes that we know today. So in 2011, a few years before I sold Venda, my board didn’t really want to do this so, I decided to create it as a separate entity as I felt that systems in retail are not fit for purpose, and I’ll give you an example.
Retail has been developed iteratively, and the technologies to support physical retail have been iterative. You started with a counter, somebody goes in and goes up to the counter and says, I’d like to buy this and the shopkeeper says ok, and you pay with cash and then a till came along with some buttons. Then that became an electronic till and then the electronic till could accept plastic cards so all of these things have been iterative.
The idea of walking into a retail store, walking up to a counter with some plastic and paper and queuing up is actually really rather odd. I think we all just accept it now as normal. But if I said to you “there are no systems for retail. There are no cash machines, there are no tills, there’s nothing”, none of those things would exist. We’d just have a bit of space and we’d want to sell something and the only thing that people have coming into the store is a mobile device in their hands. Would we put a big pile of things up at the counter? No!
So, I challenged my team. I said, look, let’s try and think out of the box. Let’s try to imagine a world where there is no infrastructure in retail, and we’re going to invent it, we’re going to invent the way that it should work, with people walking in with these incredible devices which are, super connected and super powerful, more powerful actually than any other device that we use because our desktops and laptops don’t have the comms piece as well. And yet, we get people to walk up to a counter to tap their phone onto another device. There’s got to be a better way than that.
So, we brainstormed for a while and we came up with this new kind of engagement, which was originally called Powa. Now, the idea was that this was so revolutionary, and I knew from my history that when you try to come up with something that’s completely new it takes a really long time for people to accept it. But as I knew with MAID it took a long, long time before we started getting real momentum, five or six years at least.
And the same with Venda we started it in 1998 but it wasn’t really until 2003/4 people started to rent infrastructure and use our platform. So as soon as I came to Powa I realised that this vision I have for mobile engagement is going to take a while. So I created three divisions, one which was a website because people still need websites and I knew that business very well so we built e-commerce websites that we called PowaWeb and that immediately started generating revenues. It was an existing market we had no issue with that.
The second business unit was a company called Powa Point of Sale – PowaPOS. And I recruited people from Verifone in America, to help me deliver what I thought was an intermediate business, which is the business that you see quite active now with those little card readers connected to mobile phones like Square, and I thought that will bridge us for five or 10 years.
Then the other one was really outlandish, it was this idea of PowaTag which was really a new way to use your mobile phone to engage with advertisers brands, merchants, retail – quite revolutionary. The infrastructure was in place but I knew it was going to take a long time. The investor community got super excited about this PowaTag, for the right reasons because it’s a pretty cool thing. I was able to raise a lot of money, about $180 million dollars and I put an awful lot of my own money into it all – pretty much everything if I’m honest.
In total, we put about $240 million dollars into this business. Everyone was super excited about the idea that we’re going to save the high street and maybe I should have seen the writing on the wall but I didn’t because I was used to success.
Anyway, we started to get real momentum. We signed a big deal in China with UnionPay which is a state-owned enterprise that owns all the payments infrastructure in China, they issue all the credit card and debit cards. You can’t get Visa, MasterCard, Amex in China, you can only get a UnionPay card.
They also provide all the infrastructure for payment processing. So they’re like WorldPay and Streamline because you cannot process cards in China without UnionPay. So winning that deal was pretty mega, even Alipay and WeChat sit on top of UnionPay’s infrastructure and if UnionPay wants to turn them off they can turn them off. So signing a deal with them for Powa was a big deal, and Goldman Sachs our advisor at the time said it was worth many billions of dollars, and I think they were right. I mean the potential was huge.
Then straight after that, we signed a deal with L’Oreal to use our technology on their advertising, and then Otto Group in Germany, which is a big retail conglomerate to use it in their advertising and their catalogues and so on and then we signed a deal with Danske Bank in Denmark and The Royal Bank of Canada. This all happened in about a week or two so I knew we were taking off, and then we went bust.
So how do you go bust in the middle of things taking off? Well, we were under pressure financially and had been like all startups. The scale, however, was bigger, much bigger we had a few million dollars in payroll every month. This was a big operation with very big ambitions to own mobile engagement globally. And both our investors, Wellington and I, had reached the end of our capacity to fund it all. But we were in the process of engaging with more investors and had a multi-billion dollar valuation to put money in.
We had a number of potential investors who had given us term sheets. Then we had some others like that were very close to giving us term sheets. The term sheets represented an investment into the business of around $200 million, one was $170m one was $220m, that kind of number, which gave us a multi-billion valuation.
So that’s all rolling along, Goldman Sachs are representing us and we’re coming into the end of 2015 coming into 2016. And I’m trying to raise bridge finance in this period from investors. And one investor I meet, Ben White, walks in says, “I love it. I’ll give you $10 million. I’ll give you $10M, and I can do another $10M on top to bridge you to the investment you have coming. In the end, we never got the $10m-$20m and Ben White mounted a hostile takeover that poisoned confidence in the business from investors and although his plan to take the business ultimately failed, in the process took the entire business down.
Now I’m building another start-up, we’re making real progress and it’s called Rezolve. I’ve been running it for nearly four years now and we’re totally dependent on the capital markets. Unless you have an endless amount of capital yourself, you’re totally dependent on investors and totally dependent on capital markets. If somebody on my board said to everybody I went to see, and who I got excited about investing in Rezolve; “You don’t want to invest in that” because Dan Wagner is a nutter” then most investors will walk away. It’s very simple, sentiment is a very sensitive thing. Look what happened to WeWork.
The point I’m making is you’re walking a tightrope starting a business, it’s not a straight line. Every day is a challenge to stay alive and to get momentum and to build. You need to build positive sentiment with customers, partners, investors and your employees to help build that momentum. You’ve got four stakeholders that you’re trying to please when you’re building a business.
Obviously I was naive to bring this guy in. But I’ll give you another analogy, the doorbell rings at your home, “Hello. Amazon delivery” you buzz them in, they come, punch you in the face, kick you in the nuts, tie you up, demand you give them all your money, and they take all your stuff.
Okay, that’s very unlucky, not something that happens to you every day and I’m very sorry it happened to you. However, fast forward three months, the doorbell rings, “Amazon delivery”, what do you do? Do you not open the door? How do you carry on your life? You can’t let things like that get to you. These things are not normal events, what happened to Powa was not a normal event, I met the wrong guy at the wrong moment. In order to continue, you’ve got to have an optimistic view of life. I’m a fighter and an optimistic individual who would never ever say that it’s all over, I’m giving up.
So what happened to the guy? What actually happened was the company went into administration on that Friday and by late that afternoon I’d collected my thoughts, and I put out a statement together with a guy called Richard Thompson who’s a billionaire from the Hillsdown Holdings family, he backed me to put an offer in for $400 million to buy the business out of administration and that blew up the hostile takeover plan to push the business into administration (by unnerving investors) and then buying it out of administration the next day for virtually nothing and, hey presto, you have a great tech business.
Because the moment we put that announcement out at 5pm on Friday evening saying we’d made an offer to the administrator to buy the business back, Deloitte at that point could not sell the business the next day there’s just no way. So they had to run a process now. And everyone on the other side was very very angry.
That was an issue number one, issue number two was that I’d put in place contracts with every one of the 18 subsidiaries that meant that any change to the structure needed my approval, because I had debt for about 10 million of my money in the business, so that was my leverage. When the administrator realised that, they knew that they couldn’t sell those subsidiaries in this nice “moving the cups around deal” without getting my approval.
When they found that out (it was about two weeks in) and they realised that they couldn’t do it, I thought fantastic! Let’s sit down and talk with Wellington to get this all sorted out, but I think Wellington was just too embarrassed. Emotions got too high, and you’ve got to remember that over that two week period the story is in every newspaper. I mean it was a high profile blow up and I was getting it both barrels full in the face, daily – from everybody.
Anyway, so now let’s fast forward to March 2016, three weeks after this thing went down. I’m sitting at home with a scotch at 11 in the morning thinking, what happened there? I’m sitting there thinking “what just happened?” The first thing I did was I called the key people at Powa and said let’s have a chat about whether or not we think it’s worth picking this up again. Let’s learn all the lessons we can, because what happens in technology is that you build a platform and you iterate it, and you iterate it, and you iterate and you get to version three and it’s been iterated all over the place so the technology stack, sometimes can get a bit complex.
At Google, after version three they rewrite it all. Google Maps or Google Mail or whatever, they completely rewrite it as a new environment. Now they have the luxury of that because they’re making so much money from their services, but most tech businesses just have to keep iterating with the platform they have.
So we had an opportunity to rewrite it with Rezolve. We looked at things that we could do better with it and we tried to improve it. And fundamentally what we build with Rezolve is a much more advanced version of PowaTag but with all the learnings. So what is it? Essentially it’s made up of two components, a piece of code that sits on the mobile device that wakes up to what we call triggers, which are Audio, Images, Geo Zones Beacons with little Bluetooth transmitters and a variety of others.
These triggers wake the phone up, and then the phone can interact through a transaction with that merchant or that advertiser and the transaction is created using a dashboard so when you walk into a retailer it triggers a transaction on the phone saying, “Welcome to Dan’s sandwich shop, it’s just around the corner, come and get a sandwich”. Or I’m seeing an ad in a magazine and I scan it and it triggers a transaction to buy that product, or whatever you want that transaction to do, it’s innovative and pretty cool.
I signed a deal with Samsung which was recently announced, which embeds our technology in every Samsung device globally, giving us 300 million devices. And I’m in discussions with other hardware manufacturers and very close with one other major manufacturer to embed our technology into their phone.
So what’s happening is we’re trying to create a global standard and what Rezolve is about is incredibly ambitious again, but I can’t help it! I’m very committed to the fact that we’ve created a technology that we think is the standard, like the “INTEL Inside” side of mobile engagement. If you’re Sainsbury’s and you’ve got an app, you can put Rezolve into the app, and it will wake up to all these triggers and you can use it.
And if you don’t have the Sainsbury’s app and you’ve got a Samsung phone it will wake up to a trigger as you walk past the nearest Sainsbury’s store. So you need to have a standard because if you’re flipping through a magazine, which not many people do anymore, and you see an ad for a bottle of scotch, you should be able to engage with that ad without having to download their own app. If I continue to flick through and I see another ad for something else like an aftershave, I can use the same app to engage with the aftershave and the only way that happens, is by having a standard.
It could be anything. It could be a product label. It could be a clothing swing tag. It could be a business card, anything that triggers a transaction. So that’s where we are, three and a half years, nearly four years after Powa went down we’ve got some momentum with this company and we’ve built it back up.
So I would say, as I bring this to close there’s only one lesson here. If there’s anything to take away from this talk today. There’s only one lesson. Every day is a new opportunity, every single day. Whatever happened yesterday, you can turn it around today. You really can.
As I told my daughters who are now 16 and 19 I said to them, look four years ago, things were pretty bad. But things are looking pretty good now, and I said it’s really in your control to wake up to whatever happened, whatever awful thing happened yesterday and pick it up from there.”
