C – Start-up

“Unleashing the beast”

The premise of the business plan at launch was simple – free marketing through the PC business and its magazine spend giving us a free full page advert in all the main PC mags. Low cost build based on a 1st gen Lintel stack and low cost of operations by piggy-backing off the PC business.

The launch of Force9 was very reminiscent of the early days of Express Micro in that it was put together in the same Worksop Council owned business start-up site called old brewery yard that Express Micro
started in (by this time the business was at the other side of Worksop occupying approx 40k of light industry units) and that it was characterised a big chunk of by goodwill and excitement and an equal
chunk of disorganisation.

The server room was upstairs in a 12×12 ft room with fresh laid laminate flooring and state of the art environmental controls i.e the windows were either shut or partially open. Downstairs there were a couple of small rooms and another larger room set up with around 8 desks for call centre and admin activities.

My first conversation with Nick Lott was a weird one because from his perspective I was just a supplier but from mine these first few months were a trial run. Paul Cusack had said that Nick was too immature to be
told about the trial run and to keep him in the dark until I had made my mind up at which point we would all sit down and have a discussion. I said something along the lines of being asked by Paul Cusack to do more than just sort out the phones and do him a favour by helping out as much as possible, he said something about not being bothered so long as everyone stayed out of his server room. It was clear that Nick was a very talented techie and academically a very smart person but I had already had years of experience dealing with dysfunctional techie’s / engineers. What gave me comfort though was that there was a clear passion for making Force9 a success – this I could work with.

The first Force 9 advert ran and by March 1997 we had 2000 customers who wanted to pay £7 per month for 56k dial up access, email and a bit of webspace – good times  but Energis had not installed the lines on time and the servers weren’t 100% – bad times  but at least the CDrom was done – unleash the beast!!!

After a challenging March Force9 started billing customers in April 1997, the business got this far with a big chunk of goodwill and hands on help by a mall group of customers and this would set the tone for how
we would build our relationship with customers from then on in. The first people involved in Force 9 were a real mixed bag with a couple of common traits good attitude and lack of experience. Amongst these people were a a couple of local lads called John Plant and David Hanson and Nick Lott’s side kick was an a typical unix engineer with zero communication skills and a complete inability to hold eye contact called Alistair Wyse – these guys were still involved in Plusnet in senior managerial positions after I parted company a year ago – what a personal development journey they have made!!!

These early months exposed two problems with the business, the first a complete lack of business processes and the associated accountability mechanisms which was clearly a function of a start-up and more worryingly we were paying Energis for the right to generate revenue for them as at this time Energis were supplying our 0845 numbers / traffic. The first one I knew could be sorted with operational development but the second would prove to be more challenging than I had thought……….

A major positive that came out of that rocky start was the fact that the customers who working with the business to get the service working formed themselves into the Force9 Usergoup and represented a unique
opportunity for an ISP to develop its product sand operations in partnership with its customers.

I was well aware that the business model for 0845 and premium rate numbers was one of sharing revenue that were generated and was amazed to learn that at this time ISP’s had not questioned the fact that not only were they not getting a slice of this revenue but they were also paying rental fees to the telco’s!!!!

I said to Paul that there was no point doing anything about this until we were satisfied that the business was a goer but that we would need to turn this cost centre into a profit centre if we wanted a workable
financial model and that I would see what the appetite for deals was like.

A year or so prior to this point I had been contacted by someone that was involved as a senior consultant with Intertel. A retired former MD of Ericsson’s UK called David Potts. Like me he was from Sheffield and
he had heard about my progress and came to me with an offer to help if I ever needed business development support.

I contacted David and told him about what I was doing and he confirmed his willingness to help. The first thing I asked him was who he knew that could provide us with an industry report showing which ISP’s were on which deals with which Telco’s.

He said that his son was a senior account manager with Telewest (now Virgin) business division and a big part of his revenue was 0845 / premium rate. I met with David and Steve Potts and explained to Steve
that I was involved with a Start-up ISP that was undercutting the market by offering service at £7 per month and were able to because we had a very efficient rout to market that would cost us nothing in the launch
phase. I told Steve that were were expecting to gain around 50k users over the next 3 years and that we would like to look at moving to them from Energis but we would want to take a look at their market
intelligence to establish trust for Paul Cusack.

 
I took the market intelligence report and met with Paul Cusack. The report listed names of ISP’s, the Telco partner, the estimated customer base, estimated traffic and derived revenue. It showed that there were
only a few hundred thousand users across less than 20 ISP’s and crucially that at best some ISP’s were getting discounted line rental but none were getting revenue share. I told Paul that I was ready to commit based on being helped by David Potts and being given free by Paul to work with Nick and the rest of the team to develop the business separately to the PC business. I said that the key enabler other than the involvement of myself and David was changing the terms with Energis or moving to a better Telco partner and asked him to think about things and give me a shout and I would arrange a meeting with David.

Paul called a couple of days later and I set the meeting up. It was a memorable meeting because David made a point about asking about whether it was a suit or jacket and tie meeting – old habits die hard  I told
David informal and left it at that. I picked David up and the look on his face was priceless he was wearing jacket and tie and I was wearing flannel shorts, trainers and a top – the whole way there he kept going
on about not being dressed right for a business meeting but when he got there he admitted defeat and took off his tie .

We met in Paul’s office at Choice Peripherals and I laid out my plan; move the business to Sheffield and implement the necessary operational changes on the back of the move, change the terms of our Telco deal,
David to help me with operational development and Nick to be left doing what he was talented at and managing the technology but under a proper review process supported by Paul and finally that Paul would be Chairman but not involved in day to day activities and that we would hold monthly board / review meetings. I said that I would wind down my other activities and with a view to going full time from Jan 1 1998. Paul said that he supported my plan and then went on to say that he had already talked to nick and after a rocky start to the conversation Nick had been supportive because of the investment in the development of the business.

The three of us met with Nick Lott and took him through the plan, he was fine with everything but the issue of paying Energis versus making money from dial-up calls. He said that Energis were the top guys serving ISP’s and no other telco’s understood “Internet Protocol” and he was planning on making Energis our Internet access supplier as well as dial-up. I pointed out that what we cared about here was the 0845 product and that there was no Internet Protocol involved at this point as 0845 services were a traditional voice billing product and that we could buy the Internet access separately. Paul jumped in and asked Nick if he was really advocating that we stick with Energis and pay for the privilege, I chipped and said that we could simply get a proposal off Telewest and ask Energis to match the deal. Paul confirmed that the financial model had to be right if he was going to support the business, Nick agreed and we were done. That’s when the departmental experiment moved into a being a proper start-up.

The agreed share structure was 10% Nick, 10% to me, 10% to a senior person at Choice peripherals in order to maintain their support for the business with Paul retaining the rest. I mentioned making the biggest
mistake off my life in the prior chapter well technically speaking this was it, I should have been braver, jumped in earlier and negotiated harder for a greater slice of the shares. Although there have been times
where I have questioned why Paul did not look after me better based on the value I ultimately created for him through plusnet I ultimately come back to one thought – Paul Cusack gave me my big chance and then he went and let me be successful by being supportive and staying out of my way and for that I will always be grateful.

I set about finding the premises in Sheffield and obtaining the proposal from Telewest.

I narrowed in on two premises option one was a newly built self contained 6k sq ft building at Victoria Keys and the other was the top floor of a new 5 story building at Nunnery Square with the second being my preference as we could lock out other renters by taking one floor and have all the expansion we needed. Paul preferred the first option because it was the easiest to exit if things did not work out with the
business. We signed up for Internet house I and targeted the move for September of that year.

I also got the draft proposal from Steve Potts of Telewest offering zero cost and 40% revenue share and he told me he was authorised to go to 50% to get the business. I told Steve that I would set up a meet with Paul ASAP. I spoke with Nick and Paul and told them we should push for 50% and Nick went off to Energis to elicit their response. Energis came back with an offer of zero cost and 10% rising to 20% revenue share dependant on significant growth in traffic.

We sat down to discuss the subject and bizarrely Nick took a position of preferring to stick with Energis and became aggrieved when Paul agree that we should move to Telewest. This did not bode well and was a
surprise to me as the dynamic between us all had been very good over the past few months and despite the difficulties of dealing with such an academically and technically gifted person I and Paul were inspired by
his technical talent and this interaction lead to early discussions about using the web to automate our product proposition in order that we could keep costs under control.

So we were moving to Sheffield and moving from Energis to Telewest, turning a cost centre to zero cost and 50% revenue share. We had free marketing and a supportive underwriter via Paul Cusack, a great bunch of
willing co-workers and lastly we had customers who wanted to work with us as well as consume and recommend our service. Not withstanding the other components this final piece proved to be pivotal to the future success.

I contacted one of the leading characters of the Force9 Usergroup a certain Mr Paul McMichael (Paulmac) and told him of our plans and informed him that it was our desire to bring the user group closer to
the business as we developed and asked him to go away and think about talking to the other members about formalising the user group further in order to help us develop the business as I believed that our people needed to view customers differently to other ISP’s if we were to mature our operational performance and ultimately differentiate from the competition. I also offered to pay the expenses of a use group trip to Sheffield. He said he would go away and discuss everything but that if someone came to Sheffield then no money would be excepted from us. I thought cool this is a man of honour and maturity – this relationship could indeed prove pivotal!

———-

“Is that smoke I can smell?”

The build up to moving to Sheffield generated a great deal of excitement because of the obvious statement it made about about investing in the business.

We were all excited about getting a proper server room with actual climate control, three phase power, and what seemed to us all cavernous space that the 6k sq ft of floorspace that Internet House had. We also had a recruitment push into customer services and admin functions and this phase of recruitment represented us moving into a more professional approach.

Along side moving to Sheffield I had identified the easy win of launching business products and doing so under a new brand and that’s where the discussion leading to picking the name PlusNet occurred. The thinking was that we would develop a multi brand strategy and enable other companies to offer internet access, with Paul having strong views on other PC businesses expressing an interest in following the same path and launching Internet access offerings.

Although I came up with the name Plusnet Technologies it was not my favourite option, that was Synergy Technologies, Paul made the call and Plusnet it was.

We had a whole bunch of help over the early years from people at Choice
Peripherals and one that stood out was Marco Potesta, who was effectively our marketing and web design manager whose day job just happened to be marketing manager / director at the PC business.

Things were not all smooth going though, Nick Lott was very evasive in relation to finalising the server room move and the associated transfer of traffic to Telewest. This was an incredibly difficult situation because as I mentioned earlier the prior months had demonstrated that mine and Nick skills were very complimentary and I was desperate to make things work as I was 100% dependant on him to make the technology stuff sing and dance having put in place the other components to position our business well for the future. This was all unfolding at a time when I was winding down my other interests and not putting any effort in to create revenues in my prior life.

Telewest were not happy with the delays because they had agreed to install redundant fibre to Internet House 1 at their own cost in order to support long term expansion in traffic.

Ultimately Paul had to talk to Nick and force him to agree what would loosely be called a migration plan. I think it went something like tell the customers we are going off-line for the day and Nick and Al will transport the kit to Sheffield in their cars, with Al decommissioning and Nick commissioning……….I was furious – it would not have been too difficult to have Nick and Al on site, working to a check list and having the kit moved by more suitable means.

I decided to sit down with Nick and try and figure things out. This was not easy though because Nick had closed down and just did not want to talk. I laid out to Nick my honest opinion of him and my belief in his talent and the clear problem that his lack of trust manifesting in the form of agreements being made and not be delivered on. I told him that we were in a very privileged position to have someone like Paul who did not dictate to us but fostered a debate as part of the decision making process. I laid out to him about my personal history and referenced the trust I was placing in him as I took the biggest risk of my life and confirmed that I was willing to agree commit and then deliver on what ever we as a board decided to do.

This gamble paid off, Nick started to share views in his lack of personal confidence on anything that was not pure technology, poor interpersonal skills and pressure from having a young child while still at University and living in the same student digs still and getting the chance of a lifetime in this start-up having working in the tech support department of Choice Peripherals following graduation. I told him that no one expected him to have the experience he clearly couldn’t have by that point and said I was happy to trust him with the technology if he trusted me with the operational stuff,  I offered to help and support him personally and get Paul to help too.

When I updated Paul he was pleased because I had gotten Nick to open up and naturally concerned about Nick’s personal circumstances and willing to help.

OK – last big loose end out of denial and being addressed – now lets goooooooooo………..

Well err not quite.

The phones sounded a bit busier than normal, someone came and told me customers were unable to connect, pull email or access webspace. Oh great our first Sheffield major outage?!?!?!

Walking up stairs my thoughts are, we go from laminate flooring to raised flooring, no air-con to climate control, 13amp ring main to a dedicated three phase supply, and it’s been days since the amateurish move with no issues – why does everything die now?!?!?!?!

As I approach the server room door a new thought enters my mind “Is that smoke I can smell?????!!!!!!”

By the time I got through the door Nick had already started to demand that non-techies get out of the server room and he fired one of these salvos at me, I asked the others to leave and told Nick I would follow based on a time to fix to give to customers. He and Alistair were feverishly plugging and unplugging things and Al was not getting drawn into any conversation. Nick barked ‘tell the customers 1hr and everything will be sorted’. Things got back to working and I went looking for Nick wanting an explanation. I asked Nick what had happened, he smiled and Al looked very embarrassed.

Nick held up an extension lead that had burned out and carried on smiling, I was struggling to see either the punch line or the relevance of the extension lead and asked how that had take everything out. Al’s downward stare started to resemble a bore hole drill and Nick said that in the rush of the move he may have inadvertently daisy chained every server on a bunch of extension leads instead of powering each cabinet separately off the power distribution.

I turned and walked away without saying another word.

Oh shit – “Houston we have a problem”.

I spoke to Paul and he told me to sort Nick out or figure out another approach as he was busy dealing with some Americans that wanted to buy the PC business, he also re-iterated his desire to not get dragged into day to day stuff. I agreed to try managing Nick and figure out a plan B just in case.

My approach with Nick was simple, he was clearly the technology brains but his tech execution was crap and his passion was programming and databases. I told him that Paul was not coming to Sheffield any time soon and that from this moment on it was honesty and a professional focus or we would have a big problem and I placed a call on the phone in front of us and called Paul McMichael (F9 Usergroup) and told him I was putting Nick Lott on and that he was going to tell him what had just happened and I then just put the phone on hands free and stared at Nick who after a short pause described what had occurred. When Nick was done Paulmac said that the early months had been fun but now it was time for the business to grow up, that the Usergroup had done so (it had formalised its structure and roles) and the rest of the business clearly had, and that meant what was left was to recruit proper network engineers and server admins and that Nick should focus on technology leadership and development and not implementation and maintenance, concluding that if we were to commit to this action that we would retain the support of the Usergroup.

Nick agreed that it was time to move on and develop the tech personnel (him and Al) in the same way that we had in customer service and admin. Adverts were placed and interviews were carried out.

At the same time I sought out Alistair to see what he was made of and whether there was something to develop in him. I found Alistair in the server room and asked him to stop what he was doing and pay attention to what I had to say. I told him about what had been discussed between me, Nick and Paul Cusack and told him that if Nick did not transition then he would be gone. If that alone wasn’t enough to freak him out I then asked Al whether he thought he could make the transition and whether he realised that given the situation we faced that the business was entirely dependant on him to keep Nick on the straight and narrow and to ensure we recruit the right people. Talk about baptism of fire…….

Al composed himself and said he was ready and wanted to move on and that in his opinion we were looking at candidates with good CVs and that if we got through the next couple of months with no major miss-haps we would be fine.

We hired a couple of guys in and promoted a couple of young guys out of customer support.

OK now its coming up on one year since launch, consumer net adds are growing nicely, business net adds are the same, with the support of David Potts we have transformed the operation from an atypical Web 1.0 bootstrapped start-up to a proper fledgling operation and we have done all of that based on what is now a profitable proposition which is generating solid positive cash-flow and what was the key to all of this (well not withstanding the obvious market demand) it was the 1st generation of PlusNetters that made it all happen.

More on that shortly but first lets deal with one more minor distraction 

Paul Cusack asked me to meet him asap.

He told me had agreed to sell the PC business to the Americans (good times) but that they also wanted to buy him out of Plusnet (bad times). My frown must have been clear to see as he quickly added, don’t worry they are interested based on you leading the business, they are just blown away that we are making money and growing so fast and want to invest and sell out for loads of money in a few years. That he was sticking around for a while as they were buying him out based on an earn-out and that was the best bit we would get a valuation based on the full year financials for 1999.

Paul confirmed that he would have 100% control until the end of 1999 that gave me enough time to properly establish the business. He told me that he had trusted me with the business and now it was time for me to trust him. Then he told me the real bad news (as I thought at the time), that they had to buy 85% of the shares which meant that I would have to sell half my (10%) holding or there would be no deal. again he asked me trust him and he advised me to take something off the table as it was best for me (and he was of course right) as he had gone nuts over the prior years wondering if he would make something out of the PC business. He concluded by saying that he was 100% certain that Nick would not want to sell (and he was right about that too) and I could not disagree.

So simple choice, swap a relationship with a small flaky PC business for big American Nasdaq listed PC business or risk everything going to shit on the back of screwing up the major shareholders exit.

Next stop was a sit down with Nick as well and replay the conversation – this should be fun. Unsurprisingly Nick wanted nothing to do with the deal and thought as I did that shareholder value being maximised was further out than 1999. Paul said that it did not matter as he was selling and Insight didn’t need to buy Nick out. He also surprised me by saying there and then that I was going to be made Managing Director on the back of the deal going through as Insight wanted Paul to run the PC business and a proper independent management structure for Plusnet which meant Paul being Chairman and Plusnet needing to hire our own accountant.

The Americans were of course Insight Enterprises Inc and the American in question was Tim Crown. at this point I really had no idea just how interesting that chapter in the story would become 

I had the briefest of meetings where Tim said that he loved what we were doing but they did not want to get involved or bring us inside their core activities, that Paul was in charge until 2000 and that he just wanted to see us keep growing profitably and that they would invest in supporting the business if a suitable opportunity developed. He concluded by saying if we kept our noses clean then the big bad American company would be invisible and that I should go through Paul if I needed anything from him.

So now its time to focus on running the business and growth – well err, not quite – Nick did not exactly take to well with dealing with more than just him and Alistair and we had the most interesting of marketing discussions as a result of which things came to a head.

The new recruits were seen as a threat not an asset and things got prickly again. Secondly Paul, Nick, David Potts and I had a discussion around marketing where Nick pushed hard for an idea he had, he wanted us to buy and post 2 million CDRoms to a database of consumers just like AOL was doing. I was gob smacked (understatement), Paul asked him where the money was going to come from and did he appreciate that AOL could afford to because they were not only huge but they were making a lot of money off their product where our model was based on low cost marketing and referral with a good product and a low price. Three people in the room knew where we had arrived and one clearly did not.

Paul sat down separately with Nick and told him that he was done at Plusnet, that it just was not going to work with him involved and that he appreciated the fact that Nick came up with the idea to launch the business and that he would invest in Nick’s next project. He concluded by saying that he would employ Nick as a consultant at the PC business until Insight took over in 2000 and that he was was under no obligation to do anything as a shareholder in Plusnet but that he was sure that Insight would offer to buy his shares at some point.

Now it was time to get our heads down and motor and that’s just what we did!!!

So just over a year had passed, the business was sold, but that process would take another 18 months to complete. We had a very successful small business servicing early adopter demand for dial-up internet access. With all of our success being a function of Paul letting us get on with stuff, strong demand (and support) from customers, a sound financial model and the real magic being a great bunch of people working hard and just loving what they were doing!

So to wrap up the start-up section here are my nominations for the first generation of Plusnetters as at Oct 1998 (in no particular order):-

John Plant
David Hanson
Alistair Wyse
David Singh
Kevin Revill
Stephen Dean
Scott Elliot
Wendy (Basford) Bray
Peter Jackson
Simon Mann
Ahlame Taha
Paul Crutchley
Garry Wilson

 

Honorary Plusnetter awards also go to David Potts (can’t be a full Plusnetter if you’re a consultant! everyone knows consultants take no responsibility) & Paul Cusack.

I could well have included a few other names at this point but I am not sure of their start dates – so I would appreciate it if anyone listed above prodded me with suggestions based on your recollections.