In this episode, we had a chance to discuss the pre-emptive wind up of Ten Carbon Chemistry with Dr Tony Peacock. Earlier this year, Tony candidly posted on LinkedIn some of the story behind the journey and the recent decision to wind up the company, returning the IP to Wintermute Biomedical and I was very keen to explore the story behind this decision.
Tony has been involved in tech transfer in many roles, most notably Managing Director of the Pig R&D Corporation (a forerunner of Australian Pork Limited), Chief Executive of Cooperative Research Australia, Chairman of Wintermute Biomedical, as well as a consultant to CRC bids and angel investor. We started by exploring our perspectives on what technology transfer is and discussed that perhaps the name suggests a simple handover where, in fact, tech transfer is a complex and ongoing set of interactions and iterations to enable success.
We started exploring the rationale to the formation of this new venture. The venture was designed to enable Wintermute to continue its strong focus on biomedical applications while exploring opportunities in agricultural and industrial chemical markets. The formation of the new venture enabled market development and the positioning of the novel chemistry with different partners working who had different technical, market and regulatory needs.
The timing of the venture was particularly interesting, (Launching in the time of COVID), which distorted demand for cleaning and hygiene solutions. We discussed how market structure and big brands can create opportunity and challenges in entering consumer facing market segments. The inherent risk to well known brands to adopt formulation change became a challenge. Regulations set around older chemistries presented challenges with a new mode of action. Agriculture applications emerged where the technology received interest as a fungicide resistance solution.
Tony introduced the 2:2:1/2 rule – that biotech takes twice as long as expected, with twice the resources envisaged and half the revenue generated! We particularly focussed on the timing issue, with various delays in trials and paths to market impeding the return on investment. The importance of market pull, or the role of the desperate customer as Paul Bryan mentioned in an earlier podcast, was also explored where Tony described the initial enthusiasm amongst glass recyclers for the product and getting and holding the attention from (potential) customers.
We then explored the governance and management that oversaw the decision to wind up the company. Tony reflected on the importance of governance and the need to think beyond risk management, an area we discussed with Anne-Maree Perret in an earlier governance podcast. We discussed the importance of clear financials, the role of the founder and having a focused management team to bring the venture into maturity. In reflecting on the journey, Tony reinforced the need for due diligence and wearing a black hat in assessing opportunities and recognise that new ventures take time and energy.
Transcript
CB: Hello everyone, and welcome to Tech Transfer Talk. My name is Cameron Begley, Managing Director of Spiegare. And joining me today is Tony Peacock. Now, for those of you listening in Australia, Tony is a little bit of a giant of the innovation community, having been heavily involved in the CRC program over many years, not only as a leader or a CEO of the Invasive Animal CRC when it was in its prime, but also as the head of the CRA or the association that led the industry, for want of a better word. Tony, it’s a great thrill to have you on the show. Welcome.
TP: G’day. Thanks for that.
CB: Quite alright. I hope that was a reasonable representation of your past…
TP: Well, before I was involved in CRC, so I did a decade in the pork industry. So a bit more actually. So I’m a regular researcher originally out of Sydney University, then Melbourne University, then Saskatchewan. And, but I found I preferred to talk about innovation and implement research as much as possible rather than doing it. Some might argue I wasn’t very good at doing research either, but I preferred the process of talking about research and do a lot of public speaking about the process. And then the actual technology transfer. If you’re like, I’m not absolutely enamored by that term, but the process of innovation and where it tries to make a difference, that’s what all researchers want to do. But a lot of them get a much bigger kick out of doing the research than I ever did.
CB: Yeah. You crossed the chasm there into the outward facing stuff, and it’s interesting. I just grabbed that, your discomfort with the term ‘tech transfer’, that’s, given we’re on the Tech Transfer Talk podcast, I think we’d better square that one away early.
TP: Probably because I see it as much more iterative than, you know, working with industry, working with universities and stuff. And that idea of a tech transfer department in a university or an office, which kind of implies, you know, what smart people inventing stuff, transferring it to other people who take it up. And I always found that working with industry, they have something like, you look at ABS stats, it’s less than 5% of ideas come from universities to industry. They take ideas from their own staff; they take ideas from their competitors; they take ideas from their customers and all sorts of places. And they give ideas back to universities who work on them and improve them. And I prefer the term ‘innovation’. I hadn’t thought about it in terms of the name of the podcast. Sorry, Cameron.
CB: No, no, that’s all right. This is actually really interesting because it’s good to get other people’s perspectives on it. And I sort of gather from that, Tony, that it’s the sense of linearity that is the point of discomfort for you. If we think of tech transfer as what you’ve described, that’s what I think it is; it’s a set of relationships, tossing ideas and concepts around, trying to find solutions to problems. That’s my definition of it. But it’s that sense of linearity that might be inferred from the name ‘tech transfer’ that might be the point of allergy.
TP: Yeah, exactly. And that’s, ‘innovation’ is a difficult term for some people as well. So, anyway, I concentrate on that end of that part of the research process is where it gets implemented and used and where it makes a difference, that’s what I get a kick out of. Rather than doing research or publishing papers or some people that love when they get a new publication, I get a much bigger kick out of a farmer saying, ‘Oh yeah, we used that. And it worked.’
CB: Absolutely. And the journey that you’ve been on following your leadership in, you know, ostensibly in the industry with the Cooperative Research Centres Association and all of the work, you’re leading up to that you effectively, I’ll say, retired from that role or left that role in late 2020, but then started to get a little bit more hands on in some other businesses. And I guess this is what really catalysed my hope that you’d come onto the program, Tony, because it was one of those adventures in particular around Ten Carbon Chemistry that I am really interested to understand. Sort of how what happened and then how it didn’t happen. At the risk of being a little blunt.
TP: Yeah. So, look, I’ve been an investor in some startups over the years, for more than 25 years, and we’ve done that at one stage, going to an auction of a property. In Australia, I think we over overemphasise investment in property. And I said to my wife, I’d rather invest in a company that gives people jobs rather than compete against them for a house. As an investment, she was probably right, and I was probably wrong over the years. Let’s leave that aside.
CB: A whole other conversation, the investment philosophies of Australian people and funds, etc.
TP: So, I’m an investor and then company director of a number of startups and now a number of kiosks and my own consultancy. And I spoke about Ten Carbon Chemistry on LinkedIn, because we closed it down, we decided we wouldn’t seek further investment. We’d return a little bit of capital that we had raised to the investors because it was just going to be too hard, too long. too big a process. And as a company, you know, making a decision to go into voluntary deregistration, we didn’t put it into administration. We didn’t need to do that. We took a decision that the technology, although we do believe in it, it’s there and exists within, as a part of a platform which is owned by essentially the parent company. We decided that we wouldn’t proceed with it. I suppose I’m a little bit embarrassed, but it’s important that people talk about their failures.
CB: I think it is.
TP: But you do often also hear this. You know, you learn so much through failure and all that, but it still feels absolutely crap when you have to close.
CB: There’s no denying that it feels rubbish because everyone wants to succeed in what they’re doing. And I think that’s a fair enough feeling. I don’t think everyone that’s been in this tech transfer or commercialisation or innovation, whatever name you want to give, has been through the process that you’re going through that you’ve felt. We’ve all felt it at one time or another, but I think the reason that that post might have got the interest that it did is because I think within the tech transfer community, I’m going to stick with that nomenclature, given the name of that podcast, I think within the community, there’s a genuine interest to learn in these moments. I do sense, and this has been a little bit of a theme at various times within the podcast, that there’s just this little soupçon of schadenfreude I would call it, where there is the odd moment where people sort of take a bit of glee from this. I’m not in that camp. And I think the vast, in fact, overwhelming majority of people are not, they’re genuinely interested in what happened. And strangely enough, Tony, the most popular podcast that we’ve had through our series, was in fact, a case study with Victor Pantano from here in Canberra. The interest in the story is why I was really keen to have you come along and tell us sort of, now you’ve told us how it ended, really curious to…how it began. Why even consider doing this in the first place? And then sort of the journey that took you to the decision of ‘It’s better actually to wind up voluntarily and hand some money back than press on.’
TP: I’ll go back to the beginning of my involvement. So Ten Carbon Chemistry. The ten comes from Ten Carbon. So, we were working on fatty acids. That came out of many years of research by an American fellow, Tom Rau, in Montana, and some of his colleagues on antimicrobial resistance. And that’s a long-term interest of mine. I’m on a CRC that addresses that issue. It’s obviously a big issue for food producing industries that I’m involved in. And so, I did have, you know, a fair interest. And we made an investment into the parent company, Wintermute Biomedical, which is looking at the human aspects there. Wintermute’s is going really well. When I invested it was pre-clinical. It’s now a clinical company doing its first clinical trial, that sort of thing. But the technology, we thought of as a platform because we can make the fatty acids soluble which makes it-normally they’re, you know, they’re a gluggy fat if you like, and making them soluble without using alcohol or harsh solvents, it gave you a possibility of doing all sorts of things with them, One of which was applying them in agricultural and industrial settings and hygiene settings. So, cleaning-huge, huge market in fungicides, in plants, those sorts of things. And in many of these markets, antimicrobial resistance is coming in. And so, I was asked, would I chair Wintermute at the time-I did. We implemented a few changes and various things, did a bit of raising money there, really concentrating. And the thing you always-there was this dichotomy of look, it seems like a platform technology that has all these other uses, but when you’re doing a medical research program, everyone will tell you ‘focus, focus, focus’. You know, ‘Keep’, you know, ‘You’re going to raise money from a venture group, we want to see laser-like focus’, you know, ‘24/7. We don’t want you to actually have any other dreams than that absolute focus on getting to the end of this process, etc.’ And so, we decided if we were going to look at other uses of the technology, we probably should put them in a separate company.
CB: Yeah. That’s interesting
TP: Now should we or not? You know, we didn’t see ourselves as a mini version of a giant conglomerate. We did see the ability to focus. And we thought they’re probably quite different investors out there. Yeah.
CB: And quite different markets as well, Tony. Your orientation is very different.
TP: Completely different, completely different business models. So, if the clinical trial goes well in Wintermute that’s currently going on. You know, there’s an established business model. Ten Carbon Chemistry,it was more, you know, ‘Do we directly sell this stuff as a cleaner in cleaning technology?’ And we actually won the Best New Cleaning product in Australia in 2022 with one of its products. We were accepted in one of the fairly prestigious accelerators. We won, yeah, placed into the International Fresh Food, Fresh Produce Association‘s inaugural accelerator, and we displayed in Florida and we had a lot of attention, we had a lot of interest. People were sounding us out and we got interest. And we commen…you know, we signed some deals with one of the largest distributors of agricultural chemicals in the world to start doing joint research into product. But again, these things just take time. So, you know, there’s a whole model that people talk about in biotechnology of, you know, two by two by half. It’ll take twice as much money and twice as much time, and it’ll bring in half the revenue of your wealth. You know, if we could have done that, we’d have been delighted, I think. It’s just because, you know, you ran into things like chemical company gave it to their Italian lab and didn’t realize that guy was, you know, distracted for six months, and hadn’t actually done the tests that we thought were coming. Things like that. And you’ve got to start to pay staff and pay people and get things going. And then you’re trying to enter some markets where there are incredibly big established players, big brand names in hygiene that people trust. And it’s not enough to have a product that I claim is better, uh, better for the environment, better for the…you know, on the bugs. And there’s very big barriers in terms of regulation. Um, so, we were naive to the degree that we didn’t understand enough about the regulation. I think we were definitely prompted. As I said, it was the product was starting up within winter during Covid, so there was this great rush for new cleaning and better, cleaner materials. I think we overestimated people’s appetite for innovation at that time because actually, uh, people didn’t want to take on new products unless they were a vaccine for Covid, obviously that was, uh, necessary. But in terms of cleaning and sanitising products, they wanted to be told by government what did they need to do? And there was no spare money around to look at new things or take new things through. And not a lot of regulatory attention to looking at new things. They were overwhelmed with requests for new registrations of old things.
CB: There are a lot of themes that you’ve touched on through all of that, Tony. And just to sort of work, maybe perhaps backwards through them. So, Covid distorted the market because the regulator was overwhelmed, unable to process new chemistry. And if government is going to be prescriptive around what is needed to clean a surface, they are not going to get all experimental and funky. They are going to take things that are absolutely well-known, demonstrated, proven. Big brands help secure confidence in products and all of that sort of works against you. Have I got the gist of it?
TP: I think the regulators in Australia, at least the ones I’m familiar with, did an extraordinarily good job during Covid. They did set up mechanisms. The rules did become clear, but we were new players in the area, and the rules are largely based around quite old technology as well. And so, there’s no real room to argue for new things.
CB: An interesting point you made there, Tony, was that the rules were based around maybe older chemistries, which may have also disadvantaged newer molecules, such as what you were bringing through.
TP: You know, it’s on us that we underestimated the openness of both the market and the regulatory system to new claims. And I think, you know, your average consumer just probably wants to stick to what they know.
CB: And this is the power of the big brand, right?
TP: Yeah. You know, these are products that worked for your grandmother.
CB: The big brands thing is really interesting. This has come up a few times on the journey because as a new entrant with innovation, big brands have got risk associated with change because their reputations and, you know, the intangible value of those reputations is really high. Through your approach to market, were you trying to work with the bigger brand owners in the home care, personal care, institutional and industrial cleaning? Were you working with them, or were you trying to create sort of your own product formulation and take that through?
TP: A little bit of both. We were trying to develop our own to get a market to try and get some income, but we certainly…and I’m subject to NDAs and things I won’t name the brand…
CB: Please don’t.
TP: Everyone listening to the podcast would recognise the brands, and we published a paper that got some attention and we were approached, or we made approaches. And essentially several of the brands did try our products and did actually get quite good results. But they, essentially, and I’m speaking on their behalf, which is, you know, you know, that’s not entirely, it’s my perspective. But they really decided there’s not enough innovation there. Why would we fix something that they didn’t regard as broken? Then you’re faced with, do we go out and do another round of investment and try and convince people to keep putting money into this when we don’t own it? Very many, you know, university tech people will say, ‘Oh, you know, a license is every bit as good as an ownership of, of IP, or a startup’. It’s not.
CB: So I just want to grab that idea of the license and the investability that I think you just, you know, sort of floated through there towards the end. Tony, so, it’s really interesting. You, you knew you were licensing to start with. That’s a perfectly legitimate starting point, but because you couldn’t own it. Was there a sense then of it was unclear how the investors would exit their investment or how it would all monetise?
TP: We believed the research was good enough or would become good enough in these areas that it would be licensed. And, you know, they would prefer to directly deal with the patent owner. The dilemma being, they’d never have heard about it if Ten Carbon hadn’t existed, because it didn’t have the, you know, the expertise at the time or the bandwidth to be out there, you know, at a fresh produce conference in Florida talking about the stuff. Its beginning focused entirely on its medical uses. It’s a bit of a dilemma.
CB: Yeah. So what strikes me, just struck me is we were chatting and you were describing it there, Tony, is that you’ve, in a way, set up a sales and marketing and market development subsidiary. Because the IP couldn’t exit, it had to, you either had to do all those license deals and the resulting funds would pay for the capital, and they’d be returned to shareholders, etc., or you would get to a point where sufficient critical mass had been built in these, I’ll call them secondary markets or additional markets, that it could just be reabsorbed by the parent, because all of a sudden it had scale.
TP: Um, yeah. So, I think that’s probably right that if it got scale, then, you know, the investors in the medical company are not going to worry if you’ve got a division that’s paying for itself. And returning back and maybe funding the medical…
CB: Wouldn’t that be nice?
TP: You know, that’d be terrific. And again. Yeah, it’s when you’re on a board of directors trying to decide what’s the correct strategy here. I’ve been on boards where, you know, you’re very reluctant to go into veterinary markets with it, with a new product because, you know, is it too soon because we want to reserve this for human markets. And, gee, if we become a, you know, agricultural chemical to people and it’s basically the same technology, different actual chemical, but same technology, are we going to have some sort of impact on the perception of the medical?
CB: You think that’s a thing by the way?
TP: You will find many people that you know don’t like the idea that, you know, I’m going to use this on my skin condition, but in another use it’s a household cleaner. That, or an agricultural chemical, that was part of our thinking. I wouldn’t say it was a primary part of our thinking.
CB: Yeah. Yeah. Interesting. When all this was being set up, and I did like the ‘two-two-half’ ratio, by the way, around time and dollars in revenue. I think there’s a truth in that for, not just biotech, I’d just stretch that out a bit more to biophysical sciences. There were a set of sort of expectations and some due diligence that probably happened early on. And did you find that those expectations or assumptions started changing as you kept moving along down the path with Ten CC-which is a good name for a band if nothing else?
TP: Yeah, there was a moving uh, so people that, were incredibly enthusiastic. And yeah, we’ll take it up and we’ll start buying in these quantities. That would give you the confidence to go on. They, you know, like us, were overestimating the willingness to innovate in markets they were trying to address. So, one form of the chemical in very dilute amounts, we did tests on piles of waste glass. Now waste glass smells because it’s crushed glass from recycling. It’s got beer in it. It’s got soft drinks in it. Lots of sugars. So, when it sits in piles it grows a lot of bacteria and it stinks.
CB: Yeah. Okay. Makes sense.
TP: And we had a number of them, including, look, I’ve been to a very large pile of waste glass in the Netherlands. Probably the biggest hill in the Netherlands, to be honest.
CB: Um, so it was this high, was it?
TP: Yes. Yeah.
CB: Right. Okay.
TP: Yeah. My hands are about four inches apart. And hell of a, you know, tonnes. And they. And it can smell to the extent that they have lots of problems with neighbours, or they can’t sell it into certain markets because they can’t transport it in certain markets.
CB: Oh, interesting. Okay.
TP: We had serious international interest in, could the chemical be used to just spray on because it had this property that it kept working. You sprayed it on, it killed the bacteria. Stopped the smell. But it kept working for at least long enough for it. But then people start to, you know, just do the sums and you have to get down to incredibly low amounts, and then you’ve got, ‘Oh, gee, it’ll cost me this much in new infrastructure to actually spray the glass as it comes through the recycling’. And then you’ve got okay, now I’ve, I’ve convinced the site manager-he’s really, really keen on this. He’s got to convince…
CB: The controller.
TP: …the financial controller who happens to have 17 factories across Europe.
CB: And you do the math…
TP: If we do it for you, we’re going to do it for all 17. And we don’t need to for these ones who don’t have the neighbors that are complaining and…
CB: That’s right. Is there a market for de-smell recycled glass? I suspect not.
TP: How much value are you adding compared with how much cost? Um, those sort of things were very, very hard to, uh, spreadsheet and to work out. How much should we spend, how much time, you know, should we? If we’re going to do major trials of this stuff, do we ship it over from us? Make it here- we were manufacturing in Melbourne. Do we manufacture it here and ship it to Europe to trial it, or do we do batch manufacturing over there? All those sort of stuff starts to come in with a really uncertain, well, I would buy it if it was me because I have this particular problem with the tulip farm next door.
CB: It strikes me, as you describe that, not that I’ve been through that particular problem, but I am familiar with that process where innovation is out looking for problems to solve and problems such as these come up, but the value proposition doesn’t come together. I guess the challenge here, Tony, is how do you spin through those quickly to identify what really does have the ability to get productised, and to actually solve a problem where there’s a preparedness to pay. In contrast to a ‘Gee it’d would be nice if it didn’t smell.’
TP: Yeah. And you know, and getting to that amount of scaling up that you have to do to get to the stage. And of course, you’re increasing your risk all the time because you’re spending more money. You’re taking more time off people. You’re a big problem for them, but you’re not the number one problem for them. And so they don’t get back to you for three months where they were incredibly enthusiastic. And now, you know, something’s happened. And so, that ability to work with, and this was all through Covid, as you can understand, post Covid-era… people have got 99 problems and you’re only offering to solve one of them, getting enough attention from them. So, it was not enough of a burning platform for the customers to…when there was still development. You weren’t honing them a solution absolutely on a plate.
CB: You’ve hit on a few really interesting points there, Tony. One is this idea of, while you’re in this development stage, you need customers, end users, supply chains, to come along with you and understand that it’s development. Whereas, if perhaps in some of these cases, they just wanted the solution package ready to go, apply it, problem solve, make them move on so their 99 problems suddenly become 98. And the appetite for joint development, in my experience, tends to hinge on a real problem that desperately needs a solution. Uh, and one of my colleagues refers to them as the ‘role of the desperate customer’ in innovation. And if you can’t find that desperate customer, you can get caught in what you just described.
TP: Yeah. And so that’s where, you know, I think it’ll probably see more like, from the customers there that have that real problem of antimicrobial resistance really kicking in and them absolutely needing a solution. As opposed to those markets where this is just, you know, a little bit better or you know a lot better, but in their view a little bit better than their current product. But they’ve already got a market and it’s not going to steal the market of their competitor necessarily completely or anything like that. So it would be nice to have. But uh, again, you know, we’ve got so many things we’re juggling, that sort of thing.
CB: It seems that after the journey that’s been gone on around the market, facing opportunities, it comes back to who is that desperate customer and it comes back into this idea of resistance, whether it’s antimicrobial or whether it’s fungicidal, it’s the resistance piece where desperation rises as a function of biological adaptation.
TP: We were smart enough to know that we needed advice from people that were really much more in that market, and we got Stuart Nicol, who was, you know, the most experienced guy in the hygiene market in Australia. He chairs the association, all sorts of things. Stuart came onto the Board. We had really good expertise around agricultural markets and things like that. My approach as mentioned right at the start in the inventory space, that sort of thing. So, we did have expertise that we leant on and we all thought the products were worthwhile, but we just couldn’t stretch to that innovation gap, was a wider gap than we all thought it was. We were selling some product, but just not enough to really generate the level of development that you need to do. So, you would have to go back to investors, you know, probably again and again. And there’s only so many times you can go to the well.
CB: I’m just interested. This is probably a bit of a blunt question, Tony, maybe a bit hard to answer, but was there a particular moment or a particular handful of sequence of events that got everyone to sit up and say, hang on a tick, we’re not going to get there.
TP: No, there was, we came to it at different times, but we put the guy we put in as managing director. We said, let’s put you in full time and really have a go. We could have spun it out for longer and done more, you know, fractional appointments and things like that. But we made a decision. And to his absolute credit, Doctor Rob Smits, he said to the directors, ‘Look, I think we need to make the call, okay? I don’t think we’re going to get there in time’. We had done an accelerated program that was actually pretty helpful in really making us look really hard long term. And where are we going to get a cornerstone customer that would be enough to really keep building. Or are we better to just say, look, this is a much longer-term play and let’s return it to the original IP owners. Many of the investors still have a stake in that company. Let’s not use, go, let ourselves go into administration. Let’s not use every dollar that everyone has given us. Once we’ve decided in our hearts that it’s in our spreadsheets.. this is…
CB: Yeah, in the spreadsheets.
TP: It’s not going to be, it’s not going to be a goer. People will have a tax loss and they’re not going to get a return on their investment. But they’ll get something back.
CB: Yeah. We all have that moment in an Excel spreadsheet. I think everyone’s had that moment in the past. But the thing that really strikes me about that moment of realisation, if I can call it that Tony, is that the board’s made the decision to go with a full-time managing director, and it was that appointment that accelerated or brought forward the decision. If you kept working on that fractal basis, which you mentioned in passing, you might have just dripped along for a little bit longer. It strikes me there’s something in that point of full-time appointment, really focused, look through the whole business case and we’re not going to get there.
TP: Oh, look, we had very good governance. Of course, I’d say that I was the chairman, but we were very thorough in our governance. Our accounting was top rate. So we always had a very clear picture of where we were. Nobody was under- or overestimating the actuals, but we didn’t have a founder who was also the inventor of the technology and so passionately involved that was going to bootstrap this to the nth degree. We were all pretty rational about it throughout. And yes, I think you do get to, when you have these meetings. You know, I always had meetings in, as I said, Florida and the Netherlands, that I was coming away wildly enthused by it. But then, we always had monthly board meetings and a very sober external accountant.
CB: Right Okay. A couple of things in there that strike me. your rationality and, you know, good accounts, like all foundational issues for any venture. But you made a passing comment about a passionate founder. Do you feel that the passionate founder is a necessary condition for success?
TP: Well, look, I would probably say the technology needs to stand on its own. But people still have to pay the bills and marry it up with all those very rational side of the brain things and looking at the accounts every month. And did you make your forecasts? And if not, why not? And when are we going to have somebody ask, more than one person on the board asking those difficult questions? There, so that you don’t get to a um, you know, luckily we didn’t really get to a crisis point. We made a rational decision to say that this is just going to take more money and more investment than, and more, much more time now…
CB: Than you were prepared to do.
TP: Yeah. And so, um, you know, if we put the CEO on half time, for example, well, I think we would have just made the same decision. I think we did go in with our eyes open, but maybe it’s just important that you do keep to your plans. And our plan was if we didn’t make these targets, we couldn’t make it work under the circumstances we were in, so we wouldn’t push against reality.
CB: A very sage point not to push too hard against reality. It does get in the way. But Tony, what I infer from that is that the passionate founder is a useful part of the equation, but keeping that business strong business sense, keeping a strong eye on the numbers and the discipline needs to be an important part of what the board does and what the management does, because passion alone will not get you there.
TP: Yeah. And we had a small but effective board. People willing to meet, do the work. You know, I was executive chairman for a period. I prefer not to do that. You know, I think having a chair and CEO is vastly preferable, depends on the situation. But really, making sure governance is really good and not getting so down in the weeds that you, you know, your side. All those analogies.
CB: Understand that separation. It can be quite powerful.
TP: Many startups do ignore their governance to a much larger degree than I would. I don’t like governance that is simply risk management, but governance that is genuinely about the strategy and performance.
CB: The issue of governance is a whole other area, of course. Tony, we had the pleasure of having Anne-Marie Perrett come on about 12 months ago talking about ‘big G’ and ‘little G’ governance. And I think what you’ve headed on there very much resonates with the conversation we have with Anne-Marie around the importance of governance and it being beyond risk management.
TP: And I’m involved in boards myself and also appointing directors. So tend to be chair and nominations committee and a few things like that. And it’s, you know, there’s a hell of a lot of people who want to be on boards, now. There’s a real difference in how people perform on boards in terms of, you know, their attitude to risk and, you know, their tolerance to work, do the work between the meetings and support the staff, that sort of thing. And yeah, there’s not a lot of prestige being on the startup board, to be honest, you’re probably not going to get paid. And there’s probably more work than you need, but they probably need the advice and the help of directors. You know, more than a company that’s coming along fine during that phase. That’s where they really lean on that, you’re getting so much expertise across from a board because you just don’t have the staff. You don’t have the manpower to employ consultants or staff. So, you do rely on your board. Pretty heavily.
CB: Tony, in bringing things to a close, it’s been a really fascinating journey talking through the Ten CC experience. And, I’m just wondering if there’s one or two major takeouts for you that you go, ‘Yep, they’re the one or two things that I’ll carry with me into the next venture’.
TP: When you do your due diligence right at the start, it’s really worth putting the black hat on and doing what’s the worst-case scenario and what do we need to survive? What do we need to actually thrive, and what do we need to go really well. And be really hard on the numbers to decide, is this worth investing a lot of time and a lot of energy in? It is hard on time and energy. Do you have the breadth of expertise and all that stuff that they do teach you now in startup schools, or do you have a cornerstone customer? Is somebody actually going to pay you for this thing? Now, in our case, we were being paid for, you know, we were selling product before we even spun the company out, but it just never, the trajectory just was much lower than we hoped, planned for. And we couldn’t get into a major customer.
CB: That cornerstone customer.
TP: That cornerstone customer. Who are they? Who? Who is the actual person that, you know? Not a brand or somebody that should love this, but who’s the actual person that will really stake it and become your champion in their company as a, as a customer. And is it…are they the decision maker? I think we spent a lot of time and energy with people who love the product and wanted it for their situation, but they were not the decision makers in there.
CB: Yeah, fascinating thought to close on.
TP: To go to the next level because yeah, you know, it was a hard product to just buy a bottle of and try if you were trying to apply it at a factory level. Somebody had to commit to a refit that might cost hundreds of thousands.
CB: Yeah, I think that is a really strong point or a strong thought on which to close on, Tony, which is that idea of getting that anchor or cornerstone customer and understanding the people and the dynamics of that customer. Not just, because it’s not a brand that buys things or a company, it’s people. People buy things. People make decisions. People advocate for you internally. People don’t advocate for you internally, and they’re pretty critical if you’re trying to get, get things up and running.
TP: Yeah. Can they really sell it up the line? Or actually are you able to talk to the person who is up the line.
CB; Yeah absolutely. Tony, it’s been terrific hearing this story. And thank you very much for being generous with your thoughts, around Ten CC, your own experiences. I’m sure that everyone listening has taken a few insights from this conversation. It’s been great having you here. Thanks a lot.
TP: All right. Thanks. All the best, mate. Cheers.