Entrepreneur Tim Hall and David Henderson, chairman of Kleinwort Benson and a small-business investor, tell Amy Duff how they worked together to launch "eco-eatery" Pod
Tim Hall I had a minor heart problem about four years ago and one of the things my consultant told me was that I had to eat healthy food. I couldn't find any healthy fast food. Together with an interest in retail, it led me to think there was a big opportunity.
David Henderson I invested in Pod after I had attended a dinner organised by a group of angel investors (Beer & Partners). It's quite difficult presenting before a dinner but Tim's presentation was first-rate—very clear, concise, and an excellent concept. It ticked most of the right boxes in terms of the growing trend in healthy food. That, combined with his obvious charisma and belief in what he's doing, stirred up my interest. I was struck by the opportunity.
TH The primary challenge when you launch a retail business is funding. It's expensive to run early stage retail businesses because it can take as long as 12 months before the unit is in profit. We raised the pre-revenue funding through a group of between 10 and 15 angels. That's grown to about 35 shareholders, 25 per cent of whom were Pod customers who just walked through the door.
DH I'm a banker and accountant by background and I wanted to see some figures. They looked good and sensible. I was also impressed with the people working with Tim. In these young companies there's often a passionate, energetic, committed founder, and a good concept but, in my experience, there isn't the support around the entrepreneur. It seemed to me that he had those people—it wasn't all about Tim.
TH The vast majority of the third round of funding has come from existing shareholders. We're growing quickly in a market that's in serious trouble, but we're growing at about 50-60 per cent in terms of revenue at the moment. So shareholders are happy. And the majority have reinvested in another round of funding, which will allow us to open three more outlets.
DH One of the things about Pod is that it's raising money as and when it opens stores, which is fine in one sense, but rather than raising a chunk of money up front, its business model requires it to go back to shareholders for more. If the climate gets sticky, however well it's doing, an investor strike may cause difficulties.
TH Our experienced board, and the support of the chairman [Nicholas Payne, ex-business development director for Burger King Europe] has helped me enormously in distinguishing the strategy. It's about taking things carefully and not getting ahead of yourself, which is the danger when things are going well.
DH I think business principles apply across industries. I wouldn't claim to be an expert in his field, and I don't want to be a totally passive investor, but there are basics that I'd like to see operating well and Tim is always willing to take a call and communicate. In that respect he's very refreshing. He's a very honest and capable person—those are the things I look for in an individual.
TH Being a successful City banker, David's familiar with the food market, not just in the commercial sense, but as a customer. He could see that what we're doing is revolutionary. That's why he's parted with his hard-earned money to support it. It's not easy to persuade very experienced professional businessmen to invest in companies. His view is that we can roll out throughout the UK, the US and Europe, possibly as early as 2010. He's very ambitious.
DH The intention is to roll out several branches in the Square Mile [initially]. Some might say that's concentrating the risk in one area, but my experience of small companies is that they often try to do too much too quickly. It's sensible to negotiate franchises—in service stations or airports, for example—once you've got your brand up and running and it's got some traction.
TH We're trying to be a leader in the environmental side of retail. We have an in-store composter. That costs me more but customers appreciate it, and are prepared to pay a little bit more for that. Customers are telling us by spending money in the store that values-driven business is what they want.
DH It's early days and we have got a difficult economic environment, so I'm not holding my breath on this. But so far, they appear to have exceeded their budgets. They're on track. My understanding is they'll get it done.