Latest / Hydroponics Daily / Bootstrapping Your Hydroponic Start Up: Keep Control, Innovation, Motivation and Fun

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Bootstrapping Your Hydroponic Start Up: Keep Control, Innovation, Motivation and Fun · Hydroponics Daily

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Hello there and welcome back to
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Hydroponics Daily, your go-to podcast for everything soilless cultivation.
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I am your host, Dr. Russell Sharp, the founder of Utrema Limited.
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And yesterday I talked about how some of the aspects of funding an indoor controlled
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environment agriculture setup.
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And it was an interview that I read by a guy called Dave Chen,
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who runs a large investment firm.
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And he's talking about how you need to have serious scale in order to be a success in hydroponics.
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And you need to be multiple acres and raising 20 to 30 million dollars.
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All about raising funds, raising capital to give you runway, as they call it, to.
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To get your venture going. I wanted to give the other side of the argument today
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because I take a very different approach to business and I am very much a proponent
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of something called bootstrapping,
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which is where you allow your company to grow organically and use the profits
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from your sales to drive the growth of your company.
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Now, the problem is that people often mistake this for a lack of ambition,
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but far from it. It's the exact opposite.
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Now, yes, your growth will not be as fast. You will not be able to make as many
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hires as quickly as if you were getting investment.
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And you're not able to move straight into swanky offices and facilities.
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And your sales will be less. And
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potentially your budgets for things like marketing will
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be less so potentially your growth will be slower however i
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think it sets you up in the long run for a
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more enjoyable more successful more sustainable and more innovative business
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and venture and i'm going to explain why so you'll often see on linkedin or
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in the news press releases people celebrating investment in their startup.
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And you'll see people on Dragon's Den or Shark Tank, as it's called in America.
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Celebrating trying to get people to invest in their company. And,
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they'll have you know champagne and they'll
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have you know big parties to celebrate this this
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is not a sale they haven't sold goods they
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have just sold part of their business and same
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on you know the stock exchange you list on the stock exchange way
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ticker tape parade loads of parties brilliant
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in essence you've sold part of
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your company and you've lost control
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but it's so much more than just
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losing control because and let's start but let's start
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with the control you've lost control you'll often
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see this is happens so many times in
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in science-based companies you wouldn't believe and hydroponics is a science-based
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company they convince the founder who is currently ceo to dilute the shares
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below 50 and then they say but you will carry on a ceo out.
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Then that's all well and good until the investors start to get jittery about
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the lack of sales or the lack of even just growth in sales.
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And then they say, right, well, actually, we don't think you're the best person
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to lead this. You're more of
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an innovator and you're not going to be running the company from now on.
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And the founder is like gobsmacked and like, but it's my company.
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No, it's not because you've sold more than 50% of your shares.
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And we've all clubbed together and decided you're
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no longer ceo you're just a minority shareholder and
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that that scenario happens time and time again you think
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people would be wary of it but they don't because
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they're convinced by investors to dilute their
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shares beyond that 50 point so you
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lose control that's the first thing but it's another
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reason why you i think bootstrapping
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is better than looking for investment and that
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is that you lose motivation
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because when something is a hundred percent yours you are a hundred percent
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motivated to make it a success for you and your family that's going to inherit
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it or when you're going to sell it and things like that so you are a hundred
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percent motivated so the less you own of something the less motivated you are so control,
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motivation the other reason I think bootstrapping is better.
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It allows for far superior product and business innovation.
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And that's because you can do something called serendipitous innovation.
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This is something that is at the heart of everything we do at Utrema.
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And it's only possible because I am the only person who owns any stake in the company.
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And I have built this company up through blood, sweat, and tears,
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through my hard work and innovation and
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I would never sell part in the company because I know
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it would stifle innovation because serendipitous innovation
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involves me going to a grower or a
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farmer and listening to
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their problems and their issues and just sticking them in a cupboard in my brain
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and I might come up with a solution for that in two years times two minutes
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time or three weeks doesn't matter but I'll know when I've got a killer idea
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and I've got the correct solution to that problem.
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And I can suddenly go back to them and say, you know, that problem you had five
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years ago, Ian, I've got the perfect solution for it now.
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And, or I'll be messing around in the lab. I'll find something and I'll go,
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you know, that's a perfect solution for that thing we were doing with Ian.
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So it's not laziness. I'm not waiting five years because I am a lazy twat.
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I'm waiting five years because I'm waiting for the best thing to come around, serendipitously.
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Whereas if I have investors, then I need Gantt charts and aims and.
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And milestones and targets and
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things like this and objectives and right chafer
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grubs are a massive issue in golf courses therefore in
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the next six months we need to come up with a solution for chafer groups
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and therefore in russell you're going to invent this product in
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two months time and then we're going to start manufacturing it
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and we're going to do this and you end up with a crap
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product you end up with loads of issues
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you end up with loads of stress and that sort
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of innovation is crap it's the reason why uk innovation
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stalling at universities because it used to be the case that lecturers just
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got paid and they got money for research and they would go away to their lab
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and they would do the best research they found the most interesting and was
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the most impactful whereas now they have to go to research bodies to justify and have to write.
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Project proposals and they have to have gantt charts about what what they're
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going to do and when they're going to discover something new. You just can't do that.
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Proper science and proper innovation just doesn't come via Gantt charts.
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Worst fucking thing ever for innovation is a Gantt chart. Sorry for swearing.
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I know some people listen with kids in the car.
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So lack of control, lack of motivation,
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lack of innovation. Other thing is lack of fun.
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Like if I go to work and I decide, right, today we're going to go serve manufacturing.
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We're going to go and play golf.
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Dane, Greby Clubs, we're playing golf today.
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We can do it. If I decide, right, we're going to do a set of top trumps,
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you know, the card game for hydroponics. We're going to do it. And we did it this week.
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If I think we're going to start a podcast, because I think that sounds like fun, we'll do that.
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If I decide we're going to go microgreens for three weeks or
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hops or anything else we can
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do it we can do whatever we think is interesting and
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as long as it aligns with the goals of what you know making money
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for a youtuber we can do it if i decide i want to go to madrid on a jolly with
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the air miles you know i can do it we can do it we can go to green tech we can
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go to spanibus all sorts of things you have a lot more fun if you're not answerable
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to shareholders and investors So control,
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motivation,
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innovation, fun.
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And yes, there might be a business that requires a massive capital expense,
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but for every business like that, there's probably a small scale way of bootstrapping
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to get to that point before you have to.
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Something that requires a massive piece of kit, you can do something aligned
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with that industry before you get involved with it.
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You don't necessarily have to think, right, we need to buy the big piece of
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kit, so I need to sell out my soul to somebody with money first.
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And then the other thing around that is you can dial back and dial in the risks
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depending on what you see as the current market trends at the time.
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Whereas if you've got investors, it can also be,
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you can almost be like groupthink and you
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get 10 people around the table and they
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can make a worse decision than one person on their own when it
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comes to the risks and things like this because you've got
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to 100% own it so there is a big risk
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when it comes to you know just thinking about massive capital expenses
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you make a very different decision if
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you know all the money on the table is yours as i
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said when it comes to fun a lot of the things times when it
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comes to bootstrapping companies you can the marketing budget would previously
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be a big big constraint but as you've seen with what we do at utreema we've
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got a podcast we do youtube videos we're massive on social media so we don't need the massive,
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physical media ads that traditionally in our sector would be relied upon.
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So it used to be the case that if you were in the fertiliser sector,
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you'd have to spend £10,000, £30,000 on an A4 advert in a journal.
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In a trade press, and that was money down the drain and you'd never see the
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return on investment for it.
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And that was a big moat that the big fertiliser companies and the biostimant
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companies could have around them.
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Whereas now you can do completely organic media, you can do organic LinkedIn.
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You could do organic Twitter, you would have to pay a penny.
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But even if you do start paying, you know, you can get really good results.
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So on the last but one episode, I talked about my idea that somebody could set
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up a sweet potato company growing sweet potato slips in the UK,
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perfect for a bootstrap company.
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All the kit you could buy from a growth shop for under £2,000, I would say, and set up.
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And within that, you could even have some money for marketing budget and you
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can market just to allotment growers
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in pre pre-spring so
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not late or late winter and i
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think that would be a fabulous idea you wouldn't need massive newspaper adverts
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things like that and you could build that company up and you could think of
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new ideas new crops that you could sell to the similar companies so the idea
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that you need to be 20 to 30 million pounds for a indoor growing facility, I think is incorrect.
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You can start it organically. And then there's another piece of information
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that shows that bootstrapping companies have long-term success.
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And that is one that shows that family-owned businesses survive longer than
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the likes of those that are on the stock market.
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So think of Ferrero, Ferrero Rocher chocolates, That is a family owned company.
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They have never taken, I don't think they've even taken a loan out.
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They are 100% organically grown.
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Other companies like Latheweights, the wine company,
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Yorkshire Tea, owned by Betty's Tea Room, these companies are extremely good
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at advertising and they're innovative because they are family-owned.
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They're not successful at all.
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Despite of it, they're successful because of it, because they can have an idea and the idea isn't,
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drilled into obscurity by committee and by investors.
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So you think, but often you can see an advert and you can see the crumb of what was a good idea.
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And then you know, it's been through 20 iterations
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to make it fit go through
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all the committees required to allow it
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to get published whereas a family-owned
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company can do what they want when they want
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like i released a advert yesterday
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targeting lawn care customers and
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it was going it was going to target people in scotland and
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i think the tagline was something like that's it
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it was a humic acid product and it was a humic acid
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product that isn't weak as pish which is
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as close to swearing as you can get in the
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UK so weak as pish is famous like
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a famous Scottish saying now if I
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had an investor I could guarantee you
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I would not have allowed to run that copy and it's the reason why Elon Musk
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gets away with a lot because he is a majority shareholder but normally you wouldn't
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get away with what elon gets away with and a famous example when i did have
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investors in a previous company and when i was working for people with investment
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i tried to do a video which was.
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Seven reasons why you shouldn't grow cannabis and it was like the reasons why
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was basically it was wasn't as economical as certain other crops and i was told
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to take the video down because we don't we're not we're not going to tell people
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to grow cannabis and i was like no i'm telling people not to grow cannabis.
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Yeah, yeah, we're not mentioning cannabis. I'm like.
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It's telling people not to grow cannabis and like yeah yeah still no
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no no you've got to take that down russell i was like oh you know
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ridiculous absolutely ridiculous but like you
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know that that was like the first spark to
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the fire weather was gonna right i'm gonna set
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up you treatment and i'll do what the hell i want
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when i want to do it so bootstrapping was
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the way forward and i didn't even start the company with a lot of money and
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yeah you look back at it and you think god you took
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some crazy risks there and you were very lucky getting
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some key customers when i when i
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got them but you know such is life
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i've missed out on plenty of other big customers along
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the way so swings and roundabouts and so
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yeah let me know if you've got any thoughts about bootstrapping a
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hydroponic company and growing it into something sustainable
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and long term and if you look at the list of
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some of the oldest companies in the world they are
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invariably family owned and because
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they don't go through mergers and acquisitions to satisfy stakeholder shareholder
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value all the time and that's another good reason is why once you get publicly
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listed a company gets publicly listed the motivations of the people in charge are become un-
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Coupled it's a great word uncoupled from
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the aim of making profit for the company because
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their take-home pay packet no longer
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relates to the company being profitable their take-home
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pay packet relates to providing shareholders with dividends and share price
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and increasing the value of the company which is not intrinsically the same
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thing as profitability and long-term sustainability of the company.
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Just look at a famous example, Dr.
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Martins. I'm in Northamptonshire at the moment here, and Dr.
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Martins is a famous Northamptonshire, I think it was family-owned,
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shoe company, sold to a Chinese company.
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They reduced the quality, reduced the price. Sales went up for a couple, three years.
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The management would have been heavily rewarded with bonuses for those couple
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of years and then feedback from the customers was these shoes are rubbish and then.
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You're in a real problem there because you've lost the kudos of the brand this
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worldwide famous shoe brand as suddenly is that the brand is no longer worth
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what it was how do you build that back up do you increase the quality and people
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still think they're going to be rubbish or do you stay as a sub.
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Quality brand that you've driven it to and so
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things like fashion that's a big issue but lots of businesses
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that uncoupling between what is
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profit profit of the business and what is the long the
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short-term goal of management are two completely different things and that's
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why management you see these directors the ceos on stupidly high salaries and
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and they don't deserve it but they've locked into them and the share the people
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who own the company can't really do anything about it.
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So that's my take on it. I would encourage anybody to be a bootstrapper.
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If you see anybody celebrating investment in their company, then I always take
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the opposite opinion and I see them celebrating loss of control,
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loss of innovation, loss of motivation,
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and yeah, loss of fun.
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A famous example by Rory Sutherland, the
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marketing executive who has always got
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something very interesting to say he always talks about bees and the waggle
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dance and you go to a bee colony it's the essence of a family-owned company
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isn't it a a beehive everybody's in there with the motivation of helping everyone
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else and they do the waggle dance to tell everyone else where the honey is.
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What you don't realize is that 20% of all
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the bees seemingly ignore the waggle dance
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they don't go to where the waggling
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bees tell them is the nectar
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and the pollen and so they
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they go off in a completely different direction and they do that because if
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everybody listened to the bees that were doing the waggle dance yes they would
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in the short term create more honey because there would access those pollen
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and nectar sources very efficiently,
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but they would soon run them dry and there would be no innovation in where they're
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going for the pollen and nectar.
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And so in family run businesses, that ability to just devote 20% into interesting
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innovation, serendipitous innovation is what actually makes these companies thrive.
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And it's the competitive advantage
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against these people who are getting investment from
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external sources so a very i
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think it's an interesting topic might be a bit dry for some people but i
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think it applies to hydroponics but it also applies to people growing in you
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know do things like insect protein and insect rearing i had a conversation with
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a person on linkedin they they posted a picture of them in an empty warehouse
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and they were saying they're shutting down be a bar limited and they were looking for.
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Investment but it's a very different world now and they couldn't get the investment
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so they had to close the company down and so i said you need funding to scale
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faster than organic growth but if you didn't secure it why did you have to wind the business up.
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And they said that they were a startup built on equity investment that is capital
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expenses intensive and organic growth is not economically feasible for us.
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And so really, as soon as they took the investment, unless they were very successful,
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it was the death knell in their company.
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And how quickly things can unravel is scary for a lot of these startup businesses.
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And they could have had very long-term successful
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businesses employing a lot of people if you've
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just slowed down and didn't actually see the
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motivation as getting investment and a
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lot of people spend their lives trying to get investment and
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it's really easy like i could have started numerous
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companies getting investment from the city of london or wall street but
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i knew that it's not long-term what i
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was interested in because i'm interested in building a sustainable company that and
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really you know you can be focused you can
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the the top five people in these companies can
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be focused on just getting more and more investment and
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not focused at all about selling a product
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and making a profit and for me that's what it's
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all about is solving people's problems and then them
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rewarding me for it and having the best ecologically sound solution for them
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and if that sounds interesting then check out utreema.co.uk because we've got
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a portfolio of products that are all completely unique have all been generated
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by serendipitous innovation.
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And if you have any issues with them or if you've got any questions then you
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can contact me at utreema if you found this interesting then please do give
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us a podcast review on apple that would help share the podcast tremendously
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but if you're not on apple don't bother leaving a review it doesn't help us.
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But just make sure you follow the podcast so that you don't miss an episode.
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And I'll see you again tomorrow. Thank you very much for listening. Goodbye.