Why Most Hardware Startups Fail (and What Damon Bonser, CEO of British Design Fund Looks for Instead)

Chris Whyte (: 00:02

Hello and welcome to Why Design. I'm your host Chris Whyte and today I'm joined by Damon Bonser, founder and CEO of the British Design Fund. Damon's one of those rare people who's seen product innovation from every angle. Founder, operator, investor and champion in UK design and manufacturing. Before launching the British Design Fund in 2016, Damon built and scaled his own design and manufacturing business, launching over 400 SKUs,

and setting up operations across the UK, US and Asia. That hands-on experience means he knows exactly how tough it is to get physical products off the ground. And it shaped how he supports Since setting up the fund, Damon and his team have backed over 40 early stage hardware ventures, offering not just capital, but also guidance on design, supply chains and go-to-market strategy.

In this episode, we unpack what investors are really looking for in a physical product startup, why so many founders fall short when it comes to cashflow planning, and how the UK can take the lead in reshoring and sustainable manufacturing. If you're building or thinking about building a product business, this one's packed full with useful insight. So let's get into it.

Chris Whyte (: 01:09

So, Damon, welcome to the podcast. So I'm going to do my best to do an intro now. This is the cringiest bit of the podcast and it all gets easier from here, I promise you. We obviously met a few times in real life at networking events and various different kind of client functions, but I'm so grateful for you to spend the time with me today. So I hope I do you justice with this intro, but we'll...

Damon (: 01:10

Thank you.

Chris Whyte (: 01:32

Give it a go. So Damon, you spent your career championing British innovation. Your journey spans entrepreneurship, investment and product development, making you a key figure in the hardware startup ecosystem. Before launching the British Design Fund in 2016, you built and led multiple design and manufacturing businesses, giving you first-hand experience of what it takes to scale a product company from the ground up. You understand the challenges founders face, not just in developing great products,

but in securing investment, navigating supply chains and building commercially successful businesses. Through the British Design Fund, you and your team have backed over 40 product-based startups, helping them navigate investment, manufacturing and commercialization. But beyond just providing capital, you offer hands-on mentorship and strategic support, working closely with founders to turn great ideas into sustainable businesses. So in this episode, I'd love to get into a few things.

Firstly, what makes a hardware startup truly investable and the biggest mistakes founders make when pitching to you? The shifting landscape of UK product design and manufacturing and why the British Design Fund is doubling down on physical product businesses and lessons from the front lines of scaling product companies, what you've seen work and what doesn't. And of course, we'll go into some of the exciting companies in the BDF portfolio and what's next for the fund. So, Damon, welcome to the show.

Damon (: 02:51

Thanks a lot, Chris. You did a very good job there. Flattered.

Chris Whyte (: 02:53

Thank you very much. No, it's

that's always the hardest bit for me because it's the only real bit of the show that's scripted and and the would have the the privilege of working with some incredible companies and some incredible people but they don't have to make it challenging in the some of the pronunciations but no it's wonderful to have you on the show. So why don't we start right at the beginning then and what kind of whether it will begin

Damon (: 02:59

Yeah.

You

Chris Whyte (: 03:17

and just give us a part of history prior to setting up British Design Fund.

Damon (: 03:21

Yeah, sure. So at this point, I always kind of feel like a little bit of fraud because I'm not classically trained in design or engineering.

My undergrad, you but I've always been kind of creative as a kid, always, you know, building stuff, you know, like, you know, creative in all all technologies as well as sort of, um, it's like more hands on stuff. So building computers, coding from a young age, writing computer games and stuff. And then always like modeling and building like landscapes and stuff, all the, all the, all the good stuff that, uh, that kids get into. So, so, so I've always been very creative. I've never, when I went to university, my undergrad was, um, was techie. So it was, was IT, was, um, kind of.

database design systems engineering really and then my post-grad was European business so nothing leaps out and would indicate that I was going to go on and spend my lifetime you know in factories across the world and then investing in sort of hardware technology but how I ended up there the very sort of brief history.

So I kind of, in my undergrad, I had a placement year and that was at IBM. It's obviously like a software thing. So placement at IBM and it became really obvious to me and also quite obvious to my manager and my personal development manager there for that year. It was fairly obvious that I wasn't really cut out for the corporate life. just...

I wouldn't say I misbehaved, it just didn't work for me. It just didn't resonate and I didn't get on and do so great. So I came back. So I finished that placement year, came back and finished my undergrad and really wasn't sure what I was going to do. My experience kind of working for a corporate and as amazing as IBM, on the CV looks great, but it just was enough for me to say, I don't think I'm built for them.

t like a, we're going back to: 2001

start up, proper little start up, know, there's like 20 or 20 odd people there and I was getting exposure to the, to the board, to the, not necessarily the investors, but exposure to the team all the way up, you know, very obvious difference, a big courtroom. And I really enjoyed it. And I did that for about sort of three, four months, came back and then, and then I'd already, I'd always planned to sort of do this masters back in London. So I did European business back here, back here.

Chris Whyte (: 05:36

Hmm.

Damon (: 05:48

But when I finished that, you know, I had then this experience, my two contrasting experiences, one of working for a big corporate where I didn't, wouldn't say I really created much value at all. And then the second experience where, you know, I felt like I had a real impact. You know, I'm sure the guys don't remember that placement kid that worked for them for four months, but it had like a impact on me. I felt like, yeah, I was part of the team. I did something that made a difference. I really enjoyed it. So at that point, I kind of knew.

I need to be in that kind of environment. I need to either set something up or be in a startup, like in a small agile company to be satisfied and to make something of my life. But the problem is, so I finished this masters though, and you obviously then get approached by all the know, of the usual corporates themselves. So, you know, like the essentials of the world, they all hang about these MAs and MBAs and try and poach you out. And I just wasn't, I just...

None of it, all of it I knew was fraught with danger. I if I go into any of this, I'm just not gonna achieve much. So I kind of at that point, I knew I had to come up with some ideas, but I didn't have any ideas for a company. And to fill the time so I could earn some cash and also kind of broaden my skills, I did a little bit of contracting. It was a little bit techie, but I purposely took a sort of contract with a US drugs company where they needed someone like an analyst to look at all of their loads of Excel stuff.

but crunching through numbers, looking at profitability across drug lines, basically. And that was good. And at the same time, they also paid for me to do something called SEMA, which is management accounting stuff. So all of that. So that really helped my real world analytical stuff. And I had identified it. I had a hunch that I was missing that. If I was going to go out and start something up myself, I'd had all the academic training and.

I knew what a P &L looked like on a balance sheet, but I hadn't really put it in real world context. So I only did that for about, I don't even think it was a year, to be honest. But again, it was all part of my plan after my master's, thought, let's get some experience. And then during that time, just come up with loads of ideas. And obviously the thing is, because if you sort of ignored a bit when I was at university and stuff, my undergrad being software stuff, basically my passion was always building stuff. I always been constructing stuff.

It wasn't terribly surprising that when I'd come around to coming up with business ideas, a lot of them would be product-based. And I was out of uni as well. You'd have all these funny ideas for things you could make, and everything seemed possible. So I came up with a really funny little consumer product that I thought was a good idea. It was a little bottle opener that counted how many beers he had. That's how I got into it, strangely enough. But I had no production experience.

I really wasn't like a product, you know, product designer, but I wasn't sort of fazed by the idea of making stuff. But it's all through that, that kind of penny that dropped and then thinking, do you know, I think I could probably sell a few of these. It can't be that hard. You know, let me, and then my logic at the time was let me try and find a factory that can, you know, that can make these. And that's what kind of took me to China. And this is before, I mean, I think Skype was possibly sort of coming into existence, but I remember using stuff like Yahoo chat.

find these factories and I was sort of, and I think Alibaba was in its real infancy. So I kind of found factories that made similar kind of products and then was emailing them and ended up getting 18,000 of these things made. I I did manage to sell them all. I'll be honest, I had to discount quite a lot of them. But it's obviously that is kind of, that's what took me out to China. It was that thing there and then wanting to get on the ground and see how it all worked. And that's how it all started really.

Chris Whyte (: 09:08

Wow. that was, was that spinning hat, was it? Because it, yeah.

Damon (: 09:10

Yeah, yeah. So spinning hats and so that business

started, I it went through a few little kind of pivots, but it started obviously because it came up with this idea for product. What I realized very quickly was you can't run a business with one. can't, you know, I'd be phoning up retailers telling you about this product. mean, was, I'm fine admitting, right, it was a pretty terrible product. I was phoning up these retailers trying to sell it. You know, I didn't have a catalog because there was only one product.

But I did manage to sell to a bunch of online and slowly start figuring it out. But what became obvious is they needed, you know, for this to work in any way for it to be able to pay my rent, I needed to have at least some more products and I couldn't afford to keep, you know, making 18,000 of these things at a time. That then took me out to China and starting to sort of you know, find factories that making kind of nice stuff that didn't have maybe representation so much in the UK and then I'd buy small quantities and start shifting that. It's really...

So the first, and that was probably the first sort of, the first four years or so of the company was more like a trading business. So it me almost listening to what retailers were saying. Well, we're taking a of a punt initially on certain stocks, but then they got, you listen to what they wanted and you go and do a bit of sourcing, repackage it, send it back to them. But what I didn't realize I was starting to learn, you're starting to pick up on margins.

It's some production. mean, you it's all contract manufacturing. It's pretty basic stuff like electronics and things, but you know, it's all injection molded with a bit of circuitry inside typically. But we kind of got familiar with stuff. You know, I was starting to learn the kind of, I guess, how you communicate to retail buyers, what they need to know, know, FOB terms, all this sort of stuff, and obviously payment terms and margin requirements and slowly built that up. Yeah, and that was really, that was my sort of first, you know, that was the first four years of it.

a financial crisis point. So: 2007

pretty much my revenue is all in pounds because I didn't own the IP, so I couldn't really easily export the stuff. And I kind of, I could see it all getting squeezed as the, you know, as that margin got squeezed with the FX movements. And I, you know, made a bit of cash in the business. It wasn't like a super lucrative thing, but we made a bit of cash. So sort of, this is where we sort of pivoted a bit and started to bring on designers, build up designs.

resource in-house so that they could design stuff that was our own IP that we could then invest in tool up and typically out in China and then sell it to the world. was that's kind of that's that was a bit of a pivotal moment. And it was born out of necessity. was, know, arguably if the financial crisis hadn't come along at that point, maybe, you know, I could have got another two or three years. I'm sure at some point there would be a crash, but another two or three years.

built up my volumes, margins would have been a bit more protected, but I was always this like guy operating in the middle, know, small volumes, tight margins, so it really hurt when that dollar sort of shifted.

Chris Whyte (: 12:18

And what impact did that pivot have on the business then after that?

Damon (: 12:23

Yeah, so it allowed me to then, well, a couple of things. It allowed me to take control of our, you know, our NPD, our product development. Suddenly it was like within our control. So I mean, the downside is you've got no one else to blame when the product flops, right? It's kind of, it's basically my fault for signing it off. But we had control of our IP, which is good. None of this stuff was patented, you know, it was all kind of retail product things. But we had control. That means we could kind of be much more flexible when pitching to retailers.

You know, we can almost start designing for them listening to what they said what trends were coming through You know, we can we could observe stuff trends coming through 12 months sometimes before the season that we were selling and we could adapt that into the hard goods So that was one thing and that was important and then that also meant that we could export a lot easier because then we could appoint distributors in different territories we could open up the US market and Because people couldn't get these products unless they bought it through us because there are in designs so that kind of helped and then the

And the real, you know, of the triggers for this was this FX rate. And what this also did is it meant I was suddenly kind of hedging my FX exposure because I was invoicing a lot of people in dollars and all my factories are being paid in dollars. So suddenly I had no FX exposure on my cost, which was like, that's kind of what I was planning to do. But yeah, and then that, you know, and then so then that was another sort of five years of doing that. It was a lot of fun. Didn't make a huge amount of money out of it because it was a very expensive business to run. We were supplying

Chris Whyte (: 13:45

high volume low margin stuff is it?

Damon (: 13:47

Yeah. And the clients, we kind of got, I mean, it was all retail, but a lot of fashion retail stuff. So you get into this sort of autumn, winter, spring, summer cycle. you're constantly in the discussion, no matter how great your products are selling, you're always in conversations with sort of head buyers saying, great, that was really good. Like autumn, performed really well. What are you doing for spring, summer? You know, I'm thinking this isn't a white t-shirt. This is, I'm tooling this stuff up. You know, this is quite expensive to sort of make.

Chris Whyte (: 14:11

Yeah.

Damon (: 14:12

And then that time you didn't really do direct to consumer so much. was, you're always a little bit cautious. Like the retailers still had a bit, know, resell at the, like the wholesale channels still had a bit, bit too much control to be honest. So they could sort of pressure you. And it was always, it was accepted, it was accepted in our industry that you didn't really go direct because you'd be competing with your big customers. Obviously it's totally different now. It's completely on its head now. you know, we always say to consumer brands,

Chris Whyte (: 14:38

Yeah.

Damon (: 14:40

Get out there, get that sticky stuff, go direct to consumer, build it up and then let the wholesale come to you because they're terms.

Chris Whyte (: 14:45

It was,

yeah, I noticed that during the pandemic, because I was running online roundtables with my clients. Obviously the world turned upside down and it's like everyone's got to work remotely, but consumers still, well, they wanted more stuff than ever really in those first year of the pandemic, didn't they? So a lot of the consumer brands I was working with up until that point had maybe been thinking about going direct to consumer, but then it became a priority because all the shops were shut.

Damon (: 15:07

Yeah.

Chris Whyte (: 15:10

especially if it wasn't a key product, there weren't key workers.

Damon (: 15:13

Yeah, and didn't,

and it hasn't reversed. I mean, it stayed and you can see retail sort of struggled. It's a tough sector. But yeah, so, yeah, so that's that kind of, that second part of my sort of product life, I guess, when I was manufacturing the designer, you we ended up with sort of a few offices around the world, you know, launched a lot of product, don't know, probably our own brand.

Chris Whyte (: 15:19

Yeah.

Yeah.

Damon (: 15:33

400 or so maybe skews. And then we did a lot of private label stuff. But it taught what it fundamentally taught me. It just taught me, you know, I could walk around a factory, I could price things up. I knew how to get stuff made, you know, fairly simple things, you know, that you can get your head around this simple kind of engineering. But I could also then sell those very well and open up markets. that's the kind of skills I had at the point. And then we got acquired, the brand got acquired by someone in our market.

Chris Whyte (: 15:35

Mm-hmm.

Damon (: 16:01

like a huge exit but it gave us the opportunity to to kind of move out of that space and I was I felt like I was getting to the point I'd learn I'd learn not everything there was to learn but I kind of I like setting things up I don't necessarily like sort of

managing them indefinitely. So I had the huge learning curve and then there's the opportunity to sell the brand. And as these things happen, it kind of always ties in, starting a family, my wife was pregnant, loads of changes, sort of settling down in London. And it kind of felt like the right time to maybe start, have those chapters, that book, that first book kind of done, me basically being in China for a lot of time and manufacturing sort of high volume.

Chris Whyte (: 16:38

Yeah.

Damon (: 16:42

like you said, low margin stuff, but also stuff that didn't really change the world. Now this did sit a little bit on my conscience, I'll admit, but it really sat kind of, know, when you have that year or two of figuring out what your next move is going to be, you your next venture, you think back to what you've done. I was really proud of what I've managed to achieve, know, basically bootstrapped it really. But I was very aware that, you know, the last kind of almost 10 years of my life, I've been making stuff.

really nicely designed stuff, very proud of it. The design teams were great, really nice designs, but none of it made the world a better place really. It did in all fairness end up on landfill sites at some point. It wasn't essential to the world. And I kind of felt what I'm gonna do in my next venture, I wanted to make sure it had a bit more impact.

so yeah, so that's what it brings to really that brings us up to the start of beat of the British design fund. And, you know, I don't, go into as much detail really on kind of how that started, but basically a group of like-minded individuals sitting around the table saying, you know, all of us having made money in manufacturing, being in the UK and looking at it saying, why is it so difficult to get funding to early stage, harder engineering companies? It's just nuts. You know, pre like great ideas, good IP coming through.

Why won't investors talk to them? Why is there such a lack of investors that will talk to them? And that kind of came, it took a year or two after exiting the previous brand, it kind of, guess the penny dropped quite soon, but then I wasn't a VC guy, I was a manufacturer, so I couldn't jump straight into it and take the opportunity. I took a bit of time to figure things out and structure them.

Chris Whyte (: 18:11

Yeah. So what were the days before British Design Fund, what were some of the biggest lessons you learned from being on that side, on the founder side that I'm guessing influenced some of the conversations, some of the questions you asked as well, I suppose.

Damon (: 18:26

Yeah, so probably the most important lesson from that, the most important lessons are the most painful to learn, right? But it's probably that cash flow. You'll be amazed, because everyone thinks hardware's hard, and it's kind of a nightmare to scale up, and all the rest of it. But there are so many little kind of...

Chris Whyte (: 18:33

Hehe.

Damon (: 18:44

tweaks you can do to your cash flow model that just make it work. You could almost have two completely separate conversations. could have an accountant sat in the room looking at your 12 month forecast, and they just model it out. they say, there's no way. You're going to need to borrow like three, four million pounds to fund this lot. And then I'd come in and I'd sit down and say, well, wait a minute. So we're going to sell a load of this stuff FOB. My factories are going to give it to me on my copy bill allading. We can finance on the back of that. That gives me 30 days on C. But it was honestly

It was quite high stress, but you'd have, at one time you might have kind of, I don't know, 50 plus 40 foot containers moving around the world, moving around the oceans. And they'd all be at various different levels of finance and games being played and invoice financing one that's been FOP. So that, I think that was the thing that the ability to juggle that cash flow, can, you'll be amazed what you can pull out the hat.

with bit of kind of creative and everything completely above board. But there are so many things you can do with the stock business.

to kind of to make some of those, those that make that cash flow work. So that was probably the most important, because everything was kind of cash hungry. It was constant orders going out the door, out of door in China, out of our factories in China. It was then constant retooling. So you always have this NPD stuff. So all of the tooling and design costs sucking up almost all of that, any cash you generated kind of sucked up into the next year's development.

And then you'd obviously have the retailers and we were supplying like the world's, most of the world's biggest retailers, Their payment terms are terrible, they stink. So then you got that, you got all of these pressures, know, but even through that as a really small startup, we managed to get through it by, you know, by just learning the tricks of how you can juggle cashflow, stock financing options and stuff like that. So that was super useful because sometimes we'll see it with a startup now and they would, unsurprisingly, well, sorry, not unsurprisingly, they just won't know

stuff. They'll just see this brick wall. You could do that there and maybe don't just go direct to Kitche, but maybe it's not too bad to get a little bit wholesale. Sell it FOB, finance that, but know all these little things come into play.

Chris Whyte (: 20:36

Yeah.

Yeah, I met a guy, well, I've got quite a few actually at CES when I was there early in the year. you you think of CES for a lot of innovation and I certainly know a lot of product development professionals, but this guy sold well over a million dollars worth of stock. I said, Oh, what was your business? he says, Oh, it's mini projectors. showed us a render on the screen. I Oh, that looks smart. So I sold them for $400.

cost me about 60. I just buy them from China and then package them up and sell them. It's like $60 in, $340 out, you know, we're making good money. And then later on that day, one of his business partners, he said, I'm sorry, we just got to take a call. it was, think Red Bull were doing an event and they wanted hundreds of them to give away as gifts. And he'd just taken an order, he's like, can we do that? And he just shouted over to his mate at the bar. So yeah, we can do that.

Damon (: 21:37

Yeah, there's a real beauty to product businesses. mean, a lot of the stuff we do at the fund, to be fair, isn't sort of consumer as such anymore. But I used to really enjoy that idea that once you've done the design work, you're shifting boxes, how you finance those boxes, but you're shifting pallets of boxes around the world. Each of them's got each unit in each of those inner cartons and outer cartons all carrying a bit of margin. That's how I used to look at it.

Chris Whyte (: 21:38

It's bonkers. Yeah.

That's brilliant.

there was a couple of years between kind of exiting spinning hat and obviously starting British Design Fund. At what point did you start thinking about early stage investment as the next step in your career?

Damon (: 22:16

Yeah, was at the, so during that two year period, it might even have been a bit longer than two years, I'm trying to remember. I'm gonna say it was two years. I was giving a bit of time at the design council who'd helped me out over the years with my product companies. And it was there, I was on this program called Spark.

And it was there that I was getting exposed really for the first time to loads of product startups. I mean, it sounds weird. I I was basically a product startup myself. just head down, you know what Like head down building a business. I wasn't really hanging out with other product startups. know, I'd come, when I was back in London, I'd sort of do, I'd hang out with other entrepreneurs and stuff, and not many of were in product or design as such really. So this was the first time. And I was there to kind of give them a bit of a...

you know, to sort of give them, share my experience of building product companies and, you know, give them an idea of how they can commercialize their own ideas, which went down very well, but they, what we noticed, so myself and design council and the team running this program, was these companies were kind of coming back, taking our advice, you know, going away, continuing the design work, but obviously they needed more funding to take the things through to market. And they'd all come back and say, look, know,

It's been really helpful listening to you, but we cannot get funding. Every investor we talk to, as soon as they figure out there's some hardware, that we're kind of like an engineering startup or a product startup, they just don't even reply. It's just, they cut them down straight at that point. And it wasn't just like one or two, basically every single, every sort of inventor that got onto these cohorts were saying the same thing.

So that's kind of where the penny dropped at the time the chap that was running the design council, the CEO was a chap called John Mathers. So I sat down with John and I sat down with effectively the financiers of this program. It's kind of being philanthropically funded.

So we had us three sat down saying, I think there's a problem here. the philanthropic funder had a problem because the only way they wanted to leave a bit of a legacy supporting British product design, and the only way this would work is if these products actually made it through to market, and that meant they had to get more funding. So they were a bit grumpy.

And then the design council, know, so John was saying that this is a challenge, you know, we're running these programs, amazing startups, but we judged on how many get through to market. there was like a sort of, you know, it repaid for itself over the years, but it did need these companies to hit revenues. And then I was sat there going, well, you know, I'm...

I'm kind of looking for my next venture. It all kind of slotted into place. But it wasn't like then in three months time we started the fund as such, but that was where the penny dropped. And then I just spent a bit of time, a couple of years kind of investigating, getting to know the landscape in the UK. What were funders putting money into? What was the VCs putting money into? And I just couldn't find anybody that was a smart hardware investor, like early stage smart hardware. It's sort of, apart from VDF, there really isn't in the UK.

Chris Whyte (: 24:37

Hmm.

Damon (: 24:57

at all to be honest, they exclusively do it. But that's kind of where the penny dropped. But obviously, you know, we describe ourselves as operators, you we're obviously investors, we kind of, we say we're operators because we have been, we've more been founders making, you know, designing things and manufacturing than we have investors. Maybe it's getting close to 50-50 actually.

But yeah, so we then needed to kind of learn how you structure a fund and get all the advice. It's a regulated industry. There's a whole load of stuff to figure out. But fundamentally, that kind of, what we say, that investment thesis, that gut instinct to, right, there's a funding gap here. That kind of, that was a bit of a penny drop moment. And then you obviously finessed it, right? You sort of, you have a bit of an investment thesis, you go out and we went out sort of pre-COVID with a small kind of group of investors and we learned a lot there.

back really sort of: 2021

of concept, but I'd say from: 2021

much remained the same since: 2010

Chris Whyte (: 26:43

So, yeah, it's interesting. it's been on quite a journey from the manufacturing point of view, know, starting a business in product and then having to learn a whole new industry, although you kind of go in pre-armed with lots of questions and experience, but yeah, a completely different game, isn't it, terms of having to, well, I guess you're kind of accredited by different, the financial side of things and making sure that kind of...

money's been put in the right place. But I mean, how do you go about even starting a fund when I get with a product go to China, pick a product and put it in a box and sell it but as you start Yeah.

Damon (: 27:20

Look, I'd say...

None of this stuff is rocket science, right? Everybody, know, none There's very few things in the world that you know hard to kind of figure out but with this so obviously the big the Big difference. Well, a couple of big differences from my previous businesses. So I was basically this is a service business first time I'd had a service business so, you know, I don't have like my balance sheet isn't full of Stock and tooling and stuff like that. My balance sheet is is pretty simple to understand right to services largely a P &L business

So that was one sort of shift. Now I'd that was kind of, you know, it makes life a little bit easier from a financing point of view. You know, it's quite easy to dial the costs down. And then the other one is obviously regulated. Right, so you can't get around it. You have to school up and get your head around the regulation. Now we partnered with a fantastic firm, Sapphire Capital, who, you know,

I'll share this with them actually, Boyd will find it very funny. Boyd and Basiliki, the sort of founding partners of Sapphire. I'm not entirely sure, and maybe Boyd can answer this after he sees this video. I don't think he knew how little I knew about the regulated sector when I first approached them. So I got introduced to Sapphire. This is right at the early, early, early stages. We hadn't really even got an investment thesis together. We had a bit of an inkling.

Chris Whyte (: 28:19

You

Damon (: 28:33

I remember Sapphire taking us on and Boyd, Boyd in particular spent a huge amount of time. Really, I mean, he really, had to kind of teach us everything to be honest. Like now, you know, now we've been doing it, you know, we've been doing it now, I guess, six, seven years, but really intensely probably sort of four years, but now we're very good. But it was, was a really steep learning curve, you know, I mean, I just, mean, even the basic stuff, know, know, shareholder agreements, subscription agreements, ASAs, like IP assignments.

I mean, and then you've got all of the FCA stuff beyond that, know, what's considered a promotional activity, you know, so much regulatory stuff. So we can only do that because we partner with firm like Sapphire that ultimately, have the say over everything that we do. We will be, you we find these fantastic companies, we attract investors, but there is an absolute line where we say, look, you know, this is a regulator activity, Sapphire, this is over to you.

So they've been fantastic. I yeah, it wouldn't have been possible to do this. I don't think you could, could not have, no matter how much cash I'd thrown at it, I don't think it would have gone very well if I'd suddenly gone to be fully regulated myself. know, a set of fully regulated business from day one, having no experience when you'd always have to bring people in, but you'd be bringing people in and you wouldn't know how to manage them because they'd be talking different language. Whereas now it's kind of, you know, can comfortably talk to these people.

Chris Whyte (: 29:48

Yeah.

Damon (: 29:52

we're doing it long enough, but.

Yeah, it's a rapid, rapid learning curve, just like a product startup, know, they kind of, the passionate, you know, like I think typical founder profile for us, they're passionate. They've got the technical skills. They've probably got some insights in the market. They basically want to make the world a better place. They've seen a problem they really want to fix through hardware engineering solution. But the rest of it, they just don't, they don't know how to, you know, they probably haven't told something up on their own. haven't taken a product through to market. haven't opened up international markets or licensed

there's so much to learn, you just, know, if you're, you know, I'd say one of the most important things when you're starting up a company is just, is that, like where you plant that flag, you know, like what is your, you know, what's your kind of north star? What do you truly believe in? What do you, what's this gap you found? Everything else is kind of detailed. be a huge amount of work figuring out the detail, but you know, it's, as long as you really believe in it, you're doing something important that the world kind of needs.

and is willing to, I guess, pay for in some way, then you're not halfway there, but at least you know then all of the hard work that comes behind that, like figuring out how you get to the top of that hill, which won't be a straight line for sure. At least kind of, each step of the way you're kind of...

you'll reinvigorate and sort of regalvanize by the fact that everybody around you believes in where you're heading, you know, and not everyone has the answers, you no one can give you all the answers, you just have to crack on and figure it out.

Chris Whyte (: 31:13

Absolutely or have some advice and help from people have been there done it or know people that have been there and done it so On that, you know, what what kind of things? Does the fund look for or you in particular? In a really strong investable hardware startup

Damon (: 31:29

Yeah, I mean, the headline stuff is you've got to be able to kind of kick it or drop it on your foot, right? So there's got to be some hardware there somewhere. But basically, we're looking for the stuff, this is specifically for BDF. We look for technologies developed within the UK that are addressing a really important problem in the world, or a compelling need. They really are going to make the world a better place. They're really needed. If this team doesn't launch this technology, someone else is going to come along, because it's

It's so important that this gets through to market. So that's kind of, so we look for those kind of technologies. Now all of those technologies will require some element of manufacturing. That's, we have to have that. So that's kind of headline stuff. Then I'd say sort of.

So that kind of gets, I guess that gets you through the door, let's say, if I'm thinking of our selection process, that would get you sort of step one. Then we start to look for things like level of development. So TRL5 ideally, so working prototype, demonstrable prototype that you can show to a potential customer, because we need to see some indication from market that there's some demand for this. So if those conversations haven't happened, then we'd say, OK, look, we love what you're working on, but come back in six months maybe.

a little bit too early for us. We also need to be confident that that technology will attract some IP in the form of patents when the design work is finished. And we know it's an ongoing kind of...

process, right, you're not going to file it once, but the problem they're addressing and the technology they're using should be generating patents, not at the point that we invest, but we should be comfortable there's freedom to operate in the next 12, 18 months of patents to start being laid down. then revenues, don't like to be too, so that combination of of TRL5 and you know, TRL5 and patents on the way through, along with kind of revenues, not being too far over the horizon. So we aim for about

12 months ideally in reality ends up being 12 to 18 but when people are coming through the process we'll be asking right you know is it feasible with us and maybe some other money and some innovate UK and our mentoring and coaching is it it feasible to think that we could get this business to the point of revenue. Now if you're medical if you're a heavily regulated product right we can take stuff like research revenues is fine but that's how we approach medical stuff what we won't do we're not going to kind of do like some complex therapeutics sort of deep science thing that's

it's no way gonna see real revenues for five, six years. It's just not the field we plan at all. We like it to be more mechanical, understand the manufacturing processes, maybe not understand all the sciences that are going on inside, but understand the manufacturing process and be able to be confident we can get it through to market, into markets where we can help them. So again, with medical device stuff, that does include stuff like the NHS, but we'd also look at other routes to market as well.

Chris Whyte (: 34:15

I'm interrupting this episode to share some exciting things happening around Why Design. At the core of this podcast are the incredible design journeys my guests have been on and where they're heading. These journeys stem from the relationships they build, the communities they're part of, and the amazing achievements that come from collaboration. So beyond the podcast, we're hosting regular online huddles and quarterly meetups in the UK with plans underway for an annual gathering in the US.

We're also running hands-on workshops both in person at Makerspaces and online to connect and inspire people in physical product development. So if you'd like to join us or stay in the loop about upcoming events, sign up at teamkodu.com forward slash events or click the link in the show notes. Now back to the episode.

Damon (: 35:00

But yeah, mean, that's, and I guess some of the sort of...

things that will maybe stop things going through our selection process, because people might be sat there listening to this thing. I'm sure that's ticked mine. There's got to be an attractive enough market, so the scale of the problem that you're addressing has to be big enough. You've got to think we're an investor. It's got to be big enough that we can make a return. And you've got to look at that size of market and penetrability of that market. How can you access it?

at the same time, think about what your valuation is today. you know, if you've got a kind of small market and you're overpriced and, you know, invest and it's not just us, people, people are looking for returns. So the returns are normally, you know, a point of exit will be that you've penetrated that market is an attractive market that you're scaling it. You'll hit your scale up on growth stage and you've come from a sort of sensible grounded valuation. Then, then, you know, founders and investors will make money. You know, what you want to avoid is kind of that trap of

slightly flattering valuations at the start that you can always find someone that will go along with that price and then you end up in a down round situation and things are getting a bit expensive and overpriced and your markets proving harder to open up. it's just, I mean, it's a really difficult conversation if you're looking for funding, know, we sort of avoid those things. So, yeah, and I suppose really the other thing I'd say is really, really ask yourself about the kind of...

the positive impact that your technology will have in the world. And this is just for us as BDF, right? This is just one of our criteria. But I'd really say, think about if I don't know, is it so impactful that someone else will or is it a bit of a nice to have? If it's on the nice to have thing, it probably won't go too far with us.

Chris Whyte (: 36:41

Yeah, absolutely. are there any, going back to like the size of the opportunity, because like you say, you're a team of investors, so you need to see a return, ideally kind of around the 12 to 18 month mark, or at least it's like, let's not make money, so it's showing a return. But are there any resources for founders going into that conversation, know, to, how do you find out what like the total addressable market or the total serviceable market is?

Damon (: 36:59

Yeah.

Oh yeah, yeah.

Okay, so, you know, everyone, well, if you haven't seen a pitch deck before, you don't know this, but everyone, most PIP founders will present something that's got like a huge TAM, slightly smaller, Tom and Simon, all the rest of it. So it's kind of, your total addressable market, can find most, you can find this stuff just by Google, it's all available online. you know, investors,

you we expect to see probably like a very large number, you know, the total addressable market we expect to be huge. But then as you boil it down to then the actual serviceable obtainable market, that side of things is where I'd say you want to start, you know, you can work, you know, because what we typically will see is, I don't know, like a medical device going to a certain sector and they'll know how many of this certain thing is sort of within this, like the entire market for, you know, kind of

I don't know, healthy aging, Alzheimer's support or something is this big. And then within that, you have these territories we're looking to a target, you know, and then within that, our obtainable market. So like the first sort of initial push out, you know, that will be then very focused down on what is your route to market. And that should be backed up by, you know, by fairly easy to understand an executable sales plan. Nothing too complicated. get, don't just put...

Don't just pluck numbers in Yale. think start to think when you get to your song, start to think from the bottom up, you know, to, you'll be making some, top-down assumptions to get to your song.

But then when you get to that SOM level, you start thinking about, literally, how many of these would we have to sell? How many could there be? And how do we get it through? Is it through distributors? Let's pick up the phone and see how many they typically sell. We're selling Lancets. How many Lancets do you typically sell within Europe per year? And start to do a bit of the two-way thing so that when we get down to that point, because that would be the market we're looking at, and say, how realistic is that?

You know, and then you start to, you know, once you got to that point, I think, you know, and all of that stuff you can get, you know, gets the British Library or, you you can find it online. You know, this isn't, you know, you know, it doesn't need. There's so much risk in these companies. You know, we're not this isn't like you're producing a dissertation and you have to, you know, every single reference was scrutinized and, you know, and taken as kind of, you know, we don't we take everything with a pinch of salt, basically, and we apply risk into everything because it's all just so, so risky. But again, what you but

But you go on the flip side. You shouldn't come into it saying well, it's also risky You know Damon says is all like a bit of a pinch of salt and all rest of it So we're just going to kind of wing it and make it up, you know that that equally doesn't work, But but it's definitely that that huge like the total address more markets all things like slightly academic I'd say when you get to that songs that should then start resonating with your financials, you know your commercials What is your sales and marketing plan? But who are you? How are you actually getting this amazing contraption? How are you getting that into the hands of your users because they make the main?

Chris Whyte (: 39:26

Just feels good. Yeah.

Mm-hmm.

Damon (: 39:49

very often they're not the customers. So let's go one step up from them. All right, there's some, you know, there's some sort of wholesale activity of some sort. There's some institutional buyers. Well, let's pick up the phone to them and see how many of these sorts of products are they likely to sell? And again, at some point you're gonna wanna get a letter of intent or something like that to come to us. So again, at that point, you can start to flesh out some of that. You can sort of sense, check some of the stuff in your numbers. And again, the other thing to do is if you're, you know, if you're...

Looking to kind of penetrate. I don't know anywhere near 50 % in your serviceable market. Like you probably being a bit too aggressive, you know, it's all you can have all these sanity checks. Like are you really going to penetrate it so like successfully and rapidly that you become a dominant player in the first few years, like really, really unlikely, you know, so again, all this sort of stuff we look at to just sense check stuff, it's one, if we put a good layer of risk into all the numbers that we look at, without overthinking it, you just go market that you've got to market down because we, we, because I guess the advantage we have

Chris Whyte (: 40:29

Yeah.

Mm-hmm.

Damon (: 40:44

investors. We see this, you know, we see so many decks.

And we track the performance and we obviously closely track the very closely the ones we invest in. So you can kind of see, you know what your pitch, you know, the number you're pitched is not the number they're going to hit. You we know that because we see them every, you know, it's great. We want to see enthusiasm, want to see optimism, but we as investors go, OK, we know it's not going to be that number. It's probably not going to be the first couple of years. It could be wildly different. So does it still work if we put this much risk in for the first couple of years? What cash, what cash issues does that present?

But yeah, that's kind of where it becomes sort of down to us and our analysts looking at stuff.

Chris Whyte (: 41:19

When you turn people away for, obviously, for whatever reason, whether it be they haven't, they've taken too much salt in their pinch, do you find many come back with improved pitch decks, improved, and if so, how many of those typically will then go on to secure funding?

Damon (: 41:29

Yeah.

Yep.

Yeah, so I don't have the stats to hand, but we encourage them to come back. So if you get to one of our pitch days, you are already, you know, so we invest typically about one company per month. So 12 per year comes from, it comes from about, I think it's from about 650 or so interactions, not always applications, but interactions with inquiries coming in.

So to get through to our pitch there, which is every six days we see six, every six weeks we see six companies, you're doing very well. You're already, you know, you're already pretty impressive to be honest, to get that far. So we don't want to, you know, it's in our interests, you know, to make use of all the costs of getting these, you know, to finding these companies and getting them through to that point. It's in our interest to maintain a relationship with them. So no, we encourage them, you know, it's very rare that we'd...

It's very rare that we not encourage someone to come back. There's somewhere we'll say, you

Having now really understood your market, it's one that we can't really add value to. That's a bit of a, if we get to that decision in a pitch day, then it's, you know, we'll certainly try and help them out, find some other investors, but possibly, you know, we were unlikely to change our ability to support them in the next year. But quite a lot of the times it will be that they're just a bit too early. You know, we'll say, look, you know, we love what you're doing. You're just a little bit early for us. Right. Come back in six months, you know, stay in touch with us and then get back in. And, and, and, you know, and there's a certain that you sort of fast track through

Chris Whyte (: 42:44

Yeah.

Damon (: 42:58

the system a bit, you you then come back in and pitch. We'll send a note and say, right, to my selection committee, my selection panel will say, right, okay, we've seen these guys before six months ago. We think now that they're ready, actually, you know, they've made significant improvements. know, IP is almost filed. They've got these three letters of intent from, you know, partners and all the rest of it. We'll say that we think this is an interesting one to see.

But don't know, but in each pitch they sort of change. So out of the six, I'm trying to think, we had one last week. I think they were all, all of those six were...

We're new, I think, but it's not unusual for us to have maybe one out of the six that's one that we've seen before. And we have invested in quite a few that have come back. Again, I don't know the number off the top of my head, but I can think of definitely three out of the 40 that were ones we encouraged to stay in touch and then invested in when the time was right.

Chris Whyte (: 43:45

Interesting.

Yeah, it's just a lesson in kind of take the feedback and then keep going. But I'm guessing there's as much value in a rejection in some cases. I was speaking to Claire from Untap recently on this and it's a slog going through the investor, but the questions that get asked really kind of give you stuff to think about and really help you improve as a founder.

Damon (: 43:59

Hmm.

Yeah.

Yeah. And also this and also the feedback you get from innovate UK and stuff, places like that, because investors are mean, there's no one and they think they've got to remember investors are just investors are fallible. They're they're humans, right. And they make mistakes. And so there's always a danger you can listen to everybody's and you just your head spins around, you know, and you just you end up just staggering around, not knowing what to listen to. But

Chris Whyte (: 44:14

Yeah.

You

Damon (: 44:31

I think you can kind of take a grounded approach and go, right, okay, you know, can't, you can't please everybody. You cannot meet as as a startup. can't, you can't be the right investment for every investor. It's just, we've all got, we've all got weird investment theses. I've got weird stuff in my thesis. It works really well for us, but that purpose led bit throws a lot of people off the, you know, but we know what it means and it works really well and we're performing well on it. But then another fund will have to make slightly different. So kind of understand what those really important metrics are, what are all those important investments

Chris Whyte (: 44:48

You

Damon (: 45:01

criteria for the different funds but they will be different and you can't sue all of them you know they'll have different revenue requirements all the rest of it right but also stuff like innovate UK is good I mean like you know the feedback you get from them you know I was talking to someone last week about this can't recall who it was but someone was saying part of the due diligence they do is they ask the company even if the companies had a

like a negative response from Innovate UK. So they failed to get a grant. They said, actually put that in the data room because it's so valuable. What you can do is put a document in the data room with the negative feedback you've had and then how you'd counter that. you know, don't just dismiss it and say, they just didn't understand the technology. Actually, what is it they didn't understand? Try and repitch in and have a little document that shows you kind of how you'd kind of counter it and the lessons learned from it and put it in the data room because it's actually,

It's quite useful exercise to go through.

Chris Whyte (: 45:53

Yeah, that's brilliant. in your experience, obviously we like, I think I asked you this at a hard stuff event as well, we want companies to succeed, you're investing in things that you believe in, you think are gonna succeed, but clearly not all of them do. What separates the startups that thrive from those that struggle after securing funding?

Damon (: 46:13

A lot of it.

Yes, just a few factors. personality is like the personal makeup of the founding team. know, we're not just talking about chemistry. Chemistry is important, how they work together. know, actual, you know, that sort of the personal makeup of them, like their ability to withstand all of the difficult stuff that's going to be thrown at them.

is a big one and we never know. try and you you can't see it. You do your best during and before investment, but really you only start to figure out.

These things post investment. I say kind of things like sort of founder burnout, ability of a founder to persevere on, I believe the founder to kind of, you know, pivot when stuff gets hard, but also not pivot to every single requirement, you know, stay a bit focused. All these kinds of things are pretty important. And we do, I say we're pretty good at picking them. Like, you know, fast majority of our founders are, they're well grounded. They're based, they are largely engineers. And what we sort of look for, if they don't have that commercial skillset within them, they'll

or a co-founder that's commercial. So we do pretty well. We usually end up with quite robust founding teams, but when one slips through and you kind of know it quite quick, usually within a few months, you sort of go, okay, this is gonna, it's necessarily a fail. We've got a very, very low failure rate. Most of us don't fail, but you just know, you kind of know that they're gonna be a bit more work. You're really gonna have to throw some stuff at this. And you might need to swap a few bodies around.

gets more it's usually like on the commercial side and so that's one i think and then

I mean, again, fortunately, we don't have too much this, but we have seen it before. Like basically burying your head in the sand. Burying your head in the sand is like the kiss of death. mean, because we're here to help, right? Your investors, your investors are in the same boat as you, right? But they just own a really tiny bit of the boat at the back, right? You're sailing the thing, right? But we're all in the same boat. We all want you to succeed and we will help. We will do everything we can to get you there.

But if you come to us and say, look, I've got three weeks worth of runway, I've got three weeks until we go bust.

That's pretty hard for us to figure out, right? So what we wanna be seeing is three and six month stuff. And actually that's something that we've learned over the last few years is often some of the support we give is very rapidly will upscale the kind of governance in companies. It's never what they think we're gonna do. They think we're just gonna talk to them about injection molding and roto molding and rapid prototyping and all this stuff and commercialization. But sometimes we say, right, okay, who's your chairperson? Who's chairing the boards? Can we diarise them for the year every two or three months?

Chris Whyte (: 48:12

Yeah.

Damon (: 48:39

Do you do a CEO report? you have a management pack you send out? And often they don't. you say, it's not complicated. need to get this stuff sorted. Because without it, if you don't do that, you are effectively burying your head in the sand. If you've not got visibility on your numbers.

It's like that's where the surprises come and with a startup, it's different. Like, you know, if you're a global, you know, massive company, can bump a little bump along a bit, right? You've got enough cash in the bank, but startups, you know, really can't, they got to know, they kind of got to have, we've got to have comfort on what they're spending and what the cash forecast is. And it always changes. You know, I think that's kind of something that founders don't always understand in their heads. I'm sure some of them think, well, we're always running out of cash. We've always got to be fundraising. Almost like what's the point of doing the cash flow? It's going to look terrible.

We know it's kind of like challenging, like all cash flows for startups are pretty hair-raising things to go through, but we're used to it. We can, again, like you asked earlier, some of the useful stuff I brought with me and us as a team, we know some of these little tricks. We know how you can stretch your operating cash for a bit and we can get some more cash in if we've given enough notice. But yeah, it's challenging. And again, we're very fortunate. founders are typically, they're engineers most of them, right, at least a good.

Percentage of the founding team will be engineers and they're pretty grounded, know. won't be, they're often not sort of finance experts or expert governance, they kind of get, they, you know, if you lay out to them in a black and white way and, you know, they understand why they're doing something, they do get it pretty quickly.

Chris Whyte (: 50:01

Yeah,

there's a process they can follow, quite often it's, yeah, they're engineers, not business leaders. but they need to become both really, don't they? So, in terms of the market then, obviously we said we've covered that off as well. We'll fix this. What...

Damon (: 50:05

Hmm.

Hmm.

Chris Whyte (: 50:21

What do you see has changed really in the last five to ten years from the sense of kind of hardware startups and UK manufacturing and Do think there's more opportunities or more challenges for UK product startups today versus? Five ten years ago

Damon (: 50:34

So yeah, five to eight, so I'd say definitely a shift to kind of reshoring, like from the actual point of production, stuff's getting closer to home for sure.

And I think there's this whole acceptance that margin just has to adapt over time. You can't have the margins that you're going to have in year five, in year one. And I think five, 10 years ago, everyone just rushed to just outsource stuff as far away as they could because they were just chasing a dollar cost of goods. I'd say that's sort of changed. I've seen that a lot. And there's obviously a lot of geopolitical stuff going on, so not everybody wants some of their tech and IP necessarily dotted around the world. That's one, I'd say that's a big one.

I think kind of we've got to see what's going to go on with Innovate and the funding. Hopefully the government doesn't kind of mess around with that because if that stays as it is, and I think UK remains, I passionately believe this, remains the most attractive place to launch a hardware startup in Europe.

because we've got, there's a few things at playwright. You've got the phenomenal, you've got phenomenal talent coming out of universities, coming out of the, like, you know, the JCBs of the world, Dysons, all this sort of stuff. Like we educate engineering and science-based grads well. They then tumble out into great roles. So you have this like hot bed of stuff going on in the UK.

And then on top of that, when they get to sort of startup mode, there's Innovate UK, non dilutive, phenomenal, know, amazing. All of our companies get Innovate money without a doubt. You know, quite considerable tickets. So you have Innovate, you've got things like EIS as well, and SEIS obviously, you've got these tax breaks that make it attractive for investors to take a risk.

you know, make plays into companies that maybe they consider too risky because you get then a tax break on it all. And then for the companies back to the companies again, then they get stuff like the R &D tax credits and all that sort of stuff. I mean, there's quite a few things in the UK that a lot of other countries don't. so it's talent plus these, the way that the government has interfered with.

the playing field, I made it not level with the rest of, I'd say Europe for sure, is, you know, it's something that we can do very well. And I know obviously, you know, you get to a certain scale, you have to have multiple points of manufacturing, you know, it's unlikely you'd only scale a product business with production in the UK, but it can be done. you know, it's not surprising we see people open up US points of production and maybe European and Fari and sort of, you know, sort of Fari's production. But,

But I think what, you know, and I think sometimes people immediately jumped to that point in a manufacturing business's journey and say, well, you know, you know, we're never going to be like the world's number one manufacturing nation. I think what we can be there, we can still play really well at the IP generation bit, that innovation stage. And if you think about it, if you talk about UK PLC and kind of, you know, tax revenues, mean, know, I don't know if these companies want to track tickets from the US and so forth, but the IP, if they're licensing it out, like they are, there's a, there's a good chunk of that company's life that will become

contributing significantly to the UK economy. know, making us a really attractive place to play for that innovation stage of the business without a doubt. know, the rest of it is maybe like heart, there needs more government interference if they want to really play seriously in that space as their companies really, really scale. I think that innovation piece, it's already there. It's ours to lose, which hopefully we don't. know, lot of that comes down to sort of government support of innovate.

I think it's here to stay.

Chris Whyte (: 53:46

Yeah, I think so too. it's an exciting time to be involved in British hardware. What sectors or product categories are you seeing most innovation and growth in right now?

Damon (: 53:52

Mm.

I'd imagine, well, we don't really do defense, right? We do some dual purpose stuff. I think I will not be surprised over the next couple of like, you know, two, three years, you see a lot of defense funds. And that doesn't mean there'll be hardware, but just, you know, defense is clearly going to get a big chunk of the government cash, right? Over the next few years. And we don't, we don't really do, we don't do defense. We don't do things that effectively go bang. We can do dual purpose stuff. So things that, you know, can monitor health in certain scenarios we do that might have military applications.

I'd say sort of, you there's a lot, I mean, it's continuing, right? So obviously you could be mistaken to think it was a bit of a sort of bubble and we've moved past the whole kind of climate, water tech and those sort of things. But I think there has been, I'd say there's possibly been a bit of a bubble in terms of the amount of cash that was available for those kinds of businesses. The amount of funds that set up, they basically, they were impact funds. Only invest in...

in startups that have a positive impact in the environment, strip out carbon, all the rest of it. There was so much money that went in and it didn't really know where to find a home. So you end up with these inflated valuations of companies that have just disappeared. They've disappeared off the landscape and the investors are scratching their heads and they've lost their shirts on it. So that time has gone, you I don't think you're just not seeing that sort of level of investment in that space. What I'm seeing, this is relevant to hardwares, I think there's been a bit of a realization that actually, okay, what we thought

was like a impact climate startup, you maybe the, you know, five, 10 years ago looked very different and was attracting much different size tickets at different valuations. Maybe it was a little bit harder to even get your head around. was quite, you know, how, how is it really, you know, the green washing or not? I mean, and how real is this tech to now actually, I think there's an acceptance. Actually a lot of our, of the problems in the world can be solved quite simply through engineering and hardware. Like if you want to remove things from the ocean, like

You don't want to do that purely with a bit of software. Some element of hardware probably has to interact. And I can understand the hardware and I can see how that takes this problem out of the ocean. It monitors the health of the riverways. Usually there's a hardware interaction. So we're seeing a lot of that stuff like sensible engineering solutions for climate challenges and stuff you can just understand at sensible valuations. We're seeing that. And then something that maybe is...

That's kind of coming to the end a little bit. I feel like we're sort of at the end of a sort of maybe we've reached peak kind of agri-tech. We had so much stuff around food security, ag tech for food security basically. could you remove the risk of labor from so many agricultural settings? I saw so much of it, like the number of...

Chris Whyte (: 56:19

Mmm.

Damon (: 56:35

slightly autonomous, fruit picking, transportation. mean, there were so many of them and they were valued quite high. There's a lot of people putting money into ag tech. But again, I'd say it's kind of like there's been a rationalization. So now some of the ag tech stuff we see is just, really sensible. It's like, oh yeah, okay. You've defined your own market. You're not following the herd. Excuse the pun, but you're kind of, you're doing something.

Chris Whyte (: 56:38

Yeah, I've been working with one out in Cambridge,

Damon (: 56:56

important, that's unique, that someone else hasn't done it in a way that's doing it. Because sometimes you see these bubbles and you see three or four pitch decks and go, surely they're all doing the same thing. Like, is it really that different? And you can convince yourself because then when you talk to your peers and other funds that are piling money into it and the share price is going, you think,

Chris Whyte (: 57:04

Yeah.

Damon (: 57:14

It's really tricky, but no, we sort of stick to it. Like we can't, know, keep it simple. But yeah, so, but yeah, that's sort of a problem. And obviously, I mean, look, you know, obviously AI, but AI being deployed in a sensible way, all of our businesses utilize AI.

Unsurprisingly, I can't think of any that don't really. Yeah, it's just putting it in its box, right? It's like it lives in the AI box and it does this specific thing, which is very useful. It doesn't need to be across every part of my business, but it's, know, we leverage power of AI to support this hardware and make it operate more efficiently in this space. And we understand that. Okay, great. That makes sense.

Chris Whyte (: 57:33

Mm.

Wonderful. Yeah, some really interesting insights there. I did see, yeah, from my side of the fence with my recruiting hat on, I did see a lot of, I had a lot of conversations with Agtech, kind of robotics and strawberry pickers in the, well, the run up to Brexit, that action in, because it's like, who's going to pick all the fruit? know, yeah, yeah, absolutely.

Damon (: 58:07

Yeah, we understand why we understand why right? Yeah.

Chris Whyte (: 58:12

I'm not sure the answer is robots, but we'll see.

Damon (: 58:14

No, it's fascinating seeing the number of different ways you can solve the challenge of how to pick soft fruit without a human and then transport it. They're all, yeah, they are fascinating because they go really vertical, right? They're like, I'm the raspberry guy and.

Chris Whyte (: 58:19

Yeah. It's quite, yeah, it's quite, it's interesting to watch the

Yeah. It's

Damon (: 58:32

And then the strawberries can be a completely different challenge.

Chris Whyte (: 58:32

like the most. Yeah, it's like you've got this articulated arm that comes out and it's got the most sensitive of touch and then the sensor and then these little stick scissors that come out to release the strawberry. I'm not sure how, how, I can't really do it quickly or certainly the ones that I've seen. So I'm not sure how productive it is, but it certainly looks interesting. You want to just bumping into one.

Damon (: 58:41

Yeah, it's fascinating but yeah

Mm.

Chris Whyte (: 58:55

you go out with your family strawberry picking at the weekend and then just down the line is this robot on tracks. Johnny five. Johnny five's been repurposed. And what's full of we've kind of gone over gone over time but really, but it's been an absolute pleasure speaking to you. I just wondered what if you happen to share kind of what what's next and what you're excited about for the next kind of couple years with with BDF or in the kind of

Damon (: 58:59

They're out motoring ahead of you getting all the good ones.

Yeah.

Chris Whyte (: 59:20

Your own career,

Damon (: 59:21

So it's more of the same, but slightly larger tickets and gradually increasing the frequency of our deployments. Like I said, we're doing on average about one a month. And I think by the end of 25, we'll be ticking just above that, one and a half heading towards two, I'd like to think. But it's very organic. That bit of our business is.

attracting investors is important, attracting great founders is important, supporting them and exiting them is really important. One of that part of that triangle is that, know, that these great founders, you know, there's only so many of them, you know, so we don't want to dilute our portfolio performance by over-investing, there is, we're seeing more and more, you know, each of these pitch dates, we see there's more great companies and we're taking more through to DD. So slowly our rate of deployment will pick up and also our

ticket size, which is kind of, you know, it's not an inflation thing. It's just actually as more investors back us, see our performance and want to put money in, then, you know, we then have the ability to deploy larger tickets. You know, we've traditionally done quite small tickets, 150,000. This year we'll be up to about 250, 300,000 by the end of the year. Yeah, so think that's the kind of, you know, so those two things, rate for deployment and actually seeing, you know.

mean, seeing these companies, the companies in our portfolio, like, down more IP, internationalise and start to get acquired earlier than we'd expect. All of those things are kind of happening. And I'll it down to...

Big part of it right which is relevant to this big part of it's because they're you know It brings challenges with it as well, but the big part is because they're in their engineers that they're they're they're they're pretty modest right and they typically they're generally quite modest and They really have they want to solve a problem. You know, they're not

they're not generally, they're not sort of technologists that have created the solution or want to find a problem. Like they're engineers that have really, really bugged by a problem. And then it's a problem that there's profit to be made by solving this. And then it's our job to kind of make sure there's enough cash and clear the runway for them, you know, but yeah, so I think that's kind of what to expect from us for the next couple of years.

Chris Whyte (: 1:01:22

Brilliant. Well, I'm certainly looking forward to following your progress and no doubt seeing you at multiple networking events this year. think aside from a encounter at a networking event, a hardware event, how can people get in touch with you? How can they find out more about British Design Fund and maybe bring their idea to your table?

Damon (: 1:01:30

Absolutely.

Yeah, so really like number one, go to our website, British Design Fund.co.uk. There's a really simple application form. It's got our criteria on there. Get an application in. No matter how you find us, we'll ask you to do that. That's how you start the process. Yeah, and to be honest, and then if you're looking to bump into us, we are pretty active. We're out there. We're out with the universities, the make aversities of the world, the incubators, the design agencies. We're pretty, me and certainly a few other, the team, we're generally out.

kind of preaching about hardware and how to launch it and fund it. yeah, like you say, you're probably going to bump into one of us if you're in that space. Sign up to all the hardware events and maybe connect with us on LinkedIn. We put a ton of stuff out through social. And it's very rarely us talking about BDF. It's us talking about interesting stuff, hardware stuff.

Chris Whyte (: 1:02:29

Yeah, you share

the stories of the founders and the technology that they're bringing through. So it's great to see. Damon, it's been an absolute pleasure. Thank you so much for being on the show and joining me. yeah, I'm looking forward to catching up with you at the next hardware meetup.

Damon (: 1:02:32

Yeah.

Thanks a lot, Chris.

Chris Whyte (: 1:02:48

Thank you for tuning in to this episode of Why Design. If you enjoyed this episode, please take a moment to leave a review wherever you're listening. It really helps others discover the podcast. And while you're at it, why not share it with a friend or colleague who do enjoy it too. If you'd like to stay connected or explore more about the work we're doing at Kodu.

feel free to visit teamkodu.com or connect with me, Chris Whyte on LinkedIn. Thanks again for listening and I'll see you next time.