The CEO of Aframe talks to La Fosse Associates about his journey from an arable farm in Scotland to running his own technology company in London, venture capital funding rounds, his past life as an actor and getting right what BT got wrong.
David Peto has just returned from lunch where he has been picking the brains of an old friend about the on-going repositioning of the company. As part of the evolution of the business he has recently hired a COO; an ex-Sega man who brings some big company rigour to what is still a very entrepreneurial company with many of the slightly chaotic characteristics of a start-up, “I can come up with an idea, build a small core team, build it, get people to buy-in, buy the product and pay me some money, but after that I’m pretty rubbish!” Would he describe himself as stressed? “Yes I would!” How does he deal with it? “I ignore it. We may be a highly successful company or we may be acquired for millions or we won’t. In 10 years if I’ve made a bit of money, I’ll have joined a gentleman’s racing circuit – bought a GT with a pro-driver. Stress over”
David Peto the son of a Scottish farmer is 34, lives with his wife and daughter in Lewisham, south east London, and Aframe is his brainchild – an idea hatched after a career that started out on stage. It is a cloud based video production company that changes client’s video production from, he says, “capex. to opex.” His tag line is ‘better video everywhere’. “The world of professional video has gone tapeless, the shoot ratios have gone from 4 hours for every hour you see on TV to 70 hours for every hour you see on TV & people need to invest in hugely expensive equipment, Aframe is a system in the cloud that will make it remarkably easily.” That is, or was, his elevator pitch when securing his first round of angel funding 4 years ago. With companies like MTV, Red Bull, and ESPN on board things seem to be headed in roughly the right direction.
“They all said I was nuts and that it wouldn’t work”
It seems the idea had been coming for a while; he is tight-lipped about the exact timing. For years he’d been watching people struggle with video while working as an actor and later as a producer in the film industry, “you or I will struggle organising our family videos, multiply that by ten thousand and you have the average challenge of someone who makes video professionally.” So, in March 2009, he found himself squirrelled away above a strip joint in the West End of London with a desk, a phone, a laptop and an idea on a side of A4. Things must have felt exposed. “I’d gone from having 10OOOsqft of prime Soho real estate, at Unit Post which I co-founded, with runners that bought me tea and sushi and shiny things, and a bar onsite that I owned”. He took the idea to various people he trusted – “they all said I was nuts and that it wouldn’t work”. He then took that idea round to various people who had wanted to put money into his previous firm, but couldn’t, for whatever reason, and said, “Gimme 1 0 grand.” And they did.
At a recent La Fosse roundtable David had spoken out against UK entrepreneurs constantly bemoaning the tight fisted VCs, ” it annoys me, but there is money out there” he says, ” it’s not like the US here, but they complain that people don’t get the idea, when actually 90% of ideas out there are flawed” he continues, “a few good ones get funded, but if you can’t get funding it means your idea is crap or you need to work out a better way to pitch it. You have to be credible enough to make someone believe that YOU are the person to deliver on your ideas. It’s always the same, ideas are meaningless, anyone can have an idea. I have five a night in the bath; it’s about making it happen. Ideas are worthless. Execution is everything”. You can see the passion in him that has certainly been the significant contributor to his success so far. “The idea behind Aframe is not so amazingly brilliant that I am the first person to think about it – BT spent 150 million quid trying to build what Aframe is, about 3 years before I did it. They just did it wrong”.
“VCs I talk to say, ‘would we rather fund a great idea with a b-grade team or a moderately good idea with an a-grade team?’ They’ll go for the a-grade team every time because they will make it a better idea. If people aren’t ready to invest go away and come back in 6 months and show that you have started to complete the steps, i.e. build a small prototype or do some detailed market research. Keep feeding people proof that you are going to do what you say you are going to do. Try and show potential investors the steps to delivery”.
So has his elevator pitch changed over the last four years? “Yes, it has. For companies that are serious about video Aframe empowers their teams to deliver. THAT’S IT. You work with video, we’ll make it better.” So what about the industry, has it changed too? “Not really, broadcast media in general moves so slowly, but when it adopts something that makes it better it does that very quickly. The good news is that the cloud is firmly on the agenda now and so it’s up to us to go and educate people. After 4 years, we are still educating the market on what the cloud means. We are becoming the dominant thought leaders about what it means to work on video in the cloud.”
Now we’ve mentioned the C word can he define what it really is or means? “I’m not a fan of the term; it just means you don’t need to put something in your office, I mean, it’s all about collaboration, saving on IT, saving on staff, office space, adding new services. Most people who buy a cloud service these days are business people NOT techies. The power is shifting from the CTO, who may want to spend their time talking about latency, to the user.”
So what about his competition? It does seem a little unlikely that David is building his business largely unopposed. “Our main competition is the status quo. I don’t see anyone else who has our capabilities, which sounds ridiculous because we are only 30 people ….. one or two have some of the features, they just don’t have the grunt under the bonnet”. There is, of course, some competition to Aframe – one in particular, MediaSilo, was founded back in 2008 by Kai Pradel, in the US. It has just received $2.25m of series-A funding from Schooner Capital – the Boston based VC led by Vin Ryan, the man behind Iron Mountain. “We take them very seriously, but we are not just a flashy piece of software, we own all our own service, own our network globally, the entire security infrastructure, every single line of code, everything is under our control. You can throw 70 terabytes of media at us and we can handle it without breaking sweat.”
“Our main competition is the status quo.”
So 4 years in and is he where he wanted to be? “NO! I expected to be way bigger. Of course you do. Otherwise you’d never do it. You’re never happy where you are” Define way bigger? “Well in year 3 I thought £23m revenues”. And did he think that was realistic at the time or did he think, ‘you know what? I am just going to shout about big numbers, and see what happens’. The first casualty of the year is the plan right? “Every VC expects that. … we could have had £23m in revenues if certain things had gone differently, it wasn’t pie in the sky. We are way ahead of where most people would be.” So no raised eyebrows among your backers at those numbers then? “Look, a business plan at that stage is there to show that you are capable of planning, when you sit with the VC they will check the market size and the opportunity, and that your numbers are realistic within those parameters. The number one reason companies don’t get backing is that the market is too small …. no matter how cool your idea. It’s a credibility exercise. Everyone gets hung up on the plan! The backers flick straight to the back of the plan, ‘got any customers?’, ‘have they paid you?’ ‘Now, let’s see the CVs of those involved.’ “You know what? If I started again, I’d get a better valuation ….. ”
“Revenue projection is clearly more important now, but it’s still a bit of a game – you set your numbers so people buy into them, but so you’ll be able to beat them.” To start with David acquired all his seed capital from a super-angel round. “Some without seeing numbers, can you believe it!?” Although he now has some bigger VC involvement, in the early days the backers were all private individuals who seemed to work far more on a gut instinct and on ‘who vouched for you’ before parting with their money. So no dragons den then? “No! I hate that programme. It’s not a business programme …. why make a fool of yourself on TV …… everyone has meetings that don’t go well, why on earth do that on TV.”
So what about the more human side of running a business like Aframe then? “When you start up you are a little family, but it doesn’t mean you all go round to each other’s houses for dinner. We are a company of people, in their 30s, so we have families and other commitments out of work. We are not a group of 23 year olds, who live in each other’s pockets. Back in the last firm the guys I was with were and still are among my closest friends, we’ve all been to each other’s stags and weddings …… it was a very different time.”
One of the biggest changes at Aframe last year was the people. I mean, you never find yourself sitting back and saying I’m really glad I waited that long to fire that person – you will come up with almost any excuse not to do it, one of my problems is that I become really close to a lot of these people, and I’m asking them to do difficult things, to push themselves outside their comfort zone and work long hours …. However I do have a rule if you want to work for me – “no dicks”! You have to be a nice person to work at Aframe. I’d rather have someone who is very good and a lovely guy than someone who is a genius, but who is a total dick! I’m doing this because I hope to make some money, but I have to enjoy it. It’s an interesting question – would I rather be making money hand over fist and not really like any of the people I work with or would I rather be doing fairly well and really like all the people I work with? I’d have worked in an investment bank if I’d been happy with the former I suppose. Friendless and loaded!”
“You need common sense not an MBA”
So is finding good people tough? “Operations & marketing is relatively easy, technology & finance is a total nightmare. We avoid contractors where possible.” And what about a ‘consigliore’, is there someone you can off load some of the day-to-day pressures to? “Weill do now, the new COO. I had been doing this alone. I had a CTO, who is a mate, and was my wingman although he’s left now – on good terms. I have been front man, sales man, press man, operations man all at once and have been doing all of them pretty ineffectually.” David has clearly been stretched – he does have a chairman and, one assumes support from the VCs but no one operationally in the business. “I needed someone who could say ‘ … this is f*** *d, but don’t worry I can fix it’ ….. most importantly pulling me up when I’m wrong. That’s a key role of a wingman in my view – to whisper in your ear,’ now you’re being a dick’ …. that’s not something everyone can do”.
So what advice have you got for people setting out on a similar path to yours? “Just do it. No one can tell you what it’ll be like …. you need common sense not an MBA, and don’t go to the Doug Richards School of Start-ups and slavishly write things down. Just go and do it. I have a rule of three … if I don’t know something I’ll firstly phone someone and ask really stupid questions and they’ll no doubt think I am a total pillock. Then I’ll contact someone different and talk to them , sound a little less like a pillock and then I’ll ask the person I really need to speak to and sound like I know what I’m talking about.”
David has, unsurprisingly given his boot-strap view on the world, no formal business qualification – he studied politics at Warwick and then chose the theatre. He was brought up on a farm , “mixed arable and barley for whisky”, in Scotland near Melrose. He was educated in Scotland – then a boarding school in England.
Was acting his number one choice? That didn’t work so go and run your own technology business? “well, no, because if you asked me to go back to acting I’d say, ‘over my dead body’. It didn’t really work like that.. .. when I was 7 years old living in rugby country in Scotland, I was small, wore glasses and was slightly rotund. When I first walked out on stage I played the Wizard of Oz, it felt really good. All through school I acted. I always wanted to act. I went to drama school, got an agent and did some TV commercials and some plays. Some did ok, but most tanked. Then basically, I just started coming 2nd for everything, I just missed out on a major HBO movie -life could so easily gone in a completely different direction.” Eventually he found being in a play doing the same thing week in and week out was boring him, so he started producing them and films. One day he bumped into a friend that owned a production company that then morphed into co-founding Unit Post, where he took the CEO role and that was that.
So does he differ from the classic model CEO – is he quirky? He doesn’t think so. “I liked to be judged on where I am now, my credentials for raising money for Aframe were having grown Unit Post Production not having been an actor. As the years go by and Aframe is stomping round the world crushing all before it, then maybe I can have some fun with my background. Until then I want to focus on the here and now”