How the project of a university student grew into a multi-million business without VC

Jack Barmby, a British entrepreneur, owns 2 companies and employs 350 people across the country. In 2015 his startup, Gnatta, was named among the Top 10 most promising technology startups of the North. Jack built the company without attracting VC funding or huge loans. We approached him to talk in-depth about the challenges and the growing pains he went through to get where he’s now.

Jack Barmby, CEO and founder of Gnatta

Jack Barmby is one of the many Manchester-based startup founders. Since he graduated from the university – even earlier than that, actually – he’s been working on Gnatta, a platform that allows businesses to communicate with customers in one centralized place; be it social, review, marketplace or traditional channels. Gnatta adds elements of automation and AI to increase the speed to resolution without sacrificing the customer experience.

He founded the company during his university years, back in 2012, and now has thousands of clients across the UK, 350 employees, and plans to expand internationally in 2017.

If I understand correctly, Gnatta is self-funded, right?
Yes, fully self-funded from the start.

Was that a strategic decision to build a startup based on your own resources or do you still plan to turn to VC funding somewhere in the future?
I’ll give you a bit more background: the business is broken into two companies, so as we were growing we were doing two things.

Gnatta is a customer service software solution that lets medium to large scale enterprises deal with customer service volume.

Some of our clients require fully managed solutions. This is where the second company steps in. Aside from using our software they also hire a dedicated team from us that fully supports the solution.

The outsourcing business doesn’t need any new investments but for Gnatta we are going to be looking for new funding in the next 18 months to two years in order to grow internationally and start to really have a foothold on the global market.

So you are a sole founder?
Yes.

And how big is your team today?
Across both businesses... Gnatta is a team of just short of 30. That's 20 developers and a support team of about 10. And the outsourcing team is 320. So in total around 350 staff across both businesses.

Could you give me a rough timeline for these 5 years? Do you still consider your company a startup? A lot of time has passed.
We started the concept of what the business would become in 2012 at university, and we got our first client in 2012. But this wasn’t on the back of a cleverly planned business strategy. The software was intended as an internal tool for me to do my job better. We never actually established it as its own saleable product until just before The Northern Stars Program in 2014.

In 2014 we started pitching Gnatta as its own separate entity. A year later we got our customer based only on the product. This marked our first proper client acquisition for Gnatta as a standalone company.

So really although we've been tinkering and playing with it since 2012 I would say our actual trading time started in 2014 and our first client acquisition was in 2015. We are still in startup zone.

So you have been acquiring clients for only two or three years now?
Correct, yes.

Growing process
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Any growth pains?
We had two big challenges from a development/technical perspective.

One of our biggest challenges was managing scalability while maintaining security at the proper level. Before we took on enterprise-level clients, we shipped our releases as we wanted, with edits and changes made as we needed.

We didn't really have to answer to anybody and drove a lot of process through quite quickly. Enterprise-level customers expect improved stability and security for their systems. We had to commit more resources to QA, do penetration and stress testing.

About the second challenge. The reason why we don't really struggle with hiring so much now is because we got an extremely connected internal culture among our developers.

But that took quite a long time to develop. When we were a small team we just had a few guys that really understood the product but it wasn't very scaleable. Even though we brought on new developers it was very difficult to scale them out. So while we were trying to scale our team physically in terms of how many people we had, we were also trying to scale the application, focusing on stability.

That was hard. We struggled with scaling issues for over a year, trying to get that right. It was hard because we were growing the business, growing the application, and growing the team all at the same time.

Startup founders could be artificially divided into those with more business skills and those with technical knowledge. As a sole founder, are you a business guy or a technical guy? What skills did you lack and how did you deal with the limitations?
I had 3 major weaknesses that I needed to address, and this is something that's very common among technical entrepreneurs:

  • I didn't have the technical expertise to do it myself, 
  • I didn't have the accountancy knowledge to make it viable,
  • and I didn’t know how to scale the team.

So while I had a good idea of what Gnatta should be and drove the product forward for a long time, I lacked the technical knowledge and I lacked the accountant knowledge.

My family are now involved in the business, and one of them, my stepfather, has become my mentor. He was an accountant, and he cleared that up. And again I had friends who were developers. They had full time jobs but I convinced them to put together an MVP.

After the prototype was done we had a revenue stream to move forward. This is how I was able to reinvest back into the company.

There was no silver bullet for the third challenge. The solution to my scalability problem came with trial and error. But as you know as an entrepreneurial type you tend to have a good idea if nothing else and I certainly fell into that category.

So those three areas were very very difficult to try and get on top of. They still remain the central focus points that we're working on now.

At the crossroads
Image credit: dribbble.com/samburton

Lots of startups have to pivot a few times before they find the right product/market fit. Did you have to pivot Gnatta, too?
Gnatta worked as a platform that helped people link together all of their social media platforms. It did the job well but we quickly found out that it was nowhere near strong enough to be its own saleable product.

We were developing a product that was quite labor intensive to run and to maintain. We marketed Gnatta to small business owners, microstartups with two or three people who didn’t have the time to put into the software to make it efficient. They didn't have time to monitor it and they didn't have time to manage it.

More basic tools that were already on the market allowed them to manage things a lot more easily and provided better value for their money. So we took a bit of a risk to abandon the market and run for enterprise level clients instead.

Since we shifted to a different type of client it took our focus away from having to do things like how-to videos and self-serving. Doing business with enterprise is different. Enterprise customers accept costs more easily. They understand the time and money commitment they have to make.

But we were moving away from a relatively small value to a relatively large value, dealing with bigger companies that had procurement teams and were also moving to bigger competitors like Oracle, Salesforce, and those types of guys.

It was a risky move. But we realized that we were too slow to react to what the market needed because by the time we were developing something it was already done so we needed to move to an area where we could kind of spread our wings a little more. We moved away from trying to capture the entire market to just trying to focus on enterprise-level customers and nothing else.

I think it was the right move. We’ve got a foot in the door now. We're getting clients and traction relatively quickly. And if we hadn't done it the business probably wouldn't been here today.

Building a solid startup from step one

Jack, after building a 350-strong team, what's the biggest advice you would give to an aspiring startup founder that has to create a company from the ground up?
That’s a big question. I’ll try my best.

1. Measure your costs

What you monitor, grows
Image credit: dribbble.com/eranmendel

Conversely (and perhaps controversially) in my experience then an expensive, sales process is a cost that doesn’t need to be borne by many startups. Here at Gnatta we’ve focused on the quality of our product in the belief that a market leading solution will bring clients in. We have built our business through a combination of referrals, networking, and very basic marketing and have continued to reinvest maximum effort and resource into improving our product.

Having done this, we have now pivoted to make a commercial investment in sales & marketing to help increase sustainable growth. Many startups can throw themselves into expensive sales hires early on rather than utilize their own networks & guerrilla marketing techniques – something which can hinder long-term relationships rather than help if you’re still in the process of developing your product to best in class standard.

2. Retain your soul

This is hard
Image credit: dribbble.com/eranmendel

Yes, you’re the employer here and your team will need your leadership in the good times and the bad times to keep them on course – they’ll look to you for the continued opportunity to support their families and develop themselves. But you need to remain a frontline leader. As the founder, you should be the hardest worker, the biggest believer, and the humblest person in the team.

Where being the CEO of a corporate can be a bit like being a field marshal removed from action, being a startup founder is more like being a captain in the trenches, and your team should see you as such. The good news is it’s the hardest, but most rewardable thing you’ll ever do.

3. Get the best CTO you can find

Grab them!
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For a tech product, your CTO is massive. Someone who can understand the founder’s vision and make it possible is the start; but they also need to have the strategic understanding to think past what the product is now and what it should be in 1/2/5 years’ time.

Being able to do this while also pulling together a dev team, keeping a hold of the company’s IT infrastructure, and handling the inevitable unexpected challenges that occur in the life of every startup is a difficult skillset to fill. Without our current CTO, Gnatta would have struggled to grow at the pace it has; and his ability to combine incredible technical understanding with commercial awareness has been critical.

4. Don’t neglect your team’s culture

Inviting the right talent
Image credit: dribbble.com/eranmendel

Culture is a massive part of our team and the biggest reason why people haven’t lasted at Gnatta. Especially in the early days, we used to hire based purely on technical talent alone. Today, when we get candidates that we think are a good technical fit we give them access to the social parts of our internal Slack to see how the existing teams talks to each other day to day.

With some time looking at or getting involved with our culture, the candidate can get a really good idea of whether they will fit into the business. Not having this beforehand meant the personality was somewhat of a dice roll and we found on a couple of occasions the candidate didn’t’ fit; as a creative role, personality is important and it took us to learn that the hard way.

5. Passion cannot substitute skill, but...

A passionate team
Image credit: dribbble.com/eranmendel

Passion is a massive part of any hire. Does this person want to be part of your success story, or are they just looking for the next job or at the compensation package you’re offering? As you grow, you’re entrusting more and more tasks crucial to your business to other people – they need to care about what they’re doing.

However, never mistake passion for the necessary (note “necessary”, not “ideal”) skills needed for the specific role. All the self-belief and hard work in the world won’t turn a padawan into a Jedi master overnight. Sometimes you have time to take the long road, hire a junior, and help turn them into a world-beater; but often you don’t.

A cheaper hire in the short run (salary, recruiter fees, benefits package etc.), may hit you in the long term whether in financial or opportunity cost. Your business deserves passion, but it also deserves people who can come in and add value.

6. If you are the smartest person in the room, change the room

Stick to the smartest people
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Having a mentor is incredibly important, but should be supplemented by a series of people from different backgrounds who are all available with advice when needed.

In my experience, a mentor is invaluable because they take the time to learn about you as much as about the business and so can help you navigate the potential pitfalls that are part and parcel of setting up your first business. However, there will be times when a mentor – with all the best intentions - can be too close to provide the objective advice which is sometimes needed.

When it comes to the big decisions, whether on staff/product/strategy etc.; I’m a big believer in sourcing the advice from as many people as I can. There are two caveats to this. First, remember the idea there’s no such thing as bad advice is wrong – it’s possible to receive monumentally catastrophic suggestions simply from people who don’t know your business as well as you.

Second, hold your counsel: you’re asking these people for their advice so give them the problem and wait for their solution rather than use them as a sounding board to talk through your own logic (which is what a mentor can be great for). It took me a long time to get there with this approach but now I find it an invaluable part of the decision-making process.

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