Lab to Market Leadership with Chris Reichhelm

Lab to Market – Bootstrapped | Peter Collins

• Lab to Market Leadership with Chris Reichhelm • Season 1 • Episode 3

Share episode

In this episode of the Lab to Market Leadership podcast, host Chris Reichhelm talks to Peter Collins, the former CEO of Permasense, an Imperial College spin-out focused on industrial IoT solutions for the oil and gas industry. Peter shares his unique journey of bootstrapping Permasense from its early days in the lab to a successful $50 million exit to Emerson, all without external equity funding.

Chris and Peter discuss the complexities and challenges of transforming advanced science into a commercial product. They explore the initial state of Permasense, the critical role of BP in supporting the development of their technology, and the strategies Peter employed to secure early customers and build market credibility.

Listeners will gain valuable insights into the importance of balancing technical and commercial development, the power of customer feedback, and the significance of planning and parallelising tasks to ensure success. Peter also reflects on his experiences post-Permasense and shares advice for early-stage CEOs, emphasising the importance of humility and collaboration.

Join Chris and Peter for a dynamic conversation filled with practical strategies and lessons learned from the front lines of taking lab innovations to the market.

Let us know what you think...

Learn more about Lab to Market Leadership: https://www.deeptechleaders.com

Follow us on LinkedIn: https://www.linkedin.com/company/deeptechleaders

Podcast Production: Beauxhaus


Peter Collins:

With revenues, you've got a business. Without them, you've got a project. Too many early stage CEOs focus on the raise, um, until I tell them, now you've, you're, what you're thinking of as a success is having given away a piece of your company.

Chris Reichhelm:

Welcome to the Lab to Market Leadership Podcast. Too many advanced science and engineering companies fail to deliver their innovations from the lab to the market. We're on a mission to change that. My name is Chris Reichhelm, and I'm the founder and CEO of Deep Tech Leaders. Each week, we speak with some of the world's leading entrepreneurs and producers. investors, corporates, and policy makers about what it takes to succeed on the lab to market journey. Join us. Getting any advanced science and engineering company from lab to market is difficult, but doing it bootstrapped, man, that's nuts. That's exactly what Peter Collins, this week's guest, did. In 2010, he joined Permasense, an Imperial College spinout focused on industrial IOT solutions for the oil and gas industry. In seven years, Peter had full market deployment, with product revenue of 10 million, customers in 22 countries, and an eventual exit to Emerson for 50 million. Now, 50 million may not sound like the world's biggest exit, but when you don't have to share it with investors, that goes a long way. This week, Peter joins us to talk about how he won Permasense's first three customers. how his role as CEO evolved while he was there, and the advice he gives other CEOs of other industrial tech businesses now that he's a chair. I hope you enjoy. Describe the situation. Where are they in terms of TRL, in terms of commercialization, in terms of headcount, in terms of funding, in terms of general leadership? Where is the business at this point when you meet with them?

Peter Collins:

So four of the academics. Uh, two of them actually on the staff at university, at the university, and two of them working as, as, as postdoctoral. Uh, researchers had developed the technology between them. Two had decided they wanted to stay as academics. Two, were prepared to come out and go on the journey. So they had incorporated an entity and two of them were formally on the books, the entity, but they weren't drawing a new salary yet because there was nothing for it to be drawn from. They were making prototypes in the lab for BP who had funded the technology development in the first place and had come up with a modest sum of money to take a modest number of sensors to be deployed in their facilities to see how they, how well they worked in a real life environment. Okay, so let me stop you there. So BP had approached Peter and his team, the four, and they, had they specified that they wanted something developed? Or was there already a development program going on at Imperial that BP caught wind of and said, actually, can we get involved in this? The latter, and that's, that's, uh, that's actually perhaps better than I've ever heard it described before. Um, so, uh, um, indeed, the, the, uh, Peter and, and Professor Peter, as he was, Cawley, um, and is, uh, had initiated a development effort in this area of which BP got wind, I think, perhaps, or by, as a result of the patent filing, or else it's a paper he had published. Thank you. But the first part of what you said is also important. BP then approached college because they had a problem, uh, in this case. They've had a major accident at a refinery in the U. S. in a place called Texas City, and there had been fatalities. Twelve people were killed, um, for a reason that they thought that Peter's technology could then address to reduce the probability of it happening again. And so they had funded a development effort over a couple of years at Imperial College. And it was when that was coming towards an end, and they had found a few tens of thousands of pounds to buy a number of sensors that had come out of the development effort to be installed in refineries to test how they worked, how well they worked in real life. That was the point at which you had suggested I go talk to them, late 2009. Okay. Now, Peter, do you know if BP at the time were having discussions? with other universities or research labs about the same problem? Were they only talking to Imperial about this? To the best of my knowledge, and I'd suggest that's perhaps because, uh, uh, a lot of BP folks studied at Imperial College. I think there is something about this notion of of, uh, networks of, uh, the headquarters of large companies, um, in proximity to universities and, or alumni from, from the universities. One of the reasons, and I promise I won't go down this rabbit hole too much, but why it's actually important to UKPLC that it retains a few larger companies, um, that are capable of being the early customers for startups. As BP was for Permasense, it's a lot easier for a Permasense to get the, um, to win a relatively local, large corporate as a first, as a keystone customer, um, than it would have been for me to go to the US and get Chevron or go to China and get Sinotec. as customers. Absolutely. And I was able to get both of those within the following two years as customers, partly because I had BP as a keystone customer. Yeah. I couldn't agree with you more. So they had, so BP has a big problem. Number one, they have a big problem. They had had this huge accident, which was all over the news. And, uh, and then they, so that kind of sets the tone that creates the environment. This event happens. We now need to do something about it. At what point did BP think, ah, this might be really interesting. We should engage with this. What did Permasense, what did Peter and his team have to do in order to prove that? Well, okay. What did they have to do? The first thing they had to do was establish and maintain a relationship of, um, real credibility with BP, uh, which, to which there are two parts, one to deliver what BP were hoping they would deliver, but to, excuse me, to listen with some humility to BP and BP's feedback. Yeah. Um, and you see, I think this was perhaps as important as any BP money was the opportunity that working Peter for Peter's group and Permasense to work with BP to A, draw up specs for what, what was, what a solution would be, how it would need to perform, what it needed to deliver and the environment in which it was going to operate. very much. So that the, what I might call the performance specification, um, that, and then the opportunity to do some deployment in BP facilities. And those two things were arguably as important as BP's money. And they're arguably, arguably very difficult to identify the opportunity, the, uh, corporates that have a need, um, to get access to the people within them who can, uh, deliver that specification. And, and who are receptive to having very ropey, early stage Heath Robinson prototype wires hanging out versions of technologies in their facilities where what they're being held to account for day to day and week to week is that the facility stays working and suddenly these guys are going to come in and install this stuff, which might work one day and not the next, depending on the setting at the moment. Um, and so the access to those kinds who, the kinds of people who knew what they needed, but were hard pressed and not necessarily used to or receptive to working with technology developers. All of that was at least as valuable as any money. I get it. I totally get it. So let's move it on now. You have at some point, so they incorporate, you join. What does Peter and the team. want a view. What are their expectations of you? That I actually make, turn this into a commercial entity. Um, and the going with that, so that, okay, that prompts me to remember something that, uh, the chap who had actually, who was, okay, Peter had been the guiding light and architected the overall vision for this development. But there was a man called, uh, there were, there were two people who then actually drove the development, one of whom wanted to stay in college as an academic and the one who was prepared to come out. He, uh, his demonstration of faith and trust in me was to take, uh, uh, articulate the passing of a rugby ball. And he said, what he said to me was, uh, don't, please don't get in my way with the further development of this and the rest is yours. Now that expression of trust in me was extraordinarily humbling. And you brought it back to me for the first time in, in, uh, more than 10 years. With the question about what they expected of me, John expected that I would step out front and build a team, find the customers and, and, and turn this into a, into a properly commercial entity. As part of that process, though, if I can stop you right there, as part of that process, he said, don't interrupt my development work, but I want you to go and commercialize this. Don't you have to naturally question. What he meant by that was, um, don't effectively between the lines, um, don't assume you know what you don't know. Um, I am, I am hereby admitting to you that I have no commercial experience. And so I'm not going to tell you how to go off, which customers to go after and how, but don't tell me how to develop this. He didn't mean by that, don't tell me what to develop, but rather don't, don't tell me how to do this. Um, and it, it was a division of labor, if you like. Um, but not in the sense of, and, and, and don't mess with my sandpit, but rather, um, absolutely, I engage with you to develop what you need, but then let me figure out how to do that. Now, the coronary of that, even though I'm not sure how conscious he was of this. That's humility on his part. The result of it was I absolutely did engage him in all of the decisions about the company, um, because he wasn't demanding that he, that he, that he do. And we, we developed a very deep sense of trust. Based on that, on, on a consciousness and then next consciousness that we expressed to one another of what each of us was good at and what each of us knew less about, which was the basis for mutual respect and then mutual trust. Was he involved in some of the commercial discussions? Did he meet partners or potential customers? So he was involved in all of the strategizing back at base, which groups are we going to go after? Because the business I talked about earlier about priority segmentation, prioritization, identification of early adopters. Um, he rather rarely came with me to, to meet customers, but, uh, was, was, uh, avid for the feedback from them and, um, and absolutely, um, but again, it took avid for the, uh, avidly adopted that feedback and accepted it and internalized it. In large measure because he trusted me to have, uh, the trust is necessary that, for example, I wouldn't come back and simply demand everything because that's not prioritization either. He needed to trust that if I came back and said, this is important, it really was. As opposed to, it's, sorry. And how, and how, I guess, I'm, I'm assuming here, I'm speculating, but I'm assuming that your technology background, your technical background, you've got a PhD as well in, I think, fluid dynamics, and you had, you had worked in, electric engineering for some time. You had, you were familiar with the kinds of solutions. Technically you could hold your own in a conversation about this. So I'm assuming that the feedback you're getting and the conversations you're having with potential partners and customers, they're very informed discussions if you're speaking to technical people. Absolutely. Uh, and, uh, so where a background like that helps. If you're out there in front as the, as the CEO was, and I think at the early stages in any startup, the CEO should be his or her lead salesperson. I really do feel this very strongly because you're getting that customer feedback. And even, and I'll say incidentally, even if you're selling, if you don't understand why you're selling, that's, that's just about as bad as if you don't understand why you're not. So, uh, because you're not, you're not necessarily going to repeat the trick if you don't understand why you've, you've made the early, first early sales. To make those first early sales. I've said that sales is about asking. Uh, judicious questions, but to be even allowed in the door to have the conversation, you need to have a degree of credibility. Um, and if you are getting the, the, the worthwhile people to talk to, I'm talking about business to business selling now, are busy enough that a half hour of their time, nevermind an hour, is precious. And they're going to get very frustrated very quickly if you're simply a letterbox who says, I've no idea. I'll have to take that back to base to tell you whether that's possible or not. I did need to have the level of technical understanding that I could, in principle, say to them there and then, yes, that will be possible, or no, it won't. Yes, the technology could deliver this value, or no, that's not realistic that it ever will. Absolutely. BP was instrumental in giving you the validation that Permasense required. How long did it take them to get them into a position of, because they became like an investor, and then they were also your first customer. And that's something that a lot of our listeners, those developing similar industrial tech, uh, may find familiar. So tell me a little bit about the dynamics of that relationship. How long. Did that relationship take to sort out, if you will, and what were some of the key challenges along that journey? The two key elements, uh, that needed, that I needed to negotiate with BP, and I guess this was my, uh, very much my focus for the first few months in Permasense was getting these two things sorted out. One, BP had required. Excuse exclusivity of access to the outcome to whatever technology might result from the technology development program that they had funded. So I needed to get that exclusivity relaxed as I explained to both the Imperial College folks and BP. For as long as it obtained, Permasense was only ever going to be an outsource manufacturing division of BP, um, and while, uh, we had, we went through a number of weeks of talking about royalties and, and, uh, various other commercial incentives for BP to relax the exclusivity, until it dawned on me that actually Any financial return they might get in the form of royalties or otherwise was a drop in a hot stone for an organization the size of BP. And the light switch that I found was explaining to them that if they didn't relax the exclusivity, and went through a period where they didn't require supply from us, We would by definition wither and die, and then there would be nobody, the expertise to support what they had already put in place would simply disappear. And that was the trigger, or the key in the lock to getting them to release the exclusivity.

Chris Reichhelm:

How long did that take?

Peter Collins:

Uh, three months, but only, quote unquote, three months. Uh, about three months with, uh, probably two thirds to three quarters of my time, it was, I was focused on very little else. And you were leading all of these discussions with them. Yes. Did you ever

Chris Reichhelm:

get the sense that they were fobbing you off? Uh, no, in fairness, uh, the, the, the, um,

Peter Collins:

I, perhaps because They had initiated the whole thing in the first place because, uh, the, the accident at Texas City at the Texas City refinery had been so, um, important for them as a trigger, uh, to having reached out to us. So there was, I had, if it took me three months of intensive effort, it wasn't because of being fobbed off, but rather because I was effectively, uh, challenging some of their deeply held assumptions. about how they might expect to continue to work with us. Um, and perhaps when people, maybe there is something generic in that, as you, as you caused me to reflect on it, if things are not progressing as fast as you hope they might do with the large organization, whether it's a sale to them, or in this case, a change of the ground rules and how you're working with them, it isn't necessarily because you haven't got their attention. It isn't necessarily because you're being fobbed off, but perhaps because you're actually Challenging. Maybe even without fully realizing it. And I think it's therefore desperately important to try and be aware of what of their deep down assumptions you may be challenging. And therefore it's about asking them questions, rather than telling them stuff. It's about drawing this back out of them. Yeah, so in total, from the time you join, let me move this along a little bit, from the time you join, you, getting that BP relationship sorted is pretty fundamental to Permasense is success. It was existential. Yeah. The other piece that I mentioned, there were two parts to this. The other piece was BP having given a hint that there was actually funding available at the corporate level to fund a wider scale deployment. I needed to capture that, that funding, you know, in other words, to win an order, uh, which when I did was effectively the funding of PermaSense. That was the working capital you guys required. Exactly, because at early 2010, um, there's no such thing as funding for startups, BC Capital had shriveled and died, um, banks, don't make me laugh, so this was the, the, uh, fundraise for Permasense was winning this, uh, this early P. O. that would generate enough free cash to, uh, to fund the company. and be my cornerstone reference, sales reference to others. And so just for the benefit of listeners, Permasense never raised external equity capital. You guys effectively did this by bootstrapping, by turning that initial partnership into a paying customer, and then convincing them to give you enough in the sale so that you can fund the development of this solution for them, and indeed for others, on a non exclusive basis. I haven't, I haven't ever managed to put it that succinctly myself, so I'm going to steal it, Chris. That's absolutely spot on. But that's, that's remarkable. I think it's, I think that's remarkable for a young startup to do that with a behemoth like BP, I think is remarkable. I think there are going to be a lot of founders, CEO types who are engaging with corporates. who are thinking, how the hell am I ever going to move this on and generate any leverage or at least enough advantage so that I'm able to do this and, and, you know, and I'm able to tick off a whole load of boxes. You talk, you know, you ticked off working capital, you ticked off initial validation.

Chris Reichhelm:

Yes. You know,

Peter Collins:

that, that's,

Chris Reichhelm:

that's a lot. So what are the generics perhaps that BP had a very

Peter Collins:

real need? Yeah. Um, and I think the other was me being firm now, very gently firm, absolutely not aggressively firm, but gently firm in reminding BP of what those needs were. and that if they, uh, weren't, uh, both responsive enough to me and not squeezing me too hard, I wouldn't be in a position to deliver on their needs. Because the other thing about selling is that it is about Having enough self confidence to remind the customer what the value is in this for them as well. A sale is not just revenues as a profit for the seller, it's also about creation of value for the buyer. And if you don't believe that the buyer has enough of a need, and if you haven't got the self confidence to remind the buyer of their need and the value of it, They're prerequisites. So I was gently firm in reminding BP of why they had started this thing, the seriousness of their need, and the need to allow me to get up off my knees and breathe. Uh, to, because if, if, if they made it too difficult for me, uh, to succeed either by not giving me an order or by giving it to me on terms that, uh, they, they, they can overdo the squeeze. Where did the power for the yes come from within BP? What level? I'm sure it was multi levels because often strategic selling is like that. You've got to convince a number of players up and down the chain, but where do you think as you reflect back on it? Where did the yes? Really come from, where did that decision happen? The budget, the man who held the budget within that corporate function, because usually for the deployment of solutions, operating units are the ones whose budgets you need to tap. Um, but unusually, because this was a need that had been identified at corporate level, perhaps because of the seriousness of the incident, there had also been a budget created at corporate level. But I wasn't told that proactively. I found that out again by asking if BP had created any budget to basically what I might call actualize, if that's not too horrible English, the, the solution. Um, you won't necessarily be proactively told by people in your, in your target. Um, what are the enabling factors, nevermind the who's Uh, so it's your, it's your job to go to ask those questions and open questions. Me Meaning not just with the answer. Yes. No. If you want to learn about your, uh, the other party, so it's not, have you a budget, what have you put in place to, because ha uh, have your budget. You get back a yes. You've almost, you still learn very little . What have you put in place by way of enablers? To make the solution for this happen. And then you learn that there's a budget and you learn who holds it. And because the, um, uh, and it now, I said 3 months until we had agreement to handshake in principle, both on the relaxation of the exclusivity and of, um, an order in principle. It took another nine months for those to be put, um, to be inked, but there were exceptional circumstances. But again, perhaps the generic is that there are always exceptional circumstances. They're just different every time. In this case, What happened was an accident called Macondo in the Gulf of Mexico that spring in 2010. And guess what? Everybody from the cleaner to the CEO was mobilized and sent to the Gulf of Mexico. And suddenly I lost attention again, having gotten in principle agreement in the first three months and a handshake. Um, now I was being fobbed off in, in, in ironing out the details, both of the relaxation of the exclusivity and the, and the first big order, but not because, um, we weren't important, but guess what, there was something else that was suddenly a whole lot more important, the existential. So sometimes when you're dealing with the large body, the, the fobbing, it genuinely is fobbing off, but that's because there's something that's even bigger than you. I get that. So, some quick fire questions. You win BP. How long does it take you to win your next set of customers? Now that you have BP? Another seven months. So, we got the relax, we got everything inked by the end of 2010. And I used that time entirely. So that's all in your first year? All in your first year? Yes. Yes. Yeah. But I was doing very little else because, um, we, we couldn't have any customers until we got this done. So there was nothing operational to do. Um, so basically, uh, I, I, I both could focus on this full time and it was exactly what I needed to be focusing on. In one of the, one of the early things you're doing, even if people jokingly talk about you being chief cook and bottle washer and all the functions when you're leading an early stage thing, uh, it is above a ruthless prioritization of your time. Yeah, and, and sometimes that can mean 80 or 90 percent on one thing and that's what it was for this year with BP. And if I spend 10 percent of my time on anything else, it was then preparing, um, the message for the market for that moment when BP took the handcuffs off and I could tell everybody else we exist and this is what we have to offer you. So that the, uh, the first marketing effort. Um, happened, uh, I basically had been talking in, in the Neanderthal world that I inhabit, which is heavy engineering for large corporates. At least at that time, the way you reached people was still by trade journals, and you need to know what the channels of communication are in your space. That's the other thing I forgot to add, but I did bring to Permasense was an understanding of the sector.

Chris Reichhelm:

Okay. And the

Peter Collins:

way you communicated with people, um, was through trade journals. And so I had already lined up. I'd been softening up the editors through that first year to take articles from me and then was writing the articles. And so the first of them was published within three weeks of the BP taking the handcuffs off. We signed the agreements that enabled me to go out to the rest of the world. So we, so did you publish after BP? Yes, I did. Okay. You published right after BP? Because I had already, it takes a long time for editors to decide that they will put you in the second or third next, um, version of the journal, issue of the journal, um, and then to approve the article and so on. So when I say prioritization, perhaps another thing that leaders, various stage companies need to have as, as a, an instinctive skill is the ability to parallelize. And the things that they are prioritizing. to be, to be doing them in part, very much with the consciousness of, by this point in time, this is what I need to have ready. Um, and perhaps that is a characterization of people who, who succeeded this game. It's not thinking forward from here, it's thinking backwards from where I need to be at some point in the future. So, those first two articles were published in, I think it was January 2011. The first phone call I got. As a result of those articles, one of them came out on a Friday morning, and the phone call I got was at 8 o'clock on the Friday evening. I was on my own in the office, and it was a chap in Alaska, and that's why I was getting it at 8 o'clock in the evening, because I think it was 7 or 8 o'clock in the morning for him. And he said, I've just seen the article, um, and can we talk about, uh, whether what you've got would work for me, because I've got a real big problem up here. On the North Slope in Alaska. And that of course, that is burned in my brain because those are the kinds of conversations that are critical points on your journey. A, it was a piece of validation for me that I wasn't completely smoke and dope. That, um, because, now, one of the things you can wind up experiencing if people have funded your development is. They then have a vested interest in proving to the rest of the organization that their funding was justified. You need another party to confirm to you that they have the same need for you to really have confidence that there is a wider need out there that you're serving. And that, do you feel once, so this guy in Alaska phones you, Do you feel like, shit, we might actually have product market fit here? Uh, including the shit, that's exactly what I thought. Exactly. Exactly, Chris. Um, So, uh, that was the, the, the first piece of independent validation. Yeah. And that, you said, so that came, So that was in, you published, you closed BP by the end of the year, you published in January, a day later, a few days later, uh, when the magazine comes out. The same day I had the first call.

Chris Reichhelm:

Yeah.

Peter Collins:

And, uh, within the next few days, I had another call and this was from a refinery in Germany. Okay. Um, and those were the first two non BP sales that I closed and it was by the following July, July, 2011. I closed them both at roughly the same time.

Chris Reichhelm:

Okay.

Peter Collins:

Um, what, so I talked about the length, I think I talked earlier in the conversation about the length of time it can take to get from filing a patent change. to having a company that could be sold if that's what you want to do. Um, another thing that, a period that you need to be reasonably conscious of if you're trying to commercialize technology is the length of your sales cycle. Because that has a huge bearing on cash. And, uh, and I guess you hadn't really, this was your first experience of the real sales cycle. BP is a little different, but Alaska and Germany are very good indicator of what this is going to, how long this is going to take. And so this is sounding like five, five, six months. And that proved to be about as good as it got. I mean, my sales cycle settled down to between six and 12 months with, in some territories, between two and three times that India being the, the, the one which took over two years to get there. Let me ask you a quick question. By, where were you in terms of TRL? When you made the sale to Alaska and Germany, where were you in the development of the product? Yeah, I'd put a wet finger in the air and say, um, about a five, perhaps a six. That's so interesting. So you had working prototypes. Yes. Oh, there were no more than that. Okay. Then, then, then, and you're more familiar with the TRL scale than I am. Then I've pitched about correct. Cause that's exactly what I had. You had working prototypes in a relevant environment. Yes. And was there, how much, you know, to get to TRL six and seven, where you're, you're scaling up now and you're at pilot and then you go to bigger pilots and you go to first of a kind, and then you're in the market, how, what parts of that journey were relevant to Permasense? Given the nature of the product that you guys had, or is it just refining the nature of the sensors? You were of course involved in pipeline integrity management systems, which are sensors that sit on the pipelines. Am I right? Correct. And so I knew. And because of exactly what you've just asked, the prototype I had would deliver the kind of information that was needed to tell us about the condition of the pipeline exactly to your, your, uh, phrase just now. What needed refinement was the robustness of these things. In the field, uh, but there's only one way to get, um, proof that these things will stay working in the field and that's put them out in the field and two, and this was a journey that took another three to four years thereafter, was the, the processing of the data that these things generated. And the journey that I've since described as data to information to insights. Uh, so both the mathematical algorithms to turn four millivolt signals from a piece of hardware called a sensor into information, um, and, and to be specific about this, four millivolts into a wall thickness of a pipe over a number of weeks into a corrosion rate, which is whether the wall thickness is changing or not. That's information and the insight is what might be causing that corro in this case, what might be causing that corrosion. Namely, what is the operator of the facility doing to increase or decrease that rate of corrosion? And it's that insight, which in turn is the basis for a decision that will influence the P& L. Can I drive this facility harder? Can I reduce the cost of operating the facility? Now, in fairness to myself, that was the insight, it was seeing the put, you asked me, um, at one stage, um, why was I attracted to this, uh, proposition in the first place, when I've just described as being, it was about TRL4 when I first met these guys, and there were two of them in a lab unpaid. Um, because I could see that this 4 millivolts could be turned into decision, a basis for inputs to decision making that had a huge, could have a huge impact on P& Ls, um, as opposed to just a replacement for manually doing this kind of inspection, which is what the developers and even BP thought that they were doing and funding. Um, uh, no, no, this was about, uh, generating information that had never been available to people before in order to enormously increase the quality of their decision making about operating their facilities. And the thing about large industrial facilities is that relatively modest changes and decisions can very quickly become many tens of billions of dollars of increased earnings. Did you have the digital component? Did you have the data information insight piece also in development on that TRL journey? Or was that stuff that had to come later? That came later because you need to have a certain installed basis, base of equipment generating the data, and that's a certain number of them. Over a certain period of time. And those two, there are two sides, sorry if I talk like an engineer, but think of it as a sand pit and the more piece, uh, pieces of equipment you have installed, generating data over the longer period of time. Now my sand pit, my database increases. Now I can go looking for patterns in that. Um, and, uh, look for insights. And you can build your model. And you can build your model. So what I set out to maximize the number of these hardware systems that I was selling, um, A, because contra so many, many VCs have bought into the idea that there's value in delivering data and information and insights to companies so that they can improve their operations. They don't, they can often lose sight of the importance of the hardware systems. that generate that data in the first place, or if they do, accept that they have value, it is a barrier to entry so that other people can't generate the data in the first place, that enables these high value added services. For sure, there is huge value in the services because they're high margin, but, but, but, there are two caveats which not every financier realizes. One, there can also be huge margin in the hardware systems that generate these in the first place. Because your customer has no, the conventional. Uh, uh, wisdom is that hardware isn't a high margin business, and if your customer has a reasonable idea of what it's costing you to produce, then it absolutely is a low margin game. But if they haven't a clue what the hardware is costing to produce, you can sell on value rather than on price. I get it. How many exemplary units then did you need in the field in order to start then building up this, you know, this other service, this insight ultimately back to the customer? Of the order of 5, 000. Wow. Okay. By the time I exited, at $4,000 a pop. Okay. Okay. Um. Now, by the time we exited Permasense, we had a multiple of that in the field, but yes, the size of the sandbox was, was, uh, four or five thousand of these things generating a measurement every single day. By the time you exited, had you solved the digital piece? Yes. And not only, so key milestones were, uh, get, get that first third party validation and customer, get, uh, that sort of number of sensors deployed partly with BP and partly those third party customers, uh, develop the insights, understand what we were looking at in other words, and then launch what we called Permasense 365, which was basically the whole view. It was just a badge. Basically, um, a supported data interpretation exercise so that we could lead them by the hand along that journey from information to insights, um, so that our exit proposition for the acquirers was not just as a seller of hardware systems generating data, but as a seller of the associated, um, data interpretation services. That took them on that complete journey. And we had a number of those contracts in place by the time we, we, uh, exited. The other thing though, I want to comment on in with the hardware business. And again, not something all financiers appreciate. This was a very narrow vertical. So it's a very, it was a niche market, like many, many startup technology based startups are corrosion monitoring in oil and gas facilities. To give you an idea, there are six refineries in the UK. So there was no way, and there are a number of tens across the whole of Europe. So actually there was, there was no way there was a sufficient market for Permasense to even get up off its knees, not just in the UK, but in the whole of Europe. So from the beginning, from the get go, this needed to be a global play. Um, we needed to win customers in, so I focused on four markets. The US, Germany, China, and South Korea. And I went balls out for those four because of their importance in the, in the global refining, uh, uh, industry. We were three years before I even took a customer inquiry from the UK. Um, and I spent, uh, half my time, fully 50 percent of my time in those four countries in the first four years. I flew, I never flew less than a hundred times a year and three years in a row, I flew more than 200 slides, all economy, uh, between refineries in these places until I had built a customer base. But, and here, here's the point I'm leading to, if you go to, if you have to go abroad from your home base and you're a little nobody, and there were less than 10 of us for, for, for, uh, two and a half years, um, nobody knows who you are there in many of these places, China, Asia in particular, not used to buying service. Still less from foreigners that they don't know, but if you bring a piece of tangible hardware with you that they can hold in their fist, you have some chance of closing a sale and get that installed base and then, um, get the, the, the, uh, uh, you have a basis A to develop the digital piece, as you called it, and B to start selling the, the services based on that digital piece to them. And that's the other part of the journey that takes time. You join Permasense, they're at TRL 4, you close BP, you get the first deal with the Alaska group, you're at TRL 5, how long does it take you to get the 5, 000 sensors? The 5, 000 bits of hardware plugged on to the pipelines. How long does it take that? I'm going to say until about 2013. So I'm going, I'm going to say about three years. Okay. About three years. And then, uh, and then you start building up the, the digital solution as well. So now the complete solution is kind of coming together. And how long does it take until that's in place? And so you've got the whole thing, the premise sense, three, six, five. Uh, until 2015. So about another two years at that stage, because so Ian had this wonderful phrase, Collins, we've got to move you from working in this business to working on this business. And that was what those key commercial hires were about the, the man who started as my CRO and, and, and who was obviously as much my right hand man overall in the business then as the R& D chap at the very beginning. And then the two key hires in KL, Kuala Lumpur and Houston, at which point, and I pushed, I pushed down to people, um, by instinct from a very early stage. I'm an actual delegator. It gave me the time to realize. Um, A, the importance of this digital piece, to use your phrase, and, and B, the time to think about how to pitch that and whether we were ready to pitch it, um, uh, and then to start thinking about exit. Given that you hadn't raised an external equity, it was just you and your founding team, if you'd like, was that something you were deliberately working towards? That's an interesting question. Short answer is yes. Um, and I suppose as a result, uh, so I suppose something else perhaps relevant when I came in, in late 2009, early 2010, I had been, albeit as a junior as, as a junior director through two exits, one an IPO, one, uh, one, uh, uh, a trade sale. So, I knew what was involved in particular, because in the second of those, I'd been responsible for the ownership of the data room and the due diligence process and having lived how grueling that can be if you're not properly prepared in many ways. Um, I was shaping Permasense from the get go. The, the, the, our server, for example, from the first week had the shape of a data room. So all the information that we were, which we, we, uh, we adopted a CRM very, very early on so that we had a history of all the interactions with customers from the beginning. was ready. So when actually we came to build a data room, there wasn't a building of a data room. It was just showing that it was in place, but it was in place. But that goes back to the point you mentioned earlier, which is starting with the end in mind. You start at the end and you work backwards. Correct. Thank you. I'd also say that even though I didn't have financiers with a finite type, who had a finite timeframe, there is something about the level of energy that a team has. And that if the, at least in my experience, if people have a goal that they're working towards, and even if in the loosest sense, a timeframe, it is a contributor, or it can be, at least in my case, it can be, it was a contributor. to motivation and sustainment of energy. Sustainment? Ouch. Um, but, uh, that we're all human. Well, I'm human anyway. Uh, meaning that, uh, if it's open ended, it can be difficult to sustain Um, focus and energy. Um, so when you sold to Emerson, you know, for the benefit of the listeners, where were you in terms of revenue? Where did you get to? We were, we were just pushing 10 million. Everything was in dollars in our case, even though we were UK based. Yeah. Yeah. And then you sell to Emerson and then in that, and then in the, in the time, I guess the earn out period for you. Yes. you managed to double or to help double the revenue.

Chris Reichhelm:

Yes.

Peter Collins:

You know, was that fair market value? I think so. Um, I think that, um, uh, I'm a great believer in deals that, that deliver value for both parties. The academic founders became financially independent, and I'd like to see more of those kinds of stories. That's great. Post Permasense, you've gone on to chair a number of industrial engineering type companies. What are the most common challenges and what are the, you've already shared so much advice with us. What advice do you give them? Focus on, uh, winning early customers. Again, I'm sorry to repeat the mantra, but with revenues, you've got a business with, without them, you've got a project. Too many early stage CEOs focus on the raise. Um, until I tell them, now you've, you're, what you're thinking of as a success is having given away a piece of your company, um, and that can bring them up short, uh, not, not that I'm counseling that they shouldn't be raising. In many cases, it is the right thing to do. but it should not be at the expense of thinking about where and how they're going to win those early customers. Um, not only at the, at the risk of stating the obvious, um, because it helps drive valuation as well as, as contributing to the cost of, of, uh, but because the early customer feedback, the only place you're going to get the validation of your propositions from customers, the best financiers in the world can't give you that. Um, so focus, focus, focus on, and I'm not talking about, um, necessarily, uh, pushing hard and fast to get to being profitable. I'm only talking about the top line as validation and of, of learning of what modification you may need to do. What I might call a sense of constructive urgency. I've never come across quite the sense of urgency that we have in

Chris Reichhelm:

Permasense. What do you think is missing in the companies? Maybe fear of failure, um,

Peter Collins:

uh, because that certainly drove me, uh, as much as, I mean, it's, it's, it's like the talk about stock market fear and greed. Um, in my case, it was as much the, the, the, the fear of failure as, as the greed for success. Um, and you're very familiar with this, with this thing of, of the, the holistic nature of success, that there's a number of things you have to get right. It's only one of them you get wrong in your key ones and you get, and you fail, but it's a number. Of things you have to get right, that business of team finance customers. Um, the chair can be, maybe is the key holder of the ring between those parties. Early stage CEOs don't necessarily appreciate, but it's all those parties have to have a degree of mutual trust and the communications between them are critical and so board meetings shouldn't be policing exercises. They need to be, uh, constructive conversations. With active listening between those parties, between the financiers, the founders, and the, and the, the, the managers, that's perhaps the most important role of the chairman in these very early stage organizations. Governance, yes, but governance is a necessary, but not sufficient condition if that takes more than a small portion of the chairman's time at this stage in the game. Uh, he or she is not, isn't it? It's, yeah, the, the, the facilitation, the, the ensuring that the constructive conversations are happening because the right financiers do have contributions to make to those conversations. Um, and founders, even if they don't start with commercial experience, they tend to be way above average intelligence people. If they feel they're, if, if they're, uh, if they feel they're being listened to, they have a lot to contribute. Um, and humility. Humility on the part of all of those parties, so that they're listening to one another. I have to be really careful, for example, when I, uh, not to say, uh, this worked in Permasense, therefore we should do it. Or that was, that didn't work for me in Permasense, we must avoid that mistake. At the most, what I must, what I must police myself to say is, that worked for me in Permasense, factor it into your thinking as a possibility. Or that's a hole I fell into at Permasense. Uh, keep an eye out in case that hole might be in front of you. That's so interesting. The support for the CEO. It's, I'm only repeating what's been said 57 million times. It's lonely. Um, he or she will go through phases. I know I did, of lack of, of, of loss of self confidence. One of the things the chairman can be doing. is being one of the people, perhaps even the person who allows that, CEO to admit they're, that they're going through a phase of loss of self confidence, because if they're concealing it, the financiers won't understand why. There's, there's that the, the impact is inevitably has on, on performance, even just on ability to think clearly. Um, and I'm not talking about indulging, uh, a CEO. Um, but I am, there's a difference between indulging them and supporting them. The CEO needs to bring the humility to listen. Um, if, if they're one of the founders, if he or she is one of the founders, they can be very arrogant. about their initial concept. So one of the things the chairman needs to bring is encouraging the humility of the CEO so that he or she is, is prepared to listen as the prerequisite to being able to listen. How do you do that? How do you prepare the humility of the founder CEO? I think it's perhaps it starts with the chairman himself or herself being sufficiently humbled to talk about, uh, what they thought they knew and learned that they didn't know. in their past history. In my case, that's not difficult to do. I can think of lots of things I thought I knew that I turned out I didn't know. So maybe that comes more easily to me than it might to some. Um, uh, I think that's where it starts. But that capacity for reflection and for, and the willingness to share. And to build on that, because I agree with every, every syllable of that, capacity for that not to appear as weakness or failure on anybody's part.

Chris Reichhelm:

That's right.

Peter Collins:

That's right. That's right. But with, but, you know, being blunt about it with the success behind you, that almost takes care of that. If you hadn't had the success, and you articulate it in that way, it can come across as weakness to some, I think. But because you've had this, because you've been on the journey and you've had that success, you start opening up and sharing, and they're like, wow. You're getting, this

Chris Reichhelm:

is

Peter Collins:

like

Chris Reichhelm:

the hero.

Peter Collins:

And even the hero, it turns out had his phases of real self doubt. Even the heroes admitting that actually it was luck as much as judgment that got him out of that scrape. Uh, absolutely. It does. Yes. It gives me license. It gives me capital to draw down. It gives me space or whatever it is to be humble myself, to, to, to, to be open myself. Yes. That's fair. I get that. Yeah. Peter, thank you so much for taking the time to speak with me and our listeners for giving them the benefit of your experience. You are considerable wisdom. Thank you, my friend. A joy as always. You've been listening to the Lab to Market Leadership Podcast, brought to you by Deep Tech Leaders. This podcast has been produced by Beauxhaus. You can find out more about us on LinkedIn, Spotify, Apple, or wherever you get your podcasts.

People on this episode

Head Shot

Chris Reichhelm

Host