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Thoughts on building a business today compared to the year 2000

1 Nov 2017

Written by Simon Rogerson

In the last two decades, starting a business has become both easier and much harder. This blog was featured first in

I used to think that building a business from nothing was an amazingly difficult thing to do. This was certainly the experience with our first business – Octopus Investments – which we set up back in 2000.

Salad days

I remember the first two years vividly. Although we had a clear purpose and a good idea of the kind of business we wanted to build, the practicalities of getting the business off the ground were seemingly beyond us. When you’re 24 years old and your life’s work experience is limited to a graduate training programme at a fund management company, you quickly discover that registering a company, finding an office, getting authorised by the regulator, raising the capital you need and setting up payroll are all a lot more complicated than you imagined they would be.

All these basic business operations took us weeks or months to set up, and that was before we started tackling some of the more complicated aspects of running a business, like billing or customer relationship management (CRM) systems. I’ll spare you the details, but those early months were sometimes heavy going. It took us the best part of 18 months for us to land Mr Gower, our first customer.

Scaling up is easier now

Contrast this with the newest business we’ve built within the Octopus family Octopus Energy. In its first 18 months, Octopus Energy has gone from an idea on a piece of paper to 115,000 customers. That’s 114,999 more customers than our investments business had in the same time period. While this is partly down to us being more seasoned, and much less naïve, it’s also because the world has fundamentally changed. Compared to 2000, the barriers and hurdles to setting up a business today are virtually non-existent.

There was some great analysis done by Tech City UK which shows just how radical the shift has been. It estimated that the cost of launching a technology business in 2000 was £3.3 million. Today the cost is less than £3,000, a thousand-fold decrease in 17 years.

Most of this is down to start-ups no longer needing to invest in their own infrastructure – whether that’s a CRM system, payments infrastructure or data storage. Companies can simply select what they want from a menu of third party offerings, safe in the knowledge that their decision to outsource will both future-proof their business and allow them to scale far more quickly.

The rise of the flexible workforce

Another reason why starting a business today is so much cheaper is because technology has fundamentally changed the way people work. Cloud-based communication tools mean that effective, collaborative teams can be created almost overnight, even when no-one is based in the same location. This mobile workforce is also highly productive (their commute is typically from the bedroom to the lounge), so product development happens far more quickly.  

All of this would suggest that setting up a business today is much easier than it used to be. It’s also less risky because the opportunity cost is not as high. You’ll find out far more quickly whether your business is going to be successful or not.

Technology is a double-edged sword

There is, however, a big ’but’ in all of this. Today’s entrepreneur has to be very technology-literate. It’s clearly no good having all of this power and efficiency at your fingertips if you can’t find it, or –even worse – if you don’t know how to get the most out of it. Sadly, I count myself within this group.

I have a degree in French rather than Computer Science, and coding and technology are not passions in my life. And in my experience, for those people who are at the forefront of this change, technology is a passion rather than a means to an end.

Thankfully in our case, we worked out a few years ago just how important technology was going to be in building the next generation of great businesses. We decided Octopus needed to embrace this change and run with it, rather than sit on the side-lines watching it happen. That’s why, out of the 600 people working at Octopus, 150 of them are technologists. We’ve even set up Octopus Labs, which started life as a skunkworks project, to focus on how to transform our existing stable of Octopus businesses, as well as how to build new products or businesses with technology at their heart.

To me, this move was an absolute necessity, as I think technology will continue to be one of the biggest battlegrounds for companies (old and new) in the next five years. All entrepreneurs have to obsess about their customers, but those who go on to be really successful have an instinctive understanding of technology and apply it very naturally to how they work. I say ‘instinctive’ and ‘naturally’ because those qualities are the hallmarks of entrepreneurial success today.

It’s very difficult to learn technology in your mid-30s or 40s. If you’ve not lived and breathed technology for the last decade, and figured out how it can help you to build better relationships with your customers, then there’s a good chance you’ll always be playing catch-up.


Building businesses

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