James Balmain is no stranger to the triumphs and tribulations that come with creating a start-up. Co-founder and CEO of Zesty, the healthcare appointment booking service, his first foray into this challenging environment was with his digital marketing company Light Image in 1997. Since then, James has worked as an e-commerce expert across numerous online retailers, including his own venture WebTogs, ShopDirect and EE, staking his place as one of the industry’s most innovative thinkers.
We spoke to James about his steep learning curve, early-start investment, and how to get the right talent for your business.
Can you tell us a bit about your background?
Originally, I was going to be an officer in the army, and then I had an injury to my knee and was offered the chance to repeat training. I resigned my commission and started my first company called Light Image, which was a digital marketing consultancy – back when building websites for people was actually a viable business. We ended up working in the ISP niche: there was a point in time where all of the big telcos were sending lots and lots of CD-ROMs out in the post to get online. And my company did pretty much all of the CD-ROMs in the market, for everyone except AOL. We started working with NTL, and from there we did BT and Tiscali. We ran that company for about six years, which was my first start-up.
I took a bit of time off, then started another internet retailer called WebTogs, which we grew for about three or four years. And then I got headhunted into the role of Head of Commerce at ShopDirect group, which was a super exciting job. As a large scaffold retailer, they were going through a huge transition from product catalogue to internet. I think when we started, there were about three or four people in the team, and I was involved in everything, from data overlays to SEO optimisation. It was a really interesting time, and my first real exposure to big budget. Trial by fire, as it was my first corporate job.
Where did you go from there?
From there I was headhunted into a role as E-Commerce Director at EE. My team were responsible for the huge digital transformation project, creating EE.co.uk. It threw out a very interesting set of challenges with the two big brands (Orange and T-Mobile) onside.
And from there the rest is history. My co-founder Lloyd Price and I had an idea based on experiences we’d both had: we thought the medical appointment booking thing was really interesting, and that’s where Zesty came from. We looked into early-stage investment, and were invited out to the US by Mangrove Capital to pitch, completely out of the blue. At that point in time, we hadn’t really thought about taking proper institutional cash. We had no product, it was just our business plan. True to form, we pitched to Mangrove over a few hours and did the deal the next day – they put in about a million dollars. We now have 24% of the London dental market and 26% of the London physiotherapy market, and it’s growing really quickly. It’s so exciting.
What do you think they saw that was so attractive?
I think it’s undoubtedly down to the track record of the founders. Most of this type of early-start investment is in 20-something entrepreneurs. It’s not that common to see two seasoned e-comms people running a start-up. We also have an interesting balance of skills between us. My background is on the tech side – data analysis, traffic acquisition and platform development – whereas Lloyd’s skill set is much more around international expansion and B2B. Together, they’re quite complementary.
A lot of investment companies work with those they know within their network. I was lucky enough to have been invited out to give a talk to Mangrove’s portfolio of companies in the US the year before and spent some time with the team, so there was a degree of confidence in me already.
And then obviously, if you look at the value of private healthcare in Europe it’s a quarter of a trillion pounds, growing at about five per cent a year. We were proposing to tackle an absolutely enormous market.
So the theory is that if you can make it work here, given those challenges, it’s a model that you can easily replicate in other territories?
Absolutely. We’re beginning to now think about trying to spread our wings into certain other European cities. As one of the largest European cities, the most logical place to start was London, but we’re thinking on a city-by-city basis.
There are clearly complexities surrounding the NHS and private healthcare in the UK, but what are the more subtle challenges that you face? Are there issues around talent or competition?
I think the biggest challenge that any start-up faces anywhere in the world is access to capital. Second to that is access to talent. You can fix that by strengthening your own network, by hiring people you’ve worked with in the past. Your first five to ten hires, especially the senior team, are pretty critical. What sets a mature entrepreneur apart is a fairly established network, but as an entrepreneur, you have to understand that you’re always selling to someone: to consumers, to clients, to investors, and to people that you really want to hire. I think that the single biggest thing that I’ve seen that matters to us is having absolutely the right talent, almost irrespective of what it costs us.
So it pays back over the long term?
As we like to say, if you build a team of rock stars, they pay for themselves 20 times over. It’s incredibly easy to say but actually really hard to do because you’re cash constrained, and some of the numbers are scary. If you want a senior manager, you’re looking at around £50,000, but the person you really want is asking £90,000 – you can very quickly have a senior management team earning more than you do as a founder, and it’s a difficult mindset to get into.
Do you think there’s been a shift in mentality in the UK where people are more attracted to brands that are innovating in a new space?
I think it’s very much down to the individual. You can absolutely get some people who are just risk-averse, and they understand that working for a start-up has the potential upside of an equity-based return, but equally that it could be in two years’ time. I haven’t seen a big shift towards the start-up culture. I think you’re always fundamentally going to have two different types of people: those who want the security of a big corporate environment, and those who are much more up for working in a small team.
I think probably one of the biggest determining factors is that you get motivated individuals, particularly in technology, who just want to deliver at pace. This can be very challenging in a corporate environment, with all those layers to go through, with lots of controls in place. Innovation can be slowed down.
There’s a shift in that environment towards recruiting people who are fundamentally entrepreneurial. Can you put a true entrepreneur into a corporate and make it work? I think you can, but it’s not easy.
What are you doing at Zesty that’s different from your competitors? How are you shaking up the market?
I think the whole concept behind our business is reasonably innovative, in that it’s not been done before. And doing it in this country, within healthcare, has presented its own unique challenges. Beyond that, from a technology point of view, we’re not doing anything that really breaks the mould.
We were always aiming for a service that was fairly basic in terms of its technological achievement, but hugely robust and reliable. We’ve built a platform to last us for the next ten years, we’re using technology and system architecture that you would absolutely expect to find in far larger businesses. I think that, ultimately, with any kind of booking service that matches supply and demand, there’s an element of not wanting to reinvent the wheel.
How vital is it to get the right financial backing in terms of developing a business like yours?
Completely critical. I think that getting the right investors on board, and having people who understand you, who push you, who are happy to tell you how it is when it’s not going so well, is completely critical. The investors who back you at the beginning, who stay with you when it’s raining and not just when it’s sunny, they’re rare in my opinion.
It’s easy for entrepreneurs to kick out a venture capital company, stand up and take risks, but actually that’s what they do – take risks. It’s as much about presenting your business intelligently and understanding that each stage of investment needs a degree of traction. Investor relations are vital, having the right team, the right mix. So many don’t, but it’s so important for businesses to understand their investors’ motivations: what they’re going to get out of it, what investments they’ve made in the past, what their style is.
The two things that absolutely matter are cash and people. You can’t build a big business without them.