I started Cubitts in 2013 with my own funds because I assumed that was how companies began. A few months later, having converted a decade of savings into software development, invoices and panic, I went looking for other people’s money to keep my newborn alive.
Our first investor was a customer. He liked our spectacles, and he liked the idea that a company might still try to make something properly in London. In 2014, he wrote a cheque for £100,000. It felt like the purest possible version of entrepreneurship: a person had seen the thing, and wanted the thing to exist.
Four years later, I was speaking to ‘institutional’ investors, and learning a new language. Drag rights. Tag rights. Liquidation preferences. Reserved matters. Investor consents. Good leavers. Bad leavers. The words sounded almost hygienic, but each contained a small moral universe. A drag right is not called ‘the right to make you sell when someone else decides.’ A liquidation preference is not called ‘the bit where we get our money back before you.’ The genius of investment language is that it makes power sound like stationary.
Until then, I thought entrepreneurship was mostly about effort. This is the story Britain likes to tell itself: the founder in the workshop, the laptop in the coffee shop, the brave little company building something against all odds. But what I discovered instead was a second city, hidden behind the first. Behind every shopfront was a quieter London of tax reliefs, family offices and men who spoke solemnly about risk while doing everything possible not to take any.
It is tempting, and not entirely honest, to tell this as a story of innocence meeting capital. I was not innocent. Nobody forged my signature. I wanted the bank transfer. I wanted the validation – serious people, in serious shoes, looking at the thing I had been building and saying that it should be bigger.
I read the websites of grown-up investment firms with an innocence that now makes me wince. I had built a business mostly by instinct, luck, taste, shame and occasional good judgement. The thought that someone might arrive with a system was intoxicating. As I began to talk more and more to these grown-ups, the phrase ‘100-day plan’ appeared.
The 100-day plan sounded like one of the sacred texts of private equity. I imagined that, once the ink had dried, The Plan would be revealed. Finally, someone would tell me how to run a business. And so, the deal completed, we had our first proper meeting. I sat there, ready to be inducted into the hidden order of people who knew what EBITDA really meant.
They sat across the table and proceeded to ask me what my 100-day plan was. I remember the silence that followed. Not externally. I probably nodded and wrote something in a notebook. But internally something shifted, and I realised I’d mistaken money for knowledge.
I’d assumed, for example, that investors would want to squeeze every pound, to make the business as efficient as possible. When we took investment, the highest-paid person in the company, me, earned £60,000 a year. I was delighted by that. But the first senior hire after investment (a finance director, of course), was paid £125,000. This was presented not as extravagance, but as seriousness – to be a proper business, that’s what you needed to pay people.
Six months later, the investors acknowledged that it was strange for the founder and majority shareholder to be paid less than half of the new hire’s salary. Their proposed solution was that, if I hit the plan and stayed within budget, I could receive a £10,000 pay rise each year over the next five years. It was an impressive offer, in the sense that it managed to fundamentally misunderstand my motivation and offend me at the same time. A rare economy.
Institutional money also taught me the importance of, or obsession with, the budget. Before this, I had thought about the company in a way that now seems almost medieval: is there enough cash to pay the bills?
Then I discovered budgets. The budget was not just a spreadsheet. It was a ceremony. There were forecasts, re-forecasts, sensitivities, bridge analyses, weekly dashboards, monthly management accounts, KPIs, cash flows, covenants, board packs, packs about the packs and numbers taken to a level of precision that implied either mastery or madness. A company would not make ‘about three million pounds’ of revenue. It would make £3,147,286, possibly even £3,147,286.42. This was not because anyone truly believed the 42 pence would happen. It was because precision had become a form of reassurance, a way of pretending the future had manners.
Then we would arrive at the valuation. Here the fog returned. For a while, it seemed that a company was worth a multiple of revenue. Three times revenue, perhaps. Why three? I do not know. Three times revenue was not argued so much as received.
But, inevitably, the world changed. Interest rates increased. Money became expensive. COVID came and went, but did not leave. Revenue multiples became embarrassing, like a suit paired with trainers.
The investment industry is very fond of risk, but it is less fond of taking it. This is not hypocrisy exactly. Investors don’t avoid risk; they arrange it. Risk is sent away to be washed and folded and then returned to the conversation as courage. Through a whole range of mechanisms, all perfectly explicable on their own (EIS, SEIS, fund structures, preference shares, anti-dilution provisions), a machine is formed, one that moves risk downwards, away from the people most likely to describe themselves as risk-takers.
One of the stranger features of our arrangement was the monitoring fee. We paid £50,000 a year to be ‘monitored’. This is one of those phrases that becomes stranger the more times you say it. A company trying to grow, with shops, employees, rent, stock and machinery, pays the people who invested in it for the privilege of being watched by them. In ordinary life, paying to be monitored is usually associated with an ankle tag.
The funding model has its own weather system. It is often described as ‘two and 20’: a management fee of two per cent of the assets under management, and 20 per cent of the upside if things go well. This creates a peculiar psychology. The fund is paid to manage; it is richly paid only to win. Once a company no longer looks like a win, attention drifts, even as the rights remain. Money can lose interest faster than it can leave.
Alongside this shift came a new language for selling. Before this, I thought we made spectacles and sold them to people. Quaint, I know. Then we became a ‘consumer brand’. At times, we were a direct-to-consumer brand, although it is hard to think of a more revealing phrase. Direct to consumer, as opposed to what? Indirectly to a passing horse? Later, we were ‘omnichannel’, which just meant we had both a website and a shop. Sometimes we were vertically integrated, which meant that, in an act of dangerous eccentricity, we tried to make some of the things we sold.
The language multiplied. CAC. LTV. ROAS. MER. AOV. CVR. Cohorts. Funnels. Attribution windows. Blended payback. Retention curves. Community. Content. Acquisition. Activation. Reactivation. Churn.
Some of this language is useful. It is helpful to know what it costs to acquire a customer, whether they are coming back, if money spent on advertising may as well be flung on a bonfire. But there is a point at which measurement stops describing reality and begins to replace it.
And so, for a while, a great many modern ‘consumer’ businesses were built on a simple and faintly mad mechanism: put money into Facebook, acquire customers, grow revenue, raise money at a multiple of that revenue, then put more money into Facebook. Everyone called this a flywheel and from around 2015 to 2021, it was basically how the entire direct-to-consumer industry worked.
There was a kind of magic in it. If your customer acquisition cost was low enough, or looked low enough through the right attribution window, the act of spending became almost indistinguishable from the act of creating value. You could take perfectly good investor money, send it to Mark Zuckerberg, increase revenue, increase valuation, raise more money, and repeat the process until someone asked whether the customers were profitable, loyal, real or simply passing through with a discount code.
This was called growth.
At some point, however, the language falls away; the story has to become cash again. And that is when the order of pain matters. Legal documents are not romantic, but they are prophetic. They decide, years in advance, who suffers first when the optimism drains away. Preference shares. Consent rights. Seniority. Debt. The waterfall. Such a beautiful word, waterfall. It suggests nature, movement, sunlight. In finance, it means the reverse order in which people get wet.
Professional investors understand the waterfall. Founders understand it eventually. Retail investors, friends, family, early believers, employees with options and anyone who invested because they liked the thing rather than the structure may discover it later, and more expensively.
And so we continue to go about our business. Making things, paying wages, and trying to make the numbers work in a world that has changed again. The investor, meanwhile, is largely absent – waiting, perhaps, for the world to change in their favour. My mistake was believing that capital was neutral. It is not. It has tastes, moods and fashions. It falls in love with retail, then SaaS, then AI, then whatever comes next. It praises risk and structures downside.
But long after the investor has stopped believing, the business is still there. Still trying to become what it said it would become. And still paying for the privilege of being monitored.
