This week we spoke to Richard Reed, co-founder of Innocent Drinks and JamJar Investments. Innocent Drinks is the No.1 smoothie brand in Europe. The business was started from a market stall in 1999 by Richard and two friends and has grown into a business with a turnover of over £200m, selling in 15 different countries across Europe. The innocent business is led by a mission to ‘taste good and do good’, and gives ten percent of profits each year to charity.
Richard Reed co-founder Innocent Drinks, Art Everywhere, JamJar Investments The Reed Page
Richard is widely acclaimed as a visionary who has earned all the entrepreneurial stripes. Only in his early forties, his business career can be traced back more than 30 years to when he sold Smurf stickers in primary school. He organized a lawn-mowing business as a teenager. In university he and his friends transformed a campus facility into an alternative nightclub. When he quit his advertising job after 4 years, Richard and his college friends, Jon and Adam, decided to set up a fresh fruit juice company. This is a true story that starts with £500 that goes forth to create a multi-million pound company.
What Richard Reed is not is a magician or the heir to an empire. While he was fortunate, we don’t think he was purely lucky. Read on to understand how, step by arduous step, Richard and his friends went about building their success. This is an entrepreneur’s story with lessons relevant to anybody trying to create a business. Richard zooms into what exactly it took to get business funding.
Richard: It started out with our friendship. In Cambridge in the ’90s there was just no club doing house music. Entertainment back then was just rugby songs, which is fine, but not quite what we [Richard, Jon & Adam] were looking for. We started organizing club nights and we had more fun running the nightclub than the people who were coming to the nightclub. We got a sense of how much we enjoyed working together and thought that could be the way to a fulfilling career. We were committed first and foremost to setting up a business together.
Why smoothies? The truth is we were inspired by a hangover! We came back from a snowboarding weekend in February of ’98 and spent till August trying out recipes and drafting the business plan.
We then took our plunge with a test market which was buying £500 worth of fruit and making 1,000 bottles of our favourite smoothie recipes which we took along to a music festival. We had a little stall there and put up a big sign above the stall saying: “Should we give up our jobs to make these smoothies?” There was a bin that said “yes” and one that said “no”. We made a commitment to ourselves that if the “yes” bin was full of empty bottles by the end of the weekend, we’d all resign. It was, so we did.
It took us a lot longer, and it was much harder than we thought to start running at commercial scale. We left our jobs in August ’98 and it was April ’99 before we launched Innocent. With a local sandwich shop we sold 24 bottles on our first day.
#BFS16: When it came to Innocent Drinks did you all say: “this is the one we’re going to bank on?”
Richard: It wasn’t our first idea. We’d had two ideas prior. We were committed to setting up a business together, that was the dream we made. Then we set about trying to find something that we needed or wanted. The first two ideas were pretty dreadful.
We recognized we really were solving a problem for ourselves and people like ourselves. Did we think it would become big from the beginning? Absolutely not! The internet revolution was just starting and all our friends looked at us going: “You guys are crazy. The world is going online, digital, and you’re going to crush fruits and put it into bottles?” The internet revolution has been amazing but you still want lovely, natural, fresh, healthy food. At the time we thought “oh, crikey!” Six months later we would have been working on a dotcom idea, no doubt. But we were a year into our fruit juice business and thought: “We’ve come this far, we might as well stick to it. If it doesn’t work then we’ll set up a dotcom business.” Fifteen years later we still haven’t set up a dotcom business.
#BFS16: What was that first step that made it realistically possible to get business funding?
Richard: Raise money. Find a manufacturing partner. Develop the brand. All colossally difficult. If we’d known how hard it was we probably wouldn’t have bothered. The hardest of all was raising the funds.
We went out into the world with a business plan saying: “Hi, we’re three guys that have never set up a proper business before. We’re going to be making a product that is twice as pricey as anything on the shelf. We don’t own any factories. We don’t have any marketing money. We’re going up against the world’s biggest brands. Would anyone like to invest?” And the world laughed! The world didn’t debate it, the world just said a flat “no”. We applied 20 times to 20 different banks – every single one said no. We pitched and sent business plans to every venture capital firm, angel networks – anyone that was a potential audience. No. I don’t mean an encouraging or maybe “no”, just flat “no”.
One VC told us we’d scored 0 out of 5 in the investor’s handbook. “You’ve never done it before. You’re too young. You’re taking on the world’s biggest companies. It’s a dreadful investment opportunity.”
After a year of doing this, partly out of desperation and partly as a joke, we sent out an email with subject line: “Does anyone know anyone rich?” Amazingly, we got an email back from a friend of Jon. He told us about work experience he had in the office of one of his dad’s friends whom he’d overheard sometimes making investments.
We got the introduction and went to see the man, his name was Maurice Pinto. He thought the idea was wrong, but he thought that the three of us were good. He said he would put in 50k out of the 250k we were trying to raise. He said he would get the rest from the other 6 investors he worked with. When we went back to him he told us that for the first time in 20 years all 6 of his co-investors refused to back him saying: “Maurice, you got it wrong. This is a bad idea. We’re not interested.” He wrote out the balance for the remaining 200k.
8 years ago, I heard one of his talks where he was telling this story and someone in the audience asked: “Did you put in that money out of obligation or because you thought it was a good?” Maurice responded: “Entirely out of obligation.”
You don’t know when you’re going to get a “yes”. The job of the entrepreneur is to keep going until you get that “yes”. Behind that final “no” is your first “yes”. There is one out there, it might just take a lot longer and you might just have to get a bit more creative.
#BFS16: What’s the connection between a smoothie company and a venture capital fund?
Richard: We exited [Innocent Drinks] 18 months ago. It was the most fulfilling ride you could ever wish for. It was an opportunity for us to make good on the potential wealth we’d created and to give the same to other individuals. You step aside, everyone steps up a level and the business is rejuvenated and refreshed. We had a wonderful relationship with it but now its someone else’s turn to lead it (and they’re doing a great job at it).
We set up JamJar as our next project so that we could help entrepreneurs tap into the experiences that we got from Innocent Drinks. Most people investing are professional investors and they know very well how to check a balance sheet. However, they might not be great at helping someone negotiate with a retailer. We can be money plus. That plus is everything that we learned from Innocent. Specifically, how to use creativity to cope with consumers as you go from 3 people to 300 people over a short period of time.
#BFS16: What’s the line between perseverance and quitting?
Richard: I don’t know, mate. All I can say is I’m just really glad we didn’t quit when the world was telling us that we should. I think the best advice I can give is first, make sure you’re in a team. No way would I have either wanted to or been able to do it by myself. The team is crucial. Secondly, a lot of successful people got started and didn’t stop. They start and they don’t give in. But be pragmatic about it. Gamble everything in the business but nothing in your personal life. Lose the business but don’t lose you.
If you got caught up in Richard’s story we don’t blame you. But read between the lines and understand the values that Richard continuously stressed. (1) Team, (2) creative hard work, and (3) a combination of resilience and pragmatism. Most successful entrepreneurs can relate to the elements in Richard’s story.
Through JamJar Investments, Richard and his friends are taking their experience from entrepreneurship to venture capital. Join us at Business Funding Show ’16 to learn from the experts and explore several other forms of business funding.