Turning from the sea view from the third floor window of e-commerce firm OnBuy’s Bournemouth headquarters, founder and chief executive Cas Paton recalls a meeting he held with PayPal, in the early stages of his company’s story.
“I sat in this meeting in Richmond, they asked us, ‘What are your sales’? I said around £1m. They asked ‘Where do you want to be in a year?’ I think I said £5m. And then they asked ‘Where do you want to be the year after?’ And I said ‘let’s go for £25m’ - and they laughed at me.”
Well, nobody is laughing anymore. In a short space of time OnBuy has scaled figurative heights that greatly exceed the four-story base it moved into at the start of last year.
Set up in 2016, the firm is now the UK’s fourth largest online marketplace, home to more than 17,000 retailers, ranging from small independents to the likes of SportsDirect, Unilever, Proctor and Gamble, and stocks more than 40 million products.
The company’s meteoric growth hasn’t gone unnoticed. Last year, The Financial Times ranked it inside the top 350 of a list of the 1,000 fastest-growing companies in Europe, after the business reported a near 500% growth in revenue from £394,000 to £2.2m, between 2017 and 2020.
Financial services giant Deloitte also put OnBuy just outside the top 10 fastest- growing tech firms on these shores, recording a 3,400% rise in revenue over the last four years.
Amid the gradual emergence from the Covid-19 pandemic in 2021, OnBuy recruited more than 80 new staff members, grew the number of sellers on its website by more than 50%, and secured £35m of investment during a series A funding round.
Not bad going for a young business entering the same arena as one of the world’s largest companies, Amazon, a move Mr Paton tells me he had been warned against.
“I remember the first time I sat with a VC, and said this is what I’m going to do - I think they thought I was a bit crazy, because this is the biggest company on earth.
“One VC said to me there were four companies that if I came in with a business that was going to conflict with them, they would not even talk to me. They were Facebook, Google, Apple and Amazon.
“But they invited me anyway, because while that was their founding, agreed logic, they wanted to know how we grew this company from nothing to this, this quickly with no money. And when I say no money, I mean a very small amount of money versus the competition.
“We grew a £13m company with around £2.8m of investment, and then we grew a £152m company with probably £6m investment. That’s pretty significant when you talk about how fast the company is scaling relative to capital. How do you do that?”
Mr Paton tells me that a “big driver” of OnBuy’s growing clientbase of retailers is that unlike Amazon, it is not a retailer itself, and therefore does not have what he calls “a conflict of interest.”
Born in Manchester, where OnBuy has a secondary office, the serial entrepreneur set up his first limited business aged 21 in Bournemouth where he moved to study.
After selling a web development company he founded, he then established a new e-commerce venture, helping SME clients to scale through online marketplaces.
Mr Paton said he began to notice his clients were quickly introduced to challenges after introducing new products onto “certain major marketplaces”.
He added: “We didn't see this in 2010/11, not as aggressively as 2012/13, and it rapidly got even worse. We would introduce new products and low and behold the marketplace itself had then sourced that same or very similar product form their own distribution supply and they were pushing these British companies out of winning listings.
“When you used to type ‘pet food’, as an example, I used to look for pet food, my client’s product would come up. Then when you look for this pet food again, my client’s product has dropped down a space and there's other pet food that’s made its way to the top, because that’s the one the marketplace is selling in competition with the retailer.”
Mr Paton told me that OnBuy was onboarding 20 retailers everyday on to its “fairer” platform, as it looks to capitalise on the 70% of the UK e-commerce product marketplace he calculates Amazon does not have. He added that he believed OnBuy could ultimately help give customers “more choice”.
For a company that is clearly going places, with plans to open an international office are “on the horizon”, Mr Paton said it was “really important” for the tech firm to remain rooted in Dorset, where it began.
Mr Paton said he hoped OnBuy could act like a “magnet” for tech talent into the county, as it looks to cultivate a “Silicon Beach” in Bournemouth - in reference to the Silicon Valley tech hub in San Francisco.
“There’s the long standing companies in Bournemouth like Vitality, there are some big solicitors in the area, we became quite well known for that. But tech is really the next big wave. The market is crying out for more tech businesses, the UK tech scene is exploding with investment.
“We’ve got a long way to go, we’re so far relatively behind the US. For the UK to really dominate in the tech scene, it takes things like this to capture different people. Because not everybody wants to be in a city.
“We now have a strong pull bringing people out of London and surrounding areas, but keeping that arm into Manchester gives us that resilience that we can still attract the city based tech talent.”
Research by trade body Tech South West has found the regional sector could be worth almost £20bn by 2026 and create more than 125,000 new jobs over the next few years.
The study also found that despite the proportion of tech and engineering students across South West universities (11%) being above the UK average (7%), recruitment difficulties and salary inflation were contributing to high vacancy rates.
For OnBuy, which at the time of our interview was looking to add 100 more staff to its operations, Mr Paton said while finding the right talent was “harder than I thought it would be” he felt the buzz around the business had only made recruitment “10% harder”.
Speaking on the broader recruitment struggles tech firms were facing, Mr Paton said while Brexit had caused problems with overseas recruitment, the biggest impact had been caused by the “huge rush” in investment in the tech industry.
“During Covid, if you were an investor with a large sum of money in the bank and you needed to spread your investment across different asset classes, the past two years were not easy for you to decide where to put your money. There were a lot of concerns and challenges and the only market that was showing any signs of rapid growth was actually tech.
“That rush towards investing in tech created a huge need for more people in tech, and only a finite resource. Along with your Brexit challenges and Facebook saying they want to build a metaverse and all of these big tech plays towards Europe, it does create a challenge.
“And if you’re a start-up business having raised your first £500,0000 or £1m and you need a web developer to make that happen, you’re going to pay to get them. Subsequently supply and demand kicks in, salaries increase disproportionately and unsustainably.”
Mr Paton acknowledged that while the migration of customers to online shopping from the high street during the national Covid-19 lockdowns had contributed to OnBuy’s growth, he cited research from IMRG (Interactive Media in Retail Group) that suggested that between December 2020 and September 2021 the number of online shoppers “halved”.
“That’s fascinating, because people in the investment and e-commerce worlds had this false belief in 2020 that Covid was a catalyst for e-commerce companies to scale and that traffic would not necessarily go back to the high street, as there was a misconception that it wouldn't survive Covid.
“Actually what happened was a little bit the opposite. While some stores have really suffered, what you can see in the data is people were so captive that once the stores had opened again, people wanted nothing more than to get out and go and buy something and interact in a retail environment.”
While there may be life in bricks and mortar yet, Mr Paton said OnBuy had yet to experience such a drop in volume of customers. As such the company’s growth ambitions continue at pace, with Mr Paton saying OnBuy was looking to attain a ‘unicorn’ valuation of more than $1bn.
Rapid scale at the pace OnBuy is pursuing does come with its challenges though, which Mr Paton says “nobody understands, unless you’ve done it”.
“When you sit in front of an investor or before you even start a business, you think I will raise ‘x’ amount of money, hire some people and then away we go - it’s just not that simple.
“When you've got 14 people, and need to hire 90, the relative change, management structure, process, HR, office space, bathrooms, communication, technology, the challenges across all these things are phenomenal.
“Scale-up is another layer of significant complication before you even worry about the actual business, the proposition, we’re building a marketplace, we want products, retailers get into some countries - and that’s all the public sees.
“All the good stuff goes online right? It's the sweat and tears in the middle that really count when you’re going home at night and you lay in bed thinking ‘how did today go?’ and ‘I've still got everything to do when I went to work this morning’.
“All these things are popping up because you’re trying to grow at scale. Then when it starts to calm again, you think we’re growing through that, what are we going to throw on top now? Because you can’t grow at speed without constantly introducing new challenges.”
When asked if at the age of 38 Mr Paton could have believed he would have achieved so much in his career he responded his ambition was always for the company to be big, and “I know to get it big, and I knew I could”.
He added: “But it is one thing, knowing it, seeing it on paper, planning it, talking about it, and there’s another thing actually doing it. When you’re ambitious you’ve got to be confident but there’s a big difference between being confident and overconfident.
“I always knew we could do it but of course, naturally, in the back of your mind you’re saying ‘I hope’. Who can you turn around and ask ‘have you grown a £200m sales business in five years before?’”
Returning to the PayPal meeting - the one in which his sales targets were laughed at - Mr Paton admits he “pulled their leg a little bit” in order to get the opportunity to pitch to the payment solution he said the firm at that time needed in order to go to the next level.
Mr Paton said prior to the meeting, PayPal had asked what OnBuy’s sales were at that point, and he had told them it was around £1m a year, when it was actually around £600,000 - “a relatively small business”, he said.
“You could tell by their behaviour they knew that we had something. They were very supportive of what we were doing, they knew I was an ambitious young man who was saying ‘I’m going to do this’ and they’ve probably heard it all before.
“So they were probably a little bit like ‘well, if he only does half of that we will be happy, but if he thinks he can do £5m do it.’
“And actually we did £10m and I think in the PayPal period it went £10m and then £84m, not £5m and £25m. It doesn’t take much for you to raise a few eyebrows and people to say ‘wow this company really has something here.” We’ve just done £160m with PayPal.”
OnBuy has secured a new partnership with payment tech firm Nuvei for 2023. Mr Paton said while 2022 had produced a series of “big wins” - including a 10% rise in seller numbers and 47% increase in customers - attention was now firmly fixed on the next 12 months.
The company has made a raft of senior hires, including former AO marketing director Cherie Cook and Dan Seamans, previously head of digital product delivery at Domino’s Pizza - to help oversee a “top-secret product roadmap” in place for this, of which Mr Paton says to expect “big things”.
The entrepreneur said it's this “validation in yourself” that helps during the scaling period, and he adds, the “fulfilling” feeling of a target being hit was “addictive”.
“That’s when you realise you’re on to something and you want a new target and the business was never about financial in terms of personal finance, it was always about what we could achieve and grow.
“The ‘unicorn’ valuation and things that investors resonate with, they’re good for attracting that kind of thing. But for us it is about market share, retailers, how many customers can we get on board - are we building something that is good for the market?
“If we’re growing, then we are. That’s why it is so fascinating, and if we get anything like what we’re planning to get out of this year and next year, you’ll see OnBuy a hell of a lot more in all the right places.”
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