With Chris Bruce, Co-Founder of Thomsons Online Benefits (now Darwin) and Pink Investment Club
Setting the scene
It’s fair to say that Chris Bruce has had some interesting twists and turns in his career before he met his co-founder and created Thomson Online Benefits. In this podcast, Chris talks through the early days of the business, how they honed the value proposition and why they had to totally rebuild the tech for the next stage of growth. After some huge scaling, Chris describes how and why the business was acquired, and why he felt he had a duty to protect the amazing team he’d built and the culture they’d created. What’s impressive is just how many of the alumni have gone on to create the next generation of HR Tech, where Chris and his co-founder now spend their time to invest and nurture these new emerging companies. It’s great to hear a founder talk through the entire lifecycle of their company, and then talk about how they pay forward those experiences. A must listen for all Founders!
You can find Chris' Youtube channel here.
The building blocks to Thomsons Online Benefits
I look back and join the dots to try and figure out how it all happened, and there was a lot of luck in that. I left University and most of my mates were going off to go and work for banks and insurance companies or law firms, but that wasn’t for me- I would have been really bad at it. I was going to do something a bit different and I ended up going to Colorado so I could ski and I got a job selling cars. My semi-proper first entry into sales was commission only selling Volvo’s and Mazda’s in Denver, which gave me a real bug for doing something a bit different! Then, I went to Beirut, where I worked for a wealth management company. Then I came back to the UK and my father ran a corporate financial aid advisory business, which was looking to sell. I had nothing better to do, so I joined him and I went with the furniture to the company that then acquired us.
I got on well with the CEO of that business but didn’t know him particularly well. He invited me along to carry his bag ready to go into a pitch one day, and we’re in a taxi on the way to the pitch, back in 2000, and we started talking about how the internet could change the world that we were in, which was employee benefits. He talked about how the internet can solve the admin problem, the employee engagement problem and the data problem. I was hooked, and to this day it really galls me that it was his idea. I went back, I wrote a business plan and then the two of us left the company and founded Thomsons Online Benefits. Michael Whitfield and I believed that the thing that led to our success is the culture that was created in the business. He was the guy who drove it and made that happen. I was the go-to-market guy trying to drive the business forward, he was praising the internal culture, which oozed into the marketplace.
Creating a buzz around benefit administration
First of all, with benefit admin, if you go back 20 years it was horrible; employees joined a company, they’ve got a pile of paperwork to complete, and a lot of people never got round to it. Then, you’d wait for three months for your policy document to come through in your pension or your private medical insurance. Then, if you had any deductions coming out, somehow someone had to figure out what you had put into the application form to make sure they took the right deductions out of your payroll, and then the information needed to go out to the different insurance companies. So, it invariably went massively wrong, but our solution was incredibly simple. It was ‘we’re going to put the internet in the middle of the whole thing’. We would take data from a company, and that would become a source of truth. We would let employees make selections on our tech and then we would provide payroll with the information on the deductions and we provide the information to the insurance companies at other providers on what employees have actually selected. When you look at the setup now, it’s incredibly obvious, and clearly the thing that everybody should have done, but we spent the first five years, in the early 2000s, persuading people that it was okay to put their information online.
Aligning our vision with the perfect tech
Michael and I are very, very different people. Michael is 15 years older than me and had a huge amount of business experience, and I was 26. But at that time, being young was seen as an advantage, and so Michael was quite happy to go into partnership with me because I gave it a bit of edge when we’re trying to fundraise and go out and talk to people. But initially, we both did everything. Naturally, the tech came to me just purely because of my age, but I had no idea what I was doing. We were both involved in sales and every other aspect of the business. We had a ‘can-do, get it done’ type of attitude. It’s interesting because now I’m doing a lot of angel investing, and the most important thing for me is founders and the dynamic between us, which was that we were focused on the goal, not who was right or wrong. A lot of people around us found our relationship quite difficult to understand because we argued and screamed at each other, but we were just really passionate and it was all forgotten!
There was Michael and I for the first four years, and then Pete Craghill joined us. I met Pete through a partner relationship we built with Microsoft pretty early on. I very quickly cottoned on that Pete was somebody who could help me. I regularly go and take Pete out for a Guinness and pick his brain. Back in 2004, we had just completed a fundraise, and I was picking Pete brains about what we need to do in the product, and as the evening progressed, I said, “Pete, why don’t you come and join us!” Pete, having drunk too much, said he’d love to do that. So, Michael ran the business and the operations, I led the go-to-market and being out in the market, and Pete ran the tech- it was a fantastic relationship! Without Pete, we would have very quickly spent the money that we had just raised, and probably had a lot of fun doing it, but I don’t think the business would have survived that long.
Pete, literally on day two, pulled me aside and he said, “Chris, I love the vision for the company, I love what you’re trying to do, I’d totally buy it. But you’re never going to do it with this tech. You need to scrap the tech, and start all over again.” At this point, he could see me with tears in my eyes, as I’d spent the last four years of my life working 18 hour days trying to build this thing. But, actually look at this as being a really good thing. You’ve spent four years building an amazing prototype, you now know everything that is wrong with the tech and what you would do differently. The conversation started surrounding: if we were to start again, what would we develop? So, we’re up on a whiteboard and we mapped out the key things that we needed to do and we rebuilt the technology on that basis. The product we have today is off the back of that conversation that we had.
The evolution of Thomsons
The first five years were horrific. We were trying to meet payroll and the tech was pretty shoddy, but we then really became a product company in many ways. At that point, we became incredibly clear on our value prop. It’s about helping people think about what the value prop is, and how do they really differentiate that product from what is going to be a very noisy market? And, how do you get people to do that? I prioritise this over anything else. But, we came up with a very, very clear slide deck that talked about the different generations of technology and where we fit it in and it worked. We had a sales team who believed they were going to win every deal that they went into and that just fueled the organisation and the growth. We went from revenues of about £1.8m in 2004, to revenues, around £35 million by 2011. Our growth was pretty stressful, and we actually became the dominant player in the UK market.
Even things like the financial crisis, we just repositioned our value prop to be around what was needed for that market, as opposed to the booming employment market we’d seen beforehand. We had to then reinvent ourselves again, and it became really challenging when we had set a new course, which just become a global platform. Also, the leap from being dominant in the UK market to becoming effectively creating another category, which is global benefit administration, which people said ‘you couldn’t do, it’s just way too complicated’, which in some ways was like starting up again. That was tough, because we were at that Series B/Series C stage where we had lots of people we talked to who loved what we were trying to do in the business, but actually getting people to write out a check for a global implementation is complicated. Then, dealing with very large organisations, typically, big buying cycles, big stakeholder management was tough.
The UK market is of a certain size, and I think everybody aspires to have a big global product. The fact that we were the people who had cracked it, ultimately led to our acquisition by Mercer. We were very attractive to a lot of organisations because we have such a unique asset at the point that we exited at the end of 2016. So, it wasn’t just about the revenues, but it was actually the fact that we have created something which would be difficult for other people to try and do.
We got our original money from a single corporate, as the venture market just didn’t exist for something in the HR tech space, certainly in the UK market. Then we did some angel funding, to an extent, at the end of 2004. In 2012, we did another raise which was fascinating. We went to the US, we went to Europe, and Europe were basically offering us checks about 40% less than the US were. So clearly, we went to the US and the US had a lot more belief in what we could become over European companies. I’ve had this conversation with Michael many times about how you can’t recognise the landscape now compared to the landscapes it was around both funding, but also all the support in helping early stage companies to lift off. The investment community is so exciting right now!
The path to the sale of Thomsons
People talked about it being your baby and it really is. We started in this awful, awful office around the Burger King in Victoria, and so you’ve taken this thing from absolute nothing with companies with 10 employees looking and saying ‘well, now I don’t see value in it’ to Apple, Google, Goldman Sachs, you name it. They’re all using our tech around the world, but both Michael and I were, for different reasons, ready for the business to be acquired. For me, I was living on aeroplanes, it wasn’t unusual to go to Japan, to Singapore, to New York, via London during a week. That was pretty draining and I wanted to spend more time with my family.
The other thing was, we knew from a market perspective that we were coming to a point where the product couldn’t really survive without being owned by a big consulting broking firm. Within the benefit world in which we operate is a lot of relationships, providers, global relationships, but equally, we need the technology to be truly localised. We had partnerships with all of the very big organisations, but we felt the chemistry was particularly strong with one of them, which was Mercer. They came and they approached us one day and said, “we’re really excited, we’d like to buy your business.” Michael and I just looked at each other and went ‘you’re having a laugh on me’. It was one of those most awkward meetings where they’d flown over to present the numbers, then they went away and came back four months later, with a number which by then was exciting to us. We felt so representative of the business, our PE firm didn’t want us to exit, they thought there’s still a lot of value that we were both ready to do. It’s a huge and emotional moment when you’ve sold the business that you’ve spent your life trying to build.
The company culture sticks with you forever
The business had an incredibly strong culture and we’ve worked so hard to develop that culture. We’ve talked about the characteristics of a Thomson’s person and everybody that we bought into the business wants to be brave, can-do, caring, dedicated, passionate and fun. When we agreed this sort of six-week closing period on the business, I had booked a holiday to Mauritius six months earlier, as I said at the end of the year we would go on holiday. It was ironic that at the time we’re going to be closing the deal was when we’re in the middle of our holiday. What made it even stranger was that I signed all the paperwork before I left. So, it’s ready to go on the completion date, but I was in my hotel bedroom, watching Michael telling everybody that we’d sell the business and that we had a new owner. Watching it was very strange! It’s happening slightly remotely, but it was also the loveliest thing to actually be with my family at that moment. It’s a weird thing reliving it, but it’s all it’s all sold and that was five years ago.
I still keep in contact with a lot of the alumni. We recruited a lot of young people across the business and we worked so hard to have those people feel like they were part of the team and that we would change the market. Everybody was a really important part of it. I’m so proud of seeing so many people now in really impressive roles or now they’re doing their own startup and their business is going really well. We had the Greencoat Boy pub just around the corner, which is a natural meeting point for a lot of us to go and reminisce.
Creating Pink Investment Club
After you sell the business, I’d urge you not to rush into what you’re going to do next. If I wasn’t retained for two years, I would have walked out the door straight away because in two months, I hated it not being our business. But, actually 18 months in, I took a couple of months out and decided what I wanted to do. Then, I went back and I talked to Mercer’s CEO, and I said, “I’ve spent my adult life building this technology, I want to still be a part of it in an advisory role as I cared a lot about the people”. I’d spent a bit of time with Mercer and Darwin, which I believe will continue to grow to become a very significant platform in the HR tech space. Then, Michael and I set up Pink Investment Club, where we are angel investors investing into HR tech businesses. We’re very hands on with these companies. It’s our own money that we’ve worked really hard to create, so we find businesses that we think are really special, and then help them to grow and develop. Any company we’re talking to, we look at three things:
The wellbeing space is booming!
Naturally, the wellbeing space is something which, for Michael, is a big area of focus. It’s naturally the evolution of benefits and he had to be engaged with people and think about how do we make a difference to people’s lives. There are now 70 different point solutions, and every couple of days, I get new ideas about a wellbeing benefit in my inbox. But, I think that there are those companies that are going to break through and make a huge difference. One of our first investments was a company called Unmind, which is in the mental health space. They’ve just raised $47m in a Series B, and you look at those guys, and what they’re doing makes a difference and will make a real difference in the workplace. Across the wellbeing space, there’s a lot of things that we’ve either invested in or where we’re looking at. Then, it’s other businesses where you look at the idea, but like, what we see with our business where you look at any guy that just makes a tonne of sense, that’s going to disrupt and change something- I like it. What we don’t particularly do is look at things which are really broad. We’re focused on the niche stuff, and then you’re trying to figure out: is this going to be built by someone who’s actually offering a broader suite? And if so, is it going to be able to break through or not? But, right now we couldn’t live in a more exciting time, HR tech is at the heart of that transformation.
HR tech is shifting towards the humanisation of work
People look at the actions a company takes, whereas in the past, you can have leaders standing up and saying, ‘this is what we stand for’. People can now see very clearly whether the company actually followed through. Actually, the talk is cheap and do they put their money where their mouth is? The pandemic has really shown that some companies have significantly enhanced the value of how they’re perceived by their employees, because of the decisions that they’ve taken to show that they care about them and support them, whereas other companies have really messed up. When it comes down to this, actually shareholders are number one, and you come second. The other thing that is a huge shift that you and I have seen over the years is this move from tech being about improving systems and helping the HR function to now being about the humanisation of work. Also, recognising that we are all humans; whether that’s caring about wellbeing or whether it is caring about being able to learn and improve myself, or whether it’s that I care about diversity and inclusion, either way speaking for company’s values is critical. Then of course, we’ve got the flexible working piece, we’ve got the gig economy, and there’s a lot of figuring out to do. But, a lot of figuring out means that there’s a huge amount of opportunities out there. However, there’s also a huge amount of businesses that can be really well funded that are going to fail.
Who are hot in the space right now?
Every month Michael and I sit down, we have someone who runs the finances, and we look at all of the numbers across the portfolio and how things are doing. Then, we have a tick box, and we do red, amber and green against each one of those criteria for each of the businesses and measure how they are doing against all of these things. Without a doubt, our standout company in the portfolio for its ability to be the first unicorn (I hope they all become unicorns!) would be Unmind, because of the impact it’s having on the preventative mental health space.
In the wellbeing space, we have Nudge and and then on the humanising of work there is a company called Hownow. I love what they’re doing in how they’ve developed such clever tech around making sure that people are getting the learning that they want to add the point they are at. Then from a mission perspective, there’s Hundo, who has a founder that has spent her life trying to get basic school leavers and kids from disadvantaged backgrounds into work. The companies that recruit their sponsor kids end up saying that they are some of their best employees. The performance that they’re achieving is just off the charts because companies recognise it. Then, another company HR Datahub. I love the fact that they really focused on the diversity inclusion agenda and making sure the companies aren’t just talking about it, but they’ve got the data to be able to demonstrate that they are making a difference and can measure what they’re doing.
Pink Investment Club is a community
Pink Investment Club is about how companies in the HR tech space that we’ve invested into all help each other- it’s a real community! We are very hands on and it’s our nature. Michael talks about Michael 2.0, and I’m probably substantively in that phase of my life right now. We work as a team, we often talk about, we wish that we had had people like us who have helped us in our journey to have just guided us a bit not have made so many of the mistakes that we made. We do help the companies figure out the go-to-market strategy to figure out how to get the culture right to make the right decision about fundraising and operations and governance. Also, who do you think about the order of recruiting your sales organisations. I listened to an episode of this podcast the other day about customer success and salespeople, and funnily enough, I had a conversation the following day with one of the portfolio companies about customer success. I hope that we bring experience from our journey and work with the other companies to help these guys. It probably makes a difference because it’s our own money and we want to make sure that all of our favourite children are successful.