98. The financial mechanics of scaling a high-value business | Ross Crane

James Reed: all about business

In this episode, James Reid interviews Ross Crane, co-founder of Subdial, about transforming a failed food tech venture into a data-driven luxury

Key takeaways

• Ross Crane returned £250,000 of unused seed funding to investors after realizing his food tech startup lacked sufficient customer 'love' to scale.
• Subdial leverages 750,000 daily listing records from global platforms to provide accurate, data-backed pricing for buyers and sellers.

Main topics

• Entrepreneurial pivots
• Data-driven marketplaces

Notable quotes

They liked it, they didn't love it.

Conclusion

A profound look at how specialized data can disrupt traditional, opaqu

Transcript preview

Speaker 2 (0:00) Welcome to All About Business with me, James Reid, the podcast that covers everything about business, management, and leadership. Every episode, I sit down with different guests who have bootstrapped companies, masterminded investment models, or built a business empire. They're leaders in their field, and they're here to give you top insights and actionable advice so that you can apply their ideas to your own career or business venture. Speaker 2 (0:29) Watches are emotional purchases. So how do you turn them into a data-driven asset class? Today on All About Business, I'm joined by Ross Crane, co-founder of Subdial, a platform bringing data, transparency and liquidity to the global watch market. In this episode, we discuss pivoting from failure, applying technology to a traditional industry and why watches are increasingly seen as an investable asset class. Speaker 2 (1:01) Well, today on All About Business, I'm really delighted to welcome Ross Crane. And Ross is the co-founder and CEO of Subdial. Subdial is described as a pre-owned luxury watch platform, which was established in 2018. So, Ross, I'm fascinated by this because it's a disruption of a market that had probably been going on for a very long time where dealers would quietly buy and sell. watches that have been pre-owned um you've transformed it what made you think of this how did you how did you Speaker 1 (1:37) begin so when we came into this we were actually not coming from a watchers background in fact uh both myself and christy who's my co-founder were uh andson young doing big data and tech projects we'd left or in fact i'd left back in 2017. So you were analysts, were you? We were management consultants. Management consultants at Ernst & Young. Yeah. Big organization. Doing big tech projects with sort of FTSE 100 companies, S &P 500 companies, that kind of thing. And we originally left to do something entirely different. So I raised a small amount of seed funding to do a food tech startup. So we did that in 2017. Food tech. So what does that involve? So, I mean, going back 10 years, so you kind of have to cast your mind back to how things were in 2017, what didn't did not exist. So this was right at the kind of nascent point where things like Gusto and HelloFresh and those kinds of businesses were just starting to get going. And myself working in professional services, commuting every day. thought there was a more interesting way of doing that that had less friction. So those were subscription-based, delivery-based businesses where you sign up for a subscription and get four meals a week in a great big box with loads of packaging and all of that stuff. So the concept with the food business was to do that, but through small hubs that would be at big commuter stations. So at Farringdon Station, at Clapham Junction, that kind of thing. And the idea was there was much less of a time delay. You could get to 5 p.m., you're leaving the office, you've got nothing for dinner, and instead of going to the Tesco Express and scratching around and going, like, well, what am I going to throw together? You would actually go on a map on your phone, pick from a recipe card and say, okay, I want to do this recipe, I want to do it for three people. And by the time you then get to the station 10 minutes later, it's picked and packed, ready to go for you, just the ingredients that you need, no wastage, no requirement for, you know. big freezer blocks and all of that kind of stuff that goes along with it. So I think I was invested in the idea. It sort of felt like a very academically clean idea. There's going to be less waste. You could optimize for exactly the ingredients that you needed that allowed you to do the most number of recipes, but you could get high quality stuff because you were doing a small number of ingredients. Speaker 1 (4:04) And we got that up and running. I think we probably delivered our first recipe within six weeks of getting the company going. Very manual heavy lift on our behalf. And in the end, we only really ran it for about six months. So I think we probably started in the summer. And by Christmas, we said, you know what, we'll come back after a break and we'll take a view on whether we want to carry on with this. And as it happens, we both came back and we said like, okay, you go first. I think we should call it. And it wasn't because people didn't like it, but I think people didn't love it. And I think we... For the unit economics to work, and I think for us to be really motivated to push on with it, we felt like we needed people coming back three times a week, saying, I love this, I'm going to get stuff. And the best customers were coming back maybe twice. And modeling it out, it was very hard to see how you could get this thing to scale and to ever be profitable with that kind of customer attention. Speaker 1 (5:11) So people Speaker 2 (5:12) didn't love it. I think that's an interesting observation. They liked it, they didn't love it. They liked it, they didn't love it. Speaker 1 (5:16) There Speaker 2 (5:16) wasn't sufficient impetus Speaker 1 (5:17) around it. I Speaker 2 (5:19) think when you're Speaker 1 (5:19) very early on in a sort of startup journey, you almost need that energy coming from your customers to keep you going. And I think you obviously believe in your own idea. You believed in it enough to quit your job and raise a bit of money and put your own sort of... ego on the line a little bit because people are obviously surprised when you leave and they ask what you're doing. But you kind of need that feedback to keep you motivated in the idea. And I think we both felt like we could spend our time better on something else. And there was also a sense of we'd raised this seed funding. We hadn't really spent any of it. And to get it to the next level of testing, we would have had to deploy basically all of that money. And at that point, as you well know, with early stage bootstrap seed funding is typically it's friends and family and not professional investors' money. To put that kind of money at risk when you think the chance of success is- So Speaker 2 (6:16) how much Speaker 1 (6:16) money are we talking about here? How much do you have left? 250K we'd raised. And I think by the end, we'd spent maybe 30K. Yeah, Speaker 2 (6:24) so all credit to you. So you decided to pivot and Speaker 1 (6:27) do something else with the money. Did you have to ask Speaker 2 (6:31) for their sort of support? We Speaker 1 (6:32) returned the money. So we said, we're going to wind this up. We don't know what we're going to Speaker 2 (6:37) do next. Speaker 1 (6:38) And I think it's something that I've seen in other people, both before that point and since, where I think in your heart, you know that it's not. right and you haven't quite got the traction that you want and probably it's not going to work but you're sort of stuck in the i've committed to it now so i'm going to keep going and the longer you go the harder it gets to take that step back and go yes i've Speaker 2 (7:05) seen that you know the more people put into something and you feel like you've built up this sort of Speaker 1 (7:11) external pressure on yourself to make this thing work um so i think yeah in hindsight we're both very glad that we did So you called Speaker 2 (7:19) that your food tech business. Yeah. And then how did you come to pivot to watches? We Speaker 1 (7:25) pivoted within probably two weeks to watches. And I think it was, in hindsight, an easy decision. So we were both independently liked watches. watches ourselves we had some experience with the watch industry in the pre-owned sense so Speaker 2 (7:40) you had a little collection a Speaker 1 (7:41) little collection you know nothing major while Speaker 2 (7:43) you were working at ernst and young yes yeah Speaker 1 (7:45) you know gifts from family and these kinds of things and i personally had had bad experience with some other pre-owned players and i think it the nice thing and the thing that still makes me as passionate about this today almost nine years later as i was back at the start is it is a brilliant intersection of all of the things that we care about. So it is a passion product. You know, watches is something I personally enjoy, get a lot of pleasure from looking at, collecting, doing all that kind of stuff. But it sits across technology and data and a type of customer who is doing this not because they have to, but because they want to. Speaker 2 (8:24) And Speaker 1 (8:25) that is, you know, if you're like me, most passionate about building a tech product. That intersection of something where you get to build for someone who's doing it for passion. And if you do a good job, we'll be back on a weekly basis or even a daily basis. Browsing the site, looking at new stuff, trying new features. There's not many other things I think we could think of that hit all of those kind of boxes. So you both came to this sort of... We both came to this conclusion. How Speaker 2 (8:54) did Speaker 1 (8:54) that Speaker 2 (8:54) happen? Speaker 1 (8:54) Were you in a cafe or a pub? We were sat in Christy's house. Yeah, we were sat in Christy's house, which we'd, through his very patient housemates, kind of taken over as the hub of the food business. Because he had slightly more space than I did. And so we were running the, you know, picking and packing of bags and all of that kind of stuff from there. And we, yeah, I think we probably for about a week, we sat down on a daily basis and got a whiteboard and sort of. ran through different ideas and tested them out a bit and said, well, do we think this has got legs? And with watches, as I say, a lot of things clicked. And I think crucially, it's not, you have a nice idea, but you've also got to think, do we have any advantage here? Speaker 2 (9:36) Is Speaker 1 (9:36) there something that Speaker 2 (9:37) we think we have or know? And what was that in your minds at that time? Speaker 1 (9:42) It was the data and the technology. So I'd done a lot of data projects in the previous... six years Ernst & Young. And so we looked at the market and said, there's something here. If you can collect enough data and process that data well enough, understand the demand for a particular watch model, you should be able to trade that almost like a commodity, Speaker 2 (10:04) but Speaker 1 (10:05) in a way that gives a better result for both the buyer and the seller. Speaker 2 (10:09) And Speaker 1 (10:10) so if you take a typical transaction that we would do where we are actually buying the watch. We do do consignments as well, but we're acting almost like a market maker in the middle. So customer submits their Rolex and Mariner 2020 box and papers. We would put that through the model and we would say, we know or believe that that watch will sell for within this price range of, let's say, 500 pounds. And nine times out of 10, it will sell within 30 days. And if you've got those two things, you know, what it's going to sell for and you know how quickly it's going to sell, you can decide your spread. So you can say, I'm confident in that and it's a tight window, so I'm going to take a tight spread. I can give the seller more money than for something else where I say, this might take up to six months to sell and the range is really unpredictable because there isn't the data to support the thesis. Speaker 2 (11:02) Right. And so the idea... So the more watches that you sell, the more informed you become. Exactly. And the more data we collect. So it's not Speaker 1 (11:09) only our own... data, although the first party data is always the best kind of data, but it's everyone else's data too. So we collect on a daily basis about 750,000 listing records. Pull those down all over the world from all over the world yet from every major platform every major dealer And we did we pull that down and we process it to say What watch is this because you know to pin it back to Speaker 2 (11:36) some but on your site if you're looking the watch is a price but As I understand it of specific price. Yes, so it's not like you're making a bid for them No, yeah, so this is I'd that price. This is what Speaker 1 (11:48) we're using to inform our buying So when someone offers us a watch, they say, I'd like to sell this. We're using that data to say, okay, we could pay you X to buy that today. Or if they were looking to consign it, or if we would advise them to consign it, then we're using that same data to say, put this with us. It's a 200,000 pound Patek. Our previous transactions and the market says, this is the right point to price this watch. And if we price it correctly, it will sell within. let's say 45 days. And that's very different to how most people in this market approach it. So you can really categorize it into two buckets. Either you've got traditional dealers who are purchasing and the first question they will ask when you bring your watch in is how much do you want for it? Speaker 2 (12:36) Which Speaker 1 (12:37) for us had always been the entirely wrong question. The question is how much am I willing to pay for it? I'm a professional, I should be. with all of the data. And so I should be telling you, the client, what it's worth and therefore what I could pay for it. And we've always tried to be transparent about those two things. I Speaker 2 (12:54) understand you have a good story about that. We do. Tell me that story. Yeah. So this Speaker 1 (12:59) was actually, this was very early on. So it was when it was, it was still just the two of us back in our first office. We're now in our third. And we were approached by a gentleman who had seen an advert that we'd placed in print media in a magazine called The Oldie. And I think the advert said something like, got an old watch, you know, question mark, call Sabdal. And he'd... Speaker 1 (13:26) I think initially dropped as an email and the email had a photograph attached. He said, I've got this watch. I saw your advert in the old, I love that magazine. What do you think? And I thought initially someone was pulling our leg because I looked at the picture and I recognized the, not the exact watch, but I recognized the model and the configuration from a Phillips auction, which had happened maybe eight months before. Speaker 2 (13:52) And Speaker 1 (13:52) that watch had gone for big, big money, hundreds of thousands of pounds. as I was saying, the chances of someone just having this watch is so slim and the pictures weren't very good, but it's worth a while at least following up. So I'd send a polite response and said, oh, can you send me some better pictures and give me a bit of the background of the watch? And he'd come back with a very long email with all of the context. And at that point, I started to think this might actually be real. And so the long and the short of the watch is it's a Rolex Daytona. from the 70s, which in and of themselves are already a pretty popular, pretty valuable watch. So with no backstory to it, it probably would have been a £60,000 watch anyway. But what was particularly eye-catching about this one is it had the Armani red Kanjar symbol printed on the dial, which is something with Rolex you never see because they're very reluctant to customise watches for individual clients in a way that a lot of other brands would. But they had, in that period, done a number of customizations for the Armani Royal family. And this particular one, this already sought-after Daytona reference with this Armani Kanja on the dial, maybe there's 10 in the world. And one of them had gone to auction, but the location of the other ones wasn't known. And the story of the gentleman who brought it to us was he was part of the British sort of... force that had gone out there after the change in leadership in the Royal family. Speaker 2 (15:28) And Speaker 1 (15:28) I think the father had come over here, the son had taken over and the son had then requested that a number of the British armed forces go out there and help train up their first fighter pilots because they had no air force at that point. So they bought the planes. This guy was a commander in the RAF and had gone out there to train the pilots and had been sort of in charge of that division. And then towards the end of his, I think his second tour, received a telegram from the royal family saying, would you come to the palace? We'd like to present you with a gift at the end of your service. And this watch he'd be presented with. And this gentleman had kept everything. He had the telegrams. He had the epaulets with the kanjars. He had photos of him in a Speaker 2 (16:11) barn. Speaker 1 (16:11) But this is important Speaker 2 (16:11) keeping everything, Speaker 1 (16:12) isn't it? I mean, because it never happens. So these watches come up. to market. Now, because the watch market has become more and more established and these types of watches are super collectible, but it'll be the third collector who's owned that watch. And so it's known and they know it's an example, but they might be worried that someone almost tried to make it better and they added bits in. This is coming from original owner with all of... You could not dispute it given the telegram and everything else. It just never happens. So that made it particularly special. And we ended up selling it to a collector who, as part of the deal, said, would it be possible for me to take the gentleman out for lunch and just hear his story and do all Speaker 2 (16:58) of Speaker 1 (16:58) that stuff? And he was very, very happy to do it. In fact, I think he loved the whole experience. So how Speaker 2 (17:01) much was it worth, this watch? Speaker 1 (17:03) We were not allowed to. Part of the agreement was also that we would not disclose how much Speaker 2 (17:08) it Speaker 1 (17:08) went for. But it was well into the six figures. Right. And I think it was a... a life-changing amount of money for... Very good for his pension. Very good for his pension. I think at that point, his wife was actually able to retire and they took us out for lunch in London. So a lot of happy people involved. A Speaker 2 (17:24) lot Speaker 1 (17:24) of happy people. Yeah, it was fantastic. Speaker 2 (17:27) So what you said earlier, which struck me, is it wasn't how much do you want for this watch. You were establishing what it was worth. And Speaker