“What we need as a disruptor is change and during a boom, it’s too easy for people to say what we’re doing is working well.”
Steve Phillips is the Co-founder of Zappi, a market research platform that utilises AI and automation. In an exclusive interview, we spoke to Steve about his background in the market research industry, why he believes a recession can be beneficial to market disruptors, and his advice for companies looking to raise funds in the current climate.
You spent nearly two decades in the market research industry before creating Zappi. Can you tell us more about this time and how it led to you starting your own business?
So, I worked in the UK and did my graduate traineeship in the UK in the early 90s. Then I went to Asia and worked in consumer insight for about six years, then I moved to New York for about another six. I had kids in New York, so they have dual citizenship, which is very lucky, but then we decided to move back to the UK. When we moved back, I started my first business.
I’ve been sort of a serial entrepreneur and have started four companies in the consumer insights space with different partners. The last two I merged and then sold, but they were strong professional services companies. With Zappi, I realised it was something different, that it was a technology company at heart, and it was because I was trying to solve a particular problem that I saw with the consumer insights space.
Considering your range of experience, have you seen any parallels and differences between working in the US and UK?
The checks in the US are significantly higher – you sort of add to zero! I can’t remember who it was, but they were asked why they robbed banks. They said, that’s there the money is. So, why do business in the US? Well, that’s because it’s where the money is!
So, had you always wanted to be a business leader, or did the desire develop as you went through your career?
I would always look at the business that I was in – and I’ve worked under some great and some bad CEOs – and think about whether there were different ways of doing it, and I don’t think I necessarily wanted to lead, it was just my natural way of being. I think at the heart of a lot of entrepreneurs is not a desire to lead, but a desire to solve problems. So, it’s looking at things within the market or within the company and thinking, ‘we could improve by doing that’, and I think that’s probably more of a drive for me.
Having worked for some good and bad CEOs, what do you think makes a good leader?
By far my most inspirational leader was at a company in Asia, and it was run by a guy who had some great ideas and really wanted you to help execute them. He’d be in the office on a Saturday and if you were working hard, he’d be working hard alongside you, he’d stop what he was doing to help you out, he’d get you a beer if you were working at six o clock on a Tuesday, if you’re still working at that time. He was smart, engaged and ambitious.
Then there was a CEO who I worked under in the US. He and his business partner were both very nice, but they were not ambitious at all. They didn’t want to make change, do new things, or set the market on fire, and I found that deeply frustrating. I had colleagues who thought they were the best CEOs and wonderful, but I just needed change, inspiration and new ideas.
What are the biggest challenges you’ve faced in your career? Was getting Zappi off the ground one of them?
For Zappi it was 1% inspiration and 99% perspiration. The idea for it came about as I thought I could automate the job of a market researcher and consumer insights specialist, and get expertise, into a platform. I knew nothing about technology at the time, so had to go through three different technology partnerships before I eventually found a small company that was trying to do some of what I was trying to do. We started together and then ended up merging because they had some great tech but a bad business model and we had a great business model but no tech.
So, the hardest bit was making that first proof of concept and getting a client or two to believe it could work. But once you’ve got that, you’ve got a bit of momentum and some understanding of the product market fit. We’ve had crises, and lost clients and partners along the way, but that first bit where you must prove that the idea is valid, can work, and the client can pay money for it, is the hardest bit. Once you’ve done that a couple of times, you know there’s something in the idea.
Only 3% of the market research industry is digitised even today. Why is this the case and how much of a problem is it for the industry?
I’m a big believer in exponentials and when we started Zappi, 0% of the industry was digitalised. It’s a bit like electric cars: once you get past 0.5%, the next move is 1%, then 3%, and then 10%. So, I don’t worry about the 3% because I think it’s going to change rapidly. The hardest bit is always proving that it’s possible, and of course, you have lots of people who fear change and are unsure whether they need to do digitalisation. So, it takes a bit of time, but the outcome is inevitable. I don’t think it’s going to go backwards!
Considering the global recession in 2023, how will the market research industry be affected?
I remember having this conversation with the President of the company, Ryan, about five years ago. He said, ‘look Steve, there’s going to be a boom and it should be really good for us. And I said, ‘actually I think a boom is the worst thing for Zappi’.
The good thing about a recession from our perspective – which is a horrible thing to say because it’s very bad for lots of people – is that it makes people think about what they’re doing. It makes people think about change and question if the approach they’re taking is the right one. What we need as a disruptor is change and during a boom, it’s too easy for people to say what we’re doing is working well, so why change it? And that’s not good for us.
You recently raised funding. Did you have any trouble acquiring it in the current economic climate and what tips would you give to other companies that are also hoping to raise funds?
Yes, it was even more awful because of the collapse in tech stocks! It took much longer than it should have, and it was a hard environment. Almost every fund that you spoke to was taking meetings but had no desire to do deals. Our $170m deal would have been a blip on the landscape had it happened the year before, but in the context of last year, it was a big deal.
Until the collapse of SVB, I would have said it was a better time to raise than last year. I think people do need to spend money but don’t expect people to spend money quickly. Investors can sit on cash for a while, so you must be really buttoned up, your pitch must be really strong, and you must be reasonable on valuation. But there are deals to be had.
But my advice now is probably just back off for three months. After SVB went down, the concern in the market and paranoia of every private equity and VC fund will have quadrupled in the last week. So, my advice would be to double down on getting product market fit, get some revenue in the door, and be really careful on cost. No one wants to see a big burn pitch anymore, they want to see strong, reasonable companies with a clear growth path to profitability.
What are your future plans? Do you have plans for an exit?
When you take on a private equity company, there is going to be an element of that, but we have not talked about anything specific other than creating value over a five-year plan. So, what the next stage of the company will be I don’t know, and we’re not really having conversations about it, and I don’t think we will for another two or three years. But we’ve got a timeline to create significant value and execute against the vision.
We have a programme called AI Everywhere, which is trying to push AI through our product and the organisation, so we can make everything much more efficient and effective. So, it’s just a really exciting time to be in tech.