Lessons of a start-up founder: Thomas Farquhar, co-founder of Heatio

Thomas Farquhar and his co-founder Simon Roberts have taken on a huge challenge and need to move hard and fast. They started Heatio in April 2022, aiming to help UK homeowners improve energy efficiency by up to 60% by using the latest technology.

Heatio’s Flexx platform combines sensors, smart-meter data, artificial intelligence and home-energy modelling (software simulation of energy use) to give homes a complete energy profile. It can then supply customers with all the information they need to reduce their energy use – from where they leave lights on too often to how to insulate each part of their property.

Heatio Flexx also shows customers how to adopt and use renewable technologies such as heat pumps and solar panels for optimal efficiency. Once these technologies are installed in the home, Flexx can be used to support the UK’s energy grid to manage supply and demand better, boosting efficiency throughout the system.

Thomas says: “In the UK, 98% of homes require energy improvements. That’s a huge opportunity for us, but it’s also a huge challenge and we needed significant funding to start and scale.”

The first version of the Heatio Flexx platform is due to launch in April 2024. Thomas forecasts 5,000 consumers connected to Flexx in the first 12 months of launch, and revenue will scale quickly from there, he says. Heatio aims to have the product in 28,000 homes within five years.

Here are the lessons he has learned from the first two years, plus tips for how to get your start-up moving quickly.

Learn how to get investment

Heatio raised £500,000 in investment 18 months ago and is now entering a second round of funding for £2 million. Raising funds for your company can be incredibly time-consuming and challenging, taking focus away from the business, Thomas says.

Having two founders made things much easier as one could focus on starting up the firm, while the other dealt with investors.

“Raising finance is similar to selling, except investors have different motivations and proof points,” he says. “We found it a new, scary and daunting world. You’re immediately thrown in front of the headlights. It can become an all-consuming part of your business that never stops.”

Thomas’s advice is to learn as much as possible about the investment world in advance, such as:

• the different types of investors and structures
• funding rounds
• tax reliefs
• legal issues
• how to pitch
• how to avoid giving away too much equity.

Thomas also recommends joining an accelerator programme if you can. “We joined an accelerator called Baltic Ventures, which taught us all those things,” he says. “It was a game-changer, and we would have struggled without it.”

Fail fast

Nothing is more expensive than delaying a decision to change something that isn’t working or delaying a necessary pivot, says Thomas.

“It’s better to go quicker, harder and invest slightly more so you can get failures out of the way and the business can evolve faster,” he says. “Knowing when to change course and acting rapidly is vital. For example, we hired technical expertise, then realised within a month that the task was way beyond the person we’d recruited. But they didn’t want to admit that.

“If we’d carried on, we would have failed to get off the ground. So we quickly decided to change and find someone with the right experience. That’s massively hard to do in a start-up.”

Now when hiring, Thomas and Simon ask interviewees what they’re not good at. “It doesn’t mean we won’t hire them, but we just need to know so we can fill that gap another way.”

Start-ups also often have a problem with founders not identifying their own weaknesses, which causes them to drag out failures rather than moving on quickly, adds Thomas. Thinking you can do it all is the biggest danger in terms of cost and time. Be confident in the skills you have, and recruit for those you lack.

Hire people better than you

Thomas says he has found employing more experienced staff in core roles, while more costly, saves time and errors.

“There may be people better than you at that job, and the best thing you can do is hire them,” he says. “Many founders employ junior people because it’s cheaper. This risks slowing you down. We hire more experienced heavyweights because we need to develop quickly. You can always bring in more junior people around them later.”

For example, Heatio hired a chief marketing officer who previously worked for a well-known social-media platform. It also brought in other executives who have exited multiple businesses.

“Simon and I have only exited one previous business,” says Thomas. “They’ve done it two or three times, so they’re ten years ahead of us. It means we’re not dragging our business – they’re accelerating it.”

Find a complementary co-founder

“Simon and I have complementary skills – I’m technical; he’s commercial,” explains Thomas. “If you’re a founder with no commercial experience, I’d advise finding a commercially minded co-founder.

“Sole founders will often hire a commercial manager or director, but that’s not the same as a co-founder. You need those core skills in the founding team, so you’re both completely bought in. You’re in the trenches together, have each other’s backs and can bounce off each other. Some sole founders make it work, but that’s not how I would do it.”

Thomas adds that investors tend to see co-founders as much less risky than solo founders, who have to rely more on hiring people.

Stay grounded and realistic

If you win funding, investors can put you on a pedestal and say you’re the next big thing, says Thomas.

“They’ll ask how much you think you’re worth,” he says. “Founders can pull figures out of the air. Instead, put your ego aside and calculate the minimum you need to get proof of concept and validate your model. Your business is worth nothing until you’ve proved the concept. So, stay grounded.”

Thomas says it feels good to be nearing the launch of Heatio’s first product after a gruelling two years getting the company up and running. His advice to other new firms is: “Don’t kid yourself. It will be high-risk, unglamorous and viciously hard – that’s the same for almost every start-up. But the rewards are worth it.”

Where the opinions of third parties are offered, these may not necessarily reflect those of St. James’s Place.

SJP Approved 26/03/2024