But for Vantage Power, that was a necessity. Founded by Imperial College graduates Alex Schey and Toby Schulz, the firm makes hybrid – part-diesel, part-electric – engines. Vantage Power can turn four buses currently in use hybrid for the cost of one new bus. “Before us, if you were looking to buy a hybrid bus, you were looking at a minimum of £290,000. We’re less than a quarter of that, and we plan to make it even more affordable,” says Schey, who is chief executive.
The pair rose to prominence back in 2009 when they raised £700,000 sponsorship to build the first fully-electric supercar. They did so, then drove the length of the Pan-American highway, from Alaska to Argentina, which the BBC filmed for a documentary. “We got back from that and, with a lot of technology experience and something of an entrepreneurial can-do attitude, thought, ‘let’s start a business’. The problem was that, despite knowing the kind of tech we wanted to be involved in, we had absolutely no idea how to turn that into a business,” says Schey.
It took him and Schulz a year to research the industry. “It was literally us sitting in a kitchen trying out different concepts and learning about potential markets. What could two guys with no money actually enter?” By October 2011, the pair had ruled out the enormous and impenetrable automotive industry and settled on buses – a smaller sector that was easier to approach, and made economic sense for would-be customers. “Approaching our first bus company was daunting – we were 10-12 people selling to a company that was thousands and that was quite a learning curve. But in many ways, it’s what we’d geared up to do.”
On the investment scene
In 2012, Vantage Power was contacted by its first investor. Schey and Schulz hastily put together a business plan, which resulted in their first cash investment. “Those initial investors are typically angels putting in around £100,000 each. We learnt quickly that going out to those kinds of investors with numbers and a business plan is important, but the thing they invest in over and above everything else is you as founders. Our first investor said to us: ‘I don’t know anything about buses, but I believe in you two’.”
This of course changed as the company grew. “As the business progresses, you’re judged far more on your technology, your access to market, the market research you’ve done and your business plan.” Schey also highlights that, once you’re dealing with much larger investors, the level of diligence and detail is ramped up considerably – which is something you have to learn to deal with. Vantage Power is now funded by a syndicate made up of Martlet, Qi3 Accelerator, Synergy Energy, Global Reach Investors and individuals.
To small software firms starting out, Schey recommends “trying to get as far as you can with a couple of mates and computers. That way, when you go for investment, your valuation can be far higher. Because we’re software and hardware, we needed a hardware product just to get us off the ground. That cost us quite a lot in terms of equity; if you can bootstrap, do.”
Moreover, building a business that relies heavily on R&D comes with its own challenges. This year and last year has predominantly been spent testing the firm’s second prototype. “We needed a proof of concept, to see it operated in a real-life passenger fleet, get feedback from the driver, from the mechanics... now we’ve moved to manufacturing and are delivering to our first customers over the next couple of months.” Reading Buses has signed a deal to retrofit double deckers, and Vantage Power’s strategic partner, long-term bus operator Ensign, is helping bring the technology to market.
That technology goes a lot further than just a hybrid engine. The (diesel) engine charges up a battery pack, which then charges up a motor which drives the wheel. But as Schey explains, to make those systems and the numerous smaller ones around them not just work but work very efficiently, you need a huge amount of software.
“We started growing our software team in 2013, and it’s taken on a very exciting dimension. We’ve designed a platform that allows you to stream 6,000 data points to the cloud, which can be viewed and have diagnostic algorithms run on them in real time.” Vantage Power’s platform means operators are alerted as soon as something doesn’t look right – a radiator being blocked, overheating – and act accordingly. “We can present that on an internet platform which allows them and their engineers to diagnose immediately, fix quickly and often preventatively – because we can catch a problem very early on.”
The pair are also focusing on enhancing performance. “One of the things we’ve built is the ability to set a zone where the diesel engine never goes on – the 2km of Oxford Street, for instance. That means we can deliver the benefit of a pure electric vehicle without the associated costs, like charging infrastructure.” Schey says it’s the firm’s software platform that sets it apart from its competitors.
Building for the future
And there’s plenty of business to be had. By 2018, all double-deckers in the capital will be hybrids, and all single-deckers will be electric. Over the next three to five years, Vantage Power’s focus will be on scaling, says Schey. “We’ll scale our manufacturing, supply chain, R&D and build out a team operators can depend on.” In London, bus routes are contracted out by TfL, and it sets the policy of which will be hybrid, with operators then bidding per route. “That means our technology needs to work for operators and TfL. Elsewhere in the country, we’re appealing far more to operators’ wallets. It’s less about politics and more about economics. But that might change with the devolution of transport powers.”
Back in their workshop in West London, you’ll find a year-old giant mezzanine with enough office space for 50 people (the firm is now 32). If it wasn’t difficult enough for Schey to find somewhere that’d fit a bus through the door, he also hadn’t bargained for the pace at which the team would grow. “We had to build the mezzanine because office space became a real challenge. We’d already moved once a year earlier, but still didn’t have enough space. It’s been hard to keep pace with the growth.”
This keys into another hurdle for Vantage Power: hiring the right people. “We don’t just have a skills shortage; in some cases, there’s a personality shortage as well. The kind of business we have is old-school engineering meets new tech. We don’t just need people with the right skills and experience (which is hard enough), we also need the right temperament and personality. We have a fun atmosphere, but it is high pressure and it takes a certain kind of person to go for that. We can’t offer a nine to five.”
Fortunately, Schey stresses, the company has found “the most incredible group of people. But so many people aren’t up for taking risks and making decisions. For a lot of fast-paced businesses, that just won’t work.”