Many founders who lose a business never start another one. Those who do often find the second attempt harder in new ways: more money at stake and more people to answer to.
In this episode of the Scaling Business Podcast, John sits down with Che Metcalfe, co-founder of Uniti Wireless. Che lost his first company almost overnight in the GFC, spent years in other people’s jobs, then started a wireless internet provider from a spare room in Adelaide. He talks about raising capital, listing on the ASX, being let go the day after the listing and what he has learned about failure, ego and business models.
If you are building something that needs capital to grow, or picking yourself up after a business that didn’t work, this one is for you.
From Web Design to Mobile Games
Saying Yes Before He Knew How
Che started out selling 3D architectural visualisation, but there wasn’t much money in it. When one architect asked if he could build a website, he said yes, then went home and taught himself HTML.
- A move into mobile: When the dot-com bubble burst, Che moved his five-person web team into mobile apps and games as 3G arrived.
- A test that became a client: Game publisher THQ asked his small team to port a game to 15 handsets in about four days, over Easter, from a home office. They pulled it off and won THQ’s work for the EMEA region.
The company grew to around 25 people, mostly developers trained straight out of university, and later added EA as a client.
When the GFC Hit
Che had just raised his first outside money for a Bluetooth peer-to-peer network, and someone had offered to buy half of the gaming company and take it to the US. Then the GFC arrived. The publishers stopped answering the phone. One of his staff saw on Facebook that the producers they worked with had all been made redundant.
“You’re only as good as your last contract and you have to scale up and scale down.” (Che Metcalfe)
Key takeaway: Che doesn’t blame the GFC entirely. The bigger lesson was the business model. A service business that depends on a few large clients can disappear with them.
Losing the Identity Along With the Business
Che had been speaking at events, building Adelaide’s startup community and appearing in the paper. When the business closed, the invitations stopped. He ended up in debt from leases, wages and super, and took jobs in web development and real estate.
“And so being humbled like that was probably the best thing that could happen.” (Che Metcalfe)
- Ego creeps in: Hear that you are successful often enough and you start to believe it, however humble you think you are.
- Imposter syndrome gets louder: He wondered whether his early success had been a fluke.
Starting Again With Uniti Wireless
It was four or five years before Che started again. His work on Bluetooth had led him to radio and Wi-Fi. He noticed small US carriers delivering high-speed internet over class licensed Wi-Fi, which costs nothing to license, using affordable equipment.
He built a model in a spreadsheet: about $200 in equipment per client, plus installation, against a monthly fee over a 24-month contract. There was a decent margin. What he didn’t have was capital or connections.
- A lunch that led to money: A chance LinkedIn message led to an introduction to a Brisbane investor, who became the founding investor and joined the board.
- The day the money landed: Che cleared out a room and got to work, doing 14 to 16 hour days, seven days a week.
- Doing every job: He was the network admin, installer, web developer, spokesperson and customer service.
- Asking for help: People like John Lindsay (episode 13 guest), formerly CTO at Internode, helped him understand how the internet works.
Capital: The Hungry Beast
The biggest challenge in scaling was capital, 100%. Che walked through the numbers. A hundred customers paying $60 a month is $6,000 a month, which doesn’t pay the wages or the rent. You need around 10,000 customers to be profitable. Meanwhile, every new install needs hardware bought in advance, and the network needs towers and data centre equipment.
The upside is repeat revenue, and low churn helped. Instead of leaving, customers told other people about the service.
Getting the Right Investors
The turning point was a half-hour phone call from a council car park with James Spenceley, who with Tony Grist had built Vocus. They invested a million dollars and set tough targets that made Che focus hard on sales. Their involvement brought other east coast investors with it.
“At the end of the day, they say people invest in people, not in ideas and technology.” (Che Metcalfe)
Tip: Know your numbers before you walk in. Che found that serious investors keep meetings relaxed, but expect answers straight away. One family office walked away when he disagreed with their CFO. In his view, that probably wasn’t an investor he wanted anyway.
There were still close calls, including an investor pulling out the day before wages were due. Che says that stress has stayed with him.
Learning to Lead a Bigger Team
Che was good at vision and bringing people along. What he lacked was trusting other people to run parts of the business.
“I discovered probably by accident that a good manager can only manage 10 to 15 people well at any one time.” (Che Metcalfe)
- Build a layer of leaders: Che gave three or four people responsibility for areas of the business and supported them with regular communication.
- Keep learning: He had no management training and learned by making mistakes.
Listing on the ASX and Being Let Go
The listing took about a year and a half in the making, with weekly or fortnightly meetings with lawyers and accountants to build the prospectus. As founder, Che became the person who held all the history and documents.
Before the listing, some powerful shareholders wanted a new CEO. Che agreed. Then the founders were told to sign new contracts with a lower salary and none of the protections he had negotiated, or risk the listing. The day after the company listed, he was told it was his last day. By then he held below 5%.
- Two years in escrow: He couldn’t sell a single share, so he borrowed from friends to cover rent and food.
- A clash of cultures: The new leadership focused on maximum shareholder return, though Che credits them with growing the company faster than he could have.
Che describes Uniti as a company that sold for $3.7 billion. He set out to build a big company and get a good exit, and he did both.
Final Thoughts: Dream, Pick the Right Model and Be Honest
Che now runs a different kind of project. In 2021 he and his wife Natasha bought an island off Port Lincoln and are building Rumi on Louth, an off-grid eco resort they plan to keep in the family.
His advice for anyone who wants to build something big:
- Be a dreamer: Be on the fringe a little, but not too far.
- Choose a business model that can scale: Fee-for-service work rarely does.
- Make sure there is real demand: Don’t fall in love with something cool that nobody needs.
- Keep going: Che’s honest answer to how he started again was simple. He won’t give up.
“So there really needs to be a need in the market for what you’re doing.” (Che Metcalfe)
For more insights, visit Rumi on Louth.
